It’s Smoke and Mirrors Day

March 29 is smoke and mirrors day. A day dedicated originally to magicians and their use of smoke and mirrors to create a distraction for their magic tricks.  But is has now moved on to all areas of trickery, deceit and deception.

And one area that is fraught with this is the superannuation and financial services industries.  So today, I thought I would share some of the trickery, deceit and deception I believe exists in this space.

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Compare the Pair

The first smoke and mirrors I want to talk about at the “compare the pair” industry superfund ads.  These ads typically show you how much your super would be if you were with an industry super fund and compare this with a retail fund.  They happily show the balance you super would have grown to.  But they conveniently forget to tell you that your fund has default insurance which you are generally automatically enrolled in.  And the premiums on that insurance will mean that your balance will actually be lower. For example recent research by Canstar showed that a 25 year blue collar worker’s super could be up to $244,000 lower at retirement if they kept the default super for all those years.

Appropriateness of financial advice

The second smoke and mirror is around the appropriateness of financial advice.  Industry funds keep on talking about how the banks have integrated financial planning arms which can cause a conflict of interest.  Whilst this is true and there are plenty of examples of improper advice, the industry funds have the same problem with in house financial advisers.  We just don’t hear about this as ASIC has admitted at the banking inquiry it has never investigated industry funds.  So I am guessing Industry funds will have the same problem.  Could you imagine an industry fund employed financial adviser telling the member they can get a better deal elsewhere?

Independent financial advisers?

Another smoke and mirror is all these supposedly independent financial advisers.  According to some people there are less than 100 truly independent financial advisers in Australia.  The so called independents who operate under their own name, are still constrained by their ultimate licence holder as to what they can do and say.

The financial press

The financial press are full of smoke and mirrors as well.  For example Scott Pape in his best selling book tells people they can retire on $250,000 of super and live a comfortable life.  Then in the next sentence he tells them they have to work part time.  That may be ok for a 67 year, but what about an 85 year ex brick layer.  What part time work will they be doing at 85?  So how are they going to live a comfortable life?

Super Will Never Be Enough

And the biggest smoke and mirror is that super will allow you to retire comfortably.  The reality if you are low to average earner it will never be enough.  Even Paul Keating came out the other day and said “It (being super) was always a complementary savings measure for middle Australia. Let’s say workers on between $65,000 and $130,000.”  He admits low income earners will end up on the pension.  And my analysis says it does not work for most people anyway.  So in my view it is all smoke and mirrors to generate huge fee income for a whole financial services industry.

And the biggest smoke and mirror of all is the pension.  This was the 20th century innovation. It didn’t exist in the 19th century and it’s my belief that it’s not going to exist in the 21st century.

So what should you do?

So whenever you are dealing with someone in the superannuation and financial services industry, you need to be aware of all the smoke and mirrors that exist and try and cut through and get the right solution for you.

So if you want some unbiased help so your lifestyle expectancy matches your life expectancy, then why not register for my next live and free event.

Do you and your family a favour and start taking steps so you can improve the health of Your Wealth and get off the treadmill of working till you drop.

Wayne Wanders

The Wealth Navigator

wayne@thewealthnavigator.com.au

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