In August 2022 I started a series of articles on the 3 megatrends driving data management in superannuation. In this article I expand on the last, but definitely not least, of those three megatrends – the challenges of merging data sets and replatforming.
Consolidation in the superannuation sector has been a constant theme for at least the past five years. This has partly been driven by the introduction of, and preparation for, the Australian Prudential Regulatory Authority’s performance test in July 2021. But superannuation fund mergers have also been driven by a desire for potential cost savings from economies of scale.
Important to get right
There are definitely savings to be made from merging with another fund in terms of being able to negotiate better deals with service providers. However, a lot of work needs to happen behind the scenes for a merger to work.
And with the superannuation and the financial services industry in general becoming more competitive than ever, it is increasingly important to get any merger right. A poorly managed super fund merger and data migration can result in a negative member experience which may ultimately lead to a mass defection of members.
The regulators are also watching any fund mergers closely to make sure everything is done appropriately and communicated to members properly. A misstep can be expensive for a fund if it results in a change in providers mid-merger or if any kind of remediation needs to implemented.
Complex data series present very unique problems for merging superannuation funds.
The member data collected by superannuation funds is not as simple as a name and address, which can just be picked up and moved to a new CRM system. There are investments and unit prices involved, and in some cases, there will even be a defined benefit calculation required. All in all, it can be a very complicated data set.
Adding to that complexity is the fact that a lot of the data sits on old legacy technology. Most of the registry platforms that the majority of data now sits and lives on were developed in the late 1980s and early 1990s. Modern technology can help with the integration process, but it is harder to interact with when its coming from a legacy system.
And of course, the actual product structure associated with superannuation is quite complex in and of itself. Superannuation Fund A’s products are hardly likely to mirror Superannuation Fund B’s products in investments, insurance offerings and fees. It’s not like-for-like, a transformation needs to happen for a merger to work. And one of the biggest issues during a transition can actually be the insurance component.
And then there is reconciliation. Merged funds must be able to prove that if Member A had $10,000 invested in a certain way at the start of the merger, they must be able to demonstrate it is it invested the same way at the end.
The list of problems cited above can make the whole merger process seem overwhelming. However, funds should take some comfort from the fact that at this point of the game, they are not the first fund to merge and there are now well-established ways of conducting a merger to ensure the process is as effortless as possible for members. A fund does not need to reinvent the wheel.
New cloud-based technology allows ETLR – extraction, transformation, loading & reconciliation – to occur in a much more streamlined and efficient way than previously.
Like any big project, a merger needs a good plan. Having a meticulous run sheet that details how the data will be moved from A to B in as many steps as possible, outlining who will be responsible for each step, is essential
Doing appropriate dry runs or dress rehearsals and reconciliations is vital as well. Fortunately, all of this has been done before so funds rarely need to start from scratch.
But before any of this starts, it is important that the merging funds consider the quality of the data they are working with and identify any potential problems and rectify them. Modern technology can be a great help here with algorithmic and AI techniques now able to make the data cleansing process much faster.
At Novigi, we also have a number of standard data quality checks that we run across the data in any merger we are assisting with. Many of these are industry and use case specific but we have approximately 162 standard data quality checks that we will assume we have to run across the data.
Communication between funds, executives, merger partners, the regulator, and members – of where the process is at and when completion might be reached – along the entire path is also critical. The process of communicating regularly can save so many headaches.
Finally, as much as any fund would like a perfect migration, we can almost guarantee there will be some hiccups, which really should be expected with the breadth and the depth of data that funds are working with.
The key then is to be ready for these exceptions and incorporate how they will be managed in the original transition plan.
There is no getting around the fact that a superannuation fund merger is complicated, especially at the backend where all the magic for members happens.
But it is not impossible, as the many successful completed mergers attest to and there are partners like Novigi who have done this before and can help with any data transition that a superannuation fund merger requires. You really don’t have to do it on your own.
Ash Priest is the Chief Executive Officer at Novigi
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