MLC has pre-empted any future moves to ban exit fees on investment and superannuation products by removing such fees from all new products offered by the group.
From March 31, 2005, MLC will no longer accept new applications for products through its MasterKey Five Star channel, which has no upfront fees but higher ongoing management fees, as well as exit fees for investors that make redemptions within the first five years.
Instead, advisers will be pushed towards the MasterKey Gold Star suite, which has an upfront fee but no exit fees.
“With choice coming out and some of the other conversations going on around exit fees, we just thought it was appropriate to review our fee structures and move to a simplified upfront fee rather than the complicated fees we see today,” MLC chief executive retail investments Steve Tucker told Money Management.
Matt Lawler, chief executive of MLC’s Advice Solutions, says the move is in line with the wider push for greater accountability in the wealth management industry. He says the industry has been in denial about some of the practices that may be viewed as questionable by consumers.
“We have gotten over our denial, are getting over being defensive and are now starting to take action,” Lawler said.
However, the group has come in for some criticism for not extending the ban to existing clients.
Ahead of last week’s Federal Election, the Shadow Minister for Retirement Incomes and Savings, Senator Nick Sherry, one of the main proponents of a ban on exit fees, said that by only applying the ban to new products, consumers will be denied the ability to consolidate accounts or engage in the spirit of ‘choice’.
“Institutions still have to deal with the issue of so-called legacy products in the system, of which there are half a million. They’re one way streets and provide institutions that have exit fees with a significant advantage in that funds can go in but only come out at a significant cost to the consumer,” Sherry said.
Sherry said the move to outlaw exit fees would be inevitable in the future, irrespective of which party holds office.
