Big fee goes into our adviser's pocket
Graham wants his hard-earned savings put to better use
QWe are in our early 60s. Our super is invested with MLC through our adviser, who charges 1.1%. This year our combined fees totalled $9000.
SuperRatings recently rated several industry funds well above MLC in performance. I’m wondering if we would be better off switching to an industry fund, which would charge a much smaller fee and have that $9000 in our fund instead of in our adviser’s pocket?
Goodness, Graham. I hope you are getting more than just someone looking at your statement twice a year! $9000 buys a lot of professional advice; in fact, even at a very handsome $350 a hour, it should cover 25 hours of professional advice a year.
Before I leap in too harshly here, though, it is important that you do consider exactly what services beyond super, including professional advice, you are getting. It is all about value for money. Most of the big funds have low-cost, balanced or other options based on indexing, meaning the fund captures whatever returns the markets generate. The annual costs on these are as low as 0.05% – yes, on an investment of $500,000 that is around $250 a year.
So, if you are paying 1.1% a year, you would want to be sure you are getting returns and other services that reflect the fees you are paying.
Here it is important I tell you that my employer from 1983 to 2018, ipac Securities, put employer contributions into a high-growth MLC fund. I do not pay an adviser any fees, but the MLC fund obviously charges fees. It is very much dependent on which fund you are in with any manager, but the fund I am in has performed strongly, which has justified its fees. That said, I am a strong supporter of using a big, low-cost industry fund with its huge, broadly diversified portfolio.