Superannuation, one of Australia’s largest industries, is going through change and Mercer, one of the world’s largest consultancy firms for superannuation, is leading the charge.
Australian super funds and their leaders have achieved much in recent years. Our retirement industry ranks third in the 2017 Melbourne Mercer Global Pension Index and total assets set aside for the future are now $2.3 trillion, or 130 per cent of Australia’s GDP. There is now more money in the superannuation industry than there is cash in the banking system.
Because of its scale and increasing financial importance to Australians, the industry is coming under renewed scrutiny. Financial Services Minister Kelly O’Dwyer introduced draft legislation this year that would see superannuation fund directors facing jail terms of up to five years for wrongdoing. She has also stepped up pressure on the sector to release its anticipated code of practice covering insurance in superannuation. At the same time, the Australian Prudential
Regulation Authority has warned underperforming super funds that they will be forced out of the industry if they can’t operate in the best interests of their members.
Ben Walsh, Managing Director and CEO of Mercer in Australia says it’s only natural that the regulator is focusing on how the industry is performing and delivering on its promises. And that, he says, is a good thing for members and the industry.
“There’s something like 214 regulated super funds in the country; the top 20 of those funds have around $20 billion or more under management and the bottom third each have less than
$1 billion,” Walsh says. “With such variation in scale, it’s good for super funds to be clear on how the government and the regulator are focusing on them doing a good job.
“It’s pleasing to see the government and regulator talking about how they evaluate whether the industry is performing and that’s by being focused on the retirement adequacy outcomes that members are enjoying in a superannuation fund.”
Walsh says that with the scrutiny of regulators tightening, it is now absolutely necessary for super funds to focus on how they will achieve the best outcomes for their members.
In this environment, Mercer is increasingly being seen as a secret weapon for the superannuation industry, as it continues a strategy designed to form partnerships that provide better member service and value to the overall industry.
It is now seeing many funds investing in areas of digital and member experience, accessing new types of investment and driving down the product’s cost curve.
All of these improvements are designed to help funds meet growing member demand and engaging experiences that are easy to understand and navigate.
“The world has changed,” Walsh says. “When you think back 10 or 20 years ago, superannuation used to be something you joined when you started with an employer, and you really didn’t engage with it, and even when you did engage with it, it was very old world with paper forms in triplicate, and strange language.
“In today’s environment, superannuation funds that are performing well have worked hard on the member experience they provide for their members. They are embracing innovation and member engagement through enhanced technology, digitisation and ease of interaction.”
Mercer has its own member analytics engine called Mercer Edge. It is a data-driven analytics, marketing and strategy platform that can predict members’ behaviours and provide them with personalised and contextual insights about what action they might need to take at a certain stage in their life to maximise their retirement outcome.
“IT’S A WIN FOR THE PILLAR CLIENTS WHO ARE NOW ADMINISTERED BY MERCER. IT’S A WIN FOR OUR EXISTING CLIENTS WHO ARE NOW PART OF A MUCH LARGER ORGANISATION.”
“In the past a very low proportion of the membership might engage with communications sent by their fund. Today we are seeing click through rates that are significantly higher. We are getting cut through by providing the next best piece of information that a member will need, almost before they know they need it,” Walsh says.
“Our technology and analytics capability makes the most of every member interaction by adding value to the experience. From highlighting personalised content experiences when a member logs into their account, through to call centre experiences based on next-best conversation, and innovations such as social media chat-bots designed to engage younger audiences. Our approach provides not only a rich understanding of the issues that the member might have on any given day, but also a much richer understanding of the sorts of things that are likely to be relevant for them.
“That’s a tremendous innovation that has occurred within the industry only in the last few years, to take a much more sophisticated approach for how we think and how we serve individual members of superannuation funds.”
Mercer is now on a powerful growth strategy to deliver this approach to more and more super funds, whilst creating the flexibility for them to maintain control of what is core to their fund.
This growth strategy plays a major role in its ambition to be the industry’s most powerful secret weapon.
The company’s acquisition of the New South Wales government’s funds administrator, Pillar Administration in 2016 brought $100 billion of funds under administration into the business and 1.1 million member accounts.
“The important thing to remember is we are more than an administrator. We provide products and services across the entire industry. To the clients of Pillar, we are able to bring superannuation consulting services that Pillar previously could not provide, or investment management or member communications or a whole raft of new things. Plus it enables us to take to all of our existing administration clients more benefits through the advantage of that additional capital expenditure on people, process and technology.
“It’s a win for the Pillar clients who are now administered by Mercer. It’s a win for our existing clients who are now part of a much larger organisation.
“It was the largest acquisition that we had made in our history in Australia and it was transformative from a scale perspective. It reminds everyone within the industry that superannuation is core business for Mercer and that we are deeply invested in the Australian superannuation landscape.”
How does all this help the industry?
By partnering with Mercer, super funds can retain their brand identity and trusteeship, whilst simultaneously accessing a new world of benefits and features for their members.
Over the last two years, Mercer has made a number of acquisitions and entered into innovative strategic partnerships and alliances with firms like Virgin Money and TAL.
Walsh cites the case of the partnership with Virgin Money where Mercer undertook investment management and administration for them. This enabled Virgin Money to reduce their end price to the average member from $553 to $333 a year – a 40 per cent reduction.
“Super funds are very passionate about the members they serve, their brand identity, their governance structure and trusteeship,” Walsh says.
“They can own and manage all of those activities but everything else they can partner with other providers or a single provider like Mercer to create cost efficiencies and better retirement outcomes for their members.
“By being part of something bigger, they are able to access new features and more competitively costed features than on their own.
“We are not saying or suggesting those superannuation funds become part of Mercer, we are saying they should think of Mercer as their secret weapon inside their business, helping them deliver their strategy whilst they own their brand and their trusteeship. BFM
With more than $200 billion in funds under management globally and supporting over 2.1 million
members, Mercer is one of the largest outsourced superannuation providers in Australia. As well as being a super fund administrator, Mercer is one
of Australia’s largest actuarial and investment consulting companies and operates the $23 billion Mercer Super Trust.
Mercer is helping to make a difference in the Australian
superannuation industry and creating a difference in people’s lives by offering a different kind of perspective.