Superannuation: Understanding product provider fees + costs

TL;DR

Fees in financial planning, particularly in superannuation, can significantly impact investment returns over time, making it crucial to understand and minimize them.

Transcript

good day and welcome to this week's video my name is robert gatley and this week we're gonna have a chat about fees it was based on a conversation i had with a client and we completed some planning for and did a statement of advice and as part of a statement of advice we need to compare their current scenario so where their superannuation is now an... Read More

Key Insights

• 🤱 Comparing fees in financial planning, especially in superannuation, is crucial for making informed investment decisions.
• 🤱 Direct investment frameworks can help reduce fees and provide guaranteed savings, unlike uncertain investment returns.
• 🤱 Even a small percentage difference in fees can have a significant impact on long-term investment returns.
• 🤱 Fee structures include administration fees, platform fees, advice fees, and internal cost ratios associated with managed funds.
• 🤱 Understanding and controlling fees is a vital aspect of financial planning, with off-platform and direct investments preferred.
• 🤑 Minimizing fees not only saves money but also allows for better control of tax outcomes.
• 💨 Investment returns are never guaranteed, making fee reduction a more reliable way to improve financial outcomes.

Questions & Answers

Q: How did the client's experience with their current superannuation provider highlight the importance of comparing fees?

The client's current provider only disclosed the administration fees, neglecting to mention the internal cost ratios (ICRs) that get paid to the fund manager. This incomplete information misled the client and emphasized the need to fully understand all fees involved.

Q: Can reducing fees provide a guaranteed financial benefit?

Yes, while investment returns are not guaranteed, reducing fees by choosing a more direct investment framework can lead to significant annual savings. These savings compound over time, providing a guaranteed financial benefit compared to uncertain investment returns.

Q: How can even a small difference in fees impact investment returns?

The video provides an example of a $400,000 investment over 20 years. Shaving off just half a percent in fees results in a difference of nearly $170,000 in investment returns. This showcases the long-term impact of fees on overall financial outcomes.

Q: What are the key components of fee schedules in financial planning?

Fee schedules typically include administration fees, platform fees, advice fees (if applicable), and the often overlooked internal cost ratios associated with managed funds. These components collectively contribute to the overall fees clients incur.

Summary & Key Takeaways

• The video discusses a client's experience with misleading fee information provided by their current superannuation provider, highlighting the importance of comparing and understanding fees.

• The speaker emphasizes the significance of fees and how they can be reduced by choosing a more direct investment framework, potentially saving clients thousands of dollars annually.

• An example demonstrates how even a small difference in fees can result in a significant impact on investment returns over a long period.