Become a Superhero | Take control of yours

Bryce: [00:00:14] Welcome to Super Saturday and Equity Mates media series on superannuation proudly brought to you by super heroes who are now disrupting traditional super on their platform with recent government changes to super legislation here in Australia, 100 billion of Australians money in underperforming super products and a lot of people feeling a little in the dark when it comes to their super Equity Mates media in partnership with superhero. I want to shine a light on the super industry with the aim of making Australians wake up and take control of their super over three Saturdays and four different shows will be bringing you all the information you need to help you take more control. So don't miss it. Make sure you subscribe to Equity Mates Get Started Investing feed comedian v economist and you're in good company. My name is Bryce and as always, I'm joined by my Equity Mates Ren. How are you going? [00:01:01][46.1]

Alec: [00:01:01] I'm good. Bryce good to be back in the passenger seat and having you hosting the show and reading the intro. [00:01:07][5.6]

Bryce: [00:01:09] But anyway, Ren the purpose of this episode is really to really encourage you, no matter what you are doing, to actually take a more, I guess, active approach to thinking about your superannuation. As we will highlight, there are a few, I guess, key things that you can definitely be doing to improve and optimize your superannuation. And we're going to walk through some of them, as well as take a look at some of the key stats that surround AustralianSuper, discuss passive versus active, and then have a little bit of a chat at the end around how Alec and I are approaching our superannuation and whether or not we are actually walking the walk when it comes to what we're going to discuss today. So I'm looking forward to it. Ren. I'm it's been a good exercise for me, actually, deep diving back into my super account. [00:01:56][47.1]

Alec: [00:01:56] Yeah. Now, for people who haven't listened to the last episode on in this Super Saturday series, will that the first episode we did the very first crossover episode of Equity Mates Media. Adam from comedian, the economist Sophie from your own good company. And I chatted about some of these things. But we're going to go into a little bit more detail here. And I also get a chance to grill Bryce about his super now, similar to how Sophie, Adam and I spoke about our personal situations on that last episode. But this is going to be a lot more intimate and detailed and we're really going to we're really going to put Bryce under the microscope. So I look forward to that. [00:02:46][49.8]

Bryce: [00:02:46] Yeah, well, I don't know if much is going to be revealed. [00:02:48][1.7]

Alec: [00:02:51] So let's let's start at the top super generally. Let's frame what we're talking about. Let's talk about why we think Australians need to wake up and then let's talk about some of the ways that Australians, regardless of how they invest their super, can wake up and can take a little bit more control. But let's start at the top Bryce. Let's establish what we're talking about here. [00:03:15][23.7]

Bryce: [00:03:15] We're talking about superannuation, Ren. And much like investing, I think, you know, there is no perfect way to manage your superannuation. For a lot of people, it is in that forgotten basket. I wouldn't say too hard basket, but the important thing is that you think about it and you deliberate about it. You know, the ATO website says in nice, big, bold writing at the top of the website that your super is your future. The superannuation choices you make today will help shape your lifestyle in retirement. Now I know where early 30s, late 20s for you, Ren, and for some people who are just sort of very early 20s and starting full time work and you're starting to accumulate superannuation, thinking about optimizing it over a 60 year period is often, you know, far from from, I guess, the important things to be thinking about. But we really want to make it clear that it should be. So you start getting super the moment that you start working. So paying attention to it early will have some serious benefits over the long term. So we've got some stats here, Ren, if you if you want to run through just to sort of highlight some of the challenges and I guess surprising figures that are coming from the superannuation industry at the moment. [00:04:35][79.2]

Alec: [00:04:35] So the government recently did a report. Well, they did a report as part of passing a suite of legislation around super reporting and stuff like that. And I don't know if you've had a play on some of the new tools like the ATO, your super comparison tool. [00:04:52][17.3]

Bryce: [00:04:53] I haven't. [00:04:53][0.2]

Alec: [00:04:53] No, it's it's worth having. It's worth having a look. It's pretty good. It's pretty it's pretty clear about fees. It's clear about poor performance that God, I get in my head performance performance. But as part of this report, there was some pretty stark numbers that came out in terms. Of the state of Australia's superannuation industry and like let's let's not get it twisted here, like there are plenty of great super funds, but there is a pocket of the industry that is underperforming. And it would be a real shame if you didn't even know that you were in that underperforming pocket. So a few numbers off the top, three point one trillion dollars in Australian superannuation assets. That number grew at thirteen point nine per cent between March 20, 20 and March 20 21. So a massive pool of money and very quickly growing. And, you know, you can see the impact that this pool of money is having. I'm pretty sure it was a bunch of super funds and some other companies that just put the bid in for Sydney Airport. Correct me if I'm wrong. Bryce. Yes, yeah. [00:06:04][70.6]

