iNetWorx: Making Super Make Sense

THE CHALLENGE and THE SOLUTION

If 2022 taught us anything, it’s that the standard Super funds are failing to live up to our expectations both in terms to performance, but also in how they plan on protecting you against future losses.

The average return for A standard retail or industry fund was -5.1%

99.5% of the usual fund options were structured ineffectively and provided zero active risk management against losses, lost billions of their members money, yet still charged their members fees when they made no effort to protect them against these losses.

The total cost to Australian Super funds was $150 billion

What Went wrong?

Most people have no idea of the flaws that exist in most Super funds.

Here are the main takeaways:

99% of Super funds don’t manage money: Your standard industry and retail funds don’t manage your money, they leave that job up to you.

The way most of these funds work is by handing the responsibility of investing it to someone else, and because they don’t invest it, they don’t have the ability to manage your money through the ups and downs of a normal market cycle.

Zero risk management: No active risk management means when the stockmarket falls like it did in 2022 they just watch as your balance falls and make zero effort to remedy the situation.

Zero performance management: As markets change from boom to bust, they make no effort to diversify the way your moneys invested.

Whether the market is falling, or rising, your Super fund is do nothing to mitigate risk or maximise your opportunities to make solid returns when they present themselves.

Retail and Industry funds: These are the funds that lost the most amount of money in 2022. They are passively managed (which means no one is managing your money at all) provide retail rates of return instead of wholesale, provide no active risk management and wear no accountability for how your Super fund is performing.

Why would you leave your retirement in the hands of people who don’t invest your money, don’t manage it, and provide zero risk management to protect you from losses?

UNDERSTANDING your options

There are several options when it comes to Super funds, here are the two most common:

  • Retail Super Funds: Often the go-to for many, but it's like choosing a basic package when there's a premium one available. Theres no active risk management, no active performance management, very little communication and the responsibility of managing your funds investment split is up to you.

  • Industry Super Funds: These are operated the same as retail funds, but the profits aren’t going outside the fund to shareholders or financial interests, they just keep them for themselves and re-invest them back into marketing, client acquisition etc.

HERE'S WHAT YOU'RE MISSING

  • Wholesale Funds: These exclusive funds are the gems of the industry, accessible only via financial planners. This approach cuts out the middleman, can provide much higher returns, as well as more responsible risk management to protect to you from unnecessary losses.

  • Self Managed Superannuation Funds: A Self-Managed Superannuation Fund (SMSF) is a when you set up your own private retirement fund allowing for more flexibility on how your Super is invested but require members to manage compliance, investments, and administrative tasks.

retail vs wholesale: what’s the difference?

There are several key differences between wholesale investors and retail investors when it comes to risk management, performance and a more sophisticated strategies when it comes to managing their money.

Retail Investors

  • Scale of Investment: Retail investors are individuals or small groups of individuals who invest smaller amounts of money in the financial markets. They typically invest their personal savings and retirement funds like Superannuation.

  • Access to Information: Retail investors usually have access to general financial information through public sources, financial news, and online platforms. They might not have access to the same level of in-depth market research as institutional investors.

  • Sophistication: Retail investors are generally less experienced and less sophisticated compared to institutional investors. They often have limited knowledge of how their money should be invested and managed.

  • Risk Management: Risk management for retail investors often involves diversification, which means spreading investments across different asset classes to reduce the impact of any single investment's poor performance on the overall portfolio. The issue with this approach is it’s a set and forget strategy and still leaves the bulk of your funds exposed to unnecessary losses.

  • Performance Expectations: Retail investors typically have long-term investment horizons and goals but these are often eroded due to fees, no risk management and sub-par performance metrics.

Wholesale Investors

  • Scale of Investment: Wholesale investors, also known as institutional investors, are usually entities such as pension funds, mutual funds, hedge funds etc so they manage large pools of money on behalf of multiple clients or beneficiaries.

    Through our national network you can get all the benefits of a wholesale investor without having to have a massive balance they would require if you were to try and approach these funds on your own.

  • Access to Information: They have access to extensive market research, analysis, and proprietary information due to their size and resources. They hire experts and analysts to make informed investment decisions and keep up with how the markets are trending day to day.

  • Sophistication: They are typically more experienced and sophisticated when it comes to understanding the financial markets. They make appropriate adjustments when necessary and can read industry and market trends across the space of days, months, years and even decades.

  • Risk Management: They tend to have more sophisticated risk management strategies that look for defensive positions when the markets are shaky to protect you from unnecessary losses.

  • Performance Expectations: They often have specific return targets to meet the needs of their clients or beneficiaries. They take pro-active steps to protect the money they manage and have a strict investment mandate they adjust daily to ensure your funds are in the best possible position to capitalise on any opportunities that present themselves.

In summary, retail investors usually have smaller investments, limited access to information, and a more cautious approach to risk management and performance.

