AUSTRALIANS are paying too much for funds under management, and consumers should have the option of paying fees on a performance basis to compensate for under-performing funds, according to Australian Consumer Association (ACA) senior policy officer Catherine Wolthuizen.
Addressing delegates at the IFSA conference she said Australian consumers are being ripped off.
“Australian investors are paying more than their counterparts in the United States, and although the US is a larger and more mature market, fees are still too high here,” Wolthuizen says.
This is particularly relevant in today’s low-return environment, which has highlighted the ACA’s concerns that consumers are being charged excessively.
“The industry cannot justify current fee agreements, and we need to disclose how much fees are being set in excess of costs,” she says.
The spread of entry fees is wider now, at zero to five per cent, than it was five years ago, when it ranged between just four and five per cent, according to the ACA.
Wolthuizen says the government has a responsibility to protect consumers, who are required by law to contribute nine per cent of their annual salary to superannuation funds, and should consider banning exit and entry fees.
The ACA has developed its own fee structure model that calculates the likely impact of fees on the long-term value of funds under management, which it would like to see become an industry standard.
The association also opposes the commission relationship between financial planners and fund managers, though delegates expressed concern that lower fees and the removal of commissions would cause smaller players in the industry to drop out of the market.
However, she agreed the government’s tax regime puts unfair demands on fund managers and advisers, and said the ACA is a vocal opponent of existing tax laws.
