It is just possible that one of the key trends which has shaped the Australian superannuation industry over the past four years could be coming to an end.
That trend is corporate superannuation outsourcing and there are now signs that it has almost run its course.
Why? Because, quite simply, the number of corporate superannuation funds willing to go the whole hog and to fold into master trusts is steadily diminishing.
That fact represented at least one of the drivers behind Mercer Human Resources Consulting’s decision in late February to acquire the Mellon Human Resources and Investor Solutions business.
What the acquisition means for Mercer is that it will emerge as Australia’s single largest organisation providing stand-alone outsourced services to those super funds who have not opted to fold into master trusts.
According to the chief executive of Mercer Human Resources Consulting Peter Promnitz, the Mellon transaction represented a neat fit for Mercer because it has given his company further scale.
“Mellon did not have the scale on its own, but this certainly gives it to us now,” he said.
According to Promnitz, the ability to provide stand-alone outsourcing services to Australian superannuation funds is significant in circumstances where there are around 150 funds that have made it clear it is not their intention to fold in to master trusts. Therefore they need the sort of administration, advisory and trustee services that can be provided by Mercer.
The bonus for Mercer in picking up the Mellon business is that both organisations have similar corporate cultures but, more importantly, they share almost identical technology platforms.
For its part, Mellon has made it clear that the sale of its Human Resources and Investor Solutions business is consistent with its strategy to ensure its Australian business is concentrated on its core competencies.
Explaining Mellon’s motivations to Super Review, Mellon’s vice chairman, Ron O’Hanley said the move did not represent a diminution of interest in Australia but, rather, a sharpening of focus on the company’s core business — investment management.
In the meantime, the reality confronting companies advising on corporate superannuation outsourcing is that the number of significant funds still in play is diminishing.
