Super industry consolidation moving faster than ever

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Consolidation in the superannuation industry is happening faster than ever, and those funds looking to merge must ensure the process is conducted with the needs of members remaining top of mind, according to industry panelists at a recent QMV event.

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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