The monthly data provided by superannuation researcher SuperRatings shows that industry funds have outperformed retail funds in the “short, medium and long term”, ISA said.
Over a rolling 10-year period industry super funds returned members 6.13 per cent, while retail funds returned 4.10 per cent.
On a shorter timeframe, industry funds outperformed bank-owned super funds by 2.11 per cent, 2.24 per cent and 1.96 per cent over one, three and five-year periods respectively.
ISA chief executive David Whiteley urged young workers to switch to a fund that delivers all profits to members.
“Over the long, medium and short term, independent research consistently reinforces that member’s benefit from the strong ‘all profit to members’ philosophy that drives the industry super fund sector,” Mr Whiteley said.
“Today’s data further underlines the need to maintain the current default superannuation system, which ensures only high-performing super funds can be used as default funds by employers.
“This is an important protection for millions of Australians who rely on this system and don’t actively make a choice of fund,” he said.
Another update from Chant West with data for FY 2015 and not for profit funds have taken all the TOP 10 spots. The retail funds no where is sight. The not for profit funds continue to outperform retail funds as has been the case for a few years now. Guys time to act in the best interest of the client. Please do not go off on tangent and bag the author and David and simply accept the facts presented by independent entity Chant West.
The purpose of the responses Mr Duck was to highlight the misinformation re investment performance being presented by the industry fund movement as fact. Advice practises do not compete with industry funds ( that is a contradiction in terms ) and advice is regulated by a best interest duty.
And I thought that we were all trying to change our “industry” to a “profession” where we give good sound quality financial advice the people of Australia, not bag each other publically as to who is the better fund.
Come on guys, it is the job of the planner to ensure that whatever fund we choose for the client meets the best interest duty for the client at the time. No doubt we would all do our research to ensure that the client received the best advice / fund that they need.
grow up.
Goose, that same client bought a BMW or a Merc and not a Hyundai which does the same job.
We live in a democratic state, not a communist one, much to some people’s chagrin.
Think you will find the individual with an ongoing relationship has paid a heap of $$$ for ongoing reviews, invested in an underperforming fund and bought the adviser a new BMW….and a holiday home by the beach….and perhaps a boat. Turns out that book of clients the adviser BOUGHT was a great investment
How about a survey that compares the total financial well-being of someone with an “outperforming” industry fund who gets NO financial advice to someone with an “underperforming” retail fund who has an ongoing relationship with an adviser for 10 years…
THINK YOU WILL FIND that the advised person ends up well in front and no doubt is better protected too with appropriate estate planning and risk management strategies in place!
And interesting Wildcat that Super Ratings only compare to ‘retail’ super funds that are now ‘old school’ legacy type products and not the type of super funds used by most advisers these days – ie: super wraps, MDA’s, etc. But as you say, don’t let the facts get in the way of a union sponsored spin doctor…
Pavel, did you note 12 months ago some union funds were quoting 15 year returns as their 10 year numbers were lower.
But “don’t let the facts” get in the way of a union sponsored spin doctor.
So in summary industry funds are better than everyone else by 2%pa but only if they are not high growth funds and only if you select time frames when commissions were included in retail fund unit prices. Can anyone explain how the cost of industry fund peak time TV advertising and sponsorship of football teams benefits existing members ? How are these costs incorporated into the performance? Can anyone explain why industry funds are allowed to continue misleading advertising in the compare the pair adds ? Or why there is no one in industry funds with sufficient moral fibre to stand up against these lies ?
NoneOfUrConcern[quote name=”NoneOfUrConcern”]Good question James. I have wondered that too. Some industry funds/profit to member funds cap these fees once account reaches a certain level but the majority of funds are uncapped.[/quote]
I am yet to see a cap on any fund. I have seen tiering of fees for larger balances in some funds, but I have seen no capping of investment management fees anywhere.
If there are specific examples of capping, would be great if you could point them out.
Good question James. I have wondered that too. Some industry funds/profit to member funds cap these fees once account reaches a certain level but the majority of funds are uncapped.
I’ll expose my ignorance here I’m sure, but a simple question hope I can get an answer to.
If fee for service or flat fees are totally the solution, why do industry funds charge percentage based asset investment management fees?
