Episode Details

How to get more control over how your super is invested and the fees you pay (and lower fees)

Accountants often recommend establishing a Self Managed Super Funds (SMSF) as the best way to gain full control over how your super is invested. But most people don’t want the responsibility and compliance headaches that a SMSF can create.

A wrap platform is an excellent alternative to a SMSF. In fact, they are simpler, don’t come with any compliance obligations and are often lower cost. But they still give investors a lot of control over where and how their super is invested.

In my 17 years of experience in reviewing super funds, I have found that retail funds (e.g. AMP, BT, Colonial, MLC, etc.) invariably charge high fees and deliver very poor investment returns. This was confirmed by the Productivity Commission’s recent report into super. Therefore, if you are in a retail super fund, it’s almost certain that you would be better off switching (but you must consider any ancillary benefits and/or insurance before you do).

I have written about my concerns with industry super funds in the past. I summarise my main concerns below:

§ Firstly, trade unions have a lot of control over the industry super funds, how they are operated and ultimately their lack of productivity. This ‘influence’ was highlighted during The Royal Commission into Trade Union Governance and Corruption.

§ Secondly, I am concern but the amount of money paid to trade unions and I am concerned that there aren’t enough checks-and-balances. A report in 2017 highlighted that trade unions received over $18 million from industry super funds over a 4 year period. Here’s another article from January this year stating that KPMG calculated that Cbus paid over $7 million to unions over a four year period ending in 2014. The operation of (1) trade unions and (2) investing people’s retirement savings are two separate activities and should be completely independent.

§ Thirdly, they lack a lot of transparency and accountability with respect to investment performance as I have written about here.

§ And finally, given their scale, they should be reducing fees, not increasing them – a point which the Productivity Commission has made in its recent investigation.

Having said all that, industry funds are much better than retail funds. And if you are not going to use a wrap account (or SMSF), then they are the best solution for your super. Hostplus, Cbus and AustralianSuper tend to be the best performers in terms of investment returns. AustralianSuper has the lowest fees out of the three (by a reasonable margin) so its typically my preferred option.

A wrap platform is a portal (super account) that helps you invest your super. It provides y