Major banks falling behind on term deposit rate offers
SMSF practitioners should encourage clients to investigate term deposit products beyond the big four banks, as many mid-tier banks are offering higher interest rates, says the chief executive of Cashwerkz.
John Edginton, the chief executive of the online term deposit marketplace, said SMSF investors have stayed in the same term deposit product for years and could be receiving a higher rate from some of the term deposits on offer from mid-tier and third-tier banks.
“A lot of SMSF investors are used to dealing with the big four banks and they don’t understand second- or third-tier banks that don’t have branches,” he said.
“For these reasons they may be apprehensive, but the second-tier banks have the same government guarantee for term deposits.”
Mr Edginton said many of these second- and third-tier banks offer rates above the major four to make up for the fact that they don’t have the same levels of exposure.
In the past, the paperwork associated with changing term deposits was a deterrent for many people, but with the introduction and ease of new technology this is no longer the case.
Between the big four banks, the rates on offer for term deposits can vary substantially, and it is worth investigating other products, Mr Edginton said.
Given the recent volatility in the economy he expects SMSFs to increase their allocation to cash and term deposits.