A common question asked when it comes to superannuation funds is: What performance can you achieve?
Before you begin exploring the infinite world of investment vehicles to match your desired risk/return profile, you may want to give yourself a free kick by making sure you are not paying too much for ongoing administration and investment fees.
Released last week was StockSpot’s annual Fat Cat Report. If you haven’t read it, its worth a look just to find out where your super fund(s) sits.
In this year’s report they compared 600 multi-asset investment options offered by Australia’s largest 100 super funds to find the best super funds – and the worst.
An extract from the Business Insider article states “If you’re a 35-year old earning $78,192 per year and you have your super with ANZ or AMP you could be exactly $200,670 worse off when you retire” (Aleks Vickovich, 2019). This reduction to the projected balance had nothing to do with investment returns and everything to do with ongoing costs and fees. In this example, an investor can potentially be $200,000 better off at retirement without taking on any additional investment risk. Sounds like an easy win to me.
Other free kicks for your super fund that you may want to consider include:
- Not holding multiple super funds (as you pay multiple sets of fees and lose economies of scale).
- Not paying excessive fund manager fees to manage your investments (some managers charge up to 2% per annum while in contrast, buying a share directly has no ongoing holding costs after brokerage is paid).
- Not paying for insurance policies held in super that maybe redundant, of poor quality or not provide the coverage you expected (unnecessary insurance costs will erode your balance and drag returns).
- Paying advisor fees where advice or services are not being provided or are not needed.
Beware, there can be unintended consequences from consolidating super funds or making changes to areas mentioned above so its important you receive professional advice before proceeding.
Once all the ‘easy wins’ are out the way, focusing on picking investments for your regular contributions can become priority.
William Buck provides this kind of advice daily so free to give one of our qualified advisors a call to book in a health check to see how much you could save by retirement.