William Buck’s Wealth Advisory team are often asked by clients what type of super fund is the best place to host their superannuation funds. Choosing the right superannuation fund is particularly relevant in these uncertain times, as we know of several people who have been quite disappointed with their superannuation performance, cashing in at the worst possible time. These people were without advice.
In most cases, an industry super fund is appropriate when your balance is below $250,000. However, once it has grown beyond that, there are several compelling reasons why an advisor-led Wrap account like Netwealth Super / BT Panorama Super might be appropriate. Alternatively, a Self-Managed Super Fund (SMSF) could also be more appropriate, particularly for higher balances or when the account holder wants to buy property.
So, what exactly are the benefits of these alternative superannuation funds and why are they advantageous for those with higher balances?
Wrap accounts and SMSFs provide a large investment menu. This gives you more investment choice and control and allows you to complement your super investments with non-super investments.
In addition, these types of accounts allow you to hold cash and term deposits, reducing your need to sell units in default funds to fund redemptions/pension payments in times of volatility like we are experiencing now.
Importantly, wrap accounts and SMSFs provide full transparency on what you are investing in and you know how much risk you are taking on. In our Investment Committee, we consider a Balanced portfolio to have 50% in growth assets and 50% in defensive assets, whilst one major super fund has a Balanced option with 80% in growth assets and just 20% in defensive.
Customer Service, Taxation & Fees
When our clients have a query or want to make a change to their account, they can simply call or email their advisor and we will make any changes on their behalf, without having to spend a long time on the phone.
Wrap and SMSF accounts allow you to defer capital gains tax or even avoid entirely if investments are not sold until retirement. For most industry funds, capital gains tax is already built into the daily unit price, resulting in a higher overall rate of tax payable.
Generally, even with an advisor, the fees for a wrap account may become comparable to industry funds once each member has about $250,000 or more and similarly with SMSFs for larger balances.
