New data from Roy Morgan indicates that customer satisfaction for retail and industry super funds has fallen. Why? Well, COVID-19 has certainly shone a spotlight on these funds.
When markets correct or dislocate, you start to see the implications to members of giving up legal ownership, investment decision making and in some cases liquidity when it comes to the management of their retirement savings. Industry and retail super funds have multi-asset investment options, which are essentially pooled funds – where the underlying investment managers make investment decisions on behalf of all unitholders or members.
Funds that have a significant exposure to illiquid infrastructure and property investments and are receiving requests from members who want to either withdraw funds early and/or switch to cash are now in a position where liquidity is a significant issue. This perfect storm is forcing some managers to sell growth assets at the worst possible time to raise the required cash to meet requests by members.
How does this impact someone who wants to stick to their long term investment strategy and ride out the storm? Although this might be the rational, sensible thing to do, depending on the super structure and investment vehicle used, this person’s investment outcome could still be impacted by the decisions of their fellow unitholders/members.
What this highlights is lack of control. SMSF members could come out of this crisis better off than Industry fund members based purely on the fact that they SMSF trustees have control.
An SMSF allows members to retain legal ownership of their super assets (something that feels more important in uncertain climate like this) and tailor an investment strategy to meet their individual needs.
Segregating growth and defensive assets means that income can be matched with withdrawals and funds can be set aside to meet short term needs, protecting growth assets and avoiding the need be a forced seller. The use of investment vehicles like an Individual Managed Account can provide the best of both worlds – ultimate control and transparency, but without the hassle of the day to day.
Perhaps that’s why the Roy Morgan study that highlighted a fall in customer satisfaction for industry and retail funds also showed an increase in customer satisfaction for SMSFs.
SMSFs are not for everyone, nor should they be. But when coupled with good advice, they can be powerful in preserving and growing retirement savings. If you would like to know more about SMSFs, get in touch with our Partnership Executive, Eric Armbrust on 0401 705 872 or firstname.lastname@example.org