The idea that industry superannuation funds are always cheaper than retail funds is incorrect as fees disclosed by industry funds omit property operating costs, borrowing costs, and implicit and explicit costs, according to an adviser.
Speaking to Super Review, HH Wealth director and financial adviser, Chris Holme, said he had to dig through the product disclosure statement (PDS) and the supplementary PDS to find out all the fees involved with the fund.
“If we include some of those costs that they put into their fees guide, investment guide or supplementary PDS we’re finding their fees are a fair bit higher than what we originally thought or that are disclosed to clients,” he said.
“Now these are fees that are taken out before clients see investment returns they don’t have to put them on statements but I do count them as costs because they’re coming out of a client’s performance before they receive it.”
“I still like industry funds and I’ve got a lot of clients in those funds and haven’t moved them specifically because they are still adequate for my client needs but I think the whole conception that industry funds are always cheaper than retail funds is pretty wrong to be honest,” he said.
Holme said he had a client whose industry super fund claimed their total fees were 0.93% but, in actuality, the total fees were 1.94%, over a per cent higher than what the fund disclosed.
“The fees are in the supplementary PDS but the funds are not making clients aware of it or making it easy for advisers to accurately compare like-for-like,” Holme said.
“I won’t change super funds if there is no benefit but previously we were looking at staying in a lot of the industry funds because we weren’t aware of these additional fees.
“It’s not fully hidden but what client is going to comb through the PDS an then after that look at their fee guide or supplementary PDS?”
He noted that when the super fund was approached about the fee discrepancy, they originally claimed the higher fee was incorrect but when the fees were broken down they retracted their statement and said it was correct.
“Because they take these fees out before performance is shown to the client it’s taken as a ‘that’s not our fees that’s the fund manager’s fees’ but at the end of the day if you’re getting a net return, those fees should be included,” he said.
Holme also noted that he did not think a lot of advisers realised the hidden fees as he had to adjust the comparison software he used to factor these fees to compare like-for-like super funds.
I’ve been exposing these fees to clients for years. A pity the Hayne Royal Commission did not want to know about industry super funds but elected to hammer the retail sector bludgeoning financial institutions and and registered financial planners alike.