Industry funds exaggerate diversification issue

In yet another self-serving attack on the self-managed superannuation sector, the industry superannuation fund body Industry Super Australia (ISA) has deliberately misled the Financial System Inquiry (FSI) about diversification in SMSF investment, said Reece Agland, Manager Superannuation Products and Services at Superannuation Australia, a wholly owned subsidiary of Taxpayers Australia.

“Once more we see the ISA attacking SMSFs because it is concerned at the flow out of the industry fund sector into the self-managed sector, but hiding its commercial concerns behind the veil of protecting members’ interests,” Agland said.

“The ISA makes out the fact that some SMSFs are largely invested in safe investments as a bad thing, as if all superannuation funds must have the same investment strategy. If you are in retirement phase or near retirement phase, as many SMSF members are, it makes sense to invest in low-risk investments. This is the optimal investment strategy to protect your income. This is a good thing, not a bad thing,” he said.

“At the other end of the SMSF market you have younger fund members, with an appetite for risk and the expectation that they will grow their fund. That is also a valid choice for them to make. The investment profile of SMSFs matches the lifestyle choices of those in the fund and reflects the direct choice of members, not an investment strategy developed by others for others.”

What the ISA does not mention is that most of their funds also now allow people more choice in their investment options, and include both high risk, high return options and low risk, low return options to better match a person’s risk profile.

“It is hypocritical of the ISA to complain that SMSFs can invest in either high risk or low risk investments when their member funds allow the same risk taking within an industry fund. Should industry funds be banned from making such options if they are such a risk? Of course not. The investment strategy needs to better match the needs of each individual member and this can best be done in a SMSF,” said Agland.