Ian approaches you for advice concerning his superannuation fund account. He is aged 38, earns a gross income of $80 000 p.a. and has $95 000 invested in superannuation. His super fund is invested in a conservative investment option and has achieved an average return of 5.5% p.a. over the past 3 years. Ian is attracted by a number of television advertisements which promote returns for an industry superannuation fund that, because of lower fees, has achieved an average return of 7.5% p.a. over the past 3 years.

Required:

(a) Ian wonders why his fund may have underachieved compared to the one advertised on the television advertisements. Explain.

(b) What factors would you need to discuss with Ian if he was considering  switching superannuation accounts to the industry fund? 

(c) What factors might you consider to determine Ian's risk tolerance?

Answer rating: 100% (QA)

a There could be several reasons why Ians superannuation fund may have underachieved compared to the ... View the full answer