Exchange Traded Funds (ETF)
ETF’s come in all flavours these days from a mathematical index whose formula never has to be altered (i.e. Top 200 ASX stocks) through to a high conviction crystal ball gazing stock picker. Fees can be as low as 0.03%.
Super funds also come in all varieties but they have a legislated web of compliance & investment rules to deal with that adds to the overheads. Fees can be as low as 0.24%+++. Super funds like to break down fees into individual components – to help you of course. Their investment fee often gets the most prominent exposure, this can be misleading as you’ve then got to add the administration, transaction & trustee fees, etc. yourself. Many funds still like to advertise no exit fee (banned 2019) as a selling point to contribute to consumer confusion.
Could we see Super Funds match ETF’s for fees?
Super fund fees have a long way to fall, the competition will continue to intensify to increase pressure to lower fees or become irrelevant and become a merger target. As funds automate investments, outsource compliance and have a industry full of dead ducks, new funds will be created, drawn by the potential of massive profits. Having all Australian workers contribute 10%+ of their salary each year is akin to running a casino – money comes in but it never leaves.
As the $32 Billion in fees charged is fought over, savings for consumers will increase. Some ETF’s look like they’ve hit the bottom (VTS) which is hopefully the direction where super fee rates are heading.