1 Jul 2018

The great superannuation fee-for-all

Image result for superannuation Australia cartoon

By Ian Verrender
Our pollies love to boast about our world-class super system. Except, the only thing world-class about it is in the amount of fees our money managers manage to rake off the top.
In the past decade, a little under a quarter of a trillion dollars has been siphoned off our retirement savings: $230 billion in the years since the financial crisis.
That's from a total pool of around $2.3 trillion. It's an extraordinary number and nothing short of a national scandal.
In 2016 alone, total fees amounted to $31 billion, according to research house Rainmaker.
Of that, about 26 per cent, or $8 billion, was for administration, $7.8 billion went to investment managers and a whopping $8.4 billion for insurance sold through superannuation funds.
As for the rest, financial advisors took around $5.9 billion while $600 million went towards asset consultants.
Why so much? It may come as a shock to learn that almost no-one in the industry is paid purely on performance. For the most part, fees are generated not by earnings but by the amount of money under management.
Given 9.5 per cent of almost every working Australian's salary is shovelled into the industry, the amount of funds being managed grows enormously every week. It's money for old rope.
Perhaps these gargantuan fees could be excused if our money mangers regularly produced world-beating performances. Sadly, that's not the case.
Mostly, they perform in line with stock markets. When markets are rising, they produce good returns. When they tank, as they did a decade ago, super members see their funds shrink. But the fees roll on regardless.

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