When a $30 billion superannuation fund has been serving its members for more than three decades, experiencing net member growth, consistently winning awards for the quality and innovation of its products and services, and has built a high-quality full-service financial advice division, but still feels it needs to merge to survive, it speaks volumes about the competitive landscape of the Australian superannuation industry. 

And what it says is that the forces shaping and reshaping the industry are not necessarily focused on quality, but rather on quantum – the somewhat blunt metric of scale, measured by assets under management. Whether or not a precise figure has ever been uttered by APRA, the minimum size for survival is generally held to be around the $50 billion mark. 

Sitting well below that threshold, the $30 billion TelstraSuper announced unbidden on 2 May that it was exploring merger options, in an environment its trustee directors said meant “size and scale are increasingly important”. The trustee said the interests of the fund’s members “will be best served in the long-term by seeking a suitable merger partner aligned to the fund’s objectives and values”.  

Last week TelstraSuper announced its merger partner will most likely be the $35 billion Equip Super, with the aim of creating a circa-$60 billion fund with 225,000 members. “Most likely”, because while the funds have signed a non-binding memorandum of understanding, and while they would not have reached even this point without having a more than vague idea of what’s ahead, it will still be a long and winding road. There’s always a chance it won’t end up exactly where either party thinks it will. 

There are some issues that need to be sorted out right off the bat, including the merged funds’ target operating model (including administration and investment management), along with the composition of its board and C-suite executive line-up. Others will be sorted out as the transaction proceeds. 

The transaction is in some ways complicated by the “merger of equals” tag hung on it from the get-go. It sounds good from a members’ perspective – suggesting neither group will be advantaged or disadvantaged compared to the other – but it also means the goal of selecting the right people for the relevant roles may be tempered by an “equal representation” overlay of sorts.

Were TelstraSuper or Equip to have been subsumed into a significantly bigger fund – Australian Retirement Trust or AustralianSuper, for example – it would have been be “a minnow going into a whale”, as one observer has put, and it would have been a potentially more straightforward process: the directors and execs of the “whale” would hold all the cards and cherrypick the best talent within the “minnow” fund, releasing the rest. 

In the merger of CareSuper and Spirit Super confirmed on June 1 this year, CareSuper chair Linda Scott was named as chair of the merged entity, and Spirit Super chief executive Jason Murray was named as chief executive of the merged entity. Murray will assume the position after the merger is completed. In the meantime, the position of CareSuper CEO is being filled by Michael Dundon. 

There’s also the question of whether the board (and the ranks of senior executives, for that matter) are assembled with the objective of simply satisfying two tribes; or whether they’re constructed solely with the anticipated future state of the fund in mind. 

The process will require outside input and consultation with the employer and member representative bodies that nominate individuals to board positions, and must ensure the process doesn’t leave the board skills matrix diminished.

Boards
	TelstraSuper		Equip Super
		Appointed		Appointed
Chair/independent director	Anne-Marie O’Loghlin AM	Jul 2019	Michael Cameron	Nov 2023
Independent directors			Justine Hickey (deputy chair)	Jul 2017
			Penny Davy-Whyte	Jul 2018
Employer-representative directors	Beba Brunt	Dec 2023	Mark Cerche	Jul 2017
	Gretchen Cooke	Mar 2023	Sharife Rahmani	Jun 2021
	Steven Fousekas	Nov 2018	Simone Thompson	Oct 2019
	Graeme Smith	Dec 2020
Member-representative directors	Dahlia Khatab	Jun 2019	David Doolan	Oct 2020
	Joseph Mitchell	Jul 2023	Matthew Cassin	Aug 2021
	James Perkins	Dec 2020	Julian Widdup	Jul 23
	Beth Vincent-Pietsch	Jan 2024

Assembling a board and a senior management team from the talent pools of each fund is complicated the best of times, but more so when a “merger of equals” suggests there will be equal representation from both sides of the deal in the merged C-suite line-up.  

Some of the roles exist on a like-for-like basis, and in that sense it’s a straight two-horse race; others are described differently in each fund or are split between multiple individuals.  

For example, Tim Anderson holds the position of chief customer officer at TelstraSuper, while the broadly analogous role of chief experience officer is held at Equip Super by Carrie Norman. Responsibility for technology and operations at TelstraSuper sits with chief technology and operations officer Karen Symes, while at Equip Super Anna Papile is chief operating officer, and Brent Retallick is chief technology and transformation officer. 

Senior executives
	TelstraSuper	Equip Super
Chief executive	Chris Davies	Scott Cameron
Chief investment officer	Graeme Miller	Andrew Howard
Chief customer officer	Tim Anderson
Chief experience officer		Carrie Norman
Chief people officer	Krithika Hansen	Amanda Veldman
Chief risk officer	Bryony Hayes	Natalie Alford
Chief financial officer	Paul Curtin	Marc Pizzichetta
Chief legal officer	Steve Miller
Chief technology and operations officer	Karen Symes
Chief operating officer		Anna Papile
Chief technology and transformation officer		Brent Retallick
Chief growth officer and employer relations		Charlie Yanni
Executive GM financial planning	Melinda Huggins

How the transaction is communicated to members also will be critical, for even though members can’t vote against a merger of super funds in the same way shareholders could vote against a merger of companies, they can still vote with their feet. When a member transfers into another super fund, it’s a bigger issue than for a company when one shareholder sells shares to another. 

In addition to the headline issues of boards and executives, and of administration and investment, member services will be a key focus of the funds’ respective boards. Service has become a real point of competitive advantage for some funds as they focus on retirement income solutions and the role of advice and guidance in meeting their Retirement Income Covenant obligations. 

Member service is also a driver of member loyalty, and of a fund’s ability to attract and retain new members. Members who are loyal to a fund may not react positively to its merger with another. 

When TelstraSuper announced in May it was on the lookout for a partner, it noted that despite its corporate fund origins, fewer than a quarter of its members today are Telstra employees. This means that three-quarters of its members have come to it for reasons other than just their employment. 

It seems reasonable to believe most of that 75 per cent have made an informed and active decision to join the fund, understanding the services it offers and the costs it charges.  

If members of TelstraSuper had wanted to be in a fund that wasn’t TelstraSuper, they’d presumably have exercised their choice to be in a different fund to start with. The fund is in net member growth, suggesting there continues to be a stream of individuals joining the fund, understanding and liking what they’re getting into. With the best will in the world, any merger runs the risk that the character of the merged fund may not be to those members’ liking. 

None of this is to criticise TelstraSuper or Equip Super trustees, who clearly believe their fiduciary obligations to serve the best financial interests of members demand the funds must merge members. 

Rather, it is to question a set of factors that mean good quality, albeit relatively small, funds believe they can’t do the job to the standard they want to do it to help members accumulate savings and live the best life they can in retirement. 

It’s a set of factors that is gradually denuding the industry of good quality, member-centric and innovative funds – and rendering void the active decisions members have made to join those funds in the first place – for the sake of supposed scale benefits. 

Scale for scale’s sake is useless if there aren’t tangible benefits for members, and research by The Conexus Institute* suggests the actual benefits depend very much on the specific fund concerned, and the setting and execution of strategy.  

Efficiency is delivering the same level of service, quality and innovation for lower cost; or delivering better service, quality and innovation for the same cost.  

Anyone who’s run into the bureaucratic morass of a large fund will vouch for what happens when costs and services decline in tandem. 

* The Conexus Institute is a not-for-profit think-tank philanthropically funded by Conexus Financial, publisher of Investment Magazine. 

This article was edited on 23 September to update the asset value of Equip Super to $35 billion.