(for that matter it is not just industry funds, but all funds, though it is industry funds who are strongly against percentage based adviser fees).
For investment management, why charge someone with $1 Mill 10 x more compared to someone with $100,000 for essentially the same service?
Wow, I am genuinely amazing by how many people buy into the industry vs retail fund advertising.
Modern industry funds are basically the same cost and perform similarly. Nothing wrong with industry funds (outside their admin) but these performance comparisons are very misleading…
There is a reason they have been done for misleading advertising in the past and can no longer run the ‘compare the pair’ adds with figures.
Doesn’t this article reference 10 year returns most prominently? Come back in 7 years Champ! Lets see if BT is still there.
I did notice that BT features only in High Growth (91-100) and not in ANY other asset range. Dont be so nave as to think BT is (or retails funds are) the best fund(s) because you made number one in only one category. It is difficult to stay up there, dont get too cosy. Also, I struggle to believe for a second that all of your clients are in the High Growth option. Get back to work Concerned and dont be such a silly sausage!
Concerned, yes I am! In my experience over a number of years working in both the retail and industry fund sectors I have only come across a handful of investors that would actually be high risk investors. Highlighting a fund with such a high weighting to international equities is irrelevant.
Both the crediting rate and unit pricing approaches are means to the same end. The ultimate test is whether members’ interest are properly served and that is the end goal. Both methods of calculating a members interest are externally audited.
As pointed out by ‘informed’ the retail model was set up to provide shareholders with profits vs the Industry sector to benefit and return profits to members. When there is such a contrast in business models it is the member who ultimately losers out and pays for it.
Sour grapes I would be happy to disclose the fund but I have no interest in trying to educate you on the limitations of comparing crediting rates,smoothed returns and unit pricing. My purpose of communicating via this website is to dispel your lies to others.
Recommend that you refer to the best performing high growth fund in the Super Ratings website. It is a retail fund and achieved 18.19% over the last 3 years which is 3.68% pa better than the nearest industry fund.
Interesting debate. But as usual, the retail fund cheer squad, and Funky in particular, continue to spin their wheels arguing over whether a retail fund outlier is superior to ISFs, etc.
As ever, the only effective, tangible and solidly defensible measure is the return that the customer actually receives post ALL fees, charges, taxes, etc. the SUPERRATINGS survey is wired that way, as all should be.
As to why some retail funds with supposed better performance aren’t in such surveys, well, maybe some of the executives of such funds can provide an answer to that – have you asked them Funky? I’m sure what they won’t tell you, but as a trained statistician you’d of course know, is that the survivor bias of these funds is appalling and rarely can you find any retail fund that has stayed the course anything like those of the main ISFs.
But don’t let such facts get in the way of a good old ‘evil empire’ conspirator story.
Concerned: do you charge flat fixed fee or every client the same % for advice? If the former than you cannot say exactly what the net return (net of all mgt/admin/advice fees) is as the fixed fee as a % will vary depending on the clients balance. If the latter than your an idiot as you charge someone with a million 10x what you charge someone with a balance of $100k for similar advice. Just accept the fact that industry funds have you by the marbles in this case!
Is it in clients best interest to be in a low cost, high returning, profit to members fund. Or in a high cost, lower performing, profit to shareholders, volume bonuses to advisers fund?
Appears to be a rhetorical question.
Yes goose shooter we know that the strength of your anti-adviser bigotry relies on quoting the bad apples in the industry. Now how about answering the specific questions I put to you to explain. It seems that you and Pavel have nothing to add but ill informed cheap shots. Its ironic that you want to see better education standards imposed on advisers. Keep shooting goose it reinforces the ill informed bigotry that now defines the industry super funds and their cheerleaders.
Hi Concerned,
Could you please explain to me why a fund that has a unit price versus a fund that has a crediting rate system effects the actual performance figures of the investment option?
I think when you answer the question you find it makes absolutely no difference at all. And you will find that performance returns are quoted net of fees and taxes at all funds. Figures which a collated by Superratings and Chantwest.
I think you will also find that all funds are independently audited every year and regulated by APRA.
Is this a case of sour grapes?
