By the time this edition of Professional Planner goes to press, the end-of-the financial- year performance numbers for superannuation funds will have been widely reported and the reality of negative returns will have hit home to most fund members. After 25 years of a universal compulsory superannuation system, Australians are coming to grips with the fact that investment markets are volatile and that share market investments in particular need to be taken on a long-term basis.

Negative share market performance at the beginning of this century, as well as in 1987, and now in 2008, can be balanced against some very strong returns in the intervening years. But for many people it will still come as a shock that their superannuation fund has shrunk. So for those of us in the industry there will be a considerable shared burden and responsibility to explain ourselves and defend our services. The only real defence is that hopefully our long-term track record, and therefore that of the superannuation industry itself, is sound.

However, on the most recent data I have seen, some are going to have a lot more explaining to do than others. If it is true that the end of- year numbers for the average retail master trust for the balanced (or default) superannuation option continue to lag the average industry fund by 3 per cent or more, then the advice industry has a very difficult task indeed. It is a simple fact of life that in bad investment markets, differential fee levels are fully exposed. The longer-term data tends to point to a more diversified asset allocation of the average industry fund as a factor in explaining investment outperformance. Of course there will be a few advisers who will have steered their clients to excellent outcomes. But the aggregates suggest that most have a lot of explaining to do. {mos_fb_discuss:20}

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