In recent years, Retail super funds have been on the receiving end of some heavy criticism about the fact that they pay commissions to financial advisers, unlike Industry super funds.
Traditionally this has meant that the retail super funds have been more expensive, but is not so much the case in today’s market. Retail funds, such as the AMP Flexible Super offered by AMP, are now highly competitive with industry super funds in terms of total cost of fees. But the point that is missed is that these commissions are being paid to a financial planner who is working for you to maximize your earnings in retirement.
The commissions paid to planners are going towards time they put in to ensure maximum use of these ‘extras’. This means that a planner is actually looking at your personal situation, and suggesting a product or a strategy that is best for you. The Australian Bureau of Statistics figures indicate that 72.5% of members in Industry super funds are in the default investment strategy, compared to only 23% in retail super funds.* What this shows, is two things.
One, that Industry super funds offer a smaller variety of investment options. And two, that 77% of retail members have taken on board financial planner’s advice, and used a more suitable investment option. This is a key area that Industry super funds fall short in and brings up the point again that ‘you get what you pay for’. Because retail super funds pay planners to analyse members’ individual circumstances, the most appropriate investment option is utilised.
The cost of not receiving advice may be higher than the cost of the commission that goes to the financial planner. There are strategies that exist, such as the government co-contribution or the transition-to-retirement options that people in Industry super funds are missing out on because they don’t have someone annually re-evaluating their circumstances. In the long run, the advice received from planners can add thousands of dollars into your superannuation balance at retirement, by efficiently utilising the superannuation tax environment for example.
What it really comes down to is this question… What would you rather?
Warning: This article contains general information only. It does not take into account your objectives, financial situation or needs. Please consider the appropriateness of the information in light of your personal circumstances. AMP Flexible Super is issued by AMP Superannuation Limited, ABN 31 008 414 104. Please consider the Product Disclosure Statement (PDS) before deciding whether to buy or keep the product. The PDS is available at amp.com.au