You've decided you need to choose a super fund, either for yourself or for a friend, colleague or relative. You might have even read a few things about what to look for. Problem is, now that it's time to get specific it's almost as overwhelming as when you knew nothing. If this sound like you, then follow this eight step program. By Alex Dunnin
Step 1 - What do you want from your fund?
This is not as silly as it sounds. If you've ever bought a car, a house, tried to choose a school for your child, or even tried to buy a television set, you would have quickly learned that not all cars, houses, schools or TV sets are the same. Sure they might look similar on the surface, but choosing between them often means you need to ask a few tough questions to work which ones are really the best for you.
Let’s use the example of buying a car. Remember when you were last in a car dealer showroom. What were those questions the sales rep asked you? Were they something like: what type of driving do you do, how fast do you want to go, do you need to carry luggage, do you have kids, is fuel consumption a factor, do you want to go off-road, what type of finish and décor do you want, do you have a budget?
Did you notice then that as soon as they asked you these questions that they were immediately able to steer you to some cars that seemed to miraculously fit the bill? Choosing a super fund is exactly the same, except the only differences are what the actual sharp-shooting questions are.
Are you interested in being actively involved with your super fund? Are you interested in investments and do you want to be able to choose from lots of investment choices? Do you want to leave everything to the fund to worry about because none of it makes any sense to you? Do you want something in between? Do you want to be able to choose your own investment managers?
Do you want direct shares? Do you want insurance, what type and how much? Do you want to be able to do everything online? Do you want to talk to a financial adviser? Do you want to be able to bundle extras like cheap home loans, health insurance or shopping discounts with your super?
Why does this matter? Just like when buying a car the more features, luxury, speed, and the better the fuel consumption, the higher the price, the same thing happens in super. Except with super if you want lots of involvement with your super fund and you want it to be flexible then you should look for funds with lots of investment and insurance choices, while if you want simple super and easy to understand super funds then just look for ones with easy-to-understand investment choice menus.
The thing to remember is just that the real difference between most super funds is the flexibility (or complexity) of their investment and insurance menus – okay, it's not the only thing but its the main thing.
Step 2 - Kick the tyres
Now read the article on "How to Kick the Tyres of Your Super Fund" and check out our lists of top funds.
Step 3 - It’s all in the menu
Because the main thing you are buying from a super fund is its investment choice menu, now you should read the article, "Make Sense of Your Fund's Investment Menu".
Step 4 - Check out the AAA rated super funds
Thinking about what you've already learned in steps 1, 2 and 3, now check out SelectingSuper's lists of Top Rated Funds, and try to narrow down to a shortlist of funds that you think interest you.
Step 5 - The road test
The road test. Just like how you can’t seriously check out a car without sooner or later getting behind the wheel and taking it for a test drive, the same is true with a super fund.
Focus only on your super fund shortlist and visit their SelectingSuper Fund Profiles, check-out their websites, ring up their call centres to ask for some info about them, check out how they stack-up in the SelectingSuper performance tables and Top Super Funds lists (these are on our website at www.selectingsuper.com.au).
Great signs here are that if their profiles makes sense, their websites are useful and informative, their call centre is friendly and direct, their investment returns in each of the investment sectors are at least around average (especially over three or five years), and they stack-up reasonably in the Top Super Fund lists.
Always remember that that funds that treat you well, answer your questions professionally, and who get the info to you that you asked for, are good candidates to stay on your shortlist - at least for now. But just as importantly, funds that have treated you badly already should be dumped off the list. If a fund you thought you liked isn't listed in these performance tables, then why not call them up and ask why? And tell them SelectingSuper sent you.
Step 6 - Don’t be seduced
Don’t get put off the scent by looking only at funds with great returns over the last year or ones whose only claim to fame is low fees.
You wouldn’t automatically buy a car just because its fast or because its cheap would you? Recall, that what you buy with super is the menu and the feature set – never ever forget this – so always ask yourself what you want from your fund. But equally, don’t think that just because a fund has high fees it automatically has more features and is better. You always need to sit inside it or open up the bonnet.
Regarding returns, good funds should be at least around average over three years and maybe even over five years too. While the one year figures are great warning signs - that things are improving, or that something isn't working – you should be very careful about dumping a fund just because its having a bad year. Instead you should use this as an excuse to talk to them about what’s going on. A good fund will always be able to explain what their plans are to get things right again.
It’s also the job of the fund’s marketing team to have a great looking brochure. Read them and everything else they give you, but just because they are glossy with great pictures doesn’t mean the fund is great. It just means they have a great looking brochure.
Step 7 - See an adviser and/or get a Report Card
If you still can't decide, maybe it's time to talk to a financial adviser. To find an adviser that suits you, visit our sister website www.selectadviser.com.au.
Or if you've narrowed your choices down to 2 funds you now want to compare, why not ask the SelectingSuper team to produce a Member Report Card for you?
Step 8 - Ask us a question
Still stuck? Email us a question and maybe we can point you in the right direction. We won't give you financial advice, but we'll try to help you. Why not email us anyway to let us know how you are getting on?
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