Fees can no longer be hidden

Alex Dunnin, executive director, research and compliance, Rainmaker Information

When you invest through a super fund or another type of managed investment, the true cost of your fees and charges is made up of the explicit headline fees plus any indirect costs such as investment manager charges. The financial regulator ASIC is concerned that funds may not be declaring the full value of these below-the-surface costs and is introducing new rules to make sure they do.

For example, your fund might use an investment manager that declares a very low investment fee only to divert some of the gross investment income to cover their internal costs. Or your fund uses a multi-manager that subcontracts other investment managers without disclosing to the super fund these second-layer fees. But these are fees by another name and from now on super funds have to include all these amounts when they tell you how much their total fees and charges are.

ASIC estimates its new disclosure rules could see funds increase their reported fees by an average 0.23%. The subtlety is that the crediting rates that fund members and investors receive in their accounts won’t change because they were actually paying these higher fees all along.

These new rules came into force this month. But as common sense as they seem, ASIC has created a lot of confusion due to the way the new fee rules work if your super fund uses a platform or if it has a lot of investments in unlisted property and infrastructure.

If your latest investment statement tells y you y your fees have j just gone up, now you know why.