Which super fund is the best?
A question that comes up regularly from our clients and friends here at Bounce Financial is ‘which is the best super fund?’ Whilst I appreciate the question is simple the answer is certainly not. (Hey, if things were that simple why would anyone need us!)
As we all know, a superannuation fund is an investment fund that allows you to invest your money until you are able to access it, usually in retirement. Unfortunately, there is no ‘best fund’ and each fund offers advantages and disadvantages based on the needs of the client.
To give you some guidance however, I will outline what some of the indicators we at Bounce Financial will look at when working out which super fund is best for our clients. It should also be noted that as financial advisers, we are able to access retail funds which aren’t available to the public so give us a call if you would like to have a chat about your super.
The most obvious place to start when comparing super funds is the amount of fees payable. You would think that this would be a straightforward process but unfortunately, like many things in the finance world, it is a whole lot more complex than it needs to be. Super funds charge a number of different fees and not all of these apply to all super funds. In addition, super funds negotiate different deals with different employers and other entities so the deal you are getting may not be the same as your colleague, pretty unfair right? Usually, when working with a client, we will obtain the details of the fees the client is currently paying and compare this to other industry leading funds, if the fees don’t match up, that is a big black mark for the current super fund. However, fees are not everything when comparing super funds so this must be weighed against the other performance indicators listed below.
2. INVESTMENT OPTIONS AND PERFORMANCE
Again, the issue of investment options and performance is not as straightforward as saying “which one did the best last year?” We have previously touched on the concept that generally, the more risk in your investment, the more reward that should be expected. If we were to simply recommend to clients that they go with the highest performing fund, we would be likely recommending the fund that carries the most risk every time. Now this may be appropriate for someone who is younger as part of a deliberate, diversified strategy, but if you choose to take the highest returning fund without considering these issues, you may quickly find your fund crashing, and worse still crashing at a time when you wanted to access the money!
As part of our process, we will usually devise an investment strategy for our clients and select a super fund which will allow us to adequately recommend investments that match that strategy. We will also be looking for consistent returns in line with that strategy and a strong fund management team. To assist, we have access to a number of research houses that will provide updated reports on these investment teams. The reports are quite comprehensive and even indicate how long the team members have been with the company! Now that is detail!
3. EASE OF DEALING
How easy a super fund is to deal with can be a big deal when determining which superannuation company we place our client’s with. When recommending a super fund, we need to know that the fund is able to change our client’s investment recommendations quickly and painlessly, that they can increase insurance, decrease insurance and that they are responsive to a claim. We need to know that when our client retires that our client will be able to get easy access to THEIR money. Sadly, some super companies don’t see the money in the account as the client’s money, instead all they see is ‘funds under management’ and they are not willing to let it go, not without a fight.
Determining whether a superannuation fund is easy to deal with is something that can only be worked out over time and many dealings. Whilst we would love to name and shame the bad ones, we recommend that if you aren’t going to get advice that you go with your instinct. If the super fund seems difficult on the way in, you can bet they are WAY more difficult on the way out.
4. INSURANCE OFFERING AND PREMIUM
One very major but often overlooked performance indicator is the insurance product offering within the super fund and the premiums relating to this cover. Through most superannuation funds, clients usually have death, total and permanent disability and sometimes salary continuance insurance. This varies quite substantially from fund to fund and the costs are usually quite different. Unfortunately, whether the insurance is right for you depends on a multitude of factors including your age, the level of cover required and whether you have any medical issues you may need covered. Again, this involves comparing multiple products and understanding the ins and outs of each product.
So there you have it, how we analyse what the ‘best super fund’ is. Sounds pretty complicated right? Well you are not alone in thinking this and the Australian Government is looking at ways of streamlining this, the problem is, it is hard to streamline something that is so individual.
What about you, what did you look at when working out which super fund to go with?
This post is from Ben Brett. Check out our details in the About Us page.