Raiz is hiking its fees again: Is it worth it? | finder.com.au

Raiz is hiking its fees again: Is it worth it?

Posted: 1 March 2021 7:25 pm
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Raiz Invest is increasing its monthly fee for customers with less than $15,000 in their accounts.

Micro-investment app Raiz Invest is once again hiking fees for users that have lower balances.

Raiz announced today that its flat account fee is increasing from $2.50 per month to $3.50 for accounts with less than $15,000 starting from 1 April this year.

So if you have $1,000 or less in your account, you'll now be paying upwards of 4.2% in fees each year.

Accounts of $15,000 or more will be charged the same as before at 0.275% a year. Meanwhile, fees on the newly launched Custom portfolio option also remain at $4.50 per month for balances up to $20,000 and 0.275% after.

Raiz Invest, previously called Acorns, is an investing app that collects your spare change and invests it into an exchange traded fund (ETF) portfolio of your choosing.

Because it can take more than a year to accumulate over $1,000 in spare change, the fee hike is likely to impact many of its users.

Before now, users of the app with less than $10,000 in their accounts were charged a flat fee of $2.50 per month, while those with balances of $10,000 or more paid an account fee of 0.275% p.a.

Here's how much more you'll pay for your Raiz account*

Account balance
What you paid before (approximately)
What you pay from 1 April (approximately)
$100$30 p.a. (30%)$42 p.a. (42%)
$1,000$30 p.a. (3%)$42 p.a.(4.2%)
$5,000$30 p.a. (0.60%)$42 p.a. (0.84%)
$10,000$27.50 p.a. (0.275%)$42 p.a. (0.42%)
$15,000$41.25 p.a. (0.275%)$41.25 p.a. (0.275%)
$50,000$137.50 p.a. (0.275%)$137.50 p.a. (0.275%)

*Note: The above fees don't include ETF issuer fees, which range from 0.22% p.a. to 0.43% p.a. depending on the the portfolio you're in.

As a general rule of thumb, a fee of 1% is often used as a benchmark limit to how much you should be paying into an investment fund such as superannuation or an ETF, in order to maximise your return on investment.

Applying that same rule, the new fees only come within the ideal range once you reach a balance of $4,000.

How does Raiz compare to others?

The fee increase has left some customers questioning whether the investment is worth the cost. On the Raiz Central Facebook group, some members pointed out that other investment options such individual ETFs or competitors like Spaceship might be a better bang for buck.

Others argued that the shopping rewards feature, which offers bonuses whenever you shop through the app, made up for the fee increase.

To break it down, we compared the fees of two other popular investment platforms, CommSec Pocket, which allows you to invest in individual ETFs, and micro-investment app Spaceship.

Similar to Raiz, Spaceship invests as little as a few cents at a time into an investment portfolio on a regular basis. CommSec Pocket allows you to invest from $50 into several individual ETFs.

For Raiz and Spaceship, the investment figure assumes a balance, while CommSec Pocket assumes a single investment into an ETF.

Investment*
Raiz (standard portfolio)
Spaceship (Universe portfolio)
CommSec Pocket
$100
  • $42 p.a. (42%) account fee
  • $0 transaction fee
  • $0 account fee
  • $0 transaction fee
  • $0 account fee
  • $2 per transaction (20%)
$1,000
  • $42 p.a.(4.2%)
  • $0 transaction fee
  • $0 account fee
  • $0 transaction fee
  • $0 account fee
  • $2 per transaction (2%)
$10,000
  • $42 p.a. (0.42%)
  • $0 transaction fee
  • $10 p.a. account fee (0.10%)
  • $0 transaction fee
  • $0 account fee
  • $20 per transaction (0.20%)
$15,000
  • $41.25 p.a. (0.275%)
  • $0 transaction fee
  • $15 p.a. account fee (0.10%)
  • $0 transaction fee
  • $0 account fee
  • $30 per transaction (0.20%)
$50,000
  • $137.50 p.a. (0.275%)
  • $0 transaction fee
  • $50 p.a. account fee (0.10%)
  • $0 transaction fee
  • $0 account fee
  • $100 per transaction (0.20%)

Note: Assumes an investment balance for Raiz and Spaceship and a single deposit for CommSec Pocket.

Among the three choices, Raiz Invest is the most costly at every investment tier, deducting 0.275% for higher balances and as much as 42% for a balance of $100.

Comparatively, Spaceship doesn't start charging fees until your balance hits above $5,000, then it's only 0.10% of your investment, low by any measure. CommSec Pocket has no monthly fees, instead charging a transaction (brokerage) fee of $2 for investments of $1,000 or less and 0.2% above that.

The cheapest option depends on how often you plan to invest and how much. For example, if you plan to invest one or two large sums, CommSec Pocket, which has no ongoing fees, is an attractive option. However, if you're investing small amounts regularly you're probably better to stick with Raiz or Spaceship.

What's the verdict?

The higher fees offered by Raiz will doubtless ruffle some feathers. For new members to the app, paying $42 per year in fees could make up a big chunk of your balance.

There are also cheaper options out there, particularly if you're unlikely to grow your balance beyond a few thousands dollars.

However, both CommSec Pocket and Spaceship are relatively minimalist compared to Raiz when it comes to features.

While Raiz offers shopping rewards, a portfolio tracker, budgeting options and the ability to round up your spare change, CommSec Pocket and Spaceship feature little more than the selection of investments.

All three apps also have quite different investment options available. While Raiz Invest offers eight ETF portfolios to choose from, from conservative (lower risk) to aggressive (higher risk), Spaceship has just three stock portfolios. Meanwhile CommSec Pocket offers seven individual ETFs – similar to any share trading app, but with a lower minimal investment and lower fees.

Whether the app is worth it comes down to how you prefer to invest. Yes, Raiz fees are high when you have little in your account, but would you be saving as much otherwise?

Since launching in 2016, Raiz has had more than 1.4 million people sign up and over $639 million funds under management as at 31 January 2021.

Looking for a low-cost online broker to invest in the stock market? Compare share trading platforms to start investing in stocks and ETFs.

Disclaimer: This information should not be interpreted as an endorsement of futures, stocks, ETFs, CFDs, options or any specific provider, service or offering. It should not be relied upon as investment advice or construed as providing recommendations of any kind. Futures, stocks, ETFs and options trading involves substantial risk of loss and therefore are not appropriate for all investors. Trading CFDs and forex on leverage comes with a higher risk of losing money rapidly. Past performance is not an indication of future results. Consider your own circumstances, and obtain your own advice, before making any trades.

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