Industry funds’ scale hard to overcome
Industry funds are slowly morphing into retail-style vehicles but with their larger scale will be hard to challenge and to overcome, according to a Perth-based financial planner.
Wealth and Security Planners principal Michael O'Hara said industry funds were working through a product cycle that mirrored the shifts in retail products but also had the weight of money on their side.
"Initially industry funds offered default positions and then added member options as a way of retaining members after the introduction of choice of fund," O'Hara said.
"After the global financial crisis and the increase of do-it-yourself investors they began to offer advice and direct shares to tackle the drift away to self-managed superannuation funds.
"They are becoming like their ‘enemies' but with more scale and will be hard to overcome. While they may claim to have returns that are 1 per cent higher than retail it is their mandated contributions that allows them to invest at a scale where it will be tough to compete."
O'Hara also stated that in the debate between the retail super and industry funds, the Government and the funds themselves had missed an opportunity to create a simple, low-cost superannuation vehicle.
"It would have been easy to build a government-run cash fund which would be low cost and high return, as the cheapest funds are those that offer government-fixed interest options," O'Hara said.
"However government-run funds are usually poorly run — but both sides could have tendered to offer suitable front-end management and distribution systems."
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