One Fee Super Fund
Is there a one fee super fund? No. The reason there is no ‘one simple fee’ for a superannuation product is because it’s not legislated and or no will by the super funds to make choosing a super fund simple. If consumers had just one fee to choose, it would make the choice process a whole lot easier. There’s obviously a lot of complexity about setting the right fee structure for each product but that is not really a concern for consumers.
Fee Types
Below is just a sample of fee descriptions I’ve found. These descriptions apply to hundreds of products on offer. Some of the fee’s have a co-dependency on each other, for example $7.00 per week plus 0.75% p.a.
- Administration Fee
- Asset Management fee
- Asset-based fee
- Investment Switching fee
- Buy-Spread fee
- Advice Fee
- Indirect Cost ratio’s
- Other fees and costs*
- Performance related fee
- Family law split fee
- Family law enquiry fee
- Plus Plus
- Implicit transactional and operational costs
- Transactional Costs
- Activity Fee
- Exit fee – terminated
- Insurance fee
- Explicit Costs
- Implicit Costs
- Establishment fee
- Line fee
- Indirect cost ratio
* another trove of fee types.
Scaling Fee Revenue
Whether you have $20,000 or $200,000 in your fund’s balanced option, the product you are paying for is the same. The total cost in fees increases because of the larger amount of money being managed – this is the result of charging your superannuation fund by a percentage fee.
Consumer Motivation
Could there be room in the market for a product that charges one flat fee regardless of the amount invested? I think there could be if there was enough consumer action to drive superannuation funds to this model. Or is the current model designed for the largest superannuation fund holders to subsidies the smaller fund holders. For example, paying $500 per year or paying 0.6% of FUM will work for some and not others.
Fee Future
The way fees are implemented in the future will ultimately be determined by consumer demand and government legislation. The simplicity of having one fixed fee, be it a flat fee or a percentage of funds under management, will be to the benefit of consumers when making a super fund selection. Hopefully simplicity will triumph.
SFF