Fees remain static after GST
Management fees for most wholesale managed funds have not climbed following the introduction of the GST earlier this year with most choosing to hold fees or decrease them, according to a report from InTech Financial Services.
Management fees for most wholesale managed funds have not climbed following the introduction of the GST earlier this year with most choosing to hold fees or decrease them, according to a report from InTech Financial Services.
The report says the reduced input tax credits (RITC) regime applied to managed funds has been the principal reason for the small number of funds increasing fees. As a result of the RITC, the maximum increase on fee levels would then be around 2.5 per cent.
Just over a quarter of growth funds, those with a large majority of local or international shares, have increased fee levels with most holding steady and 16 per cent actually dropping fees.
The majority of Australian share funds, conservative growth funds and international share funds also remained static with about 60 per cent choosing to maintain fees at current levels.
Listed property was the only market segment to buck the trend with more than half increasing fees in line with, and as a result of, the GST.
However the report says the reason for the lack of movement in fees is many managers are waiting for the new tax system to settle in and may make alterations as current prospectuses roll over.
The report also found fund managers offering funds in cash and growth classes were offering competitive fees to investors but those in the conservative growth, international shares and bonds and listed property classes could be more competitive on fees.
Larger investors should also negotiate fees, according to the report, with around half of most funds offering a reduction.
However this reduction averages about five basis points for an investment even when the invested amount reaches $50 million.
“When converted to dollar amounts, it would seem that the modest level of additional work and expenses incurred by the manager does not warrant the excess amount paid by larger investors,” the report says.
AUTHOR
Jason Spits
Recommended for you
ASIC has released the results of its first adviser exam to be held in 2025 with 241 candidates attempting the test.
Quarterly Wealth Data analysis has uncovered positive improvements in financial adviser numbers compared with losses in the prior corresponding period.
Holding portfolios that are too complex or personalised can be a detractor for acquirers of financial advice firms as they require too much effort to maintain post-acquisition.
As the financial advice profession continues to wait on further DBFO legislation, industry commentators have encouraged advisers to act now in driving practice efficiency.