Also what is the name of this 12.53% returning fund you speak off. Why keep it a secret?
Thanks goose shooter for reminding everyone about salesman in this debate around industry funds. Are you including Mr Whiteley and/or those “advisers” that work for industry funds that only have industry funds on an APL to recommend as salesman?
The difference in the returns between industry funds and retail funds is primarily due to fees. The retail funds have to generate profit for their shareholders whereas industry funds are not for profit organisations. To generate profits for their shareholders they have to charge customers higher fees. It is not your fault but that is just the model that retail funds operate under. They are meant to generate a return for their main stakeholders and pay good dividends for their existence. The numbers speak for themselves and come from an independent company SuperRatings. They also make the comparison on many other parameters not just performance on the website. So just accept the fact that performance of industry funds is better than retail funds by 2%pa over the 10 year period.
Interesting comments regarding market lies. How many Financial Advisers have been banned by ASIC? I can’t recall any of those being from an Industry Fund. I also can’t recall an Industry Fund be subject to an enforceable undertaking by ASIC. These market lies, dodgy advice seem to be coming from the retail sector. Hopefully better education standards are imposed on advisers to clean up the industry and get rid of the salesmen from days gone by. Or is the FPA more concerned about protecting their fee revenue than the customer?
Goose shooter the performance numbers I quoted are NET of all fees including ALL advice fees. These numbers can be independently verified. How do we independently verify the industry fund performance figures when the majority of industry funds are not unitised. The benefit of unitisation is that all costs ( including built in commissions you referred to – which are no longer applicable on new investments ) are included. Therefore we cannot compare apples with apples as the claims by many industry funds that their admin fees are $1 per week are a blatant lie. They deduct advertising and other costs out of fund earnings but how they are incorporated in their performance comparisons God only knows. Goose shooter please explain why the industry funds are reluctant to introduce unit pricing and better governance ? is it because they want to market lies and get away with it ?
The problem with Super Ratings and comparison websites is that they only include investment and platform fees not the disgusting graft of advisor fees and commissions charged….no wonder Industry funds significantly outperform. In reality Industry funds have most likely outperformed by a greater margin once advisor fees are taken into account.
They choose the older, high cost retail funds to compare themselves to. The funds available over the counter at just about every bank these days performs inline or outperforms an industry fund…
Pavel you have gone very quiet. Lets debate the longitudinal evidence you claim provides indisputable evidence of industry super fund outperformance by over 2%pa. Please note that I am a planner with 20 years experience and degrees in finance and accounting as well as psychology. I am therefore educated in research analysis and statistics. I also have several clients actual performance that can be independently verified. I don’t expect David Whitely to respond – why would he ? has been getting away with this for years. But what about you Pavel- are you going to take the debate on or shall we drop your comments in the trash you mentioned.
I just went on a website to check the performance (net of all fees ) of one of our clients bank owned super funds for the 3 years to 31/10/15. The result was 12.53% pa (net of fees )for a diversified growth fund which would have ranked it No 1 on the Super Ratings 3 year performance comparisons. Why wasn’t this fund included ? We also looked at a less conservative diversified portfolio and it generated 11.56% which would have rated it just outside the top 10. Super Ratings and David Wheatley have some explaining to do. 2% pa better performance ??? The numbers do not stack up. I can see grounds for another ICAC enquiry. Politically motivated of course.
The industry super fund marketing spin should not be condoned by this website. There are no facts to support these assertions and Super Ratings themselves state on their website that they cannot guarantee their performance comparisons.
Alarmingly these untested accusations are not only being used to market their product but also used as a defence against the need for proper governance. An absolute disgrace that this garbage was published. Why hasn’t the content been checked before being published. Same on you IFA.
The longitudinal evidence continues to support the ISFs contention that the all profit to members model continues to deliver superior net performance (200+ basis points) vs bank owned funds.
Rather than continue to trash-talk this indisputable difference when will we finally see the Banks and their cheerleaders do something to replicate or hopefully better this long-term dominance?
So what data is used to come to these results? Simply stating that industry funds have out-performed retail funds without any data to show exactly what metrics were used to come to this conclusion is very typical of ISA and why they have repeatedly come under fire from ASIC when making their statements.