This week in review - our Blog

Trimming Fat or Cutting Corners? Is Super Administration Cost-Cutting Focus Ultimately Costly for SMSF Trustees?

User Rating: 0 / 5

Star InactiveStar InactiveStar InactiveStar InactiveStar Inactive
 

It was great to voice our concerns about the “wrap” administration software being used by fund managers and big banks in the Australian Financial Review.

 

Agnes King’s article, “Super auditors feel the pinch and point finger at wrap ‘hoarders’”, talked about how institutions are using software such as Asgard Infinity and Class Super to cut superannuation administration fees to what we consider ridiculous amounts—less than $450 in some cases.

According to David Murray, chairman of the Murray inquiry:

  •        Australia’s superannuation fees are high by international standards
  •       There’s been a “modest” decline in fees over the past ten years
  •       There’s scope for “greater efficiencies in the sector”.

But as we said in the article, saying superannuation costs are too high is like saying motor vehicle running costs are too high. How do you define that cost? Is it fuel? Registration? Mechanics? Insurance?

Kevin Bungard, the chief executive of Class Super, says there’s “still a lot of fat to trim” from super administration. But while cost-cutting can be a good thing, it can also make trustees lose perspective about where to look for cost savings. Some clients paying $16,000 a year in portfolio management fees are now questioning whether they need a $50 verification certificate to confirm their bank account balances.

Yes, the software is lowering the fees. But it could also be lowering the amount of expertise the trustees are receiving.

And that could end up costing them a lot more in the long run.