Monday 12 May 2008

How I plan on saving 50% of investment trailing fees

I'd seen a couple of services advertised that will rebate you part of the trailing fees that many investment products pay to financial planners, insurance and loan brokers. So I recently visited and joined up. The service offers an annual rebate of 50% of the trailing fees they get paid if you nominate them as your "fund broker" (70% for trails above $4000pa). I sent in completed nomination forms for my income protection insurance, three margin lending accounts, and various fund investments. I got a confirmation email acknowledging receipt and processing of my forms a few days later, and was advised that a few of the investments didn't actually pay any trail (Timbercorp and Rewards agribusiness investments). Also, Commonwealth Securities doesn't pay a trail on margin loan balances, although the form will still be processed so I receive a 100% rebate of the entry fee on any mutual fund investments I make via Comsec.

This means I should be getting a rebate on the trailing fee paid on my "loss of income" insurance premiums (probably 1%-2% of the amount paid), plus I'll get a around 0.25% of the value of my margin loans with Leveraged Equities and St George Margin lending. The rebate cheque is due each anniversary after joining the service, and will cover all trailing fees received during the year.

Although I'd always known that margin loan interest rates are around 1% higher than variable rate home loans, I hadn't realised that most margin lenders are paying 0.25%-0.35% trail to financial planners! As with most investments, if you invest directly in these products (without going through a financial planner or broker) you don't normally get any of this fee rebated (the investment manager simply pockets the trailing fee). Since I have investment loans of around $220,000 through LE and St George, assigning YourShare as my "broker" for these accounts should generate an annual trailing fee rebate of around $550. Not bad for a few minutes work.

There is at least one other similar trailing fee rebate service available, but although it rebates a larger percentage of trailing fees it also charges an annual fee. This makes it better for investors with a large portfolio, but would be similar (or slightly worse) in my case. Anyhow, once I get the first annual fee rebate cheque I'll be able to tell if the other service would provide a larger rebate, and can change broker nomination on my investments if that is the case.

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uniquecoffeetables said...

the trail on your income protection is likely to be more like 10-25% of the permium than 1-2%.

And year one premiums are usually fully paid to the provider (or even up to 130% of the premium), so a way to really save is to re-write your income protection every 12 months (actually they make you hold it for 13 months usually) through one of these guys that rebates a portion of your premiums and you will effectively get it for half price.

Some issues with this:

All policies are different, so make sure you're getting what you really want.

You might have to go through underwriting if your health isnt totally up to scratch, so is it worth going through blood tests/medicals to save a few bucks?

Income Protection Adviser said...

I agree, Income Protection Insurance provides peace of mind, protecting your income in the unfortunate event that you become unable to work due to sickness or injury. Therefore if you need to save money on your income protection insurance premiums compare all the 15 providers every 12 months to see what else is out there - Do you know the latest income protection policy features? Pricing chnges around every 3 months or so or alternatively other ways to bring the price down can be by to choose the duration of the benefit period, which can be anything from 2 years up to age 65 and you can also choose to be paid a lower monthly benefit should you not require the full 75%. The price of the policy is dependent on a number of factors including the amount of your annual income, your age, gender and state of health, whether or not you smoke and what your occupation is. You can also choose a designated waiting period for the policy to start accruing the benefit which will also influence the cost of the policy. For more on getting the best value talk to a specialist income protection adviser from or to your local adviser but make sure he uses all the major insurance companies to ensure you are getting the best deal at the time.