InvestSMART caps investment fees
The following article appeared in Finder on 13 November, 2018 and discusses the launch of InvestSMARTs capped fee model.
Digital fund manager InvestSMART has announced it is capping the fees on its Diversified Portfolios, a pricing model that hasn't been seen in the Australian industry to date. Investors with balances between $10,000 and $18,000 will see their fees capped at $99 annually, while those with higher balances above $82,000 will pay $451 a year in fees. These fees include all management and admin costs of the fund. However, the fees do not include ETF management costs and brokerage costs.
CEO of InvestSMART Ron Hodge said this $451 annual fee would be capped even for balances of $1 million. "For clients with over $1 million, InvestSMART's annual fee would be just $451, or 4.5 basis points (0.045%), perhaps the lowest in the world. This makes a huge difference to long-term returns, whatever the investment amount."
InvestSMART recently released a research paper on the total cost of investing, which aims to educate investors how much fees can eat into your returns over the long run. "On a 30-year investment, an annual fee of 2% means losing 45% of potential portfolio value to fees," said Hodge.
Hodge, along with InvestSMART chairman Paul Clitheroe, spoke about the issue of high fees in investing at a media lunch in Sydney to launch the research paper last month. "The compounding side that works in your favour for investing, also works against you in terms of fees," said Hodge.
Paul Clitheroe said InvestSMART wants to educate consumers that fees are more important than the potential of high returns. "The market is the market. We don't think that we're better than anyone else out there, but we do think we're cheaper. In the world of investment, a bunch of people are paying for a Mercedes but they're driving a Toyota," he said at the launch event in Sydney.
Investors can access the capped fees as part of the Professionally Managed Account (PMA) platform. The capped fees include unlimited online viewing of the portfolio, regular portfolio rebalancing, annual tax statements and regular performance reports. "We think this model will appeal to all investors – from those starting out to the more experienced. It's about time investors who want a professionally managed investment portfolio have a low, fixed fee option. Our new PMA platform provides this," said Hodge.
Frequently Asked Questions about this Article…
InvestSMART's capped fee model is a pricing structure for their Diversified Portfolios where fees are capped at $99 annually for balances between $10,000 and $18,000, and $451 annually for balances above $82,000. This includes all management and admin costs, but excludes ETF management and brokerage costs.
The capped fee model benefits investors by significantly reducing the cost of investing, especially for those with larger portfolios. For example, even for balances of $1 million, the annual fee is capped at $451, which is just 0.045%, potentially the lowest in the world. This helps maximize long-term returns by minimizing the impact of fees.
Yes, while the capped fees cover all management and admin costs, they do not include ETF management costs and brokerage costs. Investors should be aware of these additional expenses when considering their total investment costs.
InvestSMART emphasizes low fees because high fees can significantly erode investment returns over time. As CEO Ron Hodge explained, an annual fee of 2% can result in losing 45% of potential portfolio value over 30 years. By keeping fees low, investors can retain more of their returns.
InvestSMART's capped fee model includes features such as unlimited online viewing of the portfolio, regular portfolio rebalancing, annual tax statements, and regular performance reports. These features are designed to provide a comprehensive and convenient investment experience.
InvestSMART's capped fee model is designed to appeal to all investors, from those just starting out to more experienced investors. It offers a low, fixed fee option for those seeking a professionally managed investment portfolio.
InvestSMART's fee model is significantly lower than traditional investment fees, which can be as high as 2% annually. By capping fees at $451 for large balances, InvestSMART offers a more cost-effective solution that can enhance long-term investment returns.
The Professionally Managed Account (PMA) platform is a service offered by InvestSMART that provides access to their capped fee model. It includes features like portfolio rebalancing and performance reports, making it a convenient option for investors seeking professional management at a low cost.