Employers at the heart of fund merger success
Over the past few years, we have seen a move towards fund consolidation through mergers and acquisitions. Driven largely because of the Government’s focus on fund performance through the Your Future, Your Super (YFYS) regulations and a predicted shift towards 'mega funds' as a way to meet best interest duties.
In May 21, the KPMG Super Insights report stated ‘More than three-quarters of Assets Under Management (76 percent) and member accounts (77 percent) will be managed by the top 12 funds, all with AUM over $50 billion, once currently announced mergers have been finalised”.
JPMorgan Future of Superannuation report highlighted the continuing trend toward fund mergers.
👉 Industry executives believe the pace of mergers will accelerate over the next few years - by 2025, the number of Super Funds is predicted to go from 174 to 75.
Mergers between super funds are complex and risky because it involves integrating people, processes, and systems.
Mergers provide an opportunity for funds to reimagine operations; from increased processing efficiency, standardisation of services, and improving the experience provided to members and employers.
But mergers are not without their challenges and risk. Funds need to work through how to integrate separate businesses, multiple systems, corporate culture and ways of doing things. Whilst still ensuring a frictionless experience for key stakeholders (e.g.employers) to ensure retention of value.
The change management approach can make or break the merger experience.
Our unique perspective
As one of Australia’s leading providers of clearing house solutions, we have been up-close and personal with super fund mergers over the years and understand what can go right (and what can go wrong).
In our experience, it's best to separate the employer transition experience from the broader fund merger activity. By tackling the transition this way, you can deliver a smooth transition experience to your employers and maximise retention.
With the employer experience firmly in your sites, it makes sure employers can continue to meet their superannuation contribution obligations with timely setup and notification of fund USIs.
The Fund can then focus on other key technology transition pieces, such as administration providers, registry systems, member portals, apps, call centres, and other service touch points (avoiding disrupting the employer channel).
The merger driven change can create an opportunity to demonstrate that employers are better off as you can deliver them a new refreshed user-friendly and efficient user experience while also providing them new and exciting capabilities.
This approach allows you to break down the overall merger change management program into segments and break it up into more manageable phases as opposed to the risky ‘big bang’ approach.
A sign of a successful merger is where there is minimal disruption to employers who want to do their job of paying employees super with little friction, ensuring contribution funds hit member accounts when they are supposed to.
Merger success doesn’t happen by chance. It takes planning.
Employer Experience is key.
In the past, there’s always been a primary focus on improving the member experience, which has left the employer experience languishing behind. Funds that invest in understanding the experience contributing employers have, and develop detailed plans to support the employer transition, get it right. Mergers that go well recognise that contributing employers are a key stakeholder and critical to the overall success.
When the employer experience goes wrong
A recent, but not uncommon example:
Fund A and Fund B had just completed their merger and created a new fund.
From the completion of the merger, all member contributions would be made to Super Fund B which created a new product (USI 2).
This meant Super Fund A discontinued its product and it could not accept contributions coming into it anymore. All contributions from that point needed to go to the new product (USI 2).
The problem with this was that there was a 10-day lag from when the old product was closed and when the new product (USI 2) was ready to accept the monies.
This meant that for those 10 days contributions did not have anywhere to go. Employers weren’t told about the lag and only found out about it the hard way when contributions were rejected creating confusion and potential non-compliance.
This caused the fund to receive several calls from frustrated employers who were simply trying to do the right thing and pay their employee’s contributions, causing negative sentiment towards the fund and associated retention risk.
“The YFYS legislation is just the latest in a series of changes over 10+ years, enabling technology and employer behaviour that has driven an increased focus on the employer experience. As funds ready themselves to execute critical mergers, ensuring employer experience and related change management strategy and tools are fit for purpose will maximise retention and support future employer and member acquisition opportunities”.
Richard Breden, SuperChoice CEO
Recognise the employer as a key stakeholder
How was this impact missed in planning? Simply put the employers experience in the process was not fully considered. By focusing on the critical role that the employer plays and working with a specialist provider who has experience in mergers and necessary employer focussed change management tools would have made sure that:
1. Employers are supported and contributions could continue to be processed with minimal friction
2. Contributions could be allocated to member accounts
3. All stakeholders were kept in the loop
Our experienced approach to employer change management gives funds the space to focus on their broader merger plans and the needs of the key stakeholders to deliver what they want.
Employers – Efficient processing of super payments and allows contributors to meet their SG obligations.
Employees - Having contributions processed on time and being able to keep using account numbers they know, eliminating the need for multiple accounts
Super Funds – Protecting and enhancing their market reputation by offering an enhanced employer and employee experience.
Consider the employer experience as part of your merger plan and change management piece
Aim for minimal disruption – an employer should always be able to submit a contribution.
Make sure that employer communication is clear. Funds should actively engage every employer that makes contributions - spell out what's happening, the impact and what they need to do.
Are employers transitioning to a new clearing house as part of the merger? If so – what changes can they expect to see? How can you sequence your plans so there is no (or minimal) disruption? What tools can you leverage to reduce the cost of change?
Share the benefits of change and keep them in the loop.
If you don’t
Employers may not be able to pay to contribute super (SG obligation not met)
Your members may not get their super paid in time
Damage to your fund’s reputation with both employers and your members
What employers want from their super funds From our experience employers have simple needs from super funds, including:
Simplify the path to interact with the newly merged entity
Be kept up to date
Manage the change, keep it as simple as possible for them to comply
Make them feel considered
Engage with specialist providers early Employers are at the heart of our solutions and we have working knowledge of how they operate and the impact on their day-to-day world if their needs aren’t considered. Our business is built around creating an enhanced employer experience by simplifying the payment of superannuation. By engaging with SuperChoice early in your merger we can bring our expertise to the table.
Supporting employer transitions to the SuperChoice clearing house through relevant intellectual property and employer centric tools
Mapping of contribution files
Continuity of contribution processing to new USIs
Partner with someone who understands the complexities of migrating employers
You can avoid merger pitfalls with an experienced partner by your side. Engage us early, before your merger plans are underway.
Not all mergers are equal in size. But all mergers have complexities that employers need to navigate.
We can help you identify the pain points (and how to avoid them) and design an experience to smoothly transition employers to the new fund entity.
Are you merger ready?
Need help with your merger plans? Want to have a confidential discussion with the team at SuperChoice before you’re too far down the process?
Get in touch with your account manager or email firstname.lastname@example.org
How SuperChoice stays merger ready to support employers today and tomorrow