Average superannuation fund fees have ‘jumped’ following the introduction of new disclosure rules, but this is nothing for fund members to worry about says Chant West.
The average super fund fee increased by 0.19% – from 0.95% to 1.14% – following the introduction of ASIC’s Regulatory Guide 97 (RG97) rules. All this increase came from the ‘investment fee’ component, not the administration fee.
However Chant West, which complied the figures, says super fund members shouldn’t worry about this increase.
“What we’re seeing isn’t a massive increase in fees. Rather, we’re seeing an increase in the fees that the regulator, ASIC, now requires funds to disclose,” said Ian Fryer, Chant West’s head of research.
“From the members’ point of view, the actual fees and costs they incur haven’t changed in most cases. There have always been costs like brokerage, underlying manager fees and transaction costs that funds didn’t report because they weren’t required to. Now they are. That’s a good thing in principle because it makes everything more transparent, but the danger is that people will take the higher published costs at face value.”
“Perception is important, and the last thing the industry wants is for members to get spooked into believing they’ve suddenly been hit with big fee increases. They have not! Now it is up to funds to assure their members that nothing of substance has really changed and, in particular, returns for members are unaffected by the new disclosure rules.”
Fryer said that there were positives and negatives from the new fee disclosure rules. On the positive side it addresses the ‘Russian doll syndrome’, where there are multiple layers of investment management but funds only disclosure the top layer of fees.
But the changed rules also create a “distortion” in how fees and costs of property investments are disclosed.
“Put simply, you have to disclose more fees and costs if you invest in unlisted property rather than listed REITs. That puts industry funds at a disadvantage because their property exposure is mainly through unlisted vehicles, so they will tend to look more expensive.”
Industry Super Australia has been critical of the RG97 changes, including calling on the Government to delay the start date.