Bryce: [00:06:05] QSA Super. [00:06:06][0.8]

Alec: [00:06:06] You hear about Canadian pension funds just in a desperate search for assets around the world, like Australian super funds are going to be buying a lot of very important assets because that's just such a pool of money. So it's a big pool of money. The next thing is there's a lot in fees and costs, 30 billion dollars a year in fees and other costs. You know, our number one rule here at Equity Mates is we hate fees. You know, obviously, you're going to have to pay fees as part of your super, but it's important to know who you're paying, why you're paying it, and you're not paying too much. But then you get to the the really, I guess, worrying numbers in terms of underperformance and duplicate super accounts. So there is a hundred billion dollars worth of Australians money in underperforming super products. Now, that's from this government report. And that's that's pretty. That's a pretty stark. And that 100 billion is spread across three million accounts, super accounts that are, again, in underperforming super products. So pretty, pretty stark numbers there. And then twenty seven percent of Australians have duplicate or have more than one super fund account. So that means they may be paying multiple sets of fees, may be paying multiple sets of costs for things like income protection, insurance or disability insurance that sometimes are included in your super fund. So there's a real reason for Australians generally to wake up or to need to wake up and think about their super. But then if you go to our age bracket, twenty five to thirty four, the numbers become even clear that Australians just aren't thinking about the super. Now these numbers are from research from the Center for International Finance and Regulation that surveyed a number of Australians between 25 and 34 years old, years old. Bryce, tell us what people our age think about super well. [00:08:21][135.2]

Bryce: [00:08:22] I mean, if it's based on the conversations we have with our mates, it's not a lot. They're not thinking about super a lot. So less than one third. This is from the report. Not this is not just among our mates, but, you know, less than one third of 25 to 34 year olds here in Australia actually read their annual superannuation statements. And those statements are the important things that tell you how much money you've actually made in your superannuation, how much money your employer has put in and gives you a bit of a rundown on the types of investments that you've got in there. Four fifths rarely or never think about making changes to their investment options, which is something that we'll talk about in a little bit. Nearly two thirds can't name the age at which they can start accessing their superannuation funds. And only thirty five per cent think of themselves as well informed on matters regarding superannuation. So, yes, we have a slight bias with this age group because we are in that age group. And I'm sure for a lot of people listening who might be a bit later on in life, superannuation is certainly something that they would be thinking about. But I think the good thing Ren is that, you know, you don't want to be on the wrong side of these statistics. The good news is that it is absolutely in your control to do something about it and to optimize your superannuation no matter what approach you take, so that you can actually start, I guess, having a super fund that is more aligned with your age where you are in life and the goals that you have later on down the track when it comes to retirement. [00:09:53][91.5]

Alec: [00:09:54] So, I mean, yeah, I mean, look, we we talked about all the stats. We talk about underperformance. At the end of the day, your biggest asset when you retire potentially is going to be your house. But other than that, it will be a super fund. And, you know, we. We don't we're not good at thinking about the future, but, you know, getting it right now matters so much when you think about the amount of compounding that can be done in your 20s and 30s. [00:10:23][29.4]

Bryce: [00:10:24] Yeah, it's some of those stats are pretty surprising. And, you know, four fifths rarely or never think about making changes to their investment options or even read their super statements, like, if you think about it, what super is? It's your employer giving 10 percent of your income on behalf of you to be invested essentially for the rest of your life to retirement. Now, if someone were to give you 10 percent of your income in cash and say or take 10 percent from you in cash and say we're just going to go and invest this, how we think it should be invested and you close your eyes, I'm sure people would start taking a bit more interest in it. But it's just because I think it happens so easily and it's just so easy to forget what is actually going on in the power of superannuation. So let's have a chat about optimizing super Ren because it is so easy to set and forget. But as you said, it is potentially your largest investment. [00:11:20][55.9]

Alec: [00:11:21] Yeah, yeah. I mean, you say it's surprising because it's 10 percent of the money being taken. I say it's not surprising at all because I mean, we see these numbers play out in our lives. And I think I don't know about you, but I'm definitely a reflection of some of those numbers. And I think this this exercise in partnering with superhero and chatting about super has definitely made me think about how I can optimize my super. And I think it's really important to say here that there's no one perfect answer for your super. It depends on your age, the level of risk you want to take, you know, the stage in life when you want to retire, what other assets you have. There's so many factors that go into it. And, you know, we're not going to presume to say that there's a universal answer because there's not. And also, you should never take financial advice from a podcast. But I think there's some things that everyone can do well that everyone can think about and then some things that everyone should do. So I think now I think the first part of talking about optimizing super is probably understanding the different options that are available for Australians, because you hear a lot of terms like retail industry, self managed. Well, that one's kind of self-explanatory. But you hear a lot of these terms, and I'll be honest, I don't really understand the difference. So Bryce as our resident sensible investor who thinks about his future and has spreadsheets to back it up, explained to me what the different categories are. [00:13:07][106.6]

