Retail fees anomaly
Retail investors are paying too much in fees with respect to Australian income funds, according to a new analysis released by ratings house Morningstar this week.
The analysis flowed from a sector wrap-up and said, looking across the fees for Australian income funds, retail investors were overpaying in comparison with their wholesale counterparts.
Morningstar said a number of strategies it had assessed in its review were charging equity-like fees for an asset class that would have lower long-term returns.
“The average annual fee for wholesale fixed interest funds is 0.68 per cent while for retail funds it more than doubles that at 1.45 per cent,” the analysis said. “Given the returns generated in this asset class, we think retail investors are getting a poor deal.”
It said that another issue was the level of risk taken on by retail investors over their wholesale counterparts.
“When we looked at the offerings for retail investors, we found most shops pushing higher-risk, higher-yielding strategies,” the analysis said.
It said that the shops claimed investors were searching for a higher-yielding product, but many investors arguably did not realise the level of risk they were taking on.
AUTHOR
Mike Taylor
Recommended for you
Shaw and Partners’ new national head of private wealth believes the biggest challenge for financial advisers right now is being able to deliver efficient advice delivery amid a complex regulatory environment and growing investment universe.
Global equity manager Orbis Investments has appointed a head of marketing from Capital Group as it becomes the latest manager to target advised retail investors.
While Australia prepares for the $3.5 trillion intergenerational wealth transfer, a Wilsons Advisory report suggests the ongoing gender imbalance in the advice profession could prove a challenge to this process.
Danielle Press, a former ASIC commissioner, is to chair a new AFSL committee set up by Sequoia which seeks to improve governance practices and review its approved product lists.
