Leading financial advisor warns Aussies to review super annually: Global volatility

Leading Australian financial advisor, Alex Jamieson, is warning Australians to take more interest in their superannuation. 

Jamieson is a highly respected financial advisor, financial planning thought leader and founder of AJ Financial Planning.

"Superannuation should never be a set and forget activity.  It should be monitored annually and importantly, a deep-dive review should occur every five years," Jamieson said. 

"This is something that should be taught in schools.  From a young age, everyone should understand the importance of superannuation and how to manage it through life.  Too many people trust the system. 

“Like anything, some superannuation funds are better than others.  Some do well for a period and then due to changes in leadership, direction and investment focus, start to deteriorate against their competitors.

“Everyone has different needs and superannuation should be tailored to the needs of every individual and their circumstances and retirement aims.   Needs change and in response financial planning which includes superannuation, often needs to change as well.

“Add to this the complexity of global volatility and the need to undertake regular superannuation reviews becomes even more pressing.”

Jamieson emphasised that an annual review of superannuation should focus on key areas.

Superannuation performance

"Ultimately performance is a key indicator of success however there some other areas to look at. The core areas to focus on when undertaking an annual review of your superannuation are performance, fees and insurance coverage.  Ensuring that these are appropriate to your situation and competitive against other funds is critical," Jamieson said. 

Type of fund and level of risk

"There are many different types of superannuation funds, from low risk to high risk which includes aggressive options,” Jamieson said.

“The biggest trick super funds try to pull over their members is saying that they are a balanced fund but then loading the investment options with very aggressive options. 

"A balanced super fund should have no more than 50 percent of growth assets in shares, property and infrastructure. We often see some funds have as much as 76 percent in growth and then saying they are balanced.

"In reality, this example is just a poor-performing super fund growth fund that pretends to be a balanced fund."

Use established benchmarks as part of your super review

Jamieson explained that when undertaking a superannuation review, a good starting point for a pure benchmark is the Vanguard diversified range of investment options.

"Once you have matched the asset allocation in Vanguard to the superannuation fund you are choosing, you can start determining its current status," Jamieson said.

“This will help you to determine how well your fund is performing.”

When to get advice

"I think if you have over $500k of investable assets in superannuation, you should be getting professional guidance, as you may have the ability to really optimise your opportunities,” Jamieson said.

“The intersection of fees and performance and the dollar impact starts to become really significant for larger amounts of investable assets in superannuation and getting it wrong can really have a meaningful impact on the longevity of the funds in retirement, intergenerational wealth transfer of your estate and your level of income in retirement."

Jamieson reiterated that not reviewing your superannuation fund based on the above guidance is like falling asleep on a train; you don't know if you should be getting off, and you might end up in the wrong location.  You also have the chance of having your items stolen whilst asleep on the train, which is no different from paying higher than necessary fees for poor-performing investment options.