This is the superannuation vehicle that is often a lot more expensive to operate but appeals to people who want more flexibility and options with their superannuation. They are owned by financial institutions that make a profit from providing the administration and investment services, they are also called public offer funds.
They often offer more choices and options when it comes to investing. This increased choice also results in higher administration and investment management fees. It also requires more servicing in the form of professional investment advice that adds to its cost.
As is the case with a car if the right model is chosen, and the advice received comes from a professional advisor not driven by commissions, someone with a commercial superannuation fund can experience good performance despite the extra costs.
Commercial super funds have two main models. The first is totally managed by the financial institution that owns it and often has the highest level of costs. The second is a superannuation administration platform that allows members more choice and can have lower administration costs.
When comparing one commercial super fund with another, or comparing them with the other super vehicles, you should not just concentrate on the administration costs. In some cases commercial super funds have low administration fees but have higher investment management fees.
The higher administration costs for both models is more evident when a person is in accumulation phase. Once a person commences retirement and needs a pension the difference in cost is not as great when compared to the other super vehicles. With increasing pressure on fees charged to members, largely brought about by the low-cost option offered by industry funds, the administration fees charged by some superannuation platforms have reduced greatly.