It pays to be cautious: Industry Super Funds

Author: Jonathan Llewellyn | Financial Adviser | HFB Private Wealth

1. Fees and Costs

• Higher Fees: While many industry super funds market themselves as having low fees, some may have specific investment options or insurance premiums that result in higher-than-expected fees. Over time, high fees can erode investment returns.
• Lack of transparency: If you're unsure exactly what fees are being charged or how they're applied, that can be a red flag.

2. Performance Concerns

• Variable Performance: While some industry super funds have performed well historically, past performance doesn't guarantee future results. Some investors may be wary of funds that have shown inconsistent returns over time or that may not align with their long-term financial goals.

3. Limited Investment Choice

• Conservative Investment Options: Some industry super funds may offer fewer investment choices compared to self-managed super funds (SMSFs) or retail super funds, which could restrict your ability to tailor your portfolio.
• Pre-Set Strategies: Many industry super funds have default "balanced" or "growth" options, and you may not have the flexibility to pick individual stocks or sectors you prefer.

4. Control and Flexibility

• Less Control: Compared to retail platforms, where you can directly control where and how your money is invested, industry super funds may have predetermined investment strategies. Investors who want more autonomy in managing their retirement savings might be wary of this.

5. Governance and Conflicts of Interest

• Conflicts of Interest: Some investors are cautious due to the involvement of unions or employer groups in the management of industry funds. They may feel that these relationships create potential conflicts of interest or governance issues.
• Lack of Influence: Members of industry super funds typically have no direct say in the fund's investment decisions or governance.

6. Insurance

• Default Insurance Policies: Many industry super funds offer default life, disability, or income protection insurance, but some may be concerned about the appropriateness of these policies. There could be situations where the insurance coverage is too high, too low, or not suitable for the individual’s needs, yet it comes with additional costs.

7. Economic and Market Conditions

• Market Sensitivity: Like all superannuation funds, industry super funds are subject to market fluctuations. If you're cautious, it may be due to concerns about how these funds will perform in volatile or uncertain economic conditions.

And most importantly....

8. Retirement Strategy Compatibility

• Not Tailored to Personal Circumstances: Industry super funds are often structured to cater to large groups of people, so they may not offer strategies or products that align with an individual's unique retirement planning needs.

If any of these points resonate with you, it's a good idea to consult with a financial advisor to get personalised advice that takes your situation, risk tolerance, and financial goals into account.