Regulation-driven industry consolidation will eventually result in Australia’s first “mega-fund,” with more than $200 billion in funds under management (FUM) – but that might not create better outcomes for members, according to SS&C Technologies.
“Despite this, there seems to be upward, not downward, pressure on member fees,” SS&C said in its “Future Super” report.
SS&C flagged the possibility that regulation-driven consolidation might not be enough to improve member costs and could lead to an increase in compliance costs and a decrease in competition from a smaller field of funds, adding that one of Australia’s largest funds had recently announced a new fee attributed to regulatory costs.
“We believe scale must be accompanied by digital transformation and innovation to drive down underlying costs and simultaneously improve the member experience,” SS&C said.
That transformation will involve greater co-operation with Australia’s fintech community and integration of systems and partnerships to create “member-centric ecosystems”.
“Open banking will also be a driver and will result in dramatically improved decision-making for funds and their members,” SS&C said.
“A revolution in payments and transaction clearing will drive improved efficiencies, speed and security. This will be driven by initiatives such as the New Payments Platform and the ASX blockchain-based replacement for CHESS, which has a target go-live of 2021.”
But regulatory change and attention – particularly the scrutiny arising from the release of APRA’s super heat map – “will continue to stretch funds and compromise trust in the sector” and could act as a dampener on innovation.
“Funds that have transformed into faster, more configurable systems and operating models will be better able to weather this regulatory storm,” SS&C said.
