Superannuation fund mergers continue to dominate discussion within the industry. VicSuper and First State Super have announced that they will merge on July 1 creating one of the country’s largest super funds – over $125 billion and 1.1 million members. QSuper and Sunsuper are also in talks, with the potential merger likely to create Australia’s largest superannuation fund with more than $195 billion for 1.5 million members.
The superannuation industry has seen significant increased regulatory oversight recently, particularly following the Royal Commission[1]. This increased regulatory focus is one key factor driving consolidation within the industry. As both Investment Magazine and InvestmentNews have outlined in recent articles, regulatory pressure is driving consolidation across the industry.
With superannuation funds under increased regulatory scrutiny, mergers can help improve efficiencies and make more resources available to ensure that risk management and assurance are sufficiently robust and compliant to meet the ever-increasing regulatory hurdles funds face.
Mergers are driven by an alignment of strategic objectives where the resultant synergies provide expanded capabilities, markets or improved member benefits. It’s no secret however that integration and managing any associated risks is the key to success in delivering the expected outcomes.
Bringing it all together is complex and there are important considerations to keep in mind to ensure success. Differences in the underlying structure of the merging funds business offerings and operations need to be closely analysed so that an appropriate strategy for bringing them together can be developed. From a business perspective, this means setting up teams to manage the merger process, having clear objectives and goals and articulated measures for success.
In particular, the role of Data Integration is complex and challenging. Superannuation funds increasingly rely on greater volumes and more complex and detailed data. With Member data and Product Offerings on one side, and Investments including position, risk and compliance on the other, it’s clear that data underpins a significant part of any funds key capabilities.
With data being so fundamental to the underlying operations of any fund, it highlights that successful data integration can deliver significant benefits to the merged fund, potentially expediting realisation of many of the synergies that underpin the merger. Differences in the underlying data structure of the merging funds also needs to be closely analysed so that an appropriate business-aligned strategy for bringing the data together can be developed.
The need to integrate data through the merger process also provides Management with a somewhat unique opportunity to restructure and enhance not only the underlying business offerings and products, but to ‘modernise’ the underlying operational support – particularly through Data Integration and Data Enhancement. Regulators and Members are increasingly requiring a greater level of granularity and insight into the investments made by superannuation funds on their behalf.
Many funds are restricted by the ‘legacy’ of their structures and systems, often delaying any significant restructuring of their approach or data due to operational risk concerns and any potential impacts to Members. Reviewing and restructuring within the merger process, when changes have to happen, is an ideal opportunity to alleviate these legacy restraints.
The logistics of merging superannuation funds is undoubtedly complex and can be slow. Building solid foundational data platforms on which to offer better products, better management and better risk and oversight can assist with expediting the underlying operational integration process, leading to realisation of the synergies available in a shorter time frame.
The way to mitigate the problems and risks associated with data integration during a merger is to manage data through a centralised data platform. This will provide consolidation from multiple sources, so that the data integration is seamless.
At AlphaCert, this is at the core of what we do – putting investment managers in control of their investment management data. When the decision is made to merge two superannuation funds, the data integration process is much more streamlined, fast and efficient if the data from both funds is on the same platform. Not only will it save a significant amount of time, but the quality of the data is much higher and more accurate, forming a better foundation for the ongoing growth of the merged fund.
If you’d like to find out more about how we can help data integration for your merger, get in touch and we’ll schedule a personalised demo.
[1] The Final Report of the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services industry was presented on the 1st February 2019