MUFG’s slated acquisition of Grow Inc., announced on Friday, is a deal that makes perfect sense for pretty much everybody involved and which may ultimately improve member outcomes. But it also highlights how hostile the superannuation system has become to innovation.  
 
The deal is not the best possible outcome for MUFG, which has essentially been forced to buy back clients it lost. Still, the acquisition means it will get a new blockchain-based tech platform that could replace the now-creaky systems it picked up in its 2006 acquisition of Australian Administration Services from Telstra subsidiary The Kaz Group – the deal that gave it a foothold in super fund administration in the first place. MUFG insists it’s invested a lot in its platform, but it isn’t a ringing endorsement of that investment that the company has once again been forced to purchase innovation.  
 
Grow, burning cash, had little choice. Its platform will probably benefit from deep-pocketed and patient owners, and, in the short-term, the deal is probably a net positive for the system. There’s a reason funds like HESTA, NGS and Australian Ethical went with Grow, and the possibility that more could see service uplift as a result of the deal is good. There is the possibility also that it simply languishes.  
 
But longer term, MUFG’s acquisition of Grow can’t be said to address other problems the super system is facing, including reliance on a shrinking number of service providers. The ACCC will, or should, scrutinise the hell out of this transaction, as it did when MUFG attempted to buy Pillar.  
 
And it also highlights an ecosystem that is increasingly hostile to innovation – not because of the actions of any one party within it,  but because of its settings and expectations, mainly those around fees.  
 
Any service provider to a super fund will tell you, with various degrees of equivocation, about how difficult it is to work within their fee constraints. Of course, member money shouldn’t be spent on products or services that aren’t value accretive, but that nuance has gone out the window in the race to the bottom. Superannuation might be the only industry on the planet where consumers have been conditioned to expect a better product for a lower price.  
 
Yes, fees eat into total returns; no, you should not pay two-and-twenty with no high watermark. But there are some things worth paying for, and member services is one of them, especially as member needs increase into retirement.  
 
That requires a change in regulatory priorities, from focusing on fees and costs to focusing on the overall health of the system. Prudential, for what it’s worth, means “acting with or showing careful good judgment, caution, and risk avoidance, especially in business or financial matters”. Making sure that super funds are laser-focused on paying the lowest price possible for vital services would not appear to fit into that definition.  
 
In a more permissive fee environment, super funds would have to work hard to make sure those fees were well spent and earn back trust they’ve lost through successive scandals over member services and soft-dollar spending on brand and sponsorships. Cost is only one component of the admin problem; in the case of AustralianSuper and Cbus there is plenty of evidence that member services suffered from not just a lack of money, but a lack of attention.    
 
While it is tempting – for journalists, at least – to imagine that failing to correct these settings and expectations will result in a huge and painful blow-up, the reality is more likely to be a slow grind of bad headlines and stuff-ups that gradually damage trust in the system and its integrity. It’s in nobody’s interests – not funds, not their members or regulators –  for that to happen.