Retail super facing extinction as SMSFs and Industry funds rule

Expanding the superannuation performance test in choice superannuation including on platforms may be sounding the death knell of retail superannuation.

The result, according to HUB24’s Director of Strategic Development, Jason Entwistle may be a superannuation sector which is split between industry ‘profit to member’ superannuation funds and self-managed superannuation funds (SMSFs).

Speaking on a panel at Financial Newswire’s Advice, Wealth and Super Rewired Conference in the Hunter Valley, Entwistle sounded the warning that the sector was “staring into in June APRA’s performance test in super applying to every investment on the platform”.

“Our numbers suggest the average superannuation member on the platform, depending on whether they have managed accounts or not, holds between 20 and 30 investments,” he said.

“Those having a diversified portfolio they may hold a global resources fund which two years out of seven absolutely kills it and one out of seven years has a shocker and maybe it will have two years which are shockers.”

“And if its two years of shockers its going to get caught [by the performance test] and that client is going to get a letter in scripted form which says ‘your super fund has failed’ and that prescribed form does not reference the adviser,” Entwistle said.

“I am hoping Treasury stops this but if this gets through then we’re all going to be facing many client enquiries.”

“So, retail super is under attack and it has been for years and it’s not just a Labor Government – it was a Coalition Government that put this [the performance test] in so the regulator wants big +$30 billion, dumb as in limited options, index-hugging to meet the performance test, cheap super.”

“And that’s really good for probably half the population but if you are an aspiring member and you want a bit more than that I don’t think retail APRA-regulated super is going to be suitable and this audience has to get used to SMSF being the answer – it is personal super, its portable, its household and its intergenerational.

“It’s got a whole lot of strategies you cannot do in retail super and a whole lot of benefits outside that regime that you can do so while we might have been warned off it for years, I think that is where the industry goes and we will have a bar-bell industry that looks like industry funds and SMSFs and retail will probably die,” Entwistle said.