Millennials could pay over $300,000 in super fees
Millennials in a Fat Cat Fund could lose over a quarter of their super balance to fees.
Robo advice platform Stockspot has today launched its fifth annual Stockspot Fat Cat Funds report, which analysed a record 4,102 super and managed funds and highlights the link between high fees and poor long-term performance. A Fat Cat Fund is one that has performed worse than others in the market by more than 10% over two, three and five years, and typically has fees of more than 1.5% p.a.
This year's report has shown the number of Fat Cat Funds has decreased slightly by 18%, from 638 in 2016 to 521 now. However, it revealed $45 billion of Australians’ savings is currently managed by Fat Cat Funds, in which consumers paid $600 million in fees over the last 12 months alone.
Millennials have the most to lose and the most to gain
Millennials have the most to lose from keeping their retirement savings in a Fat Cat Fund. The report shows millennials could end up paying up to $311,733 in fees with a Fat Cat Fund, totalling over a quarter (27%) of their potential super balance by retirement. With a Fat Cat Fund, millennials on average are looking at a balance of $846,957 compared to $1,178,081 if they were in a lower-fee fund.
Stockspot CEO, Chris Brycki, said millennials also had the most to gain by switching funds. "Too many Australians don’t know how much they pay in super fees and how that damages long-term savings and retirement living standards. Simply switching out of a fund charging 1.99% to one charging 0.5%, all things equal, a male millennial could boost their super balance by $355,957 and a female by $306,291. That’s a lot of round the world trips!"
Big banks the worst offenders
Perhaps unsurprisingly, the report identified the big banks as controlling most of the Fat Cat Funds. ANZ was the worst with 218 Fat Cat Funds, followed by AMP with 87 and CommBank controlling 47.
"This is the fifth year we’ve done this report, it’s incredible that the worst offenders, the banks, still drag their feet on helping customers avoid high super fund fees. There are 521 Fat Cat Funds and two thirds (67%) are managed by the big banks. The banks stopped ATM fees, the next unfair fees to come under the chop should be Fat Cat Funds," said Brycki.
When asked about their fees, an AMP spokesperson gave the following comment; "Superannuation funds have different investment options, risk profiles and other variable metrics which make it difficult to make accurate like for like comparisons. Our advice to customers is to thoroughly research the options available and consider what is best taking into account their risk profile, values and stage of life."
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Picture: Supplied by Stockspot