Superannuation choice will be with us sooner rather than later. If we are to ensure that our retirement savings are in the best super fund, good financial advice will be essential.
However, advice about industry or corporate funds may not be so easy to come by.
Tom Collins, principal of Tom Collins Consulting, says planners won't advise on industry funds because the funds do not pay trail commissions to the planners.
But Laura Menschik, principal of Millennium Financial Planning, believes planners who charge initial fees and trail commissions might not be interested in recommending industry funds, but the same cannot be said of advisers who charge a fee for services or charge by the hour for advice.
Ms Menschik says she cannot "buy in" the research from one of the managed fund research houses on an industry fund as she can with one of the retail superannuation funds. She has no way of knowing the industry fund's asset allocation and investment style unless she does the work herself.
However, Ms Menschik says she has checked industry funds on behalf of her clients. If a fund is one of the larger funds in the industry, the way it invests is usually clear. But with some smaller funds, she says, "it can be very hard to get a handle on it".
The problem with super choice, Mr Collins believes, is that there will not be enough safeguards. His fear is that we will see a repeat of the British pension mis-selling scandal. When the British version of super choice was introduced, many unethical operators saw it as a fee free-for-all. People were pulled out of good super funds and put into funds that weren't so good. Ms Menschik says the arrival of super choice is likely to encourage "churning" - the unethical practice of switching clients out of one fund and into another for the sole purpose of generating commission income for the adviser.
But Mr Collins says even fee-for-service advisers have their limitations. "Most advisers only want to talk to people with a lot of money," he says. So where does this leave smaller investors?
They need to do some research. Mr Collins says not to worry too much about fund performance in the short term. Instead, he says, look at the price you are charged for managing your super. "An annual fee of 1 per cent or 2 per cent can have a big effect over time," he says. Although Alex Dunnin, of Rainmaker Information Services, warns a low-risk type of super fund, called a Retirement Savings Account, may charge fewer fees but has a performance to match. "You might be better off in a high-fee master trust that is crediting 10 per cent more than a low-fee fund with bad performance," he says.
Insurance options are the other important factor in choosing a fund.
Advice checklist
What you should check before you make a decision to switch superannuation funds:
Does the planner have sound reasons for recommending moving from a low-cost industry fund or employer fund into a retail fund or master trust?
Do they have research from an independent research house to back the recommendation?
Are you happy with the education, qualifications and experience of your adviser?
Are you confident your planner is there for the long haul?
What dealer group is behind the planner?
Do you understand, and are you happy with, how your planner will be paid?
Are you comfortable with the advice you have been given?
Are you happy with the level of ongoing service your adviser will provide?
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