Bryce: [00:13:08] Can we also caveat that you do as well, given the other half of Equity Mates and it's not yours to be thinking about my future. But yeah, look, let's just briefly have a chat. So retail super funds and I think your you were in a retail super fund, Ren. They're there funds that are usually run by banks or investment companies. Anyone can join them, generally have a higher fee structure than some of the others. Industry super, which I'm sure many people have seen on the ad, that we'd sort of hand symbol that a lot of people do where they're comparing industry super fund versus retail super fund industry super funds. Anyone can join the bigger industry funds, such as host plus, for example, some of the smaller funds, though, they're set up so that people within particular industries, for example, health or the arts, can sign up to these super funds. Then you've got the public sector, of course, only people in the public sector, you know, government employees can join these super funds. Corporates also have can arrange super funds for their employees. And then you mentioned Ren self managed super. And this is where you really take full control and run the superannuation fund yourself. But then obviously with that, you need to comply with the appropriate super and tax laws. So, yeah, I'm sure you're either in one of those funds or you have heard about, you know, industry, retail or whatever it may be. But those are, broadly speaking, the options that you have when it comes to superannuation here in Australia. So I think Ren moving on from that to actually talk about optimization. As we said, not all funds or products within those funds are the same, but there are a few points that the government themselves has specifically said, and this is from the Money Smart website, when it, you know, some key points on looking after your superannuation if you want to kick off. [00:15:04][115.8]

Alec: [00:15:04] So, yeah, let's let's have a chat about some of the things that everyone can do. And, you know, no one with a bullet. Is our number one policy here at Equity Mates, we hate phase and yeah, I think those 30 billion dollars in fees paid last year I spoke about earlier, you can't avoid paying fees to your super fund, even if you self-knowledge. You've got to there's there's cost involved. So you're going to be paying costs. But are you paying are you overpaying? Are you paying for things you don't want? Like, you know, I'm single. No kids, kind of no responsibilities in some way. I'm not too worried about all these different insurances because, you know, I don't have a family that relies on my income and stuff like that. So for me personally, I actually you know, this is really showing my ignorance. I actually don't know if I pay for some of these insurances right now. But, you know, there's a question about whether I want to. And so for me, you know, the first thing with lowering costs is know how much you're paying in actual fees. And then the second thing is know what other costs are associated, what insurances. I mean, all that stuff. First of all, understand it. And second of all, make sure you're not paying too much. What about you do pay for the insurance and all that? You would definitely know if you have it. [00:16:30][85.8]

Bryce: [00:16:31] I've switched mine off, which I don't know if it's a smart thing to do or not. So, you know, when we're talking about insurance is most super funds offer, I think, life insurance, total and permanent disability insurance and income protection insurance. Yeah. So, of course, there is no doubt that many of those, if not all of those insurances are important at some stage in life. You are encouraged, though, to really think about, a, how much those premiums are that you're paying for, for those insurances within each super fund, and then to actually think about whether or not you need that insurance right now or not. And that's a very personal decision. But the reason that we discuss this in terms of optimizing your super is that the premiums for those insurances come out of your superannuation. So, you know, if you're unnecessarily paying for insurance that you don't need and, you know, over a long period of time, those premiums can really eat into the compounding effect of your superannuation. So certainly go in and have a look at what insurances have been ticked and what haven't. And then you can make a decision on whether or not it is important for you at that stage in your life. But the key thing to remember is that, yes, the pro, I guess, is that these superannuation funds do include these insurances. And I think in some instances the premiums are at a discount if you were to do it through a super fund or not, but you might not necessarily need them. [00:17:58][86.8]

Alec: [00:17:59] They would definitely be at a discount because of the tax advantage. Like even if the cost is the same, it would be tax free or taxed at 15 percent, wouldn't it? [00:18:08][9.5]

Bryce: [00:18:08] I don't know. [00:18:09][0.5]

Alec: [00:18:09] I'm yeah, I think even if it's the same cost as other, like if you got normal insurance through an insurance broker or, you know, when direct to an insurance company, I think it would net out to be cheaper because the income, the money that you're paying with it has only been taxed at 15 percent or is tax free rather than paying for it out of your after tax income. So if that's confusing for people, don't worry. Speak to a financial professional who can talk to you about it. But, yeah, I think I think let's put a bow on this. Don't overpay in fees and don't pay for things you don't want. It's as simple as that. And the first step in that is checking what you're paying for. The second step, which leads onto the next point is say what else is out there? Like just because your parents told you about a fund when you were 18 and starting your first job just because your employer had a default option and you just went with it, you know, there is so much choice out there. You need to check, and I know I've already mentioned it, I'll mention it again here and I'm confident I'll mention it again in this episode. Go to the website, go to that, your super comparison tool. It is it's very easy to use. It's pretty good. [00:19:33][83.6]

