Superannuation success starts here.
One of my most vivid travel memories was the first time I travelled to Europe. I was very inexperienced and didn’t plan very well for the trip. I was travelling with my wife Sarah, and it was our first big overseas holiday together.
I remember so clearly the moment I stepped off the plane and was walking around Paris airport thinking to myself how the hell am I going to get to our hostel? We couldn’t speak or read the language, google maps was not in existence, and we hadn’t arranged transfers because all we could afford was the bus. We eventually made it, but there was certainly an easier, more direct way – we just didn’t know it!
Now when I travel, I have more of an idea how to navigate a foreign country because of the experiences I’ve had.
I use this story because we’ve all had the feeling and experiences where we feel we are out of our depth. But everybody started somewhere. Arnold Schwarzenegger started in the gym with just one repetition. Jeff Bezos started Amazon by selling one single book from his garage. The rest was learnt along the way, with a guiding hand from people who have done it before. From meeting with hundreds of families, many people feel this way about their finances, mainly superannuation.
So where to from here? Let’s take that first step together.
When I first meet new families that come to us for help, I always ask what fees they are paying in their super. Can you believe that most people either don’t know they are paying fees, or they do know, but have no idea how much?
Superannuation will likely be the second biggest asset for Australians, second to their home. If I had someone taking a percentage of my house’s appreciation each year, I would want to know HOW much, WHAT I was getting in return and WHY they are taking it.
The list of fees is endless. MER (Management expense ratio), performance based fee, administration fee, management fee, trustee fee, account keeping fee and the list goes on and on and on!! If you don’t believe me, look at your most recent superannuation statement and it will be hidden there somewhere in small print towards the back.
The next question I ask is, what insurance do they have? Again, either they don’t know, or they have no idea what they are covered for and how much they are paying.
You will have insurance inside your superannuation but the chances are you’re paying too much for it. Superannuation insurance policies are what the industry refers to as ‘group insurance’. Group insurance does not require medical assessment. This means that anyone can get insurance and everyone pays the same premiums. So if your work colleague – and we all have them – does not exercise, smokes often and eats poorly, they will pay the same premium for insurance as you. Does that seem fair to you? In this scenario those who look after their mental and physical health are penalised, as they are paying higher premiums than they otherwise would.
Other common problems I find are;
- No beneficiary nomination (this means your estate could wait a long time to be paid benefits in the event of death and could pay a lot more tax).
- Expensive premiums
- Benefit amounts that are inappropriate, too low, too high, or paying for salary continuance when the spouse member is not working (I see this one all the time)
- Multiple super funds with insurance (this means that many of the policies will not pay a claim in the event insurance was ever required)
The last question I will ask is, how is your superannuation invested? Can you guess what the most common answer is? You guessed it, no idea!
This one I can understand, as it is more complicated and I could write all day about investment, but I’ll leave it for another time.
I’m not here to make anyone feel silly, I just want people to understand that your superannuation is extremely important. Ignoring it will not help. Far too often I meet with families who have left it too late. For years they’ve done nothing and had fees and insurance premiums eating away at their nest egg or they’ve had their money invested incorrectly.
In many of my cases as an adviser, I have restructured insurance, fees, investments and provided ongoing professional advice for families and still saved them from what is coming out of their super. This means that they will have more for their retirement – or even enables you to retire earlier!
If you think superfunds are there to help you first, you are wrong. They are there to make money and keep the regulators off their back first before they care for your situation.
We are a completely independent financial planning firm, who genuinely cares and has your family’s best interests at the heart of everything we do. Because we have families too, and we understand the importance of the financial security for the now and for the future.