Statistics indicate that super fund members paid $1 in every $8 from managed superfund investments throughout 2010-2011. Little wonder more and more Australians continue to take control of their own financial management.
Research conducted by Rainmaker Group throughout the 2010-2011 year found that superfund members were being slogged a massive $2.4 billion in fees or nearly 10% of the $25.9 billion invested in retail super.
Rainmaker found that a huge slice of the average Australian’s tax break, their contribution to super, is consumed by commissions paid to financial advisers. The slice increases to about $1 in every $8 if personal insurance cover is also paid through the super fund.
If you take into consideration that these fees are deducted year on year for the life of an average policy which could be up to 40 years, the numbers become staggering simply because of the compounding effect of time.
Research conducted within the financial services industry also indicates that approximately 1 in 5 Australians (20%) will have used up the money in their super funds by the time they turn 70 – so much for a long and enjoyable retirement.
What does this mean for DIY investors?
Making the decision to manage your own super should not be taken lightly. The costs involved with establishing a self managed super fund, having it audited each year and the annual accountancy fees can be costly. But for those that do make the decision to manage their own super, there are potentially better returns on offer over the long term.
I have been known to get on my soapbox and campaign for individual Australians to take control of their financial future and consider how they manage their own money. The stats above may help you to understand why!
I also recognise that the share market has been a difficult place to be as an investor over the past 12 – 18 months and that many investors have seen little or no growth and many are even in drawdown. The positive though is that those investing in their skills will be in a position to capitalise on future market trends.
For those prepared to do some work and maintain a professional approach to their share trading and investing activities, the long term rewards and monetary gains can be significant and you can never move onto retirement planning too early.
It’s no surprise the Self Managed Super Fund industry continues to gain popularity as it grows from strength to strength. Last financial year there were 33,000 new DIY funds established on top of the 460,000 existing individual funds for over 870,000 member trustees.