I am sure once certain Superfunds read what I have to say to you today there will be deep in the bowels of their organisation a hit man who will be ordered to remove my kidneys and place my head on Brisbane’s Story Bridge as a warning to others.
But I don’t care. Because I sometimes think that the Superannuation industry is a big con. In fact, its not just me saying so. Per the government, it could be a $10 BILLION dollar con for some of us.
Now don’t get me wrong. Superannuation can be a beautiful place to invest retirement funds and not just for tax reasons either. Done properly it is a great place to build wealth. I have invested personally in a Self-Managed Super Fund and I would not do that unless I thought it was a good idea.
So, you will be forgiven if you are asking what the hell am I talking about or what the fuss is about.
Well, a couple of years ago in the Budget the Government quietly put it out that they would write a report on how good our Superfunds are. At the time I jumped for joy and said it was the best thing the government had done in about 10 years. OK a bit optimistic but it was a good idea.
And true to their word this report has been released and, if you are an accountant, fascinating reading. If not an accountant, it is not so fascinating. It is long and boring. But you could be giving your retirement money to funds managers so they can buy a Ferrari and that is why you should know what it says.
So, lets start with the crap ones.
- OnePath has a whopping 33 super crap funds. 33! I am guessing they are keeping your money under a mattress!
- BT Funds Management, Colonial First State, Auscol (Mine Super), Perpetual Super, MLC Super have provided, according to the report, “significantly poor performance”.
- Verve Super is a Supefund that markets as a specialist fund to women, Spaceship Super that targets as a specialist to millennials & Student Super who as you can guess targets students, are all funds according to the report charge ‘significantly high fees’.
- And then you have Cruelty Free Super – the name alone should warn you to keep away. They too have been smashed for high fees.
It gets worse. Equity Trustees was singled out for both high fees and poor returns. A double wammy.
According to the report there are about $10 BILLION sitting in underperforming funds either because they have poor investments or high fees. In some cases, such as Equity Trustees it is both.
Some funds are so bad they are not allowed to take on new customers until they improve. That’s good news for those who will choose better funds but what about those still in those underperforming funds? Well, they are stuffed unless they get out.
Superannuation is big business for those running superfunds so many do not care.
But do not get me wrong. There are some good funds out there. The key is to find them.
But to give you an idea of what it means if you have a fund that charges high fees or underperforms on an investment side then read on.
When I was writing my book ‘The Passport to Real Wealth & Financial Freedom for Business Owners’ I did a bit of research. This is what I found:
You have $100,000 and invest a Superannuation fund which will generate a 7% return for the next 35 years. No further funds are added to the portfolio.
After 35 years if your Superfund charged a fees of 1% the portfolio will be worth approximately $575,000.
If the fee is 3% the portfolio will be worth approx. $325,000.
That’s right. The difference is approximately $250,000. And the only difference is because the advisor/ Superfund is charging 2% more.
Generally, superfunds do not charge these levels of fees but it gives you an idea of what high fees can do to your wealth. It’s the same with funds that do not perform.
But do not get too preoccupied with fees if performance is good. I know some good advisors who charge high fees but their investment strategies mean they outperform the market significantly. The key is the balance.
And that is why these boring long reports are important. And it is important you have people who can tell you what they mean. And it is important you find the right fund for you.
If you like to purchase a copy of the book ‘The Passport to Real Wealth & Financial Freedom for Business Owners’ please click here