Australian Super Fees

I went a had a chat to a financial advisor today, and one point of discussion was fees for super.

I am currently with Australian Super. They charge an admin fee of 1000 a year or so on my balance of $800K

According to him, they also charge an 'investment fee' of $5K or so, or would if I used Direct Invest.

It is not on any of my statements.

Is he correct?

 

Doesn’t seem right to me. The PDS seems to be straightforward in regards to the costs



Source: Link

 

Thanks for that. If you read the bit at the bottom (Other fees) it does mention an Investment Fee. Reading through the entire PDS, it seems this fee is .66% on the Balanced option. It doesn't specify if it is different for PreMix or Member Direct.

So it seems that my financial advisor was correct.

I had no idea.

 

Usually the fund charges an admin fee for the account and then the investment fee based on the asset allocation (investment options) chosen and the fund balance

 

IMHO they are still among the 3 cheapest funds in Australia from memory. Though I’m not sure if that that applies only to vanilla super.

 

It’s the funds MER (management expense ratio). 0.6% is fair in my view for the product. What does he propose ?

 

He's suggesting Macquarie Wrap at a total fee of .28%. Plus any underlying fund or ETF fees.

 

right, so min 50bps+ his fees.

 

Yes, he wants .33%.

 

Has he explained what sort of performance above your aus super you can expect for his fee hurdle?

 

No adviser can promise returns above the default since they are changing the risk profile too. Direct investments could see a high allocation to a smaller number of specific shares which may under/over perform or even be delisted etc. A market correction may have a greater impact where the default may have some hedge position and even a share of unallocated reserves. You may forfeit that in going direct. Where a default option may cover a broader range of factors.

You could allocate a smaller % to the adviser and compare their (say 20%) to the default and then make a better choice in 6 months. They didnt mention that I suspect.

 

Advisor puts you in retail products , some direct stocks to complicate things (more complicated the better) and then has all sorts of stories when they underperform.

Advisors have a use around pension, super rules, elder care type stuff but beyond that it’s all smoke and mirrors imho. Accountant and tax lawyer is all you need. The rest you can educate yourself

 

IMHO 90% of advisers will move you out of an industry purely out of their own interests. As per @The Falcon layer you up wirh all this complexity for what is likely to be a poorer result.

 

Australian Super is one of the best performing superannuation funds in Australia and 6k fees on an 800k portfolio is only 0.75% which is pretty good for superannuation. I'd stay with them!

 

I wouldn't automatically assume all industry funds are lowest cost (even the well regarded AustralianSuper). There is significant variation, particularly as the funds under management become larger.

For a sense of this refer to Pat The Shufflers blog series on super. Probably not the final word, but still very informative imho.

https://lifelongshuffle.com/2019/03/24/not-so-super-retirement-savings-part-3/

• Australian Super
  • “Australian Shares” chosen for the Australian equities component
  • “International Shares” chosen for the international equities component.
• Hostplus**
  • “IFM – Australian Shares” chosen for the Australian equities component.
  • “International Shares – Indexed” chosen for the international equities component.
• First State Super
  • “Australian Equities” chosen for the Australian equities component.
  • “International Equities” chosen for the international equities component.
• Care Super
  • “Australian Shares” chosen for the Australian equities component.
  • “Overseas Shares” chosen for the international equities component.
• Sunsuper
  • “Australian Shares – Index” chosen for the Australian equities component
  • “International Shares – Index (Unhedged)” chosen for the international equities component.

 

The data supports Lambos post, and he doesn’t mention lowest cost. MER around 50bps all in on 800k for Oz super 50/50 split Oz/Int’l. I’m fee focussed as much as anyone, but this is not unreasonable for some of the best active management in the business. There is no way a retail investor can replicate this type of exposure cheaper - index or LIC is cheap of course, but this is not what this is. This year we will tick over 7 figures in Australian super and I am happy to pay the clip....

They also have an diversified index product at 16bps.

 

Yes agree lowest cost wasn't the primary focus and also agree the fee is not unreasonable. Sustainable long term performance after fees is the main game.

 

Can you share what makes you have such conviction in the quality of active management at Aus Super?

Genuinely interested, I have never compared super funds in any great detail.

 

Such conviction ; everything I say should be taken with 3kgs of salt.

AustralianSuper runs active mandates and is one of the Instos that gets best of breed active
managers very cheap - just as the Future Fund does, they are shopping in the same space with a huge Cheque book. They can also run infrastructure and property deals in house and get access to the best PE. Source, AFR articles, Capital allocation podcasts and the like. Personally I hold them in high regard based on what I have seen. Based on 8% portfolio return we will end up with $6-7m with them and I am not bothered by fees. I’m fee focussed ex super however where I try to run the whole show for 25bps. A different game imho.

 

The 'since inception' performance (about 20 years) doesn't look too dissimilar to the index performance.

Screenshot_20190419-185112 by ChrisP73 posted 19th Apr, 2019 at 7:04 PM

Understand shares only isn't for everyone. For me though I'm inclined towards a lower cost index option.

Oz super diversified index looks like a great option for those wanting a more diversified investment approach.