The digital retirement advice tool ‘doing the work of 250 advisers’

Since the $210 billion profit-to-member Aware Super rolled out its Retirement Manager digital advice platform in a pilot program last year, the number of members drawing down more than the minimum amount required from their allocated pension has skyrocketed.

About 96 per cent of members using the Retirement Manager platform have opted to draw down more than the minimum after using the tool, compared with about 54 per cent of members who have not used the digital tool. On average, members are drawing down more than $18,000 a year more than the minimum.

In addition, 15 per cent of members using the digital tool set up their own account-based pension and drawdown level with no additional contact with the fund or its financial advisers.

Aware group executive for member growth, Steve Travis, claims that it would have taken 250 full-time comprehensive advisers to serve the number of members that have used the digital tool to date – and that’s before it’s made accessible to the fund’s full membership.

It’s further evidence that, pitched the right way, digital advice tools are having a marked effect on helping members make better decisions for themselves regarding both accumulation and decumulation issues. Last month UniSuper chief advice officer Andrew Gregory told Professional Planner that the $166 billion fund would have had to employ another 18 full-time financial advisers to handle the volume of statements of advice its digital advice service has produced since it was launched last year.

A test for the tool

Travis tells Professional Planner sister publication Retirement Magazine that prior to its launch Aware set as a test for the tool whether or not it would allow members to act entirely on their own and avoid them having to contact the fund for support.

“The test was, would they use this tool and then still go see a financial planner?” Travis says.

“Would they still call of our guidance advisers, would this tool not be enough to set it up, is it giving them confidence to act – and not just confidence that, OK, I know how much I need to take, but would they then act on that?

“Fifteen per cent is a material number. It’s the true test of how many people have acted on it. That is a hard number of those who are actually setting up a pension account.

“When they do set it up 96 per cent are taking more than the minimum, and before the tool it was 50 per cent. It’s giving us scale and doing the work of 250 comprehensive advisers.”

Travis says the tool allows the fund to meet its obligations under the Retirement Income Covenant to help members maximise their expected retirement income; manage expected risks to the sustainability and stability of their expected retirement income; and have flexible access to expected funds during retirement.

“The tool has been built really to deal with the three limbs of that. It helps members think about those issues and quantify those. We know the Retirement Income Covenant does talk about how you engage [members]; it’s not just building a product or products, it’s how are you engaging members in the retirement experience. This is really at its heart a deep engagement tool.”

Aware has “started building our longevity product, and we’ve built Retirement Manager ready to integrate that product into it”, Travis says.

“We’ve designed the tool, future-proofing it [for] when we deliver, in the next year or so, our longevity product. It will just be another part of the combination of how members will set up their retirement. It won’t just be an account-based pension, it will be a combination of account based pension and longevity product that we think will then get members taking higher levels of income.”

“We wanted to get the advice component right first, because building a product with advice and the [member] experience is the key to unlocking scale, to getting members to use it,” Travis says.

“Other funds have led with the product and are now building the advice, and we’ve led with the advice. That’s where we’ve put our investment dollars, and [into] the experience.”

Travis says Aware is now at “the intricate [product] design phase and has been in market with a request-for-proposal for a potential longevity solution partner.

“We haven’t decided how we will bring a product to market [but] that’s close. We’re evaluating vendors and what role they will play in the design, but if we do go the partner route, it will be a co-design thing [and] they may play a role in the delivery of it as we take it to market.”

Expanding the rollout

For now, Aware members will be encouraged to use the Retirement Manager tool to make the most of their retirement as it expands its rollout from the 5000 members in the pilot program.

Travis says the “killer” feature that supports members to maximise their retirement income is what’s called the “income efficiency score”, which a gamified optimiser.

“We use that score to have people understand the decisions they can make and the impact it has on the score,” he says.

Aware describes the mechanics of the score as “using stochastic modelling to assess the impacts of market cycles on income sustainability, then applies a weighted average score between 0 and 100”.

“Members should aim for a score above 90 to have very high confidence of achieving their retirement goals,” it says.

Travis says it’s a concept borrowed from game theory, to support members to make rational decisions and optimise those decisions towards a given outcome – in this case, maximising income in retirement.

“They’re optimising something, and they’re used to that concept in lots of other parts of their lives,” he says.

Both Retirement Manager and an earlier digital advice platform, Retirement Planner, were built by Aware in conjunction with technology vendor Bravura Solutions.

“Retirement Planner had a retirement confidence score that’s about, ‘Am I on track?’, and you can optimise your score upwards,” Travis says.

“[Retirement Manager] has an income efficiency score, so you can start to say, well, if I take out $50,000 a year, what will my income score be? And if I take it to $60,000 a year, what will my income score be? You can see that impact, and go, ah, OK, I’m still in a comfortable zone here. 

“That is, at the heart of it, where the confidence comes from.”