Industry funds powerhouse

The industry superannuation funds’ movement is evolving to look remarkably like the major financial services institutions with which it was designed to compete with.

In early July, the 42 superannuation funds that own Members Equity Bank voted to approve the bank exercising its option to acquire Industry Fund Services (IFS) and the various elements of that organisation.

The vote by the 42 superannuation funds represented the culmination of a strategy outlined by IFS and Members Equity more than two years ago, and the resultant entity is the equal of many of the major financial institutions providing backing to the major retail master trusts.

In many respects, the creation of the merged entity reflects one of the major contributions of the executive chair of IFS, Garry Weaven, who in 2004 outlined the strategy to Super Review and said that it was all about achieving scale.

At the time, Weaven said he was pursuing the creation of a “single, unified institution of considerable substance”.

In reality, little will change with respect to the workings of Members Equity and IFS, because the two groups have been working closely together for most of the past 18 months as the merger process has been bedded down.

So what emerges from the merger of the two organisations? Well, according to Members Equity, there will be retail banking, business banking, wholesale funds management, retail funds management and superannuation fund services.

In a very real sense, the new entity gives the industry funds movement the capacity to compete one-on-one with retail entities, fulfilling Weaven’s strategy to be able to provide a full service offering.

The evolution of the organisation has no doubt raised some eyebrows in the financial services community, particularly among those people who have been around long enough to remember its origins.

Those origins stemmed from synergies generated from the prices and incomes accord between the Australian Council of Trade Unions (ACTU) and the former Hawke/Keating Labor Government, the introduction of the compulsory Superannuation Guarantee and the emergence of industry funds.

Indeed, Members Equity began life in 1994 as a joint venture between National Mutual, the ACTU and the fledgling industry superannuation funds.

In 2001, Members Equity gained a banking licence, and in January, 2003, an IFS-led consortium of superannuation funds successfully completed a buyout of the AXA (previously National Mutual) interest in Members Equity.

Now, the broader financial services community is confronted by a combined entity that not only boasts one of Australia’s strongest and best-organised distribution networks, but also has more than $25 billion in funds under management.

According to the chief executive of Members Equity Bank, Anthony Wamsteker, the combined entity will be retaining the Members Equity brand.

“Members Equity derives from the intention to continue to remain close to the members of super funds and trade unions and treat all members fairly and equally,” he says.

He says the bank’s success to date demonstrates that banking products could be distributed effectively through the alliance with superannuation funds, with the savings produced by the low-cost distribution approach being passed on to members.

Wamsteker says that Members Equity will benefit significantly from the addition of a range of diversified financial services, including leading funds manager Industry Funds Management, which recently passed the $10 billion funds under management milestone.

While the creation of the new, merged Members Equity represents a milestone for the industry funds movement, it may also stand as Weaven’s legacy.