Time for a Super Shakeup

What I’m about to share with you could possibly be the biggest change to superannuation since I wrote my book, The Barefoot Investor: The Only Money Guide You’ll Ever Need, a few years ago.

But first, a cute analogy to explain how Aussie super works:

Retail super funds, those owned by the banks and AMP, are the financial equivalent of Facebook. We all signed up for them years ago before we had a clue, then gradually worked out that they made their money by digitally shagging us — so they’re now well and truly on the nose.

Industry funds, on the other hand, are like Instagram: they’re just so hot right now. Post the Royal Commission, billions of dollars are flowing their way as people switch out of expensive retail funds.

The problem is that, when it comes to fees, all super funds are about as genuine as an Instagram selfie:

#it’s-not-all-about-fees-barefoot!

And, as a result, Australia has some of the highest investment fees in the world.

Yet this week the game changed: the world’s largest index fund manager, Vanguard, announced its intention to set up its own super fund Down Under.

Why is that such a big deal?

Because Vanguard is known as the ‘Amazon of finance’. The index fund pioneer is no pouty Instagram influencer: it has a history of aggressively, and relentlessly, lowering its fees. (Case in point: over the past decade alone, Vanguard Australia has cut its fees more than 25 times.)

Bottom line?

It’s high time for a super revolution, and my hope is that Vanguard helps deliver it. I’ll be watching closely to see what they come up with, and I’ll let you know what I think when they do.

Tread Your Own Path!