Is Your Industry Super Fund Still the Right Choice: What Doctors Should Consider
For many doctors, superannuation is something that gets established early in their career and receives relatively little attention afterwards.
An account may have been opened when starting work at a hospital, with contributions continuing throughout training and into specialist practice. Over time, the balance can grow substantially without much consideration being given to where the money is invested or whether the fund remains appropriate.
Industry super funds can be excellent options. Many offer diversified investment portfolios, competitive fees and strong long-term performance.
However, as your super balance grows and your financial circumstances become more complex, it is worth asking whether the fund you started with is still the best option for you.
The answer isn't necessarily to move. It's to understand what you're paying for, how your money is invested and what alternatives may be available.
Industry Super Funds Have Their Place
Industry super funds have become a popular choice for Australians, and for good reason.
Many provide access to diversified investment options, relatively simple administration and competitive fees. For someone who wants a straightforward approach to superannuation, they can be entirely appropriate.
The challenge is that many members remain invested in a default or premixed investment option without fully understanding the underlying portfolio.
While these options provide diversification, they generally offer less control over individual investments, asset allocation and how the portfolio is managed.
For doctors accumulating larger super balances, greater flexibility and transparency may become increasingly valuable.
Understanding What You Actually Own
When investing through a traditional diversified super fund option, your money is generally pooled with other members and managed according to the fund's investment strategy.
You might select a balanced, growth or high-growth option, but you typically have limited control over the underlying investments.
Depending on the fund, you may also have exposure to unlisted assets, such as property, infrastructure and private markets.
These investments aren't necessarily a problem. They can provide diversification and access to assets that may otherwise be difficult to hold.
However, they can also make it harder to understand exactly what you're invested in, how assets are valued and whether the overall portfolio aligns with your preferences.
For someone who wants more visibility and control, other superannuation structures may be worth considering.
What Are Wrap Platforms and Separately Managed Accounts?
A superannuation wrap is a platform that allows investors to access and manage a broader range of investments within a single super account.
Depending on the platform, this can include:
Exchange-traded funds (ETFs)
Managed funds
Separately managed accounts (SMAs)
Cash and fixed-interest investments
An SMA is a professionally managed investment portfolio where the underlying securities are generally held for the benefit of the individual investor, rather than through a traditional pooled managed fund structure.
The portfolio is managed according to an agreed investment strategy, with the investor receiving greater visibility over the underlying holdings.
For doctors who want professional investment management without needing to select and monitor individual shares themselves, this can provide an attractive middle ground.
Greater Flexibility Without Having to Manage Everything Yourself
One of the main advantages of wrap platforms and SMAs is the ability to construct an investment portfolio around your individual circumstances.
Rather than choosing from a limited selection of premixed options, an adviser can build a portfolio with a specific asset allocation, investment philosophy and level of risk.
This might include combining Australian and international equities, fixed interest, cash and other investments in proportions appropriate for your circumstances.
The structure also allows for more deliberate portfolio management.
As you approach retirement, reduce your working hours or experience changes in your financial position, the portfolio can be adjusted without necessarily needing to change superannuation providers.
For doctors who may move between salaried employment, contracting and private practice, having that flexibility can be valuable.
Are Industry Super Funds Really Cheaper?
One of the most common assumptions is that industry super funds are always the lowest-cost option.
While many are very competitive, this isn't necessarily the case.
It is important to distinguish between the different costs associated with superannuation, including:
Administration and platform fees
Investment management fees
Transaction costs
Advice fees, where applicable
Other costs associated with the underlying investments
Some industry fund investment options have relatively low costs, while others can be more expensive depending on their investment strategy and underlying assets.
Equally, wrap platforms and SMAs can be more cost-effective than many people expect, particularly where larger balances allow access to competitive fee structures.
A portfolio constructed using low-cost ETFs or competitively priced SMAs may have lower investment costs than certain traditional diversified fund options.
