Originally posted by Rocky
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Why do some managed funds charge so much in fees?
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Yup, this is the key point Rocky. Try and educate yourself as best you can, then try and understand the incentives of the people providing you advice. And understand that significant possible returns beget significant risk...people will try to tell you otherwise...but they are typically telling porkies. Unless you are rolling in it, keep at least 20% of your wealth in low risk assets (preferably those that do not move strongly in the same direction as the bulk of the market).
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I'm not sure "banking and finance" has ever been an "honest" industry, at least by any commonly held meaning of the word.
Where there is big money there is big corruption. That has always been the way of the world.
Before the advent of 'mass media' the peasants existed in blissful ignorance. Now we have been woken to the 'realities' of the world.
People and organisations don't get fabulously wealthy by being 'nice guys'. I can think of many current examples just looking around the world today.
I have always said that your Financial wellbeing is like your physical wellbeing - you have to take responsibility for it yourself, do your 'Due Dilligence' and then make your decisions accordingly. This includes choosing advisors that you trust. It's not easy, which is why so many people get into so much trouble with it - you have to accept that even with expert advice you will still make bad decisions that will bite you.
I created a SMSF and then realised after several years that it was a bad idea, and had to go through additional expense and considerable trouble to dissolve it.
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Jackster will send you my tin foil hat, I haven't been using it enough recently
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The cartel case is a money washing scam too. I bet the lawyers are privately owned by the bank management and its just a extra way for the big wigs to be syphoning off money into their own pockets
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Originally posted by pamount View PostA friend was looking at OnePath, recommended by ANZ, and then compared it to Colonial First State, recommended by Commonwealth Bank
lol, OnePath isnt just recommended by ANZ .. it is owned by ANZ ... and Colonial First State .. surprise surprise ... owned by CBA. A fine display of "Clients Best Interest" principle! Their defense? "We offer the best product!! honest!!"
The fee has nothing to do with past performance as you are buying into future performance. "past results are not indicative of future results". Having said that, Managed Funds is the equivalent to saying "Coffee Beans" ... Each Fund is different, the asset in the funds and the strategy and risk profile vary.Originally posted by pamount View Posthe said the yearly fee with Colonial First State is about $600 cheaper. Plus he said Colonial First State has no entry or exit fees while OnePath charges a one off fee for setting up the fund. Does OnePath perform better? Is there an online article or forum he should check out?
but imo, ANZ might just be looking to fund the cartel case ASIC has initiated against them.
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I take offence to that. If I wasn’t getting what I wanted out of it I would change and they would be forced to change.
I believe everyone should be able to make a good income and profit if they do their job properly. Whether that is super, coffee, beer or groceries.
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This is exactly the type of attitude that encourages blatant profiteering, along with a succession of hopeless governments that have seen fit to allow the hammering of the working classes, whilst making themselves the highest paid politicians on the planet.Originally posted by rusty888 View PostI still believe this is an issue we don’t want to face.
If you don’t want to pay the fees put it in cash and earn 2-3%. Then you will complain your balance is low and not growing.
I pay a high amount of fees but my growth is far than better than the fees I earn.
Do I care I’m making people rich with all my fees? Not whilst over the long term my wealth is also going up.
If you are paying in safe funds like industry and government funds large amounts with no independence then yes there is a little issue. But in the private retail space. Competition will mean you cannot take big fees with no return.
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I still believe this is an issue we don’t want to face.
If you don’t want to pay the fees put it in cash and earn 2-3%. Then you will complain your balance is low and not growing.
I pay a high amount of fees but my growth is far than better than the fees I earn.
Do I care I’m making people rich with all my fees? Not whilst over the long term my wealth is also going up.
If you are paying in safe funds like industry and government funds large amounts with no independence then yes there is a little issue. But in the private retail space. Competition will mean you cannot take big fees with no return.
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I agree with what you are saying Greenman, but re-read Scott Pape's article carefully, he is saying even the industry funds are now involved in the rip off. The so called low fees charged by the industry funds are still a rip off. Thanks Yelta for posting the article in full.Originally posted by greenman View PostNearly 30 years ago I was made redundant and had to move my super to a new fund, I was referred to a so-called "friend" who rolled my hard-earned into MLC, Bankers Trust and MacQuarie funds with a hefty entry free and hidden rolling commissions to the "advisers", after getting a few end of year statements and seeing the exorbitant fees I moved my money to a low fee industry fund and haven't looked back since.
I have a deep mistrust of the retail superannuation industry, their advisers and all of the deep connections to the big banks and institutions.
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Nearly 30 years ago I was made redundant and had to move my super to a new fund, I was referred to a so-called "friend" who rolled my hard-earned into MLC, Bankers Trust and MacQuarie funds with a hefty entry free and hidden rolling commissions to the "advisers", after getting a few end of year statements and seeing the exorbitant fees I moved my money to a low fee industry fund and haven't looked back since.
I have a deep mistrust of the retail superannuation industry, their advisers and all of the deep connections to the big banks and institutions.
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Thanks yelta.
There is and will be too much money in super for it not to ne exploited. It is a huge pond of wealth.