Wholesale investors, on the other hand, usually require larger investments unless you go through a financial planner, greater access to information, and the ability to employ more sophisticated strategies that have the potential for much stronger performance.

CONCLUSION

While it's easy to feel disheartened by 2022’s results but remember that knowledge is power. By understanding all the options available to you, you can take control of your Super in a way you hadn’t imagined before with results that will give you the best possible transition into a smooth and comfortable retirement.

Don't be a victim of the financial markets; be its master.

The choice is yours.

how we can help

Contact us today and our network partners will put together your very own customised Superannuation comparison and Statement of Advice for free.

While many superannuation experts charge upfront fees ranging from $3,000-$7,000 for a comprehensive Superannutaion comparison, our network waive the upfront fee and provide you with a full Superannuation comparison report, comparing your current Superfund to 1000+ other options not usually accessible as a retail investor.

iNetWorx Superannuation Reports

KEY ISSUES addressed in report

  • Market Volatility: In 2022, MySuper products experienced a decline of -5.1% and balanced growth options dipped by -4.8%.

  • Decreasing Purchasing Power: With inflation rates soaring to 7%, the real value of money has been significantly reduced. This means a balance of 200K now only has the purchasing power of 186K so it has lost the equivalent of $14,000 in one 12 month period just from inflation alone.

  • Economic Upheavals: Notable events such as the Russian invasion of Ukraine and heightened inflation rates have negatively impacted global markets and, by extension, superannuation accounts. Most funds made zero adjustments when the markets were affected by things outside of your control.

  • Over-reliance on Super: Sole dependence on superannuation during economic downturns can jeopardise retirement security. This would be fine if our pension system was sustainable, but they are pushing the age of retirement to 70 which is why most people end up dependant on a pension at some stage after they retire or working well past the age they want to stop working.

  • Inadequate Government Aid: For those with insufficient super, the government's assistance remains disappointingly minimal, often barely surpassing poverty levels. This situation will only get worse as more people retire and become dependent on the government just to keep the lights on and food on the table.

  • Overwhelming Options: With over 1,000 fund options available in Australia, selecting the right fund can be such a daunting task that most people don’t even know where they should start.

  • Increasing Healthcare Costs: Approaching retirement typically brings with it heightened healthcare needs, which can significantly deplete savings and eat into your Super much faster than you anticipate.

  • Hidden Pitfalls in Fund Choices: Some Super funds, despite their appealing exteriors, come with high fees or underwhelming performance that can silently erode one's savings.

POTENTIAL UPSIDES

  • Access High-Performing Funds: Utilising insights like those from our national network can identify and tap into top-performing funds in the market, offering much higher returns than most standard industry and retail funds.

  • Access Wholesale Funds: Typically accessible only via financial planners, these funds consistently outperform standard options, offer robust risk management, and have reduced fees due to the absence of retail intermediaries.

  • Tailored Super Strategies: Using a Financial planner ensure a deep understanding of individual dreams and goals, financial positions, and risk appetites, leading to tailored super recommendations that’s a perfect fit for where you are today, and where you want to be when you’re retired.

  • Active Management: Regular oversight and timely updates of your investments ensures you maximise your ability to protect yourself from losses while also identifying high growth opportunities when they present themselves.

  • Constant Re-evaluation: Major life changes can serve as indicators to re-evaluate and adjust super strategies and contributions. An annual review is also included as a part of the service they provide to keep you up to date with any changes you need to know about.

  • Expert Guidance: Employing experts, means you’re getting the best possible advice, from industry experts, without cost or obligation.

  • Harness Compounding: Initiating early can lead to considerable wealth accumulation due to compound interest. Get in early and watch your Super balance explode!

Effect on Finances

  • Stop Losing Money: In 2022, a person with a Super balance of $250,000 at 45 could have faced a short-term loss of $18,150

    The money lost by his fund invested at 8% equates to $104,000 over 22 years!

  • Maximise your returns: With active risk management, daily performance management and ongoing communication and re-evaluation of your funds’ performance, your giving yourself the best possible chance of maximising your returns and retiring completely self-funded.

  • Inflation proof your Super: The influence of inflation can swiftly erode savings and the overall purchasing power of your Superannuation when you retire. Don’t leave your money with a fund that isn’t doing everything possible to combat the effect inflation has on your hard earned money.

  • Carefree Healthcare: With escalating healthcare costs, retirement funds can be substantially reduced. Make sure you have more than enough, because the only thing worse than running out of money, is getting sick and not having the money to seek adequate care when you need it.

  • Don’t be a statistic: Avoid the realities facing most Australians who are forced to work well past retirement age or retire with insufficient Super and end up on a government pension.

DONT WAIT

The best time to start doing something about you Super is now.

Enter your details below for your very own customised report.

And while you’re at it, why not access our other free reports that show you how to beat the banks, save thousands in tax every year, save thousands on unnecessary advice fees and access direct to wholesale investments all for free!