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Fresh warnings over ‘free’ SMSF set-ups
As free SMSF set-up offers continue to flood the marketplace, one industry body has reminded trustees about the lack of transparency and potential hidden costs that can be associated with these services.
Chartered Accountants Australia and New Zealand’s head of superannuation Liz Westover described a “bells and whistles” free SMSF set-up offer circulating the market, which includes free administration and audit for a number of years.
However, she noted the fine print suggested the service provider was “most certainly” being remunerated with a potentially significant amount.
“While there is no upfront fee, you have to use a compulsory transaction bank account. Fees charged on these and other deposit accounts range from 0.2 per cent up to 1.15 per cent of the account balance. Furthermore, you must open a default share trading account for which they collect a fee per trade also. There are also commissions paid to the provider on insurance and loans. An annual fee is also applied at the end of the free introductory offer period,” she said.
“Although the selection of investment classes that the trustees can invest in while using this service is reasonably wide there are still a number of exclusions: no collectables, private companies or trusts or wrap accounts. Apparently, this is to help keep administration and audit fees down.”
Ms Westover questioned whether prospective trustees fully understand the level of fees they could be paying for “free” providers.
“While I knew to look at the Financial Services Guide (FSG) to find out the real fees, most trustees may not know to do this! The fees section of the website certainly didn’t outline these commissions and only provided a link to the FSG. The average fund balance now exceeds $1 million. Even at a fee of 0.5 per cent, this still adds up to annual fees of $5,000. At the full 1.15 per cent rate, fees add up to $11,500 and that’s without conducting any trades. It suddenly doesn’t look so cheap anymore.”
Good article. The point is that the trustees are often not advised of the extra fees by administrators.
If the administrator was making money from my investments then I would want a discount on the administration or a rebate of those commissions - after all it is my money
And that's exactly what you get - a cheap administration service.0- Phabulous you are getting a discount on the admin. They use the commission structure to give you the setup and first year free and then charge $699 per annum - which is thousands under the average market price of $3,000. The alternative is that they give you the commissions which on my calculations may average a few hundred dollars at best and charge you $3,000. This still puts you way worse off. Think before you post garbage!0
- Good article. The point is that the trustees are often not advised of the extra fees by administrators.
If the administrator was making money from my investments then I would want a discount on the administration or a rebate of those commissions - after all it is my money0 - So what is the difference between this and the TV adds that say, "We don't charge fees to our members".0
- Its not the SMSF provider that is misleading it is you and your pathetic article. What you purposely neglected to mention was that the commissions are paid by the bank and are not an additional fee on the consumer. I use the company you mention and invest my money in term deposits and cash investments and leave very little in the low cost transaction account as many smart trustees do. I receive the full amount of interest on my investments commission free. You are also correct that they receive commission on trades. Again you fail to mention that the trading fee is no more than I would pay if I did the trade directly with the broker. If the administrator of my Fund is smart enough to arrange a deal to share that brokerage with the Broker at no cost to me - good luck to them. And don't sit their patting yourself on the back because you can read an FSG. We all can and most do. In fact it is a requirement to read this document before they allow you to apply.0
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