CBA follows rivals with super integration

Commonwealth Bank of Australia, the nation’s largest lender by market value, has launched a superannuation product that integrates with online banking, jumping on a trend initiated by Westpac Banking Corporation’s John Shuttleworth in 2007 to make super convenient to manage for customers.

The bank's Retail Banking Services and Colonial First State Investments divisions teamed up to create the new Commonwealth Essential Super product, which is designed for everyday branch customers and small businesses that employ up to 10 people.

Essential Super will be linked to Netbank, CBA’s online banking platform. This will allow customers to view and manage their super within Netbank, alongside transaction and savings accounts.

“This is the first time we have fully integrated super into our banking systems. We think it’s really exciting as historically, our industry has separated banking and super,” said Peter Chun, general manager of product and investments at CFS, in an interview.

‘Convenient feature’

CBA’s move to launch a solution that blends both personal banking and retirement savings continues a trend by banks to help customers simplify their financial affairs by offering them the ability to see, at one glance on screen, their total assets.

Shuttleworth, the general manager of platforms and operations at BT, Westpac’s wealth arm, seized on the opportunity to provide online banking customers with a single view of their wealth with the launch of BT Super for Life in 2007.

Integration of super with everyday banking is certainly a “convenient feature” and a positive from the consumer perspective, as it provides a greater level of transparency of their super holdings, said Nathan MacPhee, the chief executive officer of SuperRatings.

“Three of the Big Four banks have got integrated super products. Along with CBA Essential Super, you have ANZ with Smart Choice Super, Westpac with BT Super for Life and you also have Suncorp Everyday Super and ING Direct is offering an integrated product too,” he said.

Playing catch-up

Now, CBA has got catching up to do. Shuttleworth’s BT Super for Life has amassed $7 billion in funds under management, with 390,000 accounts having being opened,  said a spokesperson for BT in April.

Australia and New Zealand Banking Group, Australia's third biggest bank by market value, said it was seeing “rapid” growth in the take-up of its Smart Choice Super product, launched in late 2012.

The bank said that new accounts were opening at a rate of more than 800 per week. Over 17,000 accounts have already been opened, and 36 per cent of these have rolled over their existing super or commenced contributions, the bank said in its half-year results on 30 April.

Mobile focus

To close the gap, CBA is counting on its leadership in technology as well as its more than 1000 branches and 3500 customer-facing staff.

“We know our competitors are offering similar products but the big differentiator for us is leveraging our focus on mobile technology which has been enabled via CBA’s core banking modernisation, and focus on mobile,” said Chun.

“Our leadership in technology will allow customers to see their super balance as well as their bank balance on mobile and in fact apply for Essential Super online. So we’re leveraging a lot of the bank’s capability in the mobile space.”

This year, more than half of Netbank customers were accessing their internet banking via mobile devices, he noted.

“In NetBank, we are already getting more than half of our customers logging in via mobile or tablet and we expect consumers will also want to access their superannuation in a similar manner,” said Chun.

General advice training

With respect to its branch network, Chun said that CBA has rolled out training to ensure branch staff can talk about and offer Essential Super from 1 July 2013.

“Superannuation is a Tier 1 product while banking products are Tier 2. So we’ve trained 3500 branch staff to be Tier 1 accredited so they can provide general advice on Essential Super to customers and are able to give general advice to mums and dads and we think that’s really important,” he explained.

“It is a government policy intent via the Future of Financial Advice reforms to make advice more accessible to people who can’t afford to pay for advice and don’t have the complex circumstances to necessitate the need to see a financial planner.”

Lifecycle approach

Like its major rivals and Suncorp, CBA has opted to offer a lifecycle strategy for Essential Super, unless a customer specifically picks their own option such as a balanced strategy, Australian shares or cash.

In a lifecycle fund, the investment mix automatically changes to become increasingly defensive as a member ages. Advocates of the lifecycle approach believe that this investment style suits those members who are not engaged with their super.

The insurance component of the Essential Super will also use a lifecycle approach.

“When someone is aged 18 or 20 they will probably not have beneficiaries. So when you’re young you don’t need a lot of life cover," said Chun.

"Between age 35 and 40 is when the insurance cover is at its highest and then it will start to decline again because as you can imagine, the premium will start to increase."

CBA intends for Essential Super to become MySuper compliant once the final regulations have been passed. MySuper was introduced as part of the Government’s Stronger Super package which aims to provide members with new low cost, simple products that replace existing default funds.

* This article first appeared on Finsia Passport.

Categories
Banking
Tags:
Commonwealth Bank of Australia, Westpac Banking Corporation, Australia and New Zealand Banking Group, National Australia Bank, Westpac
Author:
Vish Teckchandani, vteckchandani@financialpublications.com.au
Article Posted:
June 19, 2013

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