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Industry vs. non-industry super funds

I recently went to a financial planner and when he recommended a bank-owned super fund I asked if he considered industry funds? He said he didn’t and that he didn’t like them and his group refused to recommend them. He made all sorts of arguments when I suggested that they were cheaper and had regularly outperformed non-industry funds. What’s your view?

Many planners don’t recommend industry funds and there are a few reasons for it. However, there are financial planning businesses, like mine, which do. Some groups don’t have industry funds on their platform or list of recommended funds. Industry funds don’t pay commissions to planners like many non-industry funds and that has kept the former on the outer.

Against this industry, funds are not well setup to help planners trying to service their clients. We have time delays and even neglect from industry fund back offices and that’s because they underfund their administration. A planner can’t waste one hour on the phone on a queue, but industry funds are not geared up to help advisers.

Recently there have been questions over the returns of industry funds. Many can invest in ‘non-market’ assets and therefore external valuations are used. Let me explain. One fund consistently topped the performance charts but it had a big exposure to commercial property. To work out the fund’s annual performance, there had to be valuations, which can be a little more predicable and dare I say, fair, compared to stock market assets, which can be valued by scared investors. Non-industry funds tend to be in mark-to-market assets and they are at the mercy of a scared or a boom market. Industry funds are generally cheaper than non-industry funds, but it’s possible to get your fees and charges down when using non-industry funds. There’s a history of overcharging and kickback commissions in the financial planning industry and that’s why industry funds have done well. Their cheapness improves their return to customers, but it can make them tiring to deal with and not all industry funds are great performers, so really do your homework when selecting.

For advice you can trust book a complimentary first appointment with Switzer Financial Services today.

Important information: This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. For this reason, any individual should, before acting, consider the appropriateness of the information, having regard to the individual’s objectives, financial situation and needs and, if necessary, seek appropriate professional advice.

Published on: Thursday, May 13, 2010

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