One of Australia’s biggest Industry Funds increased their fees from 30 March 2019 and is set to do so again on 1 April 2020.
We see the ads and the “sign” that represents Australian Industry Funds is well known. They are an important part of our Superannuation system in Australia – offering a simple and reasonably low-cost alternative for those starting out in their working careers. However, as with any financial product or solution it will not be suitable for everyone.
This is certainly worth further investigation if your total superannuation balance is over $400,000 – when you are talking fees within the superannuation system you need to understand what you are paying for and how to compare them to alternatives. Unfortunately, comparing fees is not that easy with a lot of the fees hidden behind the system. Even if you are a member of these funds, the fees are not necessarily apparent when looking at your member statement.
What we also know is that there is no “standard” that is applied to the various Investment Allocations. For example, as many Australians get closer to their planned retirement age, they might want to move to what they consider a more balanced investment approach – meaning that they reduce their exposure to growth assets which tend to be more volatile. You don’t want to put too much risk of loss in your superannuation when you have less ability or time to ride it out or make up any loss.
TAG considers a balanced investment approach to represent approximately 60% in growth assets (meaning shares and property both Australian and International) and 40% in defensive assets (meaning cash, fixed interest, bonds etc. which are less prone to significant volatility).
However, this is not necessarily the standard used across the industry – with some of the well-known Industry Funds having widely different definitions and therefore applying quite a different risk formulas to what their members may think that they are invested in.
For example:
- Australian Super’s “Balanced” options (which 90% of their members are invested in) has a split of 79% Growth assets and 21% Defensive assets.
- Cbus has a “Conservative Growth” option that professes to be 52% Growth and 48% Defensive – however they only have 34% of their asset allocation in Cash and Fixed Interest.
- HESTA has a “Core Pool” which is their default investment option – and advertises that it has a split of 72.5% Growth assets and 27.5% Defensive – and once again only 15% in Cash and Fixed Interest.
- REST have a “Balanced Strategy” – which shows them with an allocation of almost 50% each in Growth / Defensive – however once again the Cash and Fixed Interest allocation is 30%.
In summary, there is no consistent definition of what “Balanced” means – and even if you thought you were investing in your Industry fund in this way – is it time to ask yourself are you really invested in a balanced manner.
These inconsistencies mean that to compare the rates of returns between these or other funds becomes almost impossible on a like for like basis.
My recommended solution;
- Understand where your money is invested
- Find out what the fees are – and how they compare
Remember – if you are not starting with your goals and objectives the remedy will have limited effect.
If you are concerned or just want to understand how your fund compares and what else is out there, please feel free to arrange a catch up with one our investment advisers.
Our advisers have the experience to help you overcome these issues and allow you to gain a greater insight to your needs and how they can be fulfilled. Our Wealth Projections Tool can give you great clarity and purpose.
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Disclaimer: The information contained is general in nature. Professional advice should be sought before acting on any aspect on this page. Financial planning services provided by TAG Financial Advisors Pty Ltd (ABN 77 154 205 017 AFSL 415632), a wholly owned subsidiary of TAG Financial Services Pty Ltd (ABN 67 075 374 686).