Wattle Partners partner Drew Meredith told ifa that with dramatic falls already seen in some of Australia’s largest industry funds as the share market slumped over the past weeks, the government’s recently announced initiative to widen eligibility for early access to super was likely to cause further declines in industry fund performance.
“We have already seen Australian Super’s balanced option fall around 25 per cent from its high, and the recent announcement that workers will be able to access their super benefits of up to $10,000 is in our view some concern for the industry funds, particularly those with a lot of members,” Mr Meredith said.
“We are somewhat concerned about their liquidity, with just 3 per cent or 5 per cent cash in many of these options and most pension payments traditionally funded through incoming contributions, which are now likely to slow.”
Mr Meredith added that the firm had seen a threefold increase in client inquiries since the market rout began, with a number of those being current industry fund members who were receiving limited support from their fund.
“The reality is it’s difficult for super funds to give personalised advice with fund members running into the millions and typically directed towards websites or phone applications to answer complex questions,” he said.
“Many have access to inexperienced help desk people who can only offer to change investment options and are certainly not equipped to deal with major investment decisions.”
Mr Meredith said he expected requests for support to continue to increase over the coming weeks, as professionals became increasingly used to working from home and had more time to think about secondary concerns, including their finances.
“Our priority is in assisting and supporting our clients through this difficult period – we were more prepared than most advisers, but this is still an emotionally difficult time,” he said.
“We have reached out to clients via our newsletters offering a free second opinion if they are thinking about changing their investment strategy, or [considering] an investment option which history has shown is generally a bad decision.”
Compare the pair – Industry super have abused Financial Advisers for 15 plus years.
Now they are the ones wanting people to get more Advice to try to save them from their own Illiquid funds.
And how is this advice paid for ?
Hidden commissions charged to every member.
Fees for no Service hey Industry Super.
And how is this Advice delivered ?
Their own Vertically Integrated Advisers that fail to meet client Best Interest Duty.
We’re All In This Together – as long as you don’t ever want your super money and don’t mind paying for Financial Advice you mostly never receive.
Quality Union Style
[quote=Anon]May being the important word. This is nothing more than the bulk of the industry hoping like hell it goes sour for the Industry funds.[/quote][quote=Anon]May being the important word. This is nothing more than the bulk of the industry hoping like hell it goes sour for the Industry funds.[/quote] It is fine for them to defame advice for all these years with their slander about ‘compare the pair’ rubbish but when the tables turn they don’t want to be held to account. Shame on the Industry Funds. The sad thing is they will not be held to account for this and the CEO’s will get their big fat pay check and members will be the ones who suffer through poor returns, no liquidity, no advice and poor decisions.
The writing has been on the wall for years. Industry funds- often called balanced or stable- with 70% or more in equities have been high risk waiting for an event. Financial planners MUST make sure when they recommend a capital stable or balance fund- it really is that.
Clients who “get no advice” because they dont want to pay for it- may have paid dearly by loosing 20% or 30% -in two months- more than they would have paid in fees in twenty years. My adviser Doug Henderson of Henderson Ross and CO has had clients in cash for over 6 months. Stop knocking advice.
By my calculations if single members can withdraw $10,000 this financial year and a further $10,000 next financial year and Hostplus has over a million hospitality employed members. Hostplus face the very real possibility of up to $20 Billion dollars in potential withdrawals before this 2020 calendar year has finished.
Guys,
The fact that industry funds have invested in illiquid, hard to value assets is a design feature of their investment philosophy. One they have boasted as being central to their outperformance. The fact that these illiquid assets probably have no realisable value in this market is beside the point.
The real issue is that they are scared of being forced to pay out a small amount of super to people in dire financial need.
Heaven help them if they complain of being illiquid, given that their investment strategies are required by law to address liquidity risks.
Even more interesting is APRA PPG233 Pandemic Planning. [b]Its dated 2013[/b][b][/b].
Mayhap a few investigations as to compliance with the PPG by Industry Funds is required.
But don’t worry; “We’re all in this together.”
Epic post
Appropriate that their slogan is like the amusing Hannibal Lecter quote: “Don’t worry if we run out of food, we’re all in this together”.
Although there is reason for concern where a majority of someone’s super is in growth based assets advisers need to tell their clients not to cash out or transfer to other funds, if one thing history has shown us it’s that markets always come back and if investors “weather the storm” they will be ok
Australian Super balanced fund is down around 30% growth option about 40% tick tick tick
How about compare what is happening with an AMP growth option or any of the other retail funds. They would all be in the same boat.
But they are liquid
AMP and other private sector super funds are actually down by more than “industry” (union) funds of the same asset allocation. That’s because asset valuations for private sector super funds are more up to date. Union funds use lots of unlisted assets which have delayed valuations.
Switching from a union fund to a private sector fund right now potentially allows you to sell assets in the union fund before their price has gone down, while buying the same sort of asset in a private sector fund after the price has already gone down. Classic arbitrage.
Interesting that you suggest comparing AMP Growth with Australian Super “Balanced”.
Obviously you are aware that the “Balanced” options of Australian Super, HostPlus and other union funds are not balanced at all. They are deceptively labelled growth funds. Not many members of those funds would be aware just how much growth exposure they actually have, but they’re about to find out!
