InvestSMART caps investment fees

InvestSMART Diversified Portfolios with balances above $82,000 will have fees capped at $451 annually.
By · 14 Nov 2018
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14 Nov 2018
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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.

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