Recently, I sat down with David Meffert from Discover Financial Partners to chat about recent trends in the world of Superannuation. Discover Financial are our preferred partner when it comes to working with wealth & investment advisory firms. We have a long history of partnering together to help our clients get the best results out of their wealth.
With this year’s budget seeing changes to superannuation – including updates to the concessional limits & the work test – we thought now would be a great time to get David into the office to pass some of his super insights onto you. The following responses have been edited lightly for length & clarity.
The biggest takeaway? 2020 saw people switch on.
When I asked David what had been going on with Superannuation recently, his answer reflected something we’ve been seeing in our own clients. We discussed how the events of the last couple of years have brought finance & economics into the mainstream, driving a big change in the way people are thinking about their super.
“Over the last 12 to 24 months, a lot of people who haven’t ever looked at their super balance or selected an investment have started getting interested. There’s a growing awareness of what your super is actually doing,” says David, “There’s a growing awareness of investment, and people are taking greater control of their savings – but it’s important for people to be educated about their investments.”
David says this growing interest has contributed to a shift in the way people approach the idea of a Self Managed Superannuation Fund (SMSF), and the associated risks and benefits. “Historically, choosing an SMSF was about saving on super fees – it was seen as a cheaper option.”
“Now, a lot of people will choose an SMSF to have more control over their super, and it’s become a more expensive vehicle because of compliance and regulatory costs. But people want to make more autonomous investments, or even take full control. Often, it’s about the freedom to purchase high-risk investments.”
The key is to prioritise long-term thinking.
Of course, the freedom to make high-risk investments can come at a cost, quite literally. While it can be exciting to take on more control over your investments, David warns against getting too complacent when it comes to assessing risk: “One concern of people going to SMSF is that your larger corporate funds keep us in check, to a degree. It’s the reason you can’t do whatever you want with your super – they have a responsibility to manage investment risk and make sure you’re being sensible with your savings.”
“Especially after the pandemic – we recovered so quickly, and superannuation escaped taking too much damage, so there’s a perception that everything is going up right now. So everyone targets the best investments for immediate return – think crypto, penny stocks, or Afterpay. People start chasing these short-term high returns and start to forget about their long-term strategy.”
David stresses that despite the rush you get from making high-risk investments, or the nagging feeling that you might be missing out on some overnight crypto win, it’s important to keep long-term thinking in your mind when you’re investing in your superannuation
“Now is a good time to reset & reflect on your investment strategy going forward, and make sure it’s appropriate for the future. It’s about resetting the importance of the idea that superannuation is your retirement vehicle, and making sure your risk/return trade-off reflects that.”
According to David, a balanced approach is key. “You should aim for a more diversified, well-balanced portfolio. You need to make sure you’re investing in a less risky type of approach. This should include companies that are generally seen as a bit more ‘vanilla’. Sure, they’re not going to double overnight – but they’re not going to suddenly collapse either.”
Is your super covered in your will & estate plan?
Finally, David also noted that a lesser-known side effect of people’s growing involvement in their super funds is a rising number of superannuation-related challenges to wills & estate plans.
“We’re seeing a greater need for people to consider superannuation within their formal estate planning. Instead of just having a nominated or binding beneficiary – which is when you nominate who you want your super to go to if you die – it’s important to make it crystal clear in your will or estate plan,” says David.
“We’ve been seeing more and more cases where the beneficiary is legally challenged by family members, particularly in SMSF where reporting standards can slip or fail to be up-to-date. The likelihood of a successful challenge is lessened greatly if you’ve had professional advice from an estate lawyer to make sure it’s rock solid.”
David and the team at Discover Financial Partners are experts when it comes to superannuation advice, investment strategies & wealth management. You can find them here.
If you’d like to have a confidential chat about how to effectively implement superannuation strategies within your business or personal life, then let us know.
We’ll work together with the team at Discover Financial Partners to help you develop strong investment strategies to grow and manage your wealth.
Disclaimer: This advice is general in nature and does not take into account your personal objectives, financial situation or needs. You should consider whether this advice is suitable for you and your personal circumstances before acting on it.