Superannuation -- how to preserve your dollars at time of crisis

It seems that you have a very good experience. Was this financial advisor from the Superannuation company? Perhaps, you can give us some idea how to choose a good reliable financial advisor? Any criteria to be fulfilled before you chose this particular financial advisor? This will be very helpful for everyone. Many thanks.

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I used https://ifs.net.au/ , Industry financial services. They give financial advice to most of the industry funds, some funds employ their own advisors. The service was not cheap, but it was tax deductible as an expense incurred in my superannuation.

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Which has been my experience.

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An article regarding super at the present time.

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Like AMP, some banks, and some others? :frowning:

For most people it pays to have an advisor, and requires due diligence selecting one including how they are paid, how well they listen to what you want from them and your risk profile, and their mastery and track records. Their independence matters. Fees for service may not always look reasonable, but commissions taint advice and historically insidious trailing commissions have usually been for nothing except their next new Benz.

A few years ago I had access to State Super advisors and took up the offer. I found it to be less helpful than I hoped for. Most of their advice was ‘the obvious’ and relatively conservative even though I expressed a desire to be moderately aggressive. Their service seemed to be targeted to the less financially savvy and that is OK and not necessarily bad, just my personal observation and was not appropriate for me. It was free via my super fund and worth every cent, but the same meetings might have been invaluable to others.

Back a few years,

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Fully agree, the Federal government’s policy of letting people access their super during the Covid crisis, is commendable. BUT, most people are wasting it on share market trading, paying off debt and consumer spending, your money is safer, more tax effective, a future asset in a super fund no matter what the present balance total is.

Paying off debt now can be more cost effective depending on the balance, and the interest rate the debt has. If the payer is able to resist further debt or the high interest rates attached to some debts the value can be great both for their wealth and health now and also for their more future financial needs.

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WRAPs are a mixed blessing. mainly because you can’t directly manage them yourself in Australia; ie, you have to use a Financial Planner, who charge for doing everything, even simple things like switching.

I think this is something Choice need to do something about.

We all do online financial transaction ourselves, so having to pay a FP to do something we are all capable of doing ourselves is a nonsense.

I think it is bordering on fraudulent for the big institutions, to insist that you employ a 3rd party FP to manage one of their WRAP products. Imagine car manufacturers being able to insist that you must employ a mechanical engineer to explain how to operate their vehicles, and to operate the vehicle for you. This cosy relationship between banks and FPs is rip off.

A better role for FPs is educating the population, ie, bringing the nations financial literacy up to scratch. Then those who wish can still employ them to manage their finances, but on the basis that the client is well informed, and knows what the FP is doing for them,can ask well informed questions, etc, or conversely the population can manage their own finances.

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There is an article in YourLifeChoices that may be worth a read. It outlines how the two possible (now 1 possible) withdrawal from Super may have a later much more severe impact on future retirees incomes when that day comes around for them. I thought about where to place this post, as it is a lot to do with the current COVID issues but this may just be one crisis at the start of many (or it may not).

https://www.yourlifechoices.com.au/finance/superannuation/scheme-set-to-destroy-retirement-dreams

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I agree. Withdrawing from superannuation is only the last resort. I did not want to withdraw my superannuation, either. I did it because I was not aware of the conversion to CASH OPTION at the time when the market collapsed. If the superannuation company had included this information during the withdrawal process, I would have left my money in the CASH OPTION until the market is stabilised.

So, please spread the word about this CASH OPTION in superannuation investment. It is unfortunate the superannuation companies did not include this in their general advice to their customers when they became panicky about their investment and wanted to withdraw their fund.

If withdrawing Super was not an option what would the population do, how would they be affected?

Am asking as I think public pressure would lead to an better government response. This option is a gov’t cop out and we are letting them get away with it.

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WHEN THE CASH OPTION in your SUPER FUND is worse than having your money in the bank.

I am totally disillusioned by the unplugged in service given to clients of the government fund I belong to, during the COVID crash. They would keep you hanging on the phone waiting in queue for 45 minutes and then the line would suddenly drop out; every representative you spoke to gave you conflicting information; it took them 6 months to reply to my email sent in March 2020, and I waited over four weeks to speak to a so-called trained and qualified financial advisor on their team (who, incidentally, could not answer most of my generic questions about the what, how, why, where, when and who of the current investment climate - not specific advice, but just fundamentals).

I did not panic and switch to CASH OPTION, I lost complete trust in the authority I was investing my hard-earned life savings with and I recognised how alone anyone is in protecting their retirement savings.

