Photograph by Paul Jeffers

Amid the teeth gnashing and controversy surrounding the new Your Future Your Super legislation which passed the Senate last week, Mercer Super’s new CEO Tim Barber seems more excited about the challenges than concerned about possible downsides.

Barber points out that as far as new performance parameters are concerned, his fund is confident in its past and future performance and therefore how it would measure up on any APRA test.

And what’s more, he sees the new regulations the legislation brings in as an opportunity for the Mercer Super model to shine.

“When you’re in a situation where arguably members and their funds are a little more portable and a little less tied to default funds with employers, I think that opens up a really interesting space that we can claim and a model that’s perhaps a little different to some others out there,” he said.

Mercer may not be a household B2C brand in the Australian super landscape but it has a retail, “white label” partnership with Virgin Money (which it entered into in 2016) and another relationship with Kogan, formed in 2019.

“That’s a really interesting model to me and I think could become much more relevant going forward,” he said.

He also points out the Mercer group is a consultant to the industry with thought leaders like David Knox and others and describes the firm as a “manager of managers”.

“When you combine that infrastructure and IP with a brand like Virgin Money that I think’s a very broad brand that’s got the safety and financial services kind of trust and elements that banks and others tend to have, but it’s also got a younger audience, retail appeal to it, then that can bring younger members to the fund, perhaps, in their first job or early in their careers.”

Where size does and doesn’t matter

He’s only a month or so into the job but Barber is already talking about growth for the fund both organically and through M&A – part of his plan is to make sure the now $26 billion, middle-of-the pack fund is positioned as part of the “top tier”.

He sees Mercer Super in the $50-billion-plus league but he maintains fund size is only “one measure of the advantage you can bring.”

“In Australia, our fund has about $26 billion that we’re investing, when we’re investing money globally, we’ve got a global reach, being part of a group that’s USD380 billion. In terms of the advantages of scale in investment portfolio construction that we can bring to bear we have that, arguably greater than some of the largest funds in this country.”

New rules, new challenges

One of the more controversial of the new regulations under the Your Future Your Super legislation is the one pertaining to stapling but rather than seeing it as a negative Barber sees it as a challenge and opportunity for Mercer.

“I think stapling is probably the really interesting one, because it decouples the default fund picture from employers. What that does is really disrupts distribution models of all participants within the superannuation sector,” he said.

“How funds are able to attract members will be different for everybody, everybody’s going to need to adapt and I think that’s probably the biggest change.”

“I think it puts a bit of pressure… on to make superannuation a bit more visible, a little bit more easy to engage with… to be a bit more transparent, upfront, easier to understand, and to be able to spread that out to consumers more broadly, rather than through employer relationships and HR departments which has been the more traditional domain where those conversations around somebody’s superannuation tend to happen.”

Stewart Hawkins is a financial journalist, editor and TV producer who has worked for Bloomberg, the Australian Financial Review, the South China Morning Post and News Limited. For the past two decades he has covered markets and the broader financial industry in both Australia and Asia.
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