The hidden fees in super

Real Wealth Opinion

Posted on April 12th, 2016 at 9:21 AM by David Orth

Imagine this scenario – you go to withdrawal funds from an ATM that’s not associated with your bank. You insert your card and up pops a 100 page document that discloses the terms of use of the ATM that you have to accept to withdrawal money. Hidden within this document are the fees charged for using their ATM. Would you bother scrolling through the document to see if they charge $2.00 or $2.50? Our guess is probably not as we wouldn’t either.

Your superannuation is no different. Currently the fees for your superannuation are disclosed to you via a PDS (Product Disclosure Statement). A PDS is often a 100 plus page document that 1 in 10,000 would read, often emailed to you once you join. Much like accepting the terms and conditions on software/apps, it’s hardly a thrilling read.

The difference between the above hypothetical scenario and your super is hundreds sometimes thousands of dollars.

In 2014 ASIC (Australian Securities and Investments Commission) completed a report titled “Fee and cost disclosure: Superannuation and managed investment products”. The report found that:

“Industry practices indicates that there is significant variation in the disclosure of fees and costs”.


“It is possible to under-disclose fees or costs sufficiently for a fund to appear cheaper or better value than its competitors, while still producing an investment return that continues to appear competitive and reasonable to investors. For example, a fund could reduce its disclosed fees by 50–100 basis points for a ‘balanced’ investment option, which may be sufficient to make its fees appear cheaper than its competitors, while still maintaining its net returns within the competitive range of returns for similar options.”

In layman’s terms:

Fee disclosure is buried in paperwork nobody reads; and

Everyone discloses fees differently and therefore it’s almost impossible to compare funds based on fees; and

Worst of all its possible (and probable) that funds are deceptively claiming no fees when they were realistically being taken from profits.

Around a year after the report, after consulting heavily with the industry, ASIC updated their guidance for fee and cost disclosure requirements for superannuation and managed investment products. In the update, ASIC sort to ensure that fees and costs disclosed to investors are more accurate and are more consistent across the industry.

These updates include more consistent and transparent disclosure of fees by Feb 2017 and more detailed information on periodic statements by Jan 2018.

It must be hard working for the government; I highly doubt they get praised often. So we’re going against the flow and giving a genuine kudos to ASIC for identifying a problem, working with the industry to try fix the problem and implementing changes.

However, are these changes enough? If an ATM can disclose a $2.00 - $2.50 (Sometime upto $2.80 – but that’s a different story) fee so clearly, shouldn’t fees that amount to 100’s to 1,000’s of dollars be as easily disclosed? It also begs that questions – for those funds whom “under-disclosed fees” – how much did they make by doing this? Will there be any retribution for what we believe to be a very deceptive and possibly criminal, definitely unethical practice? Probably not.


ASIC updates guidance for fee and cost disclosure requirements for superannuation and managed investment products:

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