For many investors, their largest store of wealth outside of their family home (if they own one) is their superannuation. With 9.5% of your salary directed to super and the tax incentives attached, super naturally becomes a growing portion of an individual’s wealth the longer they are part of the workforce.

One of the common questions we get asked at ETF Watch is how our readers can invest their super in ETFs and LICs. Until fairly recently, investors looking to take more control of where they invest their super were forced down the Self Managed Super Fund (SMSF) route or the Financial Adviser focused “Wrap” type platform. With reasonably high costs associated and additional trustee responsibility, to be economically viable, a SMSF requires significant funds available in super and a desire to bear more of the admin work, and often “Wrap” platforms are available only to Financial Advisers, therefore not meeting the needs of the self directed investor.

Many super funds have seen this growing desire of investors to take more control of their super, and now offer direct investment options. This allows investors to invest in direct shares, including ETFs and LICs for a fraction of the cost of an SMSF. Today we take a look at the options available to investors, the restrictions applicable and the costs associated with their direct investment options.

Industry Super Funds

First we take a look at Industry Super Funds. These are the super funds that most Australians will have their super invested if they don’t make a choice of their fund. Each fund tends to have an industry that it supports. With all profits going back to members, Industry Funds argue that they provide a low cost option for your super.

Below we look at the 7 Industry Funds we have found that support a direct investment option. Whilst not an industry fund, we’ve also added ING Living Super to the mix here, as it displays many of the same attributes as the industry funds.

The above table shows a large variance in the offerings of each of the funds. For investors interested in LICs, options are much more limited, and even ETFs investors are limited with some of the providers. Each provider also mandates a proportion of total assets be held in other investment options (generally managed funds or cash), ranging from 1% to 20% of the account balance.

What are the costs?

All of the funds listed above have additional costs associated with their direct investment options. Below we list these costs, as well as the brokerage costs associated with trading a listed investment. We also list the standard admin costs associated with the products. We’ve calculated the estimated fees on a $100,000 portfolio, of which $80,000 is invested in self directed options. Note that this excludes the underlying investment costs associated with ETFs, LICs or any of the super fund investment options.

Fund Name Direct investment fees Brokerage costs Other annual fund admin fees Total admin cost for $100k Australian Super $395 annual fee Starts at $15 $78 per year + 0.11% of balance $583 CBUS Super $240 annual fee Starts at $19.95 $78 per year + 0.15% of balance $468 HostPlus Super $180 annual fee Starts at $19.95 $78 per year $258 Legal Super $180 annual fee Starts at $12.50 $67.60 per year + 0.35% of balance $598 Care Super $320 annual fee Starts at $13.75 $78 per year + 0.19% of balance $588 Media Super $204 annual fee Starts at $13.75 $65 per year + 0.10% of balance $369 NGS Super $247 annual fee + 0.10% pa asset based fee Starts at $12.50 $65 per year + 0.10% of balance $492 ING Living Super $60 annual fee + 0.64% pa asset based fee Starts at $20 None (estimated Operational Risk fee applies though) $572

Above you can see the direct investment fees range from $60 (plus an asset based fee) to $395. Trading costs begin from $12.50, however generally become percentage based beyond a certain trade size. For the hypothetical $100k portfolio, total admin costs range from $258 to $632. Some products include other fees which are difficult to estimate in the above apples to apples comparison, however don’t materially change the total fees.

Retail ‘Wrap Style’ Super Funds

At the beginning of this post, we briefly discussed ‘Wrap’ type super products. These products were traditionally only available to financial advisers, providing access to a large range of direct equities, managed funds and term deposits. A number of these have now opened their doors to self directed investors. Below we take a look at the three products we’ve found available to superannuation investors.

Fund Name ETFs LICs Supports other shares Restrictions Netwealth Super Accelerator 117 ETFs 34 LICs ASX 200, some international shares Must retain minimum cash balance IOOF Pursuit Select 36 ETFs 12 LICs ASX 300 only Must retain minimum cash balance BT Super Invest 126 ETFs 62 LICs ASX 300 only Must retain minimum cash balance

The Wrap style products are less restrictive than the industry funds, with all products requiring just a minimum cash balance to be retained. All also provide access to a large unlisted managed fund list, with Netwealth also providing access to some international shares.

Fund Name Direct investment fees Brokerage costs Other annual fund admin fees Total admin cost for $100k Netwealth Super Accelerator Plus Nil Starts at $18.50 $175 + 0.59% of balance $765 IOOF Pursuit Select Nil Unknown 0.70% of balance $700 BT Super Invest Nil Starts at $12.50 $500 + 0.35% of balance $850

These products don’t include direct investment fees, and whilst all are priced higher than the industry fund alternatives, provide the greater flexibility as described earlier and the larger managed fund list which may appeal to some investors. All of the above also provide a tiered percentage based admin fee, meaning investors with more than $250,000 receive a price discount. Some of the industry funds also provided tiering or capping on their fees for those with larger balances.

We should note that we did have trouble locating the above information from both Netwealth and IOOF’s websites, and were unable to locate the document that listed the brokerage costs for the IOOF product.

What about a Self Managed Super Fund?

Whilst the 11 super funds we have looked at provide the ability to invest in ETFs and LICs, all have limitations, and do not provide access to the full range of almost 300 ETFs and LICs available on the ASX. The only way for self directed investors to have total control over their super fund investments is through a SMSF.

SMSFs certainly aren’t for everyone, with increased trustee responsibility and the hassles and costs associated with fund administration. Nevertheless, with 600,000 SMSF in Australia, they have their appeal to many investors. Fund administration services start at around $1,000 per annum and an SMSF allows you to choose your favourite online broker and simply purchase your ETFs and LICs through them.

What do you think?

Have you had any experience with any of the super funds listed above, or do you know of other funds offering access to ETFs and LICs? Let us know in the comments below.