In defense of the retail super fund

Disclaimer; I use to work for CFS, consider me biased. Retail super funds have received a pretty bad wrap (tehe wrap). From under performing to charging excessive fees (here’s an article of BT charging high fee’s). So what have I got to say in their defense?

Low cost index based investing is an option

It is possible to find high growth index based options. If you want a low fee (0.33% p.a) option, CFS created Colonial First State Wholesale Index High Growth in June last year. Now it doesn’t exactly have a long term return rate yet but if it’s set up similar to FirstChoice Wholesale High Growth (which has averaged 10.05% return p.a over the last 10 years and costs 1.15% p.a in admin fee’s) or FirstChoice Wholesale Multi-Index High Growth might also be a solid option, this option has existed since 2014.Colonial First State Wholesale Index High Growth is made up of the following:

  • 36% Australian Shares
  • 22% Global Shares
  • 22% Global Shares Hedged
  • 10% Global Property Securities
  • 10% Global Infrastructure Securities

Some options have decent returns

Who ever has been invested in Acadian Wholesale Geared Global Equity over the last 10 years, good fucking job. That’s 24.76% p.a over 10 years and 76.59% growth over the last year. however gearing/leverage investments comes with their own risks. Obviously these options are cherry picked and past performance is no indication of future gain.

Investment optionReturns over 10 yearsAdmin cost
Acadian Wholesale Geared Global Equity24.76%1.24%(g)/2.73%(n)
FirstChoice Wholesale Geared Growth Plus14.28%1.14%(g)/2.27%(n)
CFS W’sale Index Global Share14.13%0.35%
FirstChoice Wholesale Global Small Companies13.97%1.37%
Colonial First State Wholesale Index Property Securities11.23%0.34%
First Sentier Wholesale High Growth11.15%1.20%
BlackRock Wholesale Advantage Australian Equity10.07%1.04%
FirstChoice Wholesale High Growth10.05%1.15%

Can access holdings information

CFS is transparent about it’s investment holdings. They released this feature about last last year. It is technically meant to be on the adviser portal but it’s quiet interesting to have a look through.Top 10 holdings for some investment options:

Colonial First State Wholesale Index High GrowthFirstChoice Wholesale High GrowthGlobal HealthGlobal Tech
CBA – 2.8%AUD – 2.92%UnitedHealth 6.13%Alphabet – 9.07%
CSL – 2.48%BHP – 2.73%Pfizer 5.01%Apple – 8.76%
BHP – 2.4%CSL – 1.61%Eli Lilly 4.79%Facebook – 5.54%
Apple – 1.96%NAB – 1.57%AstraZeneca 4.5%Marvell Tech Group – 4.8%
NAB – 1.43%CBA – 1.38%Novartis – 4.32%Flex – 3.89%
Microsoft – 1.38%Transurban – 1.08%Thermo Fisher – 4.14%RingCentral – 3.35%
Westpac – 1.35%Tencent – 1.02Bristol-Myers Squibb – 3.94%II-VI – 3.01%
ANZ – 1.24%Samsung – 0.98%Abbott Labs – 3.25%Global Payments – 2.81%
Amazon – 1.19%Woolworths – 0.91%Edwards Lifesciences – 2.85%Workday – 2.68%
Transurban – 1.19%Macquarie – 0.85%Boston Scientific – 2.85%T-Mobile US – 2.57%

Low fees for low balances

CFS doesn’t charge a weekly base admin fee and I think they waive fee’s up to $6000. Technically their PDS says they won’t charge any more than 3% of fee’s for low balances, but I had a few hundred $ in my test account for 2 years while I was working there and was never charged a fee. I’ve now set up a new account with a 4K rollover to test out this theory. I can post an update with my findings.

Options for the savvy investor

You can find geared investment options, and you can build a complicated portfolio and invest in options which are very similar to some common index/ETF funds available outside of super (e.g. ETHI, DHHF and IJX) I set up that CFS portfolio to be:

Acadian Wholesale Geared Global Equity20%
CFS W’sale Index Global Share30%
CFS W’sale Index Global Share Hedged10%
Realindex Wholesale Australian Share10%
Realindex Wholesale Australian Small Companies10%
Colonial First State Wholesale Index Property Securities10%
Realindex Wholesale Emerging Markets10%

Which is similar to my sunsuper allocation, but with a bit of extra gearing:

International Shares – Index (unhedged)50%
Australian Shares – Index20%
Australian Property – Index20%
Emerging Markets Shares10%

This is NOT an investment recommendation, it’s how I’ve structured my investments for my own personal and educational use. I personally think it’s too many investment options for a 4K balance in CFS but I want to test how that investment mix performs over a few years.

Mobile app experience

Their mobile app is the best on the market. I’m very biased here because I helped build it. But I did create 14 super accounts to compare other mobile apps.

Aussie based call center

CFS gets awards based on it’s customer service. The call center is based in Sydney and are full of some really helpful people. I sat in on a few support calls as part of learning about the business and I know they run a tight ship. The customer service is a source of pride for the company.

Now some cons – the old web technology

Though good luck trying to find any of this information on their website. The fact that CFS has over 130 investment options makes navigating their PDS, fee’s and performance a real mess. I had to hack MLC’s website to get performance data because the default link was broken. But MLC Horizon 7 Accelerated Growth Portfolio has had a 13.6% growth per year over the last 10 years too.

Do not try to switch investments with CFS online. This uses an old web page and it’s not user friendly at all. Giving the call center a call is actually the easiest way to make a switch. Improving this was on the backlog but had been de-prioritized because the company wanted to focus on the advisor experience.

Complicated product

Even with half a finance degree, it’s been really intimidating trying to explore up to 130 different investment options. Finding this information is all over the place. I only know it exists because I worked there for 2 years. I can see why advisers like CFS (particularly their wrap products), because it means more income from fee for service and a more tailored investment experience.

My final sentiment

If you are with a retail fund, have a look at their investment options before switching. If you are young and can find a high growth index based investment option you are laughing. You could consider having a life insurance policy outside of super (but still paid by super) as retail funds aren’t competitive in this department.

Hopefully you are switched on enough to be able to do your own research.

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