Bryce: [00:19:33] What would you be comparing, though, Ren? [00:19:35][1.4]

Alec: [00:19:36] Well, I compared my super account with another super from the same company, but you can say every every super fund, the fees or charges, the annual performance. But then up to in September, twenty, twenty one, there's going to be even more data that goes onto it. But it's got every my super fund currently and I think over time it will have every super fund in Australia and it's going to be it's very transparent. So, you know, the governments put those requirements in to give us more transparency and more information use it. [00:20:15][39.3]

Bryce: [00:20:16] And speaking of jump across to comedian The Economist, because the boys would have spoken in more detail about the new, I guess, rules and legislation that's come in around superannuation and making sure that there is more transparency and comparison between funds now available to the public, which is good to see from the government. I just want to pick up on something you said there Ren around comparing other products in your super fund, I guess, company, because most super companies have more than one product. So before even comparing against other super funds, it's worth actually having a look to make sure that you're in, I guess, the most optimized product within your super fund, which, you know, you're looking at performance again, you're looking at fees, all those sorts of things. And then you can make a decision on whether or not you should be looking elsewhere at other super funds, but certainly start with, you know, under the same roof. So we've just spoken about fees. We've spoken about fund's performance. We've spoken about insurance. You did mention Ren. The twenty seven per cent of Australians have more than one super fund account. So another key point from the government, and I don't know how many super accounts you have, but it's so easy when you start working. You have a part time job here. You take a full time job there while you're at uni. And then a bit later on in life, you move on from uni and you might start at one firm and then life continues. And in each job, you may have signed up to a new super fund through your employer and you might have three or four super funds by the time you actually settle into a longer term job. So combining those accounts is pretty critical when it comes to optimizing to ensure that you're not paying unnecessary duplicate fees across four or five different funds. Yeah, what's the start? [00:22:07][110.7]

Alec: [00:22:08] And Australian will have seven different jobs in their lifetime and average Australian. [00:22:12][4.4]

Bryce: [00:22:12] Is that something like that. Yeah. Yeah, sounds familiar. [00:22:15][2.3]

Alec: [00:22:16] If you if you got seven different super funds by the end of it all, that means you've paid seven different sets of fees, potentially seven different insurance costs. You know, it's it's just unnecessary cost. [00:22:28][12.3]

Bryce: [00:22:28] It is unnecessary cost. And a lot of people go, oh, it's way too hard and complicated to combine my super funds. I don't know where they all are. But from my personal experience, I did have a number of accounts from the same reasons that I just spoke about, having few jobs through uni and whatnot. And the super fund that I am with made it so easy to actually find all of those super funds and and then drag all the money in. It was a lot easier than I had anticipated it being, and they just did it all on my behalf. [00:22:57][28.8]

Alec: [00:22:58] So the government has made it even easier with this latest round of reforms as well there. This is one of the key problems that they're focused on, losing the comedian, the economist for the details, because I don't want to butcher them, but I know it was a key focus of this thing as well. It's like your super moves with you or something like that. [00:23:15][17.5]

Bryce: [00:23:15] Yeah, yeah, yeah. I remember reading at that point about that super moves. You can only ever have one account going forward or something like that, which is great. So let's have a chat about passive versus active Supai because we're starting to see a few products coming in and a few disruptors coming to the market. And some here are being one who are offering now more ability to take control of your superannuation in terms of what it's being invested in, how it's being invested for those that want to take that approach. So should we start at passive Ren? [00:23:50][34.9]

Alec: [00:23:51] Yeah. And when I assume here we're talking about not how the fund is managed, but how you as an individual person in Australia, approach the investment like. Exactly. Yeah, yeah. So passive. We're talking about you choose a fund and you sit on your hands for forty years and you pull it out at the end. Active, we're talking about you make active decisions. How that that money is invested? [00:24:18][26.7]

Bryce: [00:24:20] Well, yeah, you've just summed it up [00:24:21][1.1]

Alec: [00:24:21] not so often, but there is at the end of the episode, that's the [00:24:24][2.9]

Bryce: [00:24:24] business side. [00:24:25][0.5]

