If I told you that you had a forgotten investment portfolio worth hundreds of thousands of dollars, wouldn’t you be the least bit curious as to what you owned?
Depending how far into your career you are – and how well you chose your fund – you could easily have that kind of money tucked away in superannuation. Yet, many Australians wouldn’t have the faintest idea of what their money is actually being spent on.
For most, it’s probably in a portfolio spanning Australian and international shares, bonds, cash, as well as an interest in property, and perhaps a few infrastructure projects. But the exact asset allocation of your super fund versus another could differ wildly.
In fact, a Superhero survey of 4,000 Australian customers revealed that one in six don’t even know whether they have opted for a conservative, balanced or high-growth option.
Unfortunately, despite the importance of superannuation generally, funds have been historically reluctant to disclose where they put money, whether it’s yours or someone else’s. Given the size of your portfolio – not to mention the potential influence of your fund – that can be a problem.
The ethics of super
If you consider yourself an ethical investor, then it’s vital you know where you’re invested and why.
If you’re worried about climate change for example, you may not be happy to find out that your retirement savings are funding Australian coal mines. But if they are, perhaps you’d sleep better at night if you knew your fund was proactively lobbying for a green transition.
But how much detail you get on this is ultimately up to your fund. While a recent survey found 86% of Aussies expect their super funds to act responsibly and ethically, members can’t simply take that for granted. One in ten funds that claim to prioritise environmental, social and governance issues, actually don’t, according to analysis from Evergreen Consultants.
Dedicated ‘ethical’ funds don’t necessarily open their books either but at least they provide more concrete details of what they don’t invest in, ruling out industries such as tobacco, nuclear, and fossil fuels for example.
While it can be quite difficult to screen funds on an ethical basis, there are some useful resources to help guide you. Environmental activist group Market Forces has done much of the heavy lifting in comparing how the largest funds measure up on climate action. Similarly, the Australian Centre for Corporate Responsibility (ACCR) helps shine a light on which funds are proactive and which are all talk.
Lack of transparency can also be an issue for Australians seeking to maximise their retirement savings. After all, there’s only so much you can do to optimise it if you’re investing blind.
If a fund has a bad year, it can be helpful for its members to understand why that was and whether it could be a bump in the road or representative of a deeper problem. While asset classes can provide some indication, ambiguity over the contents of a fund can hamper any attempts at getting answers.
It can also make it a pain to compare options. After all, how can members truly be sure that by switching super funds they aren’t taking on more risk and volatility in a bid for higher returns?
The industry is making some progress on this front at least in a bid to remove the bad apples. Last month, the Australian Prudential Regulation Authority (APRA) named and shamed 13 bad super products, with each having to inform members of their chronic underperformance.
But for those not far from retirement, it may be a case of too little too late by the time they are warned.
One encouraging trend in the industry is the growing number of options for Australians who want to take a DIY approach to their super.
While it certainly isn’t for everyone, it can be a great help for those who are seeking more control over their retirement savings and more transparency from their fund.
For example, many funds of all shapes and sizes now offer direct investment options, allowing members to essentially create their own portfolio from a range of direct investments and exchange-traded funds (ETFs).
At a fraction of the cost of a self-managed super fund (SMSF), and without the hassle, ethical investors can use them to divest from dubious business practices. Those inclined towards a more active style of investing meanwhile can handpick the sectors, industries and companies they think could deliver over the next 10, 20, or 30 years.
Broadly, the arrival of these alternatives recognises the need for Australians to not only understand where their super is and how it is being used, but to engage with it. A number of players are now offering this flexibility, including Superhero Super.
After all, it’s your money. It should also be your call – if you want to make it.
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