The ways in which fund data can go wrong are infinite. What matters most is how early errors are detected and corrected, and how this impacts customers, says Stephen Mahoney, executive director at QMV.

“Achieving error-free investment and customer data is unrealistic, but effective measures can be put in place to reduce the incidence and severity of data errors and to help identify issues early.

“Early identification means before the customer is impacted, which is usually well before the customer makes a complaint and months, or even years, before a large-scale data remediation is imminent.

“A miscalculation, an administrative mistake, lack of insurance coverage, or other errors, can cause customers to feel wronged, robbed, not cared about or even marginalised.”

Mr Mahoney said the task of managing constantly-changing customer data across multiple technology platforms is enormously challenging and the more data there is, the greater the margin for error.

“Nevertheless, customers have an expectation that institutions will hold correct information relating to them, and that it will be used to correctly calculate their financial position and circumstances.

“Understanding the data risks, identifying issues early in the business lifecycle, learning from past mistakes and implementing the correct remediation procedures, will not only benefit each financial organisation but will lead to better customer outcomes. 

Mr Mahoney noted the five most common types of data errors that are encountered.

Fee calculations

“Fee miscalculations and a lack of process controls for documents – such as deeds, product disclosure statements and administrative contracts – are providing the foundation for these errors to occur,” he said. 

Interest crediting

Interest crediting issues relate to direct errors or delay issues giving rise to incorrect calculation of interest / investment returns to customer accounts.

“Delay issues may be caused by a lack of control around standard business processes; for instance, any delay in processing a customer investment switch request could have a large positive or negative impact on customer accounts.”

Eligibility issues

“Eligibility requirements around certain benefits, particularly those related to insurance or credit requirements, can have a huge impact on both customers and the institution. 

“For insurance benefits, these issues are often highly emotive because they involve someone who is hurt or has died, and typically involve large benefit payment amounts,” said Mr Mahoney.

Lack of internal controls

Another example of data error is inadequate controls around the various calculators used for financial decision making, he says. 

“For example, the Royal Commission noted that lack of controls around overdraft facilities led to clients being granted access to funds that they otherwise would not have received.

“This led to the writing off of millions of dollars of overdraft limits, and much bad publicity.”

Lack of critical information

Missing or lost information can cause serious financial errors.

“For instance, if income protection benefits are calculated based on salary, but some employers submitting electronic data for members are not providing salary with their contribution data, then these calculations may be based on incorrect or invalid data and assumptions.”

It is particularly important that errors be identified early and corrected, as when left unchallenged data errors can spread through systems like a disease.

“Constant monitoring of data would ideally be carried out in real-time or as close to real-time as can be achieved. This is particularly important, for example, for exiting customers. Once monies have been paid out, remediation becomes more difficult politically, reputationally and practically, as the organisation no longer has the funds. 

“Data held on administration platforms, advice platforms, CRMs and so on needs to be monitored simultaneously and reconciled against each other.

 “This level of oversight means that customer data is in the best possible condition across all technology platforms, and that costly remediation events are prevented. 

“Organisations that adhere to this level of data maintenance will more easily avoid the data errors that affect their business, and more importantly, affect their end customers,” Mr Mahoney said.

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The panelists agreed that many superannuation funds that exist today will not be here in five years’ time because of underperformance, or because the advantages of a merger are deemed to be in the best interests of members.

The event featured discussion from The Hon. Nicholas Sherry – Former Federal Minister and Chair, Household Capital; Rose Kerlin – Group Executive, Membership, AustralianSuper; Katherine Kaspar – CEO, Kinetic Super; and Josh Wilson – CEO, GROW Super.

Stephen Mahoney, executive director at QMV, said that the rate of consolidation over the last 15 years has been significant and shows no sign of slowing.

“Panellists agreed that grace periods are over, with more aggressive movement being required.”

“They said mergers will be driven by a number of factors, including APRA focusing on poor performance, as well as the potential for members to push trustees to wind funds up. In addition, technology and the growth of digital offerings in superannuation is changing the industry landscape in multiple ways and will see smaller existing funds seeking new economies of scale.

“Fund trustees need to continually ask themselves whether they should continue to exist, or whether a merger is in the best interests of their members,” he said.

Mr Mahoney said that key questions raised by panel members for superannuation funds include:

• What is the fund’s value proposition?
• Does the fund provide members with the tools for a better retirement outcome?
• Is the fund competitive?
• Would a merger with another fund result in better member outcomes?

“If a merger does seem like the best option, it’s important to remember that this brings its own set of challenges and trustees must remain focused on members and their needs.

“During discussion, panellists talked about the distractions that can arise during merger talks, and how resource-intensive a merger can be. Boards and trustees need to ensure that their first duty to existing members remains top of mind.

“While a merger may well be the best outcome for members, continuing to run the fund successfully during the merger process needs to be priority.

“Before, during and after the actual merge it is crucial to have a strong, dedicated and empowered transition team, with this team being responsible for managing collaboration amongst all concerned parties.

“Mergers and transfers impact almost all areas of the business, including legal, risk, actuarial, investments, operations, marketing and information technology. Ideally, such a team would be staffed by various professionals with strength and/or knowledge across areas mentioned above, and with previous experience to help through negotiating any pitfalls that may be encountered.

“Independence from either merging party is another important factor and it often helps to bring impartiality and practicality to any hard decisions that are required.

“At the same time, knowing who your members are, what they want, and what the merger will deliver to them, is key,” Mr Mahoney said.

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QMV provides independent consulting services and technology systems to superannuation funds, trustees, administrators and wealth management organisations.  It was founded in 2008 by Mr Quinn, Mr Vaughan and Stephen Mahoney.

Mr Quinn said that QMV is moving through a significant period of change and growth, including an expansion into the Sydney market, and it was decided that now is the right time for a change in leadership.

“As our business enters its next phase of strategic growth and expansion into new markets, it makes sense to bring in a new leader with fresh ideas.”

Mr Quinn will continue as a director of the business and work closely on QMV’s expansion into Sydney.

“We are experiencing increasing interest in our services which includes change management, program and project management with a focus on technology, regulatory change, data quality, data remediation, migrations and mergers.

“As the superannuation industry continues to deal with ongoing regulatory change as well as the shift from accumulation to pension phase by many of their members, we are well-positioned to help manage these challenges and ensure institutions have the resources and capabilities to respond effectively,” Mr Quinn said.

Mr Vaughan has over 17 years experience in the financial services industry.  During that time, he has provided consulting services to organisations including nab, Link Group, Mercer, UniSuper and First State Super.  Mr Vaughan holds a bachelor of commerce and is a member of the Association of Super Funds of Australia (ASFA).

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