Alec: [00:24:26] So, yeah, for positive. And I mean, traditionally, this is what soup has been. This is what I am. I assume this is what you are really self managed super funds were seen as a little bit of an outlier traditionally, and you needed a certain amount of assets to make it worthwhile for like the admin cost and the burden of all the paperwork and stuff like that. And so for most Australians, we were we were passive. And for most Australians going forward, it's the right call. People don't have the time or the energy or the inclination to do a lot of the work. And if you're not going to do the work, let the professionals do it. And so then the question is, all right, well, I don't want to do the work, but there's still some things that I can do to make sure I'm getting the best outcome. The first one, we've spoken about it before. We've spoken, we'll speak about it again is face like no, know what you're investing in and make sure that you're not overpaying for something. You know, if a if a superannuation fund. And this is just completely hypothetical because I don't think any superannuation fund does this, but if a superannuation fund said, I'm going 100 percent into the ASX 200 index, that's that's the strategy and I'm going to charge you two percent a year to do it. And there was another super fund that said, I'm going to do exactly the same strategy, but charging one percent, you know, it's sort of a no brainer. But you go with the lower fees for for the same investment strategy. But a lot of people aren't comparing face. [00:26:03][96.9]

Bryce: [00:26:04] Yeah, it's it is. Yeah, it's surprising, but it's one of the biggest. I was on find doing a fee comparison for super funds. And on the lower end you're looking at sort of on a balance of fifty thousand I think it was fifty or eighty thousand. You're down in the sort of three hundred per annum in terms of fees and that includes, as you said, Ren investment fees and admin cost and those sorts of things. And then on the top end, you were looking at over sort of two thousand dollars now. And you can just say that that compounded year after year after year is going to add up to seriously a big difference in your super balance when it comes to retirement. So if you are taking that passive approach and as we've said, there's absolutely nothing wrong with that. And if you don't have the the skills or the inclination to actually learn how to invest and set up a portfolio and manage a portfolio, then, yeah, the best thing you can be doing for your super fund right now is to look at fees. And then there's insurance, which we have also spoken about, which is another form of, I guess, cost more than a fee. But that also does, as we've said before, deduct from your super balance. And over time that is pretty important to be aware of. [00:27:19][74.4]

Alec: [00:27:19] So there's this stat that I think we used it for our book. Also shout out. We've got a book coming out, preorder Topia. But I think we we did the math on Berkshire Hathaway and Warren Buffett's investment company. And I think it just shows how little differences in fees make such a big difference over the long term. So Berkshire Hathaway was taken over by Buffett in nineteen sixty five. These numbers run until the end of twenty nineteen. If you had invested a thousand dollars in Berkshire in nineteen sixty five point twenty nineteen, you'd have twenty seven million dollars. That's with no fees because Buffett doesn't charge fees. If Buffett had charged a one percent management fee rather than twenty seven million dollars, you would have twenty five million dollars, Dollars million difference. It's meaningful. Twenty five million dollars. You're okay. If Buffett had charged two percent rather than one percent, you would only have nine million dollars. Wow. That's a big step down from twenty five million to nine million. And then here's the kicker. If Buffett had charged a two percent management fee and then a 20 percent performance fee, and keep in mind that two and twenty structure was the standard for like hedge funds and stuff back in the day. You would have six point five dollars million. So the difference between, you know, the step down from twenty seven to twenty five mil to nine mil to six point five mil, this small difference in the face, no makes a big difference when you, you know, do it over. What's that? Fifty five years and yeah, it makes a difference. So just don't overpay I think is the main thing. You know, if it's worth paying for it's worth paying Folbre if it's not worth paying for. Don't, don't, don't do it. And if you're unsure if it's worth paying for check like speak to a financial professional and interrogator because it's worth checking when you're young. [00:29:26][127.4]

Bryce: [00:29:27] Absolutely. And, you know, this is where we kind of chime in and say, wake up, because Ren made it pretty clear that there are resources online, government resources online, even that make it so easy to compare what you are paying the some of the comparable products out there. So gone are the excuses, I guess, of saying that it's too hard to figure out what's going on in your superannuation. It's now certainly easy and possible to at least have a look at the face that you're paying. So then Ren. So we've spoken about fees and costs pretty extensively. Something that we haven't necessarily touched on, though, is your investment options. Is this something that we should be thinking about if we wanted to take a passive approach? [00:30:09][42.4]

Alec: [00:30:11] Yes, well, actually, caveat so that my super fund right now is it's called like a life lifecycle fund. And there's a number of funds like this where you basically put your age in like the. Yeah, that I drew upon. Not that age. You were born the day you were born. I was born [00:30:29][18.7]

Bryce: [00:30:30] three years old. Yeah. [00:30:31][1.1]