Also, cant find my fees for cbus. There is no option on the mobile site to see the fees.
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Barefoot Investor: Big questions over a super rip-off
Posted at the request of another CS member.
"SCOTT PAPE, Sunday Herald Sun
May 27, 2018 5:30am
PICTURE this: You get a bill in the mail: $3850 for “investment services rendered on your super fund”.
Across the country, every adult is also sent a similar bill, with the amount varying depending on the size of their super balance. Some people, often the poorest workers, get three or four bills because they have their super in three or four funds.
That’s effectively what’s happening in Australia, only it’s hidden because your super fund doesn’t invoice you.
Instead, they take it automatically from your super account.
Still, can you imagine the outcry if these bills arrived in people’s letterboxes?
It would be front page news. There would be protests in the streets.
And then I’d stoke the outrage by saying:
“It gets worse! You’re not getting value for money. Over the long run, 90 per cent of these super funds fail to beat the basic market averages. Yet they’re arrogantly charging you some of the highest fees in the world.”
Billion*aire investor Charlie Munger once said, “Show me the incentive, and I’ll show you the outcome”. Well, the Royal Commission into Financial Services is a fascinating case study of an industry with the wrong incentives.
Former Treasurer Peter Costello understands incentives, and he’s angry about the financial outcomes for workers. That’s why at a super conference last year, he argued that the government should take compulsory super out of the hands of bank-run retail funds and union-backed industry super funds, set up its own fund, and incentivise fund managers to bid for the business — lowest fees wins.
You know things are bad when a former Liberal treasurer is suggesting nationalising super savings!
In America they’ve had stunning success with the Thrift Savings Plan (their equivalent of our super), which is administered by the government. Fees are as low as 0.03 per cent.
The Royal Commission has shown us there are deep-seated cultural problems in the finance industry.So let’s compare the two:
We’ll use a typical Aussie earning an average wage over 50 years, in a balanced fund earning 4 per cent p.a. after inflation. The difference is fees: the Aussie fund charges 1 per cent, the Thrift Savings Plan 0.03 per cent.
After 50 years, the balances would be ... Aussie fund: $728,668. Thrift Savings Plan: $977,120.
That’s a difference of $248,452. How’s that for an incentive!
Unfortunately, our super funds don’t have incentives to lower costs.
“Really, the only incentive not-for-profit industry funds have is to be a little cheaper than the retail funds … not to drive fees down to almost zero,” Alex Dunnin from superannuation research house Rainmaker told me.
He’s right.
The reality is that the industry — which has siphoned off $230 billion in fees since 2008 — has no incentive to be thrifty. Why?
Former Treasurer Peter Costello understands incentives, and he’s angry about the financial outcomes for workers. Picture: Stuart McEvoyBecause Aussie customers are unengaged — they’re defaulted into their super fund by their employer, and a percentage of their wage is automatically poured into the fund every year of their 50-year working life.
Here’s how it works:
Retail funds generally have more expensive fees because they’re largely owned by banks, and they need to skim off a healthy profit for their shareholders. Case in point: Colonial First State (owned by CommBank) has just announced it’s slugging super customers with a “regulatory reform fee” to cover costs of complying with ... all the laws they’ve broken?
Industry funds argue that a source of their superior investment returns are their large holdings in unlisted investments, like toll roads and ports, and complex private equity and hi-tech start-up investments. Yet who says they’re any better at picking investments than other professional fund managers — 90 per cent of whom fail to beat the market average over time?
Here’s how it really works:
The ultimate incentive for a CEO at an Aussie super fund is their million-dollar pay packet.
It’s hard to justify being paid a million bucks if you’re investing in simple index funds. So they spend millions on an army of underlings, advertising, and overseas travel visiting all those complex investments. Their incentive is to build an empire … using your money.
“Look, if everyone thought like this — with a hard line focus on fees — it’s true the industry would be a lot more efficient, and consumers would have much bigger retirement balances … but I don’t think it will ever happen,” says Mr Dunnin.
I fear he’s right.
The reason Costello didn’t drive down fees when he was in power is the same reason things will never change: too many highly-paid pigs with snouts in the trough.
So it’s time we kept the bastards honest by highlighting the cheapest super funds (see box).
Always question the incentives of the people managing your money.
After all, there’s no interest like self-interest!
Tread Your Own Path!"
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I think an element that people should take responsibility and ask questions themselves rather than just expecting someone to look after it all.
Ignorance is bliss
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I suspect this is the same article in the Herald Sun Warren.Originally posted by WarrenK View PostHave a look at page 78 Sunday Mail today article by Scott Pape "Your surprise $3850 bill". I agree with everything Scott is saying. It is worth reading!
Category: | Herald SunAcross the country, every adult is also sent a similar bill, with the amount varying depending on the size of their super balance. Some people, often the poorest workers, get three or four bills because they have their super in three or four funds.
That’s effectively what’s happening in Australia, only it’s hidden because your super fund doesn’t invoice you.
These "hidden charges" will be revealed in full on the annual statement for those diligent enough to peruse it carefully, nothing is hidden.
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