Despite regulators and government pushing super funds to merge in the best interests of fund members, new research has revealed that the majority of members themselves are ambivalent about the prospect of a merger.
Investment Trends’ Super Member Engagement Report, which surveyed more than 9,000 fund members between March and May 2021, found that 62 per cent were indifferent about the possibility of their fund merging with a larger fund.
Around 27 per cent of members viewed a merger with a bigger fund as a positive step, while 11 per cent viewed it as negative, the survey found.
Among those who had a negative view towards mergers, their most common issues with a merger were around the potential negative impacts on fees and returns.
“Super funds that are in the process of merging, or thinking about doing so, will do well if they alleviate their members’ top concerns of potential increased fees and underperformance,” Investment Trends senior analyst Bailey Hao said.
“But our research also highlights that branding plays a key role.”
Around 18 per cent of fund members indicated that they did not think their fund should rebrand after it participated in a merger, with many citing the strength of the existing brand and a potential waste of fund resources as reasons not to rebrand.
“To limit member attrition, super funds must ensure some semblance of their current identity and values is retained before rebranding to appeal to a wider member base,” Mr Hao said.
However, 78 per cent of members did not have a strong feeling either way about a post-merger rebrand, the survey said.
Further, member views around a merger did not tend to differ dramatically whether the fund was planning to merge with a smaller or larger fund, with 21 per cent of members viewing a merger with a smaller fund positively, while 11 per cent viewed such a merger negatively.
The news comes as the prudential regulator pushes back hard on funds still reluctant to merge to achieve sufficient scale in the market, with the government’s incoming Your Future, Your Super reforms set to restrict underperforming funds from receiving new member contributions.
“Smaller, underperforming funds would ideally consider merging with a larger, better-performing partner rather than another small fund – especially one that is also underperforming,” APRA deputy chair Helen Rowell told the recent Conference of Major Superannuation Funds.
“All things being equal, the evidence suggests that larger funds are better placed to deliver stronger investment performance and lower fees.”