There’s no question that the industry-fund sector has been leaking members to the self-managed world for some time, but now the industry funds are increasingly striking back.
One of the key reasons people have been drifting to the self-managed superannuation fund sector over the last few years has been a need for control.
It has been well documented: that moment when people have opened their fund statement to see their balances eroded over the global financial crisis has often been followed by an expletive and the declaration that they could do better themselves. Many people, for better or for worse, are acting on that.
In reality, the three pillars of a self-managed fund tend to be direct equities, term deposits and direct property – not a hugely complex mix of assets.
Interestingly, we are now seeing a trend for industry funds to offer a range of increased choices within their fund umbrella. This is happening to such an extent that it’s almost possible to have a self-managed fund within a fund, and without the reporting and compliance obligations that can make self-management onerous and even expensive.
As Paul Cahill, chief executive of Club Plus – the focus of our Investor Profile on page 24 of this month’s print edition – says so plaintively, “Why did it take us so long?” Club Plus is one of the growing number of funds that are giving members the opportunity to make greater individual investment decisions within their fund.
This is moving well beyond the traditional selection of choice accounts and increasingly towards a degree of self-management. Club Plus began with retail deposits and will soon offer direct shares.
Cahill says he’d love to offer direct property but hasn’t yet worked out how to do that under a trustee structure. However, there are exchange-traded funds that can replicate that, even if they might not satisfy the primal Australian urge to drive past bricks and mortar and know that you own it – or at least part there of.
Australian Super has been doing this for some years and is now enhancing its offering. The fund has a Member Direct option, which enables members to invest in ASX 300, exchange-traded funds and term deposits. This option is an upgrade from the fund’s ASX 200 option, which has been in place for several years.
The attractiveness of this sort of investing is obvious for many people. Of course there will always be those who aspire to having their own funds, and for some – particularly small-business people with property investments – it is attractive.
Independence with a safety net
Many others, however, will find these kind of opportunities the best of both worlds. The self-managed world is full of people who thought they could do a better job than their fund, only to realise they have crashed and burned their retirement savings.
With this approach, people can enjoy the security and protection – and fees – of a fund while also branching out on their own. It’s risk management on a personal level.
The trend is an interesting evolution in the industry, and one which could help slow the leak towards the self-managed sector.
In the AIST trustee survey, covered on page 22 of this month’s print edition, respondents very strongly believed that the SMSF sector would continue to grow over the next three to five years.
That may prove to be true, but with innovation from the industry side, some members pondering leaving the sector might find what they need in the new product offerings.