The so-called Balanced Option of which I was only invested in 50%, was the main culprit for costing me $35K in a 3 day period. We must be AWARE. While some fund options are named according to performance (e.g., Sustainable, Moderate, Aggressive )- the Balanced option is so named because of the balance of asset classes invested in - NOT BECAUSE it is a stable and balanced performer
it is a volatile piece of work, as many retirees have come to understand the ‘Rene Rivkin’ way.

I have spent a year developing my financial literacy so that I am better informed when making my investment decisions going forward. I seek professional external advice before utilising the free services offered by the fund (well, surely the fees we pay include these limited services, so they are not technically free).

When you switch to the CASH OPTION in your super fund, in a low interest environment (and it’s not yet ZERO) - you will be paying more than the .022% fee (approx.) for the privilege. Your balance will go down a few dollars (or more) ever day.

The bank is not charging us to have our cash with them yet, but BEWARE, your superannuation fund most likely is, as mine most certainly is.

Please start reading investment books and magazines and keeping spreadsheets, observing your balance and keeping a close eye on what these fund managers are doing with your hard-earned money. At least you will feel some sense of responsibility and accountability for your decisions in this way and not feel like a lemming being led off the side of a cliff next time the financial gears turn against us.

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Hi @JanB, welcome to the community.

One has to remember that superannuation is a long term investment where assets within the investment structure may increase and decrease within a short period.

Generally well managed and reputable superannuation funds and investment options (with exception of cash only option at this point in time) will appreciate over time. One has to look at the long term averages for a fund rather than what happens to a super balance on a day to day basis.

Adjusting investment options regularly to try and beat market rumours which come into fruition is a poor investment option as one will most likely lose money speculating on what may happen.

Balanced funds are a investment option within super to spread the risk over a range of different investments, such as cash, fixed interest, bonds, local equities/shares, international equities/shares, unlisted infrastructure etc. Balanced doesn’t mean that such investments are not immune to rapid fluctuations do to the underlying investments. Balanced can however reduce losses by spreading risk, one investment may goes down in value while the others either decline less, there is no change or appreciate.

If one can foresee what the investment markets do on a daily basis, then one would not need to work as it would be a great way to make a reliable income. Unfortunately, to foresee is like looking into a crystal ball.

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Welcome to the Community @JanB

I don’t doubt that as most investments took serious hits during the GFC, and again last year. Here is our history of a government (PSSap) balanced fund over the period. The worker who own this one retired in early 2020 so no more contributions.

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and a moderately aggressive mix from a retail fund (some data errors!) where there had been no contributions since 2013, nor any withdrawals to date. For clarity the vertical axis are quite different so the slopes of growth are really what matters, as does the value from time to time IFF a withdrawal had to be made.
image

It is worth mentioning the consistency of the balanced fund against the relatively aggressive one. Depending on when one wishes to make withdrawals or switch, it could be significant, but over time the more aggressive has been the clear winner of the two.

Congratulations and it is a shame everyone has not done that yet, from watching their super and other investments, to understanding what the individual investments behind their names. ‘Balanced’, as you correctly noted refers to a mix of underlying investments, but that equally applies to the others you cited.

You might notice that using my examples of two very different funds, both recovered fairly quickly and are worth more today than they were before. The worst losers were those who panicked and went to cash near the bottoms (and paid the exit costs for the investment) and stayed there while the investments recovered fairly quickly. Timing markets is beyond what most of us can consistently do and trying can be as dangerous as it might be rewarding.

Sage advice, that.

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How much had it earned in the previous three years? How much will it earn in the following three years? These are the things to worry about unless you expect that your investment will end in the near future (through withdrawal or death).

A ‘balanced’ investment is generally across several portfolios and preferably international in scope. It should include shares, bonds, real estate and cash at a minimum, but the balance may differ by fund. It is generally much less aggressive than a ‘growth’ investment, but will earn more in the medium term than ‘cash’ (which is generally not a great idea unless you think you are getting ahead of a bear market - and even then in most cases you likely lose from the change).

The worst thing to do when markets are falling is to ‘cut your losses’ - because in fact you are merely cementing those losses in place. Share values generally go up, and even severe recessions tend to have only short term impacts.

A really severe downturn affected most of the world in the GFC. In 2007 the Dow Jones Industrial Average peaked at 14,164.53, and then it lost one third of its value in 2008. It took until 2013 to get past that peak, and in that year it hit 16,576.66. That was a long recovery when compared to most recessions. In 2021 so far the index has peaked at 33,527.19 - so more than double what it was in 2007.

It is beyond what the ‘experts’ can consistently do; even a monkey can beat them (results may vary; see a vet if fluctuations persist)!

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