I have $3.5m in our SMSF and want to roll these funds into an Industry fund. On this amount most, funds charge at least $35000 pa (1%). Are you aware of any funds with a capped fee structure or any better options?
Leo in Canberra, ACT
Top answer provided by:
Pj Roghanchi
Dear Leo,
In response to your question I must advise the first step is to establish your objectives and plans whilst considering fees and arbitrary measures and indices such as ICR (Investment Cost Ratio) and MER (Management Expense Ratio). As a practice that works with high net worth medical professionals, our investment philosophy is very much aligned with keeping the costs down.
I prefer to put it into an illustrative context buy referring to http://www.elixirw.com.au/investment-portfolio-performance-artistry/. % in cost means less % in return BUT mostly when you are in a unit structured environment (e.g. industry funds or managed funds).
To answers this question in short, I shall say yes – there are various ways to cap these fees. Also, perhaps a good place to start would be to ask some of these questions:
- Do you need to wind down the SMSF to get exposure to the same market that industry funds are invested in?
- With the level of asset, tax effectiveness of the investments will become a substantial part of your investment costs if not addressed
- As investor a good point to start thinking about right investments (other than the returns of course, which is subjective) is to understand your tolerance for risk. The job of a good adviser is to approximate your “capacity” for risk.
- Last but not least, what are you goals and objectives? At some point establishing a SMSF and accumulating this level of asset has been a decision. Putting causation into context, have those goals and plans changed?
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Comments1
"To follow on from PJ Roghanchi, A SMSF is merely a type of Super Fund and there must be very good reasons for you to decide to close the funds and move to another possibly easier to manage superannuation solution. We would however suggest that you should worry less about the fees and more about the investment strategy, particularly in this investment environment (asset prices are expensive after an extended bull run, global debt at record levels and global growth slowing). The aim of the game is not to lose money noting that a typical BALANCED FUND fell -20% during the GFC on your $3.5M Super Balance this is a potential drop of -$700,000 ($3.5m to $2.8m) - OUCH. Hence again focus on outcomes rather than fees and do look at all options with an Independent Adviser (IFAAA member). All the best for 2019."
Fergus Hardingham 14:42 on 25 Jan 19