It’s become a major talking point during the Royal Commission and amidst ASIC’s disclosure reforms – but what are hidden fees and do your clients know about them?
No More Practice recently sat down with Platinum Investment Management’s new chief executive, Andrew Clifford. In a discussion covering a range of topics, he touched upon issues of transparency in Australia’s financial services sector.
He noted that with a typical managed fund, “you can see the returns and those daily prices. You can see what you’re paying for, and there’s plenty of information available to the investor about the fund.”
Where things become more opaque, he continued, is in the superannuation and platform spaces. “There’s a different layering of fees there,” he said, “which aren’t as clear-cut to the end user.”
“That’s becoming apparent in much of the work done by the Royal Commission,” he added, “and I think it’s important that people understand what parts of the service they’re paying for, because in some cases we would argue you’re paying quite a lot for not that much.
“And in other areas, you’re probably paying a pretty reasonable fee for what’s being delivered to you. But until you can pull that all apart and make it apparent to the end-investor, it's hard for people to make well thought-out choices about where they're going to put their money.”
As we’ve previously discussed, disclosures by investment platforms was one of the more complex issues to arise in ASIC’s review of the RG97 regime. The reason for this is that there are effectively two layers of costs involved: those charged by the platform itself and those by the underlying investments accessed through the platform.
When it comes to your clients’ investments, it may be easier to discuss the service they’re paying for if these less obvious costs are more clearly defined.
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