When deciding on an Industry Super Fund, the words ‘don’t believe everything you see on TV’ are important to remember.
It may not seem to make a lot of sense, but adviser fees can actually be a smart investor’s money well spent. Before jumping head first into an industry super fund.
Advertising such as the long-running ‘Compare the Pair’ campaigns weigh up industry super funds against retail super funds.
But in a 30-second TV spot, you’re definitely not getting the whole story.
If you’re considering an industry super fund, there are a couple of reasons you should be careful.
So what is an Industry Super Fund?
Unions and other associations developed industry superannuation funds. They did it to provide for their members for their retirement. It used to be that these funds were only for those people within the particular industry. However, these days, many of them are available to anyone entitled to super.
Advice is worth the price
The first reason to be cautious when looking to compare are some of the claims they make. Such as, ‘unlike retail funds, industry super funds charge no adviser fees’. Many go on to say, paying no commission to financial planners. What ads like ‘Compare the Pair’ don’t address is return on investment. It’s true, some funds perform well. Ultimately, it’s no good going with a fund with a no-fee structure if your returns are below average. Sometimes, you could be worse off than if you’d paid the fees and made more money.
It’s worth remembering – and not underestimating – what these adviser fees are for: expert advice.
If your financial adviser is any good, they should have a great understanding of the investments they’re recommending to you. If you skip this advice – and skip choosing the right investment options based on this advice. Then by going with an industry super fund, you and your portfolio are potentially missing out on some real long-term value. Adviser fees can actually be a smart investor’s money well spent.
Even Industry Super Funds see the potential benefits that advice gets you. As a result, and as restrictions have changed, they are offering ‘intra-fund advice’ and ‘scaled advice’. This is to try to keep financial planners out of the mix. Unfortunately, these limited forms of advice are just that. Often, they won’t be able to address your full financial picture. There’s simply no substitute for proper financial advice.
Limited options with an Industry Super Fund
Reason number two to be careful of is that you usually have more limited investment options. Somewhere around five to 15 – often less than you do with a retail fund. Retails funds can have as many as 100 options. They also tend to work according to the belief that their members are financially similar and will invest in a similar small number of funds. This is why they often offer fewer choices.
In contrast, financial advisers tend to use an individual-attention approach. They will customise an investment plan based on your individual goals and attitude towards risk. If you’re actively considering an industry super fund, make sure you look at an appropriate selection. Then make sure the fund you choose suits your wants, needs, and your views on risk.
If you are looking for financial advice, ASIC, the government regulator publishes a simple guide about choosing a financial adviser.
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