Message to big super: Stick to your knitting
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Social impact investing has gone mainstream. More than half the super funds and investment managers around the world are now incorporating social and sustainability factors into their investment decisions.
At the end of 2019 that figure was only around a third. That’s a big increase in a small amount of time.
What’s not to like?
Social impact investing can make a real difference in the world. By starving money away from harmful companies or industries, and instead directing it to ethical industries, money can be used for positive social results.
But is that really the purpose of super? And have super fund members given permission to use their lifetime savings in this way? Recent research suggests not.
According to CoreData research, only one in 10 super fund members wants their fund to prioritise social issues over investment returns and the fees they pay.
More than six in 10 super fund members are happy to invest for social good but only if it doesn’t have a negative impact on investment performance or require them to pay higher fees. The rest simply don’t care about the social impact of their super.
Other people’s money
Fifty years ago the Nobel prize winning economist, Milton Friedman, said “Nobody uses somebody else’s resources as carefully as he uses his own”.
He was right. And it appears that some super funds have forgotten whose money it is. We think they should be listening to their members. Most of their members just want them to concentrate on delivering good investment returns for a competitive fee.
Keep in mind that trustees of super funds are required to act in the best interests of members. They are also legally required to adhere to the ‘sole purpose test’. This sets out that every investment and management decision a super fund makes must be for the sole purpose of providing retirement benefits to members.
Time to engage with your super
There’s no place for setting and forgetting when it comes to investments in retirement. Retirement investing is complex. You need to balance your short-term needs with your long-term risks, manage your income and make sure you’re making the most of your opportunities.
At When Financial Solutions we can help. We give you confidence that you can understand how your money is invested. And we make sure your investment strategy is meeting your needs and preferences.
If you want to invest for social impact, that’s fine. We can recommend the right investment strategy for you. If you don’t, then that’s fine as well.
Because with When Financial Solutions it’s not a matter of ‘if’ your investments will meet your needs, but ‘when’.
Michael Bowman and James McMaster are co-founders of When Financial Solutions. This article is general and does not consider your personal circumstances. If you would like advice specific to you, please give us a call.