Is your default superannuation fund going to give you a default future?

In 2010, the Australian Bureau of Statistics released a report showing that 76% of Australians are NOT on track for a comfortable retirement.

Therefore the default future for by far the majority of Australians is an uncomfortable one. One where rather than having enough money to travel or be generous to the kids and grand kids or simply being able to enjoy life -  most of us will be stressed and have to worry about money and not be able to be generous etc.

Whats the reason?

There's actually many and I could go on all day about it but one of the simplest ones - one that we can actually do something about - is to consider where our super is invested and actually make an informed decision.

With super, apples ain't apples. Like most things in life, you really get what you pay for.

There's a massive campaign running at the moment on TV and Radio which is funded by the 'Industry Super Network' or ISN. This network most probably includes your super fund... REST, HOST PLUS, HESTA, CBUS, Australian Super, and the list goes on. These are the 'default' superannuation funds which we get automatically put into when we start a job. 

But it's your right to choose.

Statistics show that you're probably in one... so are they any good? Remembering this is actually going to be the majority of your future wealth...

1. Firstly, they are run by the union movement and are supposedly run "only to benefit members". That sounds really great.  But is it true? If you've been watching the TV or listening to the radio over the past 6-12 months you couldn't have missed an industry super advertisement. In fact last year alone the industry super network spent over $200 million on advertising to sell their products. As a member of that super fund... Did you benefit from that advertising? Your hard earned superannuation paid for it? Well you must of because they're run only to benefit members.

2. Secondly, the industry super funds are not-for-profit. That sounds nice too. Now the main use of the fees they collect from your balance goes into administration (and advertising). That's fine but who does the administration? We'll interestingly enough the ISN funds outsource this to a company called Industry Funds Services Pty Ltd - which is actually a for-profit company - which makes millions of dollars in profit each year. Who owns this company? It is actually largely owned by a trust called Industry Funds Services - Staff Equity Trust, or IFS-SET Pty, the beneficiaries of which are the union bosses who own the industry super funds. So yes technically your super fund probably is not-for-profit. Enough on that point.

3. Thirdly, your default fund is cheap cheap cheap!  But is that the most important thing? What about the calibre of investment management? Or the transparency of where your money is actually going and the safety of the underlying investments?

China's latest car maker Chery has recently hit the market and they are selling a small car for $10,900 drive away. Are you thinking of getting one? Or does a major decision like buying a car have other important factors than price alone like safety, or features? ANCAP the safety ratings board have warned consumers that the Chery J1 was the least safest consumer vehicle on the road apart from a couple of commercial vans.

I know most people, considering that the decision of which car to buy will directly impact on their safety, won't buy one of these cars. It's an important decision and the stakes are too high.

You also find these vast product differences in the world of superannuation. And how important a decision is 'which superannuation fund do I want to grow my financial future?'  Is cost the only consideration and cheapest the only option? 

For a young person, probably the biggest consideration with superannuation is the calibre of the insurance capabilities available. The ISN network funds have very limited and frankly poor insurance options. Their investment transparency and calibre is very low.  And yet the difference in price between a great fund and an ISN fund might be less than half a percent if that. 

In Summary

When considering your financial future, the superannuation fund you are in can have a major impact on your retirement outcome. It can also provide you with options to protect you and your family between now and then. 

If you're willing to have a look around for a good mobile phone deal, wouldn't it be worth having a look for a good deal on your superannuation fund. Or funds? If you've got more than one you're wasting your money!!!

Or is it that superannuation is for retirement and retirement is too far ways to worry about? Out of sight is out of mind! From experience working with many older clients - finding out at 60 or 65 that you could have done better than a default retirement - when it's too late to do anything about it - can be a real disappointment and actually a bit embarrassing for a spouse.  

Take control of your financial future and get some advice from a good financial adviser. Make sure they don't take commissions from investments though. And make sure they're a CFP.

The first appointment with Clarity FP won't cost you a cent. Not making an appointment with someone could cost much more.

Sean

Everyone deserves a financial plan.

Now you might think I'm a bit nerdy but I'm here to tell you about why I'm a passionate believer in the role of 'planning' in life to achieve great things. In fact I love it so much I've quit my job to create a business that helps people do it well.

I'm a financial planner/adviser/legend (all synonymous).

Now people often draw a blank when I tell them what I do - they either think i pick investments or superannuation or something, or I'm a bit like an accountant (Thanks guys!).

But its neither of those.

Essentially what I do is sit down with my clients (who are everyday people) and get a really good understanding of whats important to them... where they're heading. What is their vision for their life?

Once understood, i then help my clients align their financial decisions with what is important to them. This improves the certainty of that vision becoming reality. It ultimately allows my clients to live a more fulfilling life because they're allocating their resources on purpose.