However, this doesn't mean every wrap or SMA portfolio will be cheaper.
The appropriate comparison is the total cost of each option, including administration, investments and any ongoing advice, alongside the services, flexibility and investment management being provided.
Performance Matters, but It Isn't Everything
Investment performance is important, but choosing a super fund based purely on historical returns can be misleading.
Two funds may report similar returns while holding very different investments or taking different levels of risk.
One may have greater exposure to unlisted assets, while another may invest predominantly in listed shares and fixed interest.
Differences in asset allocation, valuation practices, fees and investment risk can all influence reported performance.
It is also important to recognise that strong historical returns don't guarantee future results.
Rather than focusing on which fund performed best last year, the more useful question is whether the underlying investment strategy is appropriate for your objectives and timeframe.
Do You Need a Self-Managed Super Fund?
For doctors wanting greater control over their superannuation, a self-managed super fund (SMSF) is often raised as an option.
An SMSF can provide significant investment flexibility, but it also comes with additional administration, compliance obligations and costs.
For many investors, a wrap platform can provide much of the investment flexibility they are seeking without the responsibilities associated with operating an SMSF.
This includes access to direct shares, ETFs, professionally managed portfolios and the ability to tailor investment allocations.
Where SMSFs can become particularly relevant for doctors is the potential to purchase business premises through superannuation, subject to the applicable rules.
For example, a medical practitioner or practice owner may wish to acquire commercial premises that are leased to their medical practice.
An SMSF can provide a structure for this, although the rules around related-party transactions, borrowing, leasing and compliance need to be carefully considered.
Outside of situations such as business property ownership or other specific investment requirements, an SMSF is often unnecessary when a simpler and potentially lower-cost structure can achieve the same investment objectives.
The Value of Reviewing Your Superannuation Strategy
For doctors, superannuation can represent one of the largest investment assets accumulated throughout their working life.
Yet it is often given considerably less attention than property, personal investments or other financial decisions.
A proper review should consider more than simply comparing fund names or historical performance.
It should examine your existing investments, asset allocation, fees, insurance arrangements, contribution strategy and long-term objectives.
Importantly, changing super funds isn't always the right answer.
For some doctors, their existing industry fund may remain entirely appropriate. For others, a wrap platform or professionally managed portfolio may provide greater flexibility, transparency or cost efficiencies.
The objective is to make an informed decision rather than remaining in a particular fund simply because it was established many years ago.
Key Takeaway
Industry super funds can be a very good option, but they aren't necessarily the right solution for every doctor throughout their entire career.
As superannuation balances grow, it becomes increasingly important to understand how your money is invested, what you're paying and whether your investment structure provides the flexibility you need.
Wrap platforms and separately managed accounts can offer greater investment choice, transparency and professional portfolio management, sometimes at a lower overall cost.
For doctors considering an SMSF, it is also worth understanding whether the additional complexity is necessary or whether similar investment outcomes can be achieved through a simpler structure.
If your superannuation has remained largely unchanged since your early medical career, the BFD Financial Planning team can help you review your existing arrangements and determine whether they remain appropriate for your circumstances.
BFD Financial Planning is a specialist firm dedicated exclusively to Medical Professionals. If you would like to discuss your financial goals for the year ahead and beyond, you can book a meeting at a time that suits you (including outside standard hours) via our online calendar.
Book a meeting. https://calendly.com/thomasrutter-bfdfp
Contact us today. info@bfdfp.com
General Advice Disclaimer
The information contained on this website and in this blog-post is general in nature and does not take into account your personal situation or circumstance. It is recommended that you consider and use the information provided responsibly, and where appropriate, seek professional advice from a financial adviser.
Although, every effort has been made to verify the accuracy and correctness of information, BFD Financial Planning, together with our consultants, officers, agents, and employees, disclaim all liability for any loss or damage suffered by any persons directly or indirectly relying on this information.
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