Friday 19 October 2007

Save Money on your Superannuation Investments

There is an interesting new service available from a recently launched company All My Funds which has potential to save considerable amounts of money. There are many hidden costs that can be associated with superannuation investments and insurance. For a set fee of $275 you can get a SOA (statement of advice) that compares your particular superannuation fund with other similar superannuation funds. Although the comparison funds are not specific recommendations, the information would indicate if your fund is costing you too much in fees and charges. A sample of how this report would look is provided on the website.

The other way that All My Funds could save you money is via their subscription service of $385 pa. For this annual fee you will get a rebate of contribution fees (up to 5%), annual trailing commisions (up to 1% per annum) and life insurance commissions (30+% of premiums). Often a superannuation fund will either pay fees and annual trails to a 'financial advisor' that was nominated when you joined the fund (even if you get no follow-up advice), or whill keep this fee themselves if you invested directly with a superannuation fund and don't have an advisor. By using the rebate service you could get rebates worth more than the annual fee paid to All My Funds.

Copyright Enough Wealth 2007

1 comment:

Matt Hern said...

It's good to see services such as this being released to help people become empowered in regards to their superannuation.

But, such services are not the only way to reclaim the "hidden" costs. And they are not necessarily the best or cheapest way either.

For example, $385 p.a. fee to rebate commissions is actually expensive and probably more than many people would actually be paying in commissions. Why?

(a) Because it is becoming much rarer that contribution fees are charged on employee superannuation funds. And when you leave the employer that arrangement usually is maintained in your fund.

(b) the average level of insurance in superannuation is very low. Consequently the premium is low and therefore so is the insurance commission in dollar terms.

(c) Most default trailing commissions are actually only up to about 0.44% p.a. not 1%. If the fee is up to 1% then it is because the adviser has added an extra service fee. This extra service fee can easily be directly cancelled by you if it is a personal superannuation account.

Note that if you are in your employer sponsored account you will be able to do very little about the fees on that account as they are negotiated by your employer. It is only once you leave your employer and the account becomes a personal superannuation account do you have greater control over the fees.

For a detailed four step process on how to reclaim commissions check out this article.

Matt Hern CFP
The Financial Futurist