Advice, member education key to default fund selection
Superannuation funds that offer financial advice and member education should be better regarded for selection as default funds, according to the Financial Planning Association (FPA).
The FPA has used a submission to the Productivity Commission (PC) inquiry into superannuation competitiveness and efficiency to argue for both the creation of an independently built list of appropriate default funds and criteria which encourage default members to become engaged.
“One of the criteria that should be taken into account in selecting default funds should be the extent to which the fund encourages default members to become engaged,” the FPA submission said. “For example, funds that facilitate advice and workplace education encourage members to develop a financial plan for their retirement.”
The submission also argued for mechanisms being put in place to ensure default members did not remain in inferior products.
“The risk of members remaining in inferior products could be managed by considering the history of volatility of fund performance on relevant criteria, including net investment performance,” the submission said. “Evidence of funds reducing performance after being selected as a default fund should be taken into account in assessing history.”
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