In an interview with Super Review, Mercer Super chief executive Tim Barber has shared how the fund is placed post its merger with BT Super and his views on APRA’s consolidation push.
Mercer completed the merger with BT in early April which saw the combined fund reach $63 billion in funds under management.
With the merger now complete, the newly-combined fund had 850,000 members and $63 billion in funds under management. Mercer also completed the acquisition of Advance Asset Management to expand its investment multi-manager capabilities.
Some 350 BT employees joined the firm including executive appointments of Andrew Wallace and Corrin Collocott to Mercer’s Pacific leadership team.
Wallace would be personal super and member experience leader in Mercer Super, while Collocott would be chief investment officer for Mercer Super and Multi-Sector and would also be deputy chief investment officer for Mercer in the Pacific.
“One thing we really liked about BT is they’ve got a fantastic cultural alignment and philosophy regarding looking after members in retirement. It also boosts our scale significantly and gives us tremendous local market scale alongside our strong global scale,” Barber said.
Globally, Mercer managed US$354 billion ($536 billion) as at March 2023. This allowed it to be competitive in terms of fees as well as offer a global investment expertise from 44 countries at a time when other super funds were only just beginning to expand overseas.
Although Mercer had already been operating in the superannuation space in Australia for 25 years as a super trust, Barber said it remained a “compelling geography” for the firm.
“We do like the Australian market and it has a very strong super and pension system, there is a lot of participation here with mandatory contributions and a large part of assets being managed here in superannuation.
“So it’s a very compelling geography for the firm to be growing its business in and is a high priority for us.”
Among these priorities were further growth in the region. While Barber did not have a specific sum in mind, he expected mergers could be a source of continued asset growth.
This was particularly prevalent given the Australian Prudential Regulation Authority (APRA) was pushing smaller funds to merge and consolidate for greater scale. This was leading to the rise of ‘mega-funds’ such as Australian Retirement Trust (ART) and AustralianSuper holding hundreds of billions in assets thanks to multiple mergers.
“We would like to do more mergers if the right ones arise, we think that growth is now enabled and we are in a stronger position to grow now because our competitive position is enhanced.
“We are not merging to survive, we’re merging to add new scale and continue to add value for our clients. We definitely see continued growth for us.”
Referencing APRA’s approach to consolidation, a fund below $50 billion could struggle, he observed, but it would depend on its efficiency.
“For a standalone fund, there’s an ever increasing regulatory cost of compliance. There’s also Your Future, Your Super that came in and there’s quite a sharp focus on value and investment performance. So if you are a small fund that’s not growing then you are going to struggle to keep up with that regulatory burden if you don’t have scale and that eventually impacts performance.
“APRA is certainly pushing to make funds merge and we know that trend will continue.
“I do think there is a place for smaller funds serving a particular customer segment but you need to have a point of difference if you are small and you need to be a very efficient operator.”
Offering financial advice
An upcoming change for all super funds would be the ability to give advice to its members under Michelle Levy’s Quality of Advice Review as a way to improve advice accessibility and this was being viewed differently for the various funds.
At Mercer, Barber said they already offered a form of limited advice as well as an advice service which members could opt-in to and pay for if they required something more strategic.
“We offer limited advice within our super offering at no additional cost to members. We have the capability already on offer and that’s a service we will continue to offer to our members in the future. If the regulation supports a building out of that over time then we will watch that very closely.
“We’d like [engagement] to get higher because we think our members get better retirement outcomes when they engage with their superannuation.”
He also touched on digital tools for advice and said Mercer was looking to spend money over the next year or so to build a range of new tools.
“Superannuation historically has not been something that Australians have engaged with a lot but as more and more people move through the system to reach retirement and consumer behaviour changes to use more digital tools, we think that’s going to be really important.
“We’ve got a roadmap for the next 12-18 months where we are going to be spending company money, rather than members’ money, on a range of new tools that members and our employer clients can use such as portals and tools.
“Also for independent financial advisers so that they can engage with and work with Mercer Super as well as their clients in the fund.”
ASIC greenwashing action
However, the fund made the spotlight for other reasons earlier in the year when civil proceedings were launched by the Australian Securities and Investments Commission (ASIC) against Mercer for alleged greenwashing.
This was the first super fund to face this type of action, although it had since stated several other funds were on its radar and an infringement notice had been issued against Future Super at the start of May.
ASIC alleged Mercer made statements on its website about seven ‘Sustainable Plus’ investment options offered by the Mercer Super Trust which marketed these options as suitable for members who were ‘deeply committed to sustainability’ as it would exclude investments in companies involved in carbon intensive fossil fuels, gambling, and alcohol production.
However, this was found to not be the case as some of the investments of members who took up the ‘Sustainable Plus’ option included:
In a statement to Super Review, Mercer said: “At Mercer, we are committed to doing the right thing. We have co-operated with ASIC on their enquiries and take their concerns very seriously. As this matter is before the courts, it would be inappropriate for us to comment further at this time”.