Confessions of a Financial Planner - Why UFOs and Superannuation Should not mix

Having working in the Financial Industry for over 18 years I see many things that need to be shared with consumers. This 'Confessions of a Financial Planner' series is designed to do just that. I look forward to your feedback and comments.

Why UFOs and Superannuation Should not mix

On Tuesday morning before starting the day, a lingering question from a client was bugging me. ‘Spaceship Superannuation is it a good investment?’

This client had been swept up in the amazing digital marketing this company has put out along with a catchy name. But since when did spaceships and superannuation seem link a logical connection?

Being curious, I went searching for the Product Disclosure Document to understand if the marketing hype matched the product investors were actually going to get.

Spaceship Superannuation promotes that you are going to ‘invest in the future’ and that you will get a ‘diversified portfolio with technology at its core’. Sounds great… but what is the reality?

Aiming to Under-perform

This is a fund that is aiming to significantly underperform the market with a stated investment objective of just CPI + 2.5%, when similar risk exposed funds are aiming for CPI + 5-6% over a 9 year period.

Now if I was invested in the share market and only received a return of 5.5% over 9 years on average, I would be moving elsewhere and quickly.

The Fees Just Don’t Seem Fair

They actually do not own any of the shares directly they advertise. Instead they gain the exposure to the market using Exchange Traded Funds and Index Funds. Now there is nothing wrong with that, except that you are paying extraordinary high fees for this privilege. Along with what seems little to no active management at 1.6% per annum.

To give an example, as an investor I can purchase a technology focused exchange traded fund at an investment cost of just 0.10% - 0.48% per annum. So I have to ask why are you paying 1.6% in the Spaceship Superannuation Fund?

The Investment Focus Does Not Live Up to The Marketing Hype

It is also worth noting that although the fund puts all of its focus in the marketing on being invested in technology stocks this only makes up around 35% of the investments.

Although, personally having had the experience of working in the BT call centre at the launch of the BT Technology TIME Fund, I am reminded of the risk of just focusing on one industry. In fact the BT Technology TIME Fund launched on the day the dot.com bubble peaked, March 10, 2000. From there it was all down hill falling from $1 to less than $0.40.

The fund itself also misses a number of other critical features needed by its target market, such as your professionals who need more flexible investment options or need to fund insurance coverage. It will be interesting to see how Spaceship Superannuation changes over time; they will need to match their marketing hype, otherwise risk having a lot of very disappointed investors.

Although I love seeing new innovative products hit the market, let's leave spaceships well away from super.

PLEASE NOTE: Information on fees in this article were accurate at time of publishing July 2017