Getting stung with fees is something many Australians are familiar with, particularly when it comes to banking.

But they are also often hit with a barrage of fees and charges when it comes to investing their money.

Avoiding unnecessary fees with investments can be a challenge, and experts say people need to ask the tough questions and read the fine print.


Gamma Wealth Management managing director Fraser Kahler says managed funds and managed portfolio services are often served up with a range of attached fees.

“Investors should be careful of and question things like contribution fees or establishment fees, and exit and termination fees or even account-service and account-keeping fees,” he says.

“I’ve had clients that have come to us and shown us their statement of advice and it will show some advisers will charge all those fees over and above and the client could end up paying upwards of 3 per cent with all these built-in fees.”


The management expense ratio (MER) is the total management costs that are taken from the net asset value of an investment, and Kahler says that a close eye needs to be cast over these charges.

“You have got to be careful to not only look at the MER but also all these additional fees in there,” he says. “Advisers are allowed to charge those fees as long as they are within the statement of advice and clearly outlined to the client or are within the product disclosure statement, but I would always be wary of an adviser that is willing to charge all those fees.

“In this day and age, if you are being charged all those, you would want to be receiving some fantastic advice and get great performance.”


Kahler says customers should not be charged any more than 2 per cent in fees, and if they are they should be looking at doing business elsewhere.

“In the majority of managed portfolio and funds, the fees should be around 1-2 per cent,” he says. “Performance fees are OK because the fund manager is aligned with the client’s interests.”

Performance fees are a common fee associated with alternative investment funds and is a payment made to the manager for positive returns.


These types of fees are charged with an initial investment and can be as high as 4 per cent, but AMP financial planner Dianne Charman says they are “quite discretionary”.

“On most products now, there isn’t a default entry fee,” she says. “Most product providers now have no trail commission and no upfront fees unless an adviser charges it.”

She says it always pays to ask if investment return “is net of fees” to ensure you know exactly what return you will make.


Charman says if you are trying to escape fees altogether, choosing direct shares is an option if you’re a novice investor and up for a challenge.

“There are no management fees on a direct share but it’s hard to start off investing in direct shares when you don’t have enough money,” she says.

“Look at discounts, though. If you link your super account and your investment account, they can give you a discount on the total portfolio.

“We’ll often do that for our clients. If we’re doing investments and super and pension, for instance, we will link all those accounts and the total value of the investments will often have rebate, so you will get fund manager rebates.”


If you are forking out very little for fees, Charman says often it’s a simple case of “you get what you pay for”.

“If you want to pay very little in fees, then expect a very basic service,” she says.


MoneySmart suggests investors keep their periodic transaction statements in the one place and ensure they understand what fees and taxes are paid.

“Store these records in a safe place so that you can easily lay your hands on them for accounting and tax purposes.”

Source: News.com.au