Alec: [00:30:34] And then it basically it decides your asset allocation over your lifetime based on that. So I think I get bucket it into like an early 1990s fund and then, you know, they start with a certain asset allocation for me when I'm young. And then over time they move it to, you know, more conservative, more income paying as I get older and older. And so there are some funds that are like that where you don't have to think about your investment option because it just it's like it doesn't for you. But then for the the majority of funds, they have choices. It's normally called like conservative, balanced and then growth are generally the three choices you'll get. Sometimes you'll get like ultra conservative or high growth and, you know, stuff like that. But most funds offer options and it's important that you check which one you're in. Obviously, we can't say what the right option is because it's it's completely dependent on your personal risk tolerance. You know what what you're comfortable with, how old you are, how long until you retire, and a bunch of other factors. But the important thing is to think about it and actually actively make a decision. [00:31:52][78.4]

Bryce: [00:31:53] Yeah, and that's the key point there. Ren. Again, it's it's not that difficult to do to log in your superannuation fund, find the investment option that you are currently investing in, I guess, and then compare the other options that you super fund provides and have a think about whether or not that matches your age, your retirement goals, all those sorts of things. So log in, check the phase and then next step, how to look at your investment options and then do a bit of work and compare. [00:32:27][34.0]

Alec: [00:32:28] Yeah. And can we say one thing whilst we can't you know, we we don't know your personal circumstances. We can't say what thing is right for you. I think it's safe to say that if you're in your 20s or 30s. Holding cash is a dangerous game because it might feel like the lowest risk, but it may actually be the most risky because of inflation over the next 40 years. [00:32:53][24.3]

Bryce: [00:32:54] Yeah, time is on your side. If you're lucky enough to be born in the 90s like Ren, so did you [00:33:00][6.7]

Alec: [00:33:01] are 80s way. You're at all. Seventy seven. Thirty three years. Thirty five. [00:33:07][6.5]

Bryce: [00:33:10] But look. Yeah, just like we speak about on this show, when it comes to building an investment portfolio, same principles apply when it comes to superannuation. Think about the time your time horizon and then ensure that the assets you're investing in are appropriate to, to that time horizon. So. So we go phase, we have a look at insurance. We think about our investment options. And then obviously that carries through, you know, investment options reflect how old you are in those sorts of things. So what is interesting, Ren, I found that there's and we've spoken about the new government legislations that are coming in and they're thinking about bringing in, if they haven't already, bringing in a benchmark around super funds and how they compare to passive investment options. And this is talking about the internal approach. Do you have you gone in and changed the structure yourself of your investment fund, or are you just letting it do that age thing? [00:34:04][54.4]

Alec: [00:34:05] So a couple of things in that. First of all, they are benchmarking super funds against each other and then they will be naming and shaming the lowest performing. And when I say they, I mean the government, the lowest performing super funds will be sort of named and shamed if they can't improve their performance. God, I have to say performance a lot of the time. Our apologies. If they can't improve, the government will stop them being able to take on new members and new money. So, yeah, the government are benchmarking. That was a concern from the finance industry that it will lead to more index hugging because super funds won't want to be in the bottom. I don't know if it's like Cortile or whatever that bottom band is of under underperformance. Does that does that matter? [00:35:00][55.2]

Bryce: [00:35:01] Does that matter? [00:35:01][0.3]

Alec: [00:35:01] Look, being in the bottom band, [00:35:03][1.6]

Bryce: [00:35:04] no index hugging. [00:35:04][0.8]

Alec: [00:35:06] Well, that is a great question, Bryce. And that is more a philosophical question than a question I can answer. I think I think some would say that the beauty of super funds is that they can be uncorrelated to indexes in that they can, you know, invest in alternative assets because I have a pretty stable capital base. They have such a long time horizon. And, you know, they don't need immediate liquidity at all times that they can do things like invest in power generation and airports and stuff like that. And perhaps that gives everyone in Australia a little bit of diversification, whereas if super funds are just becoming index huggers, potentially that puts a lot of pressure on the index to keep chugging on. [00:35:55][49.0]

Bryce: [00:35:56] Well, I also think, though, if you're if you're in a super fund and they are index hugging, then you're more than likely to be paying more fees than if you were to take control and index hug yourself, you know, like actually just invest in the index. [00:36:09][13.1]

Alec: [00:36:09] But yeah. And I think I think, you know, obviously there's more volatility in the stock market than there is in Sydney than there is in like an airport or a, you know, electricity transmission lines or whatever it is. So so I think that was the concern. I think the government of measuring it over three or five year period, which I think will be good because that will take some of that focus of index hugging. I haven't had that confirmed that five year or three. I think that was actually my housemate telling me that who because we were chatting about Super last night, because that's the kind of fun conversations you have when you live with Equity Mates. But yeah, I think so. I think. I think. There is you know, there will be some benchmarking and that that, again, I told you I'd mention it again, you'll be able to say that on the Atos, your super comparison website. [00:37:08][59.1]

Bryce: [00:37:10] Nice. So I guess the second part of my question, though, as well was do you play around with your investment options within your superannuation or have you just put in [00:37:19][9.6]

