Russell Investments launches GoalTracker – Australia’s first truly personalised super solution

From

Jodie Hampshire

Russell Investments has launched Australia’s first goals-based superannuation solution, using mass personalisation and proprietary algorithms to make it possible for every Australian to access a tailored investment strategy based on their unique circumstances and retirement income goals.

The launch comes as Russell Investments released research showing that a personalised approach to asset allocation and voluntary superannuation contributions could substantially reduce the number of investors falling short of their retirement goal.

The study of the retirement goals of more than 8,000 Australians uncovered that a personalised approach could increase the number of investors categorised as on-track to their goal by nearly 70%, with higher projected retirement incomes for more than 85% of those analysed.

Called GoalTrackerTM, the ‘goals-based’ solution aims to tackle what Russell Investments identifies as Australia’s “real retirement savings gap”: the gap between the income that each individual needs to fund the lifestyle they want in their retirement, and what they are on track to achieve.

Russell Investments Managing Director, Australia, Jodie Hampshire, said that while the Australian retirement system is considered amongst the best in the world, policymakers continue to debate how to improve the Australian system.

“Our analysis shows that optimising asset allocations and contributions at the personal level can form a substantial part of the solution,” Ms Hampshire said.

Global trend to mass personalisation

GoalTracker is a significant breakthrough for the superannuation industry and a major evolution from ‘lifecycle’ funds, which mainly focus on a person’s age. Today’s super system sees most Australians defaulted into ‘one size fits all’ investment options, which apply a single asset allocation to all members, or an age-based cohort, and ignore the many pieces of additional personal information that could improve asset allocation at an individual level.

The GoalTracker solution factors in up to 10 individual data points, including a person’s age, super balance, salary, plus capital market forecasts, to determine how each member is tracking towards their retirement income goal  and to set up a customised asset allocation to ensure they have the best chance of reaching that goal.

GoalTracker draws on Russell Investments’ multi-decade work with some of the world’s largest and most sophisticated institutional investors. The firm has identified mass personalisation as a critical step forward, bringing the super industry in line with other sectors such as retail, entertainment and fitness, which use technology to offer people highly personalised customer experiences built around personal goals and preferences.

Ms Hampshire said the world’s largest investors have long understood the importance of matching their asset allocation to their unique goals and liabilities, and had the substantial resources required to do so.

“Large institutions invest for outcomes. Now, for the first time, everyday Australians can also benefit from an investment strategy based on their own unique funding goal and situation,” she said.

What’s the problem?

Understanding Australia’s “real retirement gap” is challenging due to a lack of national data on individual retirement income goals.

As part of the GoalTracker launch, Russell Investments today shed new light on the issue with the release of a whitepaper Making Super Personal. The paper draws on the analysis of the retirement goals and financial circumstances of more than 8,000 Australian superannuation members within the nearly $10bn Russell Investments Master Trust (RIMT) – highlighting the power of setting and tracking goals.

The paper also references a survey of more than 3,000 working Australians nationwide, identifying four key engagement hurdles each individual must overcome to make additional contributions to get on track to achieve their retirement goal. These include:

Hurdle one: Intent to engage and take ownership of their retirement

Hurdle two: Choosing a desired retirement lifestyle (income goal)

Hurdle three: Understanding how they are tracking to that goal, and

Hurdle four: Being aware of the actions required to achieve their goal.

The paper also highlights that those members who had used Russell Investments’ goal setting tools were 67% more likely to have made additional voluntary contributions, relative to those who hadn’t – reinforcing the significant impact goal-setting and tracking can have on engagement.

The analysis also showed that if individuals optimised their voluntary contributions, adding up to 5% of salary in additional contributions when tracking behind, or reducing voluntary contributions when tracking ahead, the number of members on track to their goal would increase by more than half.

The solution

Ms Hampshire said the answer to helping everyday Australians close their ‘real retirement gap’ lay with improving the two levers. Firstly, how much is put into superannuation, and when – the contributions. And secondly, how those contributions are invested over the course of a working life.

Ms Hampshire said that the key with voluntary contributions is increasing people’s engagement with their super. GoalTracker helps members build a personalised retirement income goal by choosing the lifestyle that meets their needs across eight lifestyle expenditure categories.

“By focusing the superannuation experience on personalising the lifestyle each person would like to have in retirement, GoalTracker makes superannuation feel more real, and members are more likely to take voluntary action to improve their likelihood of reaching their goals,” Ms Hampshire said.

The other major lever to improve retirement adequacy is asset allocation, which is widely considered the single most influential factor on investment earnings.

“By determining asset allocation at the individual level, GoalTracker can invest in more growth assets early in life, and more intelligently reduce downside risk as a member approaches retirement. This reduces the chance of a significant market crisis such as the outbreak of the COVID-19 pandemic wiping out a large part of their savings just when they need it most,” said Ms Hampshire.

“GoalTracker is unique in that once an individual has set a goal, it can do the hard work by implementing and reviewing their asset allocation quarterly and adjusting it on their behalf if necessary, as their financial circumstances and markets change,” said Ms Hampshire.

GoalTracker has recently been rolled out to more than 50,000 members of the RIMT as the MySuper option. GoalTracker has already attracted several new employers to join the fund and is also available as a white label option for other superannuation funds to use for their members.

The significance of mass personalisation as a major evolution for the industry is being recognised by independent associations and organisations locally and globally. GoalTracker has already been recognised with the ChantWest Innovation Award 2020, Best Member Engagement Innovation at the 2020 Super Fund of the Year Awards, and the winner of Pension & Investments 2020 World Pension Summit – Technology Innovation Award.

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