Super heatmaps emphasise need for financial advice

The prudential regulator’s MySuper and Choice superannuation heatmaps underscores the importance of financial advice, according to the Financial Services Council (FSC).

The FSC said the heatmaps, released on Thursday by the Australian Prudential Regulation Authority (APRA), raised questions about the appropriateness and accuracy of the assessment methodology applied by the regulator.

The FSC said the heatmaps underscored the importance of ensuring consumers could access affordable financial advice that considered their investment and life insurance needs.

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FSC acting chief executive, Blake Briggs, said: “The FSC is concerned that the ‘blunt stick’ of performance assessments may cause consumers to disregard their insurance arrangements and not consider whether they can secure suitable life insurance cover should they switch funds.

“Consumers are encouraged to seek financial advice that takes into account both their insurance and retirement needs before making decisions based on APRA’s heat map publications.”

Briggs noted that the heatmaps were an important wake up call for consumers that not all MySuper products and investment options performed strongly.

“Consumers should take this opportunity to become engaged with their superannuation and seek financial advice when making investment decisions,” he said.

“The heatmaps show a range in investment returns and fees offered by funds across all sectors in the superannuation industry. Trustees have an opportunity to use the heatmaps to strengthen their products, and we have already been seeing fees reduced since the first MySuper assessment earlier this year.”

The FSC noted that in the lead up to 2022’s Your Future, Your Super assessments it would welcome consultation on investment options where the current benchmarks did not reflect the underlying assets.

Australian Institute of Superannuation Trustees (AIST) general manager for advocacy, Mel Birks, said it was “disturbing” to see the levels of underperformance in the retail super sector.

“While all the political attention has been on MySuper products – which have, on average, always clearly outperformed the Choice sector – the retirement savings of millions of Australians in the Choice sector were being held back by poor performance,” she said.

“The heatmap only considers a small fraction of the available Choice investment options – just 727 out of 40,000, in fact. So, there’s a lot more work to do to make sure scrutiny is extended to cover all APRA-regulated superannuation products.”

Stockspot chief executive, Chris Brycki, said the heatmap was a win for consumers as it shone a light on underperforming funds that were “ripping off” their members.

"To have 60% of funds underperform on fees and returns is just huge and shows there are still problems in the industry,” he said.

"From our own research we believe that 90% of these funds underperform a simple indexed portfolio.”

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I guess it depends if they are using the actual asset allocation or just the 9often understated) Benchmarks, to allocate the growth category that the fund is put in / compared to. Not exactly apples for apples, more like 'comparing the pear'...

Does anyone know how say a a choice inv option eg vanguard growth option would perform against its apra benchmark? Would it be no difference, under, or over?

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