So your super fund is merging - what does that mean for you?

"Consolidation" has become the buzzword in the superannuation industry.

For years it's been the go-to label for transferring fund members' super into a single fund. More recently, it's been used to describe the wave of mergers and joint ventures reshaping the industry.

The mergers we see now are the direct result of the work of the Productivity Commission, which found a market saturated with 29 underperforming MySuper funds.

Merging funds, it's argued, will lower management costs and increase investment opportunities.

"The proliferation of small and serial underperforming funds is clearly not in anyone's best interests," says Xavier O'Halloran, director, Super Consumers Australia.

"Staying in one of these funds could see someone hundreds of thousands of dollars worse off in retirement. In many cases people would be much better off if these funds merged with better performers."

It's not all upside, though. Combining funds raises a set of dangers that investors should be mindful of.

"It may come to a point where a fund is too large and it cannot access the range or diversity of investments nor be agile enough to take advantage of opportunities that may generate excess return," says Marisa Broome of Wealth Advice.

Nor is personal finance a one-size-fits-all endeavour. Funds have different principles and goals, as do investors.

"Many funds do not have like-for-like offerings," says Broome. "A balanced fund can mean very different things between funds so you should always assess your investment strategy and make sure it is appropriate for you."

And like all corporate mergers, incompatibility between funds can take cultural and operational forms, according to Genene Wilson of Finesse Financial Advisers.

"Often issues with merging portfolios will not emerge until very late in the piece. Operational and even cultural differences may come to light that may impact members for a period, such as unit pricing and how investment decisions are made."

Investors should also avoid blindly joining the race to the bottom when it comes to fees. In some cases, slightly higher fees may be justified.

"The fund may invest in service and information infrastructure more than its competitors, or it may have a cutting-edge investment team and process which may be important to consumers," says Geoff Pacecca of Gap Financial.

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