Alec: [00:37:21] as I as I said before, I don't have the ability to it's just life. [00:37:25][4.3]

Bryce: [00:37:25] Just you've actually just let it do its thing because you can't [00:37:27][2.2]

Alec: [00:37:28] yet bang put in the year you were born. Nineteen ninety nine for May. And then then it's just off to the races. [00:37:39][10.7]

Bryce: [00:37:40] Nice. All right. So that's the passive approach Ren, which we've said many times there is absolutely nothing wrong with taking that approach. The majority of Australians would probably be happy with that approach. They don't want to have to feel like taking control of their super and and worrying about making the right investment decisions. But there are a number of key points that we've spoken about there to help you wake up and actually optimize your super fund for your stage in life to ensure that you are getting the best result over a long period of time. But as we said at the top, the good news is that if you are in a position where you want to be able to take more control and you enjoy the, you know, the process of investing and think that you could do a better job than perhaps a passive approach, there are ways to do so. And I think it's exciting. Ren you're certainly in that basket where you'd like to start taking a bit more of an active approach. [00:38:32][52.7]

Alec: [00:38:33] Yeah, I am. I am I I am going to move my suit at some point. And I think I think it's worth when we talk about being able to be active, it's worth taking a bit of a historical lens to it. And, you know, traditionally it was self managed super fund. That was the that was the option. And there were all these reasons why a lot of people couldn't do that. The costs involved, the admin involved. And so that but that was sort of the only one. And what we've seen over time, I mean, quite recently is a lot of the plays, either in the super industry or outside the industry, try and create active options without the cost and the administrative burden of self managed super funds. Correct me if I'm wrong, but your super fund allows you to, like, allocate certain amounts of money to different ETFs and stuff like that. Is that right? [00:39:32][58.8]

Bryce: [00:39:32] No, not it's not even as specific as ETFs. It's asset classes that you can allocate to, but only within those asset classes. You don't get a breakdown of specific investment options beyond beyond that. So, you know, I could go all international equities if I want to, or I could go or cash if I wanted. But if I was to choose international equities, I don't then get to say I want Altec. I want a couple of things from, you know what I mean. So, yeah, it's still I would say it's an active it allows for a more active approach, but definitely not taking full control of where that's being invested. [00:40:12][39.6]

Alec: [00:40:13] And then I guess if you can say that that was like the super funds giving people more control, but not total control. And now we're starting to see the next generation of platforms. Among among them is super hero, where the the ability to take control. Without the self managed super fund burden, again takes a step forward, so there are two options for super hero autopilot, whether it's 70 percent or more in just a traditional kind of super fund wrap, like a diversified portfolio that you can't really touch. And then up to 30 percent that you can allocate between six themed ETFs. And I mean, the it's as the name suggests, it's autopilot. So you it's for people who want to allocate, you know, set proportions to different ETFs and then sort of set and forget it. But then the other one that is quite interesting is control, where a minimum of twenty five percent is in a diversified portfolio, but up to 75 percent can be directly invested in ETFs, but also companies in the ASX 300. [00:41:28][75.0]

Bryce: [00:41:29] Yeah, that's sort of like a level of control for the average retail investor or just, you know, non self managed super fund people, that it's a level of control that we haven't seen in the market. So it is pretty exciting. And it's great to see that there's now an opportunity, if you do want to be able to take more control and and invest your superannuation into some of those stocks in the ASX 300 that you think are going to be some long term holds, or perhaps there are some of those ETFs that you would rather be in than perhaps where your super is currently invested through one of the super funds. There's now plenty an option to be able to do that. [00:42:08][39.2]

Alec: [00:42:09] So now we did ask if someone could just load up 70 percent of their super or seventy five percent of their super on Afterpay. And the answer is no. There are limits on what you can do and how you can do it. But I think when you think about it in terms of like the historical continuum of active supah, it's definitely a step forward from the days of self-management being the only way to the super funds, giving you some control to now being able to take control and directly invest in ASX 300 companies. It's pretty cool. I mean, I would love to say international, but, you know, no pressure so big on the. Sure, I'm sure you get that one day. But I think regardless of where you are on that spectrum, if you are self managed, if you're, you know, taking some active control with the super fund like Bryce Fund or if you were a superhero, what are some things to think about in terms of optimizing your super? [00:43:10][61.1]

Bryce: [00:43:11] Is that a question for me? [00:43:12][0.8]

Alec: [00:43:12] That is a question for you. [00:43:13][1.0]

