Transparency at core of SMSF growth
As the industry, retail and self-managed super fund (SMSF) sectors of superannuation continue to jostle for position and market share, it is not investment flexibility that has dictated SMSF growth in recent years but rather transparency, according to Phillip La Greca, technical services director for Multiport.
"Transparency hasn't helped," he said. "Or at least the lack of transparency."
"So particularly over the last few years, when things have been going poorly from an investment viewpoint, in a balanced fund the question for many members has been ‘where's my money?'" explained La Greca. "Where actually is my money?"
"So transparency has been a big issue and it's about who's calling the shots, not just within investment strategy but in all aspects of superannuation."
Yet for La Greca, fee transparency has been an equal issue.
"I've always been a big believer that we shouldn't be calling the cost that funds pay management ‘fees' because they're not actually managing the fund," he said.
"The management is usually around investment management, so what they're really charging is the operational cost of running the fund and that's where it can get confusing.
"People will say, ‘I'm paying all this in fees and they're losing money for me', and it's because they don't always see the investment cost," La Greca continued.
"They see the admin cost and it's that admin cost that they focus on in the midst of poor performance."
La Greca said that, in reality, there were three costs that super fund members, irrespective of sector, needed to be mindful of; the advice cost, the administration cost, and the investment management cost.
"But this is one of those problems, that translation of what you're actually paying for — because no one actually has that discussion," he said.
"And so every year a client gets his member statement and sees these fees coming out of his account and he's saying, ‘well, what am I getting for it?'
"The only thing that he can actually see that he's getting for it is this negative performance," La Greca continued.
"He doesn't understand that what they're doing is all these other things; making sure that the fund follows the rules, making sure that information is there and available, reporting to the various regulators, all of that sort of thing.
"Now obviously different sectors have different bases for how they charge, but I think that's part of the appeal of the SMSF: you know exactly what you're paying and you know exactly what you're paying for."
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