The well-fed passengers on the financial services gravy train have sprung from their premiere classe seats with burning indignation. They are shaking their fists and crying foul. They accuse your humble essayist of professional misconduct and deceit, of prejudice and poor research!
Notwithstanding that it is deemed a high honour in this journalism caper to be attacked by financial planners and banking types - all right, lawyers too; anybody, really - we will not dismiss their cries. Let us hear them. There is great public interest in this story.
At issue is last week's report that 45 per cent of the average investment return enjoyed by Australian savers over the past five years had been gobbled up in fees.
The research came from a young fund manager, Chris Brycki, who had taken the trouble to trudge through 497 fund documents. He found fees charged to run a balanced fund by the wrap platforms - controlled by the banks and AMP - had averaged 1.91 per cent over the past five years. That's just the basic management fee; before any establishment fees, contribution fees, exit fees, switching fees, performance fees, financial planner fees, fee-fees and any-fee-will-do fees.
Over the five years to June 2013, the average Australian share fund returned 2.3 per cent a year. On those numbers, 45 per cent of the return for the average investor has been extracted in basic fees alone since 2007.
These figures are for balanced funds but the snip on superannuation, though lower in terms of the basic fee, is of similar magnitude in toto. It's no wonder people are flocking to self-managed super.
We also noted in the offending piece that, in pure dollar terms, the average couple on the average salary could expect to enjoy a super contribution over life of $830,000 while forking out fees of $338,000.
Well! If there were any such thing as a throbbing backlash this was it. Who is this Brycki bloke anyway? He is talking his own book! His research is flawed, they cried, though none bothered to nip through the 497 documents to credibly rebut him.
Brycki is a prospective rival to be sure, a parvenu on the discount funds scene keen to make the impact of an "Aussie" John Symonds. Naturally he is talking his own book. But he does have a point.
It does not matter which way you cut it, fees for Australian investors are too high. The banks, which control three-quarters of the market, saunter away with roughly 2 per cent of the average person's savings year-in, year-out.
The government has created a monster, a super Frankenstein's monster marauding across the national landscape, devouring people's savings at every turn.
Let us deal with a couple of the main complaints. The years 2008 to 2013 cited in the Brycki analysis were a period of low returns due to the financial crisis. So this 45 per cent fee-fest is not a fair reflection of what the industry takes.
Fair cop, but the era of high returns from 2000-06 put us in this predicament. The boom gave rise to industry rationalisation and saw managers squeeze more from investors (a 2 per cent fee is less of a drag when returns are 15 per cent).
The fees went up, but they didn't come down. Now we have a low-interest rate, low-return environment so the fee-rip as a proportion of returns could stay high for a while. Even assuming market returns of 8 per cent, which is the 20-year average, a 2 per cent fee still amounts to 25 per cent of performance paid away on average.
Vanguard says total fees are 2.08 per cent a year but Brycki reckons this estimate low-balls the "all-in" cost of investing, which is closer to 3 per cent.
"It costs the average Australian roughly the same to invest as it did 20 years ago," he says.
In dollars it is costing a lot more. The growth in the financial services sector has been driven by sharemarket growth as most money managers charge a fee based on the size of assets. Since 1990, assets under management have risen from less than $250 million to $2.1 trillion.
There are two critical points to be made here: if competition was working as it should, fees would have fallen thanks to economies of scale, not to mention the entry of new players in the market. Instead, there has been consolidation - with the big banks swallowing the smaller funds every year, and the new entrants too - and the market is now a hegemony of a handful of players and their wrap platforms. They control the product and its distribution.
Yes, statistics can be twisted, as Brycki's detractors charge. Just look at the umpteen press releases which gush from the $2 trillion financial services sector every week - the industry data masquerading as research which cherry-picks the good stuff and ignores the bad.
That's life. But gee, it's good to hear the other side of the story. What with the ubiquitous, kow-towing media, the blanket TV advertising, the glossy magazine spreads, the jingly radio campaigns - nary a one which discloses the baksheesh. You can't even go for a drive without the distraction of a giant billboard.
Come to think of it, the only possible way you can avoid contact with financial services promotion for an entire 24 hour period is by being under general anaesthetic.