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Written by Kris Wrenn – Senior Adviser
A few weeks ago as part of new legislation known as Your Super, Your Future, APRA released the results from the MySuper Product Performance Test.
What are MySuper funds
There are 80 MySuper products across Australia at present. Most of us have had the experience of going to work for a new employer and being told that they have a “default” Super option available, for those that don’t yet have Super or don’t wish to contribute to an existing Super account. From 2014 ONLY funds that had a MySuper option were eligible to be offered by employers. Investors don’t specify how they want to be invested and their investment allocation is based only on their age. It makes sense that the Government has initially focussed on the performance of these funds, because, by definition, they are funds that people “fall into”, without specifying how they want to be invested, without seeking advice from a professional and most won’t even know how they are invested, never mind how their fund is performing.
APRA assessed 76 of them (4 didn’t have enough history) and deemed that 13 of them failed to meet the benchmark performance required. The 13 were as follows:
Unfortunately most news articles reporting on this only showed the first column above (the trustee), not the second (the platform). So, if your Super is with Australian Catholic Super, you need to know that it is only the LifetimeOne option that was deemed to underperform.
Likewise when it comes to Colonial first State, it ONLY relates to the “Employer” version, NOT the “FirstChoice Wholesale Personal Super” platform.
Furthermore, within the “Employer” version of Colonial, it relates only to the LifeStage options that someone may have defaulted into if, in the past, they have started with an employer and elected to start putting their Super into the default Colonial fund.
How do things differ when you seek advice?
When a Hudson adviser recommends a Super product, they take into account all facets of the individual, including age, existing income and assets and most importantly, “risk profile”. Once an appropriate platform is decided upon, the individual investments options (perhaps up to 12 or 15) are chosen.
For those with a lower appetite for risk, we may use a range of index fund options. These are diversified, are not influenced by the beliefs/methods of a fund manager and most importantly are low-cost, (usually lower than most industry fund options).
For those with a higher appetite for risk, we will consider a range of more actively managed funds. Hudson use numerous options that have up to 20 years of performance history behind them, and have beaten the index on average over that timeframe (net of fees).
Once the account is established a Hudson adviser will speak to the client at least annually to review the performance and to review the persons situations and whether there have been changes that may influence how they should be invested. They will also consider changes to Superannuation legislation that may impact their financial strategies.
Our investment committee at Hudson meet regularly and continue to monitor the performance of all fund options applicable to our members. To complement this we have an ongoing subscription to fund researcher Lonsec, who send us daily updates.
APRA are going to continue to actively assess Super funds in order to keep investors informed of how their Super is doing and this can only be a good thing.
If you have an existing advice arrangement with a Hudson adviser, rest assured that we are monitoring all investment options that are applicable to our clients and will consider all future reports released from APRA.
If you do not utilise Hudson’s advisory service for your Super, and if your fund is named by APRA in the future, be sure to check that it relates to your investment option/s. Consider having a complementary appointment with an adviser if you are unsure, or to see if advice might benefit you. Be mindful that switching your Super may have unintended consequences, such as losing insurance policies or incurring transaction costs.
As way of an appendix, here are some facts about the Colonial First State FirstChoice platform and their fund managers:
They have actually received several recent accolades for 2020/21, including:
1/ The Finder awards named CFS FirstChoice as Best Rated Brand for a Retail Super.
2/ Money Magazine’s Best of the Best awards named CFS FirstChoice as having the highest performing Super fund within their options.
3/ Chant West named CFS FirstChoice Wholesale the best fund for “Longevity”.
4/ The Institute of Managed Account Professionals IMAP declared “First Sentier” best fund manager for Australian Equities.
5/ The Roy Morgan customer satisfaction awards named CFS FirstChoice as Retail Super fund of the year.