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Financial Happenings Blog
Friday, October 26 2012

Alan Kohler through his Eureka Report enterprise has today commenced a Save Our Super campaign.  I imagine that the campaign will be taken up by the News Corporation suite of newspapers in due course as News now owns Eureka Report.

The launch piece for the campaign has some compelling arguments:

  • fees are still too high, and
  • there are way too many vested interests in the management of the funds under management including within the “Industry Funds” sector that we hear about so often on TV.
So good on Alan for taking up the cause.

Unfortunately I have a few problems with the launch piece in the Eureka Report.

One problem I have with the launch is the innuendo that Self Managed Super Funds are the saviour of the superannuation industry.  I have come across many SMSF holders who have been advised into this structure but it is really not in their interests because:

  • fees are actually higher than they could be with other solutions thanks to high accounting and administration fees,
  • they are not investing in asset classes that are only available to SMSF members such as direct property, (and could be investing in what they are invested in much more cheaply)
  • they actually don’t want the responsibility of being trustees or directors of a corporate trustee
  • they have not been made aware of the implications once they arrive at the latter years in life – i.e. key man risk
Please don’t see this as saying SMSFs are bad, they are definitely the right structure for some.  Let’s just not promote them as the only alternative.

Members of my family have been the recipients of such advice in the past so I speak from personal experience.

Another problem I have is the broad brush attack on the financial service industry as a whole.  There are a growing number of practitioners out there doing the very best for clients, including superannuation members, through offering low cost strategically positioned portfolios with high quality ongoing advice and service.

The final issue I have is the broad based attack on Australian equities as a culprit for the woes of super.  Were experts making this argument in 2006 and 2007 after years of uninterrupted growth?

I agree there needs to be a greater focus on broadening the base of asset classes away from cash and Australian shares especially into high quality fixed interest but is now the right time for investors to be making wholesale changes?  History tells us that when asset classes have experienced tough times that is the exact time to be sticking with that asset class as it will rebound.

The other aspect of the debate around Australian shares in superannuation that is often overlooked is the growing income stream that is being provided by this asset class through time, even including the past 5 years.  This is exactly what investors in retirement or who are reliant on there investments need to keep pace with inflation.

There is no doubt that Australian shares have struggled of late but it still remains an important asset class for all of us into the future.

Time for me to get off my band wagon and head into the weekend.  I wait with interest to see how the Save Our Super campaign gathers momentum.


Scott Keefer

Posted by: Scott Keefer AT 05:06 am   |  Permalink   |  Email
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