SMC criticizes FSC on fund performance

The Super Members Council (SMC) has accused the Financial Services Council (FSC) of making selective claims regarding the fund performance of ‘platform’ super funds compared to mandated MySuper products. A recent report commissioned by the FSC and conducted by NMG Consulting suggests that relatively simple changes to superannuation choices early in a career could significantly boost retirement savings compared to staying in a default MySuper product. The council argues that the comparison relies on cherry-picked data rather than a holistic view of member outcomes. Such selective analysis risks misleading members about the true cost of their chosen investment options.

Switching options could boost retirement savings

The research indicates that an individual who switches to a lower-fee investment option from age 30 could retire with up to $1.2 million. Conversely, moving from a default MySuper fund to a high-growth option at the same age could increase retirement savings by as much as $690,000. Such growth is vital for offsetting the rising cost of living in retirement. FSC chief executive Blake Briggs emphasized that greater engagement with superannuation at key life stages could materially improve long-term financial outcomes. He aimed to show that active management of accounts yields better returns.

The report challenges the perception that platform products are inherently more expensive than MySuper. It found that compact and mini wrap platforms can offer comparable fees, particularly for higher account balances. Briggs argued that policy proposals making it harder to control superannuation will directly harm financial wellbeing. He fears restrictive legislation will stifle innovation and choice within the sector.

Industry funds dispute the figures

SMC, which represents major industry funds like AustralianSuper, Australian Retirement Trust, HESTA and UniSuper, disputes the FSC report. The council stated that members of platform super products typically pay higher administrative fees and have lower exposure to growth assets. They also claim these products deliver lower risk-adjusted returns than the defaults provided by industry funds. Data from member accounts supports this view. The disparity in fees can significantly erode the compound interest that drives long-term wealth accumulation.

A key argument from the SMC is that the financial benefits of platforms often exclude the cost of advice. Since having an ongoing adviser is an inherent requirement for most consumers on these platforms, the total expense ratio is effectively higher than reported. “Rather than switching to more complex and costly products where higher fees can erode their super, most consumers would be best served by taking simple and practical initial steps,” the SMC said. Advisors provide essential guidance to avoid these pitfalls. Ignoring advice costs presents a distorted picture of the true value proposition.

The debate highlights a fundamental friction in retirement savings: the gap between what consumers have access to and what they need to understand. While the FSC highlights the mathematical upside of aggressive asset allocation early in life, they often assume the consumer possesses the financial literacy to execute the switch successfully. The SMC’s focus on advice costs suggests that without professional guidance, high-growth strategies can backfire, resulting in losses that are not captured in simple “potential outcome” modeling. This creates a dilemma where the cheapest option for a fund manager might not be the safest path for a member without a financial advisor. The disconnect between the two perspectives complicates the ongoing policy debate.

Previous clashes over member behavior

A prior dispute between the two groups occurred earlier this year. The FSC questioned SMC research which found a spike in younger members switching out of industry funds into self-managed super funds (SMSF) and platform accounts. This trend signaled a potential shift in how younger demographics view traditional superannuation structures.