A financial plan is simply a documented set of actions that, when taken, will give you the most certainty of achieving your goals.

Do you have one?

But as you know I'm also a Christian... What! A bible basher!?

I often get a bit of funny look from other Christians when I tell them what I do - as if to say - oh you deal with planning and money huh...hmmm. Tisk tisk.

"God's in control mate so just sit back and let it happen". I think some people honestly think working with things monetary is a sin... and yet I haven't yet heard of an up and running ministry which hasn't required money and or planning for it to be successful. Gods work also requires planning and funding.

For example , if as a Christian i felt my calling from God in life was to "provide counseling support to missionary couples all over the world". The reality is that I'm going to have much more of a chance of carrying that calling out if I have a plan to achieve it - rather than just hoping for the best. In fact i think, arguably, planning would be the more Godly thing to do.

The same truth should flow through to everything we're hoping to do in life - ministry related or not. It could be that I just really want to give my kids a good education one day and give them nice holidays. No matter what your goals, a good plan will only help.

I believe that because God blesses us with money in life, we are called to be stewards of that money. Not to worship the money, but to worship God with it, by prayerfully and carefully planning how we will allocate it. And doing some things for yourself is OK too!

But surely we could look ourselves in the mirror more honestly if we can say, "Well I'm not squandering my dough because I know where it's going. I have a plan".

If anyone in life has things that are important to them, and has plans to achieve things, then having a plan which aligns your financial choices with whats important to you is a wise thing to do.

But what about the cost? Those sharks love to make money!?

Firstly, a good financial plan will always be affordable to you (your advisor would be pretty daft if it wasn't). And secondly, a good financial plan will provide you with more value than what it cost to create. Does that make sense? A good financial plan will give you more (yes in dollar terms) than it costs. It has to be that way or who would get one?

I think most people, if they were honest with themselves, would admit that they know they could probably be doing more with their hard earned money. A good financial adviser will show you how.

I believe God is ultimately in control and he is working in our lives and in the world... but He also asks that we be proactive with our decisions.

In my humble and biased opinion, having a good financial plan is a Godly thing to do.

If you want to achieve things in life, the chances are it's going to require funding to get there.

I believe everyone deserves a financial plan.

Sean
www.clarityfp.com.au  

Do you protect your most valuable asset?

What is your most valuable asset?

Your house? Your car? Your ridiculous good looks?

What about your ability to earn an income?

Huh? That's random.

But when you think about it, and as gross as it is, most things we do or have in life involves shelling out cash. Either to purchase or maintain. Think about your goals... Saving for your first house? Want to start your own business one day, or even just live a comfortable life... It's going to cost money.

Where is that money going to come from? Well unless you're Richard Branson, James Packer, or the randomly lucky Lara Bingle, the reality for most of us is that we have to get up in the morning and go to work.

If you think about it, assuming you're not a bludger, there'll only be two times in your life that you won't work for an extended period of time. The first is retirement - you know, when you do the gardening in Speedo's. The second, would be if you got quite sick or had an accident and couldn't work - possibly by getting hit by a parked car?

If someone asked you... which is more important to you right now? - your income in retirement or your income while your working now - what would you say?

Well unless your 64.5 and shopping for Speedo's you're going to say my money right now thanks!

So we dont work in retirement (yes Sean, that's the definition). How will we afford to live then? I mean i need my spray tans, my itunes - and new roller blades...??? Well fortunately the Goverment is making sure you set aside 9% of your income now to protect that income once you're finished.

So what percentage of your income are you setting aside to protect your income while you work?

If you're like most of my very wise clients, you'd be happy to set aside about 3% of your income, to protect that income no matter what. That's what it cost the average Joe to get income protection insurance.

Would you?

Remember, everything your planning to do in life is going to require it.

Insurance is a dirty word. Like stiffy or slug. Or Simon. But why do we insure our cars as a given? Cause it would suuuck if someone stole it bro!

I pay over a thousand bucks a year to insure my crappy Hyundai from getting stolen (its worth about $15,000 - o.n.o - buy it mate! Please!) Yet I'm more than twice as likely to get injured or sick enough to stop me from working for 12 months than I am getting my car stolen - and income protection insurance costs me about the same (I've protected myself for $80,000 a year).

Wait a minute... For about the same premium I've protected something worth more than 5 times my car!?

And if I couldn't ever go back to work (that car was hard) the policy will keep paying me till I'm 65!

So what is your most valuable asset? Well if your 30 and earn, for example, $60,000 per annum... you'll earn over $2 million by the time your 65.

Worth protecting?

If you want to know how to get income protection insurance, speak to a good financial advisor and they'll hook you up.

If not - I guess you're just lucky Lara Bingle.