Super funds have recently had to change the way they report and disclose the fees they charge to members. Intense lobbying and demands for a delay, particularly from the industry super funds, fell on deaf ears at ASIC. This meant their Indirect Cost Ratio or ICRs had to be disclosed for the first time.
According to ASIC, there has been a significant amount of under-reporting of fees, as well as considerable inconsistency in the way fees and charges were disclosed by super funds.
“ASIC found this made it very difficult for consumers to understand how much they were paying, what they were paying for, and to compare funds.” ASIC’s statement on the changes said.
Remember the ‘compare the pair’ ads?, where industry super funds had previously made a big fuss about fees. I don’t think we will be seeing those ads anymore. After the changes to fee disclosure we can see the industry funds have been charging the same as most other funds, and more than many. One particular industry fund is charging as high as 1.6% on a $50,000 balance.
Fees are the most important factor when striving for high performance in your investments. According to Vanguard, one of the world’s largest and most respected investment managers, research on future performance points out:
Alpha is a measure of risk-adjusted outperformance. Unfortunately, as our analysis has reaffirmed, previous alpha and other measures of historical performance are of little use in identifying tomorrow’s superior performers. More than any other quantifiable attribute we have examined, lower costs are associated with higher risk-adjusted future returns—or alpha.
Across the 15 industry super funds the average fee for the default option on a $50,000 balance is now disclosed as 1.24%. The lowest is 0.89% while the highest is 1.6%.