Barefoot Investor: Get in line for a super refund

TURNS out there’s a one-in-three chance you could be owed thousands of dollars in missing super, and all you need to do is join a class action to get it back. But the lesson here is don’t rely on regulators, your super fund, or lawyers to look out for you. Keep your hands on your own wheel, writes the Barefoot Investor.

DID you know you have a one-in-three chance that you could be owed thousands of dollars?

It’s true.

This week, law company Slater & Gordon announced it was launching Australia’s biggest class action.

“The Royal Commission into banking has revealed that if you’ve been a member of a big bank-owned superannuation fund (or AMP) then your retirement savings may have been gouged for years. We believe you can and should get your super back,” the company said.

Giddyup!

CLASS ACTION LEGAL CASES SURGE AS CONSUMERS FIGHT BACK

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In fact Slater & Gordon contacted me this week to see if I would “promote this to my networks”.

Consider it done!

So, what do I really think?

Well, I think if there’s a group I trust even less than finance executives … it’s ambulance-chasing lawyers.

(Never get between either of them and a bucket of your money.)

And so with “clowns to the left of me, jokers to the right …

Here I am, stuck in the middle with you.”

Slater & Gordon is suggesting there are five million Aussies who have been shafted by their retail super funds (my words), for a total of up to $1 billion (their words). They’ve set up a site where you can register to getyoursuperback.com*

(*Less their huge legal fees, of course.)

And if you genuinely believe you’ve been screwed ‒ most notably because you’ve invested your super in low-earning cash options (though I simply can’t believe that can be too many people?!) well, yes, you should sign up to the class action.

After all, why not?

“Ya got to be in it to win it, son”, advises Bluey at my pub (a man who admittedly will drink from the drip tray because he’s so broke from punting.)

However, let’s get a few things straight.

First, there is nothing new about bank-owned funds underperforming their peers. Since super began, AMP and Commbank (and other bank-owned retail super funds) have, on average, charged high fees and delivered low returns.

Don’t rely on the regulators, or your super fund, or lawyers, to look after you.

(In fact, I wrote about it in 2016 in my book. An old bloke named Frank, from Bendigo, was (legally) gouged with fees by AMP for tens of thousands of dollars over his working life. I suggested the least he could do was to ask the AMP CEO to mount a plaque at AMP HQ’s toilet saying “This urinal was paid for by Frank from Bendigo’s super”.)

Second, paying high fees on your super is the easiest way to rob yourself of a secure retirement.

Yet get this: around 82 per cent of the Aussie market is invested in high-fee, actively managed funds, rather than in the low-fee index funds I recommend.

How’s that working out?

“Active fund managers let investors down”, was the headline in the Australian Financial Review this week.

“Most Australian active fund managers in a majority of categories failed to beat their benchmarks in 2017-18, lending more ammunition to the case for passive (index) investing,” the AFR reported.

Vanguard’s Robin Bowerman said: “I don’t think anyone is surprised by the results. Active underperformance is less about the investment style and more about the high costs. In investing, the more you pay, the less you get.”

Touché!

So, my final piece of advice is this: By all means join the class action if you think you can claw back some money.

But that’s all in the rear view mirror.

For the future, keep your eyes on the road and your hands upon the wheel.

Don’t rely on the regulators, or your super fund, or lawyers, to look after you.

Instead, do what Frank didn’t, and ask your super fund whether you’d be better off having your money invested in low-cost, passively managed index funds.

Tread Your Own Path!

The three golden rules to investing are don’t invest with money you can’t afford to lose; don’t put all your money in one stock; and don’t invest in businesses that don’t make any money.

I DON’T LIKE THE SOUND OF THAT

PAUL ASKS: I have just learnt that the value of shares I own has dropped by $5000 since last week, from $25,000 to $20,000.

In April last year I purchased them at $30,000, so they had already dropped $5000.

I want to sell immediately, but I talked to my girlfriend last night and she suggested I contact you.

The shares are Audio Pixels, which is an audio company. This is my first ever experience with shares, and I want to cry.

I have a big mortgage and can’t afford to lose $10,000. I am petrified if I leave it there, but hate to take such as loss. Please help me quick!

BAREFOOT REPLIES: Admittedly, I’d never heard of this company before, but Audio Pixels Limited has a very new-age sound about it:

“Audio Pixels Limited was founded in July 2006 (and) has developed a revolutionary technological platform for reproducing sound, thus enabling the production of an entirely new generation of speakers that will exceed the performance specifications and design demands of the world’s top consumer electronics manufacturers.”

Sounds impressive, but then my ears began bleeding as I flicked open their 2017 annual report:

Over the past five financial years Audio Pixels has lost a total of $17.76 million.

And in the past 10 years it hasn’t turned a profit … and there’s not even a squeak of the revolutionary speakers.

“A material uncertainty exists that may cast significant doubt on the Company’s and Group’s ability to continue as going concerns”, says the company’s auditor, Deloitte.

That doesn’t sound good.

Paul, there are three rules I apply to investing:

1. Don’t invest with money you can’t afford to lose.

2. Don’t put all your money in one stock.

3. Don’t invest in businesses that don’t make any money.

Cobber, you’ve broken all three!

So what should you do?

Don’t pray that the share price returns to what you paid for it … because the share market is tone deaf to your prayers (much like Audio Pixel’s speakers).

If I were in your shoes I’d sell this stock immediately, pay down your mortgage, and buy some Sonos speakers.

Teachers like you have one of the most important and most underpaid jobs in the country.

THIS IS MY KIND OF CLASS ACTION

TOM WRITES: I turn 40 next month, and for the first time in my life I feel in control of my finances.

You see, I was given your book as a gift, and it is one of the best gifts I’ve ever received. I have told many people about it and lent it to family and friends.

But there is one very special group of people in my life that I can’t wait to give it to: my students! I am a high school teacher, and my form class ‒— which I have grown to love over the past few years — will soon finish year 12 and venture out into the world.

I wish I knew at their age what I now understand about managing finances, so I have been putting a few extra dollars into my Splurge account to buy a copy of your book for each of them (20 in all).

I have been sharing some of your ideas with them, and I hope they will start their adult lives much wiser than I did.

Thank you in advance for what you have helped me to teach them.

BAREFOOT REPLIES: Teachers like you have one of the most important and most underpaid jobs in the country.

Twenty signed copies of my book are in the post for your students.

Thanks for all the hard work you do.

If you have a burning money question, go to barefootinvestor.com and #askbarefoot

The Barefoot Investor for Families: The Only Kids’ Money Guide You’ll Ever Need (HarperCollins)
RRP $29.99. Pre-order now from Dymocks, Booktopia, QBD or Amazon.

Originally published as Barefoot Investor: Get in line for a super refund