Fund managers set to unveil GST adviser strategy
Macquarie Investment Management has set the pace for what advisers can expect when it comes to the impact of GST on their hip pockets.
Macquarie Investment Management has set the pace for what advisers can expect when it comes to the impact of GST on their hip pockets.
While most fund managers - including AXA, BT, Zurich and Perpetual — are yet to finalise their strategies and several uncertainties still exist, Macquarie has un-veiled its plans.
Executive director Tim Farrelly says upfront fees for investors — either direct or advisers’ clients — will not increase as these will be absorbed by Macquarie.
In addition, advisers’ commissions will not be eroded by the 10 per cent GST as Macquarie will increase the up-front and trail commission paid by 10 per cent.
This means that the GST component can be passed onto the Australian Tax Office, leaving net adviser revenues unaffected by the GST.
“With Macquarie’s approach, the tricky question of whether advisers need to charge clients more to help pay this new tax should not arise,” Farrelly says.
MERs (Management Expense Ratio) are generally expected to rise slightly because of the GST, but Farrrelly says: “The good news is that our MERs will go up 2.5 per cent — rather than 10 per cent — because Macquarie’s funds should be able to get some input tax credits.
“For example, a fund which charges 1.88 per cent in ongoing management fees would charge 1.93 per cent after GST is applied from the middle of this year.
“On an investment of say $10,000, this additional 0.05 per cent represents about $5 extra a year,” Farrelly says.
He cautions, however, that uncertainties still exist and that Macquarie’s calcula-tions could change before the GST is introduced.
Nonetheless, Macquarie’s announcement will no doubt be closely watched by its rivals, with market forces expected to influence the way GST is treated.
Perhaps echoing industry thoughts, Perpetual Investments project manager Peter Sawtell says: “We wouldn’t want to be the ones to increase fees if others are not.”
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Zilla Efrat
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