In a recent speech at the Conference of Major Superannuation Funds, AustralianSuper chief executive Ian Silk stated that SMSFs below $500,000 “significantly underperform” public offer funds while calling for a fresh inquiry into the SMSF sector.
BGL chief executive Ron Lesh said the comments made by Mr Silk were extremely disappointing and that he lacked an understanding about why members are attracted to SMSFs.
“Ian, like most chief executive executives and directors of industry and retail funds, simply just doesn’t get it,” Mr Lesh said.
“People move out of large funds because of the lack of transparency, the huge salaries paid to executives, the unrepresentative boards, the hugely wasteful advertising expenditure, but most of all, the desire to control their own destiny.”
Mr Lesh said the data from the Productivity Commission that Mr Silk is using to base his comments from is incorrect.
“Industry data over the past 20 years shows SMSFs, over the long term, have generally performed better than industry and retail funds. And the breakdown of funds that performed better or worse is very subjective,” Mr Lesh said.
“Some SMSFs with balances as low as $50,000 have performed better than all other funds,” Mr Lesh added.
He also noted that performance of a fund also depends on the mix of assets.
A simple example, he said, might be an SMSF with a property that has experienced significant growth and has returned 40 per cent on its $50,000 member balance.
“It seems to me that Ian is concerned when he sees so many large balances leaving his fund,” Mr Lesh said.
“Maybe he should be looking at the reasons why rather than attacking a part of the super industry that is performing well, is independent and is meeting the needs of its members.”
Regis is misguided in relation to the fees charged by AustralianSuper. Their investment option fee for Balanced is 0.66%. So, for every $100,000, that’s $660. If you have $300,000, that’s $1,980 + admin fee. Not sure if there is exit fees… this is the whole problem. They hide their fees so we’ll, so that people are lead to think that their fees are so low or non-existence. At least in a SMSF, you know what you are up to and it is in your hands.
Hi Regis,
You haven’t taken into account the investment fees, which on a balance of $250,000 in a balanced portfolio is another $1650. Yes, I believe that it is a push to have SMSF balances transferred to industry funds to help offset their loss of revenue resulting from the transfer of small balances to the ATO. Fees will be forced to increase because operating costs will have to be spread over a significantly reduced number of members.
Methinks there may a huge push to force everyone into industry funds so that maybe union-affiliated directors can then dicate to listed businesses their own agenda under threat to sell them off if non-compliant. Or is that too conspiracy-like?
Ron is so right. It’s about members wanting to actively take part in controlling how their super is invested. Even if they pay more in administration fees, when they weigh it up they rather pay more and get the control over their super. These members know it’s up to them and rather than simply forget about their super they put the time and effort into managing it themselves. We have many SMSFs under $500k balances and they do rather well. This whole negatively about SMSFs and introduction of SMSF advice licensing is just a way to push SMSFs out of the market by making them too expensive and most likely very much, in my opinion, instigated by these big salaried CEOs in retail and industry funds.
@Anonymous. I agree that everyone should be able to make their own choice and choose a SMSF if want too. I however think a lot of people go into SMSF not fully aware of the costs and responsibilities associated with it. Is it time to implement a mandatory training that prospective SMSF trustee should complete before they can be a trustee?
Ron is spot on and I would personally love to see an inquiry into all of the superannuation sector particularly with regard to all the myriad of fees that industry and retail funds charge in relation to their Fund services operations and where the dividends or cash from those are distributed. This was a big failing of the Royal Commission, And while we are at it, let’s look at the breach of the sole purpose test where Australian Super bribes contributors to their Fund with frequent flyer points. Surely the CEO of Australian Super and the Board of Directors should be penalised under section 62A of SISA?
I support SMSF run by individuals who are directly beneficiaries and responsible for their own actions and success. Industry super funds are obviously too tied to Unions who as it has currently shown, want to exert their powers on employers for what can only be described as self perpetuating advantages regardless of the MEMBERS’ own wishes and if put to a vote (by all members) I doubt that they would allow the boards to misstep their duties.
Go Ron!
To me, it makes perfect sense, when your Super balance basically hits about $250,000 that the 1% annual fee (on average) charged by the big funds becomes more than running a SMSF (average fee across industry esp new age SMSF Administrator service <$1,000 annual fee + ATO Levy $259 + very little else !!) Even my Chartered accountant gave up trying to recruit new SMSFs to his practice years ago, he knew he would cost too much, and advised me and others to head to the SMSF Administrators flooding the market.
@Anonymous, not sure I am following the logic here. AustralianSuper administration fee is a flat $78, soon to be $117, per annum. This is less than the ATO Levy alone! Switching to a SMSF will never be justified on costs alone, only real reason is to invest in assets not allowed by trustees of APRA funds.