MONEY MATTERS MONDAY 27TH AUGUST 2018
Check Your Super Fund
The Financial Services Royal Commission has uncovered many instances of bad behaviour by people in financial services. The most recent revelations relate to superannuation, no doubt causing many super account holders to wonder whether their money is being well managed.
The Royal Commission has highlighted cases where the best possible returns were not earned because of conflicts of interest. In some cases, the company promoting the super fund and doing the administration also managed the underlying investment options.
This led to the lowest possible fees not being negotiated and external managers doing a better job not being used.
There were also cases where ongoing advice fees were charged without service being provided. In some instances, the financial adviser servicing the fund member left the company and the member was not allocated to another adviser but the ongoing adviser service fees continued to be charged.
Another problem involved smaller super funds that considered merging. This would have increased scale and allowed fees to be reduced. The plans were dropped because directors refused to give up their board seats as that would reduce fees paid to them and their unions.
Look over your superfund and check how it is operated
What can workers do to ensure their super funds are well managed for the best outcomes? Running super funds involves three main functions. There is the fund administration, the management of the underlying investments, and provision of ongoing personal advice and service.
It is best if all functions are not performed by staff of the same company as conflicts of interest will exist. The administrators do the tracking of investments, the accounting and the annual reporting and tax returns.
Members can check the fees in the prospectus and choose their preferred fund. They can avoid smaller funds with higher fees.
The fund managers do the money management, selecting what and when to buy and sell. They aim for high returns while managing volatility. They also want to earn high fees especially if they do well. So it is best the administrator is not also the fund manager.
Seek professional help
Financial advisers provide a range of services. These include recommending the best financial strategies for clients based on their personal circumstances, selecting the most suitable super funds and other products, and choosing the underlying investments most appropriate for the member.
Super fund members can expect ongoing service, advice and returns for the fees they pay. They should contact their advisers if they aren’t happy with the service, if their circumstances change, and whenever they have queries or concerns.
This is general advice and should not be treated as personal advice. Russell Tym is an authorised representative of MoneyLink Financial Planning Pty Ltd ASFL No: 247360.
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