The industry super funds are the time bomb of financial services , no adviser fees wont help members when liquidity rears its ugly head. The property fund of Aust super can freeze redemptions for 2 years, and if you check the unit price over the last 3 months has not fallen ….as julius sumner miller would ask…. how is that so ? Answer because it is not a market to market valuation
I agree that what the Industry funds do re unlisted assets is wrong, especially with many of them being classes as both growth and defensive at the same time. However, I find it disgusting that many advisers on this site seem to be willing their downfall.
Is that similar to the ad campaigns from Industry Funds willing the downfall of Advisers?? Asking for a friend. I’m disgusted at your disgust.
As an Advise, I’m not just “willing their downfall”, I’m praying. Also looking to move as many as possible from Industry Super while they have high unit prices and more importantly the cash.
I don’t think they are allowed to use contributions to fund pension payments…. that sounds made up
It would be possible if a pension member who held the default option was having a pension payment made on the same day as the super member was making an equal contribution which was going into the default option, the fund could just not sell any underlying investments.
Same way as a stockbroker might receive an instruction to sell 1,000 BHP shares and buy 1,000 BHP shares at the very same price and time. They don’t go into the market and execute both, they just offset them.
in the same way excess franking credits from pension members are credited to accumulation members? I think Unisuper announcement that they’ve stopped lending shares out, (profiting from option premiums) is a clear message that not is all transparent as we’d like in super world.
Advice is imperative at this moment in time!
My relevance and worth being an adviser to ordinary mums and dads is definitley an asset for their well being.
Who wants to call 1300………… and talk to a random call centre person with minimal knowledge and pretend empathy at this time. I genuinenly want to improve my clients well being!
didnt try to call hostplus today did you? recommend and email, letter, FAX! They are not gong to be real quick to the party on these 10k cash payments
I bet they are using the same techniques they have perfected over the years for “adviser blocking”.
1. Throw away the form without processing it.
2. When client rings to follow up tell them form never received.
3. Repeat above steps 3 more times.
4. On 4th attempt tell them the form they used is out of date. Post (not email) them a new form.
5. Tell them their signature not clear enough. Send again
6. Tell them signature needs to be witnessed. Send again.
7. Tell them witnesses signature in wrong colour pen. Send again
8, Tell them witness not in our acceptable categories of witness types. Send again
etc
etc
etc
What are the dates that Mr Meredith is using for a 25% fall from the high watermark for the Balanced fund? It doesn’t fit with the published crediting rates.
So, how do they do that?
I wonder how the masses who followed the ” general advice” of the barefoot investor and opted for the Host Plus Balanced index fund ( 75% growth assets ) based solely on its low fees are feeling right now ?
I had a client calling me crying from happiness that I convinced her not to use that book as her advice. She was 1 year from retirement I pulled her back to 20 growth 80 defensive and she can still retire happily now.
That book needs to be banned.
I’ve had a few new insurance clients who previously switched their super to HostPlus based on Pape’s “general advice”. In doing so they had lost their auto accepted insurances from their employer’s default super fund. Luckily none of them had underwriting issues, and I’ve been able to secure them replacement insurance.
But there will be plenty of Pape’s disciples who end up losing the only decent insurance they could ever get, by blindly switching to HostPlus based on their faith in the Barefooted One.
Will be interesting to see returns of Australian supers Balanced option. It has a very overweight position in growth assets reflective to its balanced profile. It’s more like a growth fund asset allocation.
There is definately an arbitrate opportunity for members moving from growth options to more cautious options within industry funds right now, at the expense of other members within the fund.
Or moving from growth options in union funds to growth options in private sector funds.
Industry funds caught out holding unlisted illiquid assets with opaque valuations. Now the tax payer to provide the liquidity.
Maybe they will now actually find out what those ‘Alternative’ assets actually are
Yessss
All of these issues highlight the value of advice! Clients have never needed advice more and yet it has never been more difficult/expensive/slow to provide for many in the advice industry.
Industry funds have been dishonest and they are about to be caught out notwithstanding Justice Hayne gave them a free pass on this behaviour.
Justice Hayne and his team of lawyers, would not of understood the complexity around industry funds. They had no financial qualifications. Adviser ethics state if you don’t have the expertise you cannot provide advice. Justice Hayne should of declined the job to allow someone with better knowledge of the industry, I guess his fees were too enticing to turn the job down. Excellent demonstration of proper behaviour!!
Let me guess, Industry funds are dead and the best option is to call Wattle Partners and get them to invest the funds for you. I assume you have managed to get your clients through with no losses.
Yes, and a better idea than staying with Industry Super. How are they (Industry Super) going with all those unlisted assets? Will they (Industry Super) be able to pay you your $10K? Wouldn’t think there are many buyers for those unlisted assets particularly at the valuations it appears Industry Super has them booked at?
Hes not talking about investment returns, he is talking about the illiquidity of the industry funds, which may blow up in their faces big time.
May being the important word. This is nothing more than the bulk of the industry hoping like hell it goes sour for the Industry funds.
Yep definitely hoping it does! Better an early pre-emptive end to the world’s largest ponzi scheme than waiting the 15 years until retirement outflows are higher than contribution inflows and it all goes pear shaped on an even larger scale then.