“Many wealth management organisations are simply striving to get back to where they were before lockdowns, before COVID,” says Adam Salzer, Chairman of Whitewater Transformations.

Speaking from the post-lockdown United Kingdom, Mr Salzer said: “By contrast, savvy wealth managers are preparing for the acceleration in business that has come with the ending of lockdowns in other countries.”

“Leaders of UK and European wealth businesses were surprised by how fast the economic recovery was there,” he said.

“The industry in Australia should be learning from what has happened in other, quicker opening markets, as what is happening in the UK now will likely be happening in Australia in three months.”

Mr Salzer said wealth management industry leaders need to prepare to be able to react quickly to emerging challenges. “Many wealth mangers are restarting stalled projects, realising this is an opportunity to move ahead of those that are slower to respond.”

“Others are adopting emerging technology for an advantage, and as investors have grown used to doing more online.”

He added: “Many organisations are seeking transformational leaders – to be able to better adapt to change – and there are not that many in wealth management.”

War for talent emerges as markets exit lockdown

Super Recruiters also noted that people were beginning to move jobs in Europe if their employer did not continue to offer flexibility of working. “We expect that to occur here,” said Cathy Doyle, Chair of Super Recruiters and the SR Network.

“Employees have seen the benefits of flexibility and they don’t want to lose that – and will move. This includes some executives.”

Ms Doyle said: “This is leading to a war for talent in the UK and Europe and we expect it to repeat here.

“Each company is working out how to address this for themselves as their markets come out of lock-down. Australian wealth management leaders could be, should be, learning from the experience in the UK and Europe.

“Just look at what is already happening in the tech and software space in Australia in terms of war for talent and skill shortages. For example, key projects I am championing at MNF Group, a software company, are bold retention and recruitment programs. It’s a preview for wealth management firms.”

Ms Doyle concluded: “Australia will be where Europe is now in just three months. We can learn from that.”

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The people merging process has to become much smarter, much more transformative.

The pace of mergers in the superannuation sector is forecast to rise this year – and impact more people in our industry than ever before.

Superannuation funds MTAA Super and Tasplan recently announced they will be known as Spirit Super after completion of their merger on 1 April 2021. Spirit Super will be Australia’s newest industry super fund and have some $23 billion funds under management with 326,000 members.

LGIAsuper and Energy Super are expected to finalise their merger as early as this July, with the resultant group having $20 billion in FUM and 120,000 members.

Late last year QSuper and Sunsuper announced they will also merge, creating one of the largest funds in Australia, with combined assets of about $182 billion – putting it ahead of Australian Super and its $170 billion in FUM.

Other super fund mergers underway include NGS Super and Catholic Super, Media Super and Cbus and the completed merger of WA Super with NSW-based First State Super to become Aware Super.

KPMG estimates that this decade will see a 60% fall in the number of funds and estimates that in five years’ time, the current 217 APRA-regulated funds will have shrunk to 138, a faster pace than M&As in the retail industry.^[1]

Industry people specialists the SR Network and transformation specialists Whitewater Transformations see the biggest challenge of these mergers in bringing not members and funds together, but in how they merge their people.

Cathy Doyle, Chair of SR Network (including SuperRecruiters, SR Consult and SR Research), said it was not a matter of one fund group subsuming another, nor merging two groups of people into one entity, but rather “creating a new entity and determining who were the best people for it in terms of capability AND culture”.

“For example, mergers result in two potential CEOs, CFOs, other C-suites and range of management and teams,” said Ms Doyle. “How does the new entity decide whom is the best?

“It is no longer appropriate to simply offer redundancies and see who takes it and who remains,” she said “The people merging process has to become much smarter, much more transformative.”

Adam Salzer, Partner at Whitewater Transformations, said: “Funds spend a great deal of time, years, considering and then working on the pros and cons of their M&A; but not enough on how they will actually bring two workforce’s, two systems, two cultures together.”

Mr Salzer suggested: “Rather than favour one of the existing fund structures over the other, the best way forward is to create a third structure, one that would create and take the merged entity well into the future and best meet members’ needs.”

Ms Doyle said: “This requires independent assessment, no favouritism, of whom would take the new structure forward best at all levels in terms of technical capability as well as cultural appropriateness.”

She added that as funds keep coming into the new entity, there is not as much pressure for significant change and transformation as there are in the M&As of other industries. “Good leadership recognises this and the need to improve and build a business that is future fit.”

“Leaders have to have independently assessed which employees will best add value to the new entity, rather than just trying to keep every role,” said Ms Doyle.

Mr Salzer estimated that, at present, “some 40% of financial services organisations are doing well, 30% are holding on and some 30% will not survive long term”.

He said he believed there would be two types of organisations going forward in financial services:

• Inward-focused organisations and leaders that seek to repair the damage caused by COVID, cut-costs and make operational tweaks to get back to where they were before the pandemic, and those that are
• Outward-focused organisations and people whom embrace the opportunity to rebuild for the future, become more innovative for the changed world.

These two types will retain and attract very different types of employees and human resource departments responses, said Ms Doyle.

———

[1] Superannuation fund merger insights

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The pace and poignancy of change has certainly heightened in recent years; spurred on by increasingly innovative ways organisations are applying technology.

“One of the biggest mistakes financial service organisations (both private and public) make in approaching digital disruption and transformation is that they focus too much on the technology and its capabilities, rather than on fundamental operational transformation, cautions the head of the premier digital disruption grouping, the Australian Transformation and Turnaround Association (AusTTA).

Adam Salzer OAM, chairman of AusTTA, said today: “Disruption should primarily focus on transformation of the whole organisation. It needs to rethink and recreate its culture and its fundamental processes, not just embrace the technological opportunities.

“Technology is just a means to an end. Not the starting point.

“To meet increasing competition, many established organisations have to rethink their basic the model to provide better and more tailored service that offers consumers significantly better value and greater control.

“Accordingly, changing the internal mentality of senior management and employees regarding the role of the customer and full consumer empowerment should be the focus for management. Too often it is not, as our research identified.”

Research by AusTTA identified a raft of challenges facing organisations. These ranged from the changing business and political environment through changing consumer tastes.

However, the greatest concern is management, be its resistance to change and/or poor leadership. These together concern over two thirds (71%) of respondents.

Other major concerns include availability of hiring good people, then the impact of new technology, as shown in the chart in the attachment.

The survey also found respondents reported that employee resistance – or unawareness of the need to change – is their main barrier. This was followed by management resistance and engaging people to assist with the transformation process, as shown below.

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