Super fee separation fallacy

Separating adviser fees and product fees from the cost of retail superannuation funds, as suggested by the Future of Financial Advice reforms, is unlikely to achieve the Government’s objectives, according to specialist superannuation research house Chant West.

Chant West principal Warren Chant this week published an analysis which suggested that the end result of separating out adviser commissions and product fees would be a convergence in the performance of retail master trusts and industry funds.

However, he said that the differing practices of retail and industry funds meant that it was not always possible to make a fair comparison.

Chant’s analysis claimed that on the question of fees, the Australian superannuation industry had found a way of complicating something very simple and that the Cooper Review findings had only served to confuse matters further.

“Where the debate goes off the rails is the suggestion by some parties (including Cooper) that returns should be reported after deducting non-investment fees as well as investment fees,” he said.

However, Chant warned that once you start deducting non-investment fees you are no longer measuring an option’s investment performance and that the services paid for by the non-investment fees were impossible to value objectively.