Bryce: [00:43:15] Well, just to touch on the active approach, Ren, we've certainly touched on the positive side of things when it comes to fees. And there's no doubt that fees are still going to be existent with the active approach. You're talking brokerage every time you're making a trade. So all of those fees still apply within your super fund. Again, you probably need to be a bit closer to superannuation tax laws and and those sorts of things as well if you're in self managed super fund. But I think the key really is that if you are well, whatever you're doing is it's around time horizon and you have the ability now, especially if you're in our age bracket or younger Ren or at that early stage in accumulating, accumulating superannuation, you have the ability to really think long term and build out a portfolio that reflects where you are in your superannuation journey and just let compounding do its thing. And I think that's the biggest thing to to remember. What are your thoughts? [00:44:11][56.0]

Alec: [00:44:13] Nothing. Nothing really. Beyond that. I think, you know, there are so many different active approaches you can take and there's plenty of ways to make money investing in the stock market or in other assets. But if you're not thinking with a 40 year time horizon, you're missing the opportunity that super has. [00:44:34][20.9]

Bryce: [00:44:34] Mm hmm. So I hope that is sort of helped everyone listening sort of really think about where they are in terms of their superannuation. As we said at the top, you know, there is nothing wrong with continuing to do what you're doing. Just make sure you are doing it the best way possible for where you're at. If you are wanting to take a little bit more control, makes them more active investments in some more active trading decisions, then this products like superhero that allow you to do that. Let's have a quick chat about what's next for us on our super journey. I think Ren, because this has been a great, I guess, research process for me. I think in terms of preparing for this series with superhero has made me actually go under the hood again with my super fund and actually really have a look at what's going on there. And I'm sure you've done the same. [00:45:26][51.8]

Alec: [00:45:27] Yeah. [00:45:27][0.0]

Bryce: [00:45:28] In the process of doing this, the reasons that I chose. My current superannuation provider four or five years ago, were things around fees, their reputation and their performance. It was a passive approach, just it was an industry retail, sorry, as an industry fund. However, doing this process is really highlighted that so much has changed in the last four or five years, so many new competitors to the market that it is no longer the funds that I sort of thought it was. And so now I'm in the process of doing everything that we've just spoken about, really having a look at where it compares to industry and and also whether or not it is the right thing for me. Do I actually want to be taking a bit more control? So I thought it was a really good exercise. And, you know, everything that we've spoken about was very important when it comes to figuring out where I am. So I'll jump on the tour that you've you've recommended and have a look as well. But I'm certainly thinking that it's time for maybe a little bit more of an active approach for me. What about yourself? [00:46:29][61.5]

Alec: [00:46:30] I just find it unbelievable that you talk you talk, you know, glowingly about all the research you've done and you haven't even jumped onto this at all. [00:46:38][8.1]

Bryce: [00:46:39] Yeah, obviously. [00:46:40][0.8]

Alec: [00:46:40] Obviously working hard, but not smart, mate. They do the work for you. [00:46:44][3.5]

Bryce: [00:46:44] Oh, well, I mean, there's plenty of other comparison tools that also do the work. [00:46:48][4.2]

Alec: [00:46:52] In terms of answering your question, I, I mean, my my super story, as people have probably heard on this episode and the crossover episode with Adam and Sophie, it just wasn't something I really thought about. You know, I was so excited by the opportunity of investing in the stock market. Obviously, we've been doing this show for a number of years. And I love, you know, looking at companies, researching companies, speaking to experts, hearing what they're talking about. And yet there was this whole asset that was sitting there that I just paid no mind to. And I was with a fund because, you know, it was just sort of like a default thing that I've just stayed with and never really thought about it. And so for me, this has been a good exercise to actually get me to think about it. And hopefully, you know, for Australians listening, they don't need to have to prepare content for a series on super to do the same. I think it is actually really easy to start comparing some of these funds, their performance, their face, stuff like that. So I think the government deserves credit for driving transparency in this industry. I can imagine and this is just total conjecture, not based on anything, but I can imagine there are a few lobbyists employed to not increase transparency in the industry just because, you know, one hundred billion dollars in underperforming funds, they have a big incentive not to make that clear to the public. So I think the government deserves a lot of credit for getting this transparency through. And I think it would be a shame if people didn't take an interest in them. And honestly, like twenty seven percent of Australians who own more than one super account, that number should be zero. One hundred billion dollars in underperforming funds of the funds need to get better or people need to get out of them like that number should be zero. So wake up Australia, right. Australia, because I have definitely woken up at night. [00:49:03][130.9]

Bryce: [00:49:03] So I think we both have, which is good. So hopefully by now we've been able to help you wake up and feel like you can take more control of your sleep. So a big thanks to Super Hero for supporting this series. Super Hero are giving Australians more control. So head to super hero Dotcom today to find out more about their auto pilot account or their control account. If you are looking to take more control of your super, it's been a great series and Ren always good to chat all things stocks and finance with you and looking forward to picking it up again when we kick off next week. [00:49:37][33.5]

Alec: [00:49:38] Sounds good. [00:49:38][0.0]

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