FS SUPER JOURNAL
THURSDAY, 18 FEB 2021
BY CATHY DOYLE & ADAM SALZER *
There will be more mergers of superannuation funds this year than in any other time in our industry’s history.
MTAA Super and Tasplan recently announced they will be known as Spirit Super after completion of their merger in April and will be the country’s newest industry super fund with $23 billion funds under management and 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 their merger to create one of the largest funds in Australia, with combined assets of about $182 billion – putting it ahead of AustralianSuper and its $170 billion FUM. Other super fund mergers underway include NGS Super and Australian Catholic Superannuation and Retirement Fund, 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 of mergers and acquisitions than in the retail industry.
One of the biggest challenges of these mergers is how to merge their people. Leaders of merging funds spend a great deal of time, years, considering and then working on the pros and cons of their merger, but not enough on how they will actually bring two workforce’s, two systems, two cultures together.
Birthing a new entity
Rather than one fund group subsuming another, the best way forward is to create a third structure, one that best positions the merged entity for the future and best meet members’ needs.
It is then a matter of determining who are the best people for it in terms of capability AND culture. Mergers, for example, result in two potential chief executives, chief financial officers, other C-suites and range of management and teams. How do the leaders of the new entity decide whom is the best going forward?
It is no longer appropriate to simply offer redundancies and see who takes it and who remains. The people merging process has to be much smarter, much more transformative. Leaders have to assess which employees will best add value to the new entity, rather than just trying to keep every role.
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.
This challenge is often overlooked, as funds keep flowing into the new entity, meaning that there is not as much pressure for significant change and transformation as there are in mergers and acquisitions of other industries. Good leadership recognises this and the need to improve and build a business that is future fit.
At present, we estimate that some 40% of wealth management organisations are doing well, 30% are holding on and some 30% will not survive long term if they do not transform. There will, most likely, be two types of organisations going forward in wealth management.
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. The second are OUTWARD-focused organisations and people who 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 – and people and futures.
* Cathy Doyle is Chair and Consultant at SUPER Recruiters