Fries with that? - ESUPERFUND does not "upsize" your SMSF fees

In today's world of add-on sales, businesses are always keen to sell more to the consumer. Buying a meal at McDonalds is accompanied with the catchphrase "Would you like fries with that". The purpose of the question is simple - to sell you something you did not ask for. These marketing strategies add millions of dollars to the bottom line of large organisations and they are also common to the financial sector, including the superannuation industry.

ESUPERFUND does not upsize SMSF fees

Financial services options can be essentially broken down into two categories - the DIY Service Offering and the Full Service Offering.

The overriding principle separating the two service offerings is cost. Those who opt for Full Service Offering typically delegate the management of their investment portfolio to a professional and pay the additional cost that this premium service demands.

On the other hand, the DIY Service Offering involves investors choosing and managing their investments. As it does not involve Financial Planners and professionals, it is obviously a cheaper choice.

However in the Self Managed Superannuation Fund (SMSF) industry, while there is a definite divide in terms of a DIY Service Offering and a Full Service Offering, there is no major distinction when it comes to cost.

For example, assume a $250,000 superannuation portfolio with a Financial Planner or Full Service Share Broker appointed to look after the portfolio. These companies will choose particular Super Investments for the investor, recommend strategies and arrange for the preparation of all relevant paperwork, at a premium cost of usually around 1% of your portfolio value. On a $250,000 super investment this equates to around $2,500 per year.

Compare the alternative, DIY Service Offering where the investor chooses their investments for their super fund typically using a Self Managed Super Fund (SMSF). These investors attend to all the financial requirements for their SMSF themselves, except the annual compliance requirements (i.e financial statements, tax return and audit) which must be performed by a licensed Taxation Agent.

While these investors only require a basic reporting service at year end, the Taxation Agent typically charges them a premium price. The average fee of a typical $250,000 SMSF portfolio is also around $2,500.

Evidently, the problem in the SMSF market is that Taxation Agents are essentially charging investors a premium price for a premium service they did not ask for and are not receiving. This is akin to being charged for the fries without even getting them, let alone being asked if they would like to order them.

The Taxation Agent will simply pass this off with their typical answer of "Well that's what everyone else charges". This may well be true but it does not solve the problem for DIY investors who only want a basic service at a basic price.

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ESUPERFUND believes that it's long overdue that the SMSF industry caught up with the changing face of the DIY Investor and offered a DIY Service Offering at a basic price. We believe that you should not be paying a premium price for a premium service that you did not choose or want. After all, typical Investors are more than happy to choose their own investments and have the tools in today's financial world to do so.

ESUPERFUND attends to all our clients' SMSF administration needs (including financial statements, tax returns and audit) for per annum, significantly below the average market fee. What's more, we fix this cost irrespective of the size of your Fund or the number of transactions made.

ESUPERFUND solves this dichotomy by providing a premium service at a basic price. We assist our clients on more specific issues concerning their SMSF including the benefits of establishing an allocated pension, consolidating non super investments into their SMSF, implementing a salary sacrifice strategy and so on. Yet, we do not charge for this premium service. Maybe there is such a thing as a free lunch after all.

Before you start

An SMSF can be a great vehicle to take back control of your Super, but an SMSF may not be right for everyone. We have conveniently summarised other factors to consider when contemplating setting up an SMSF here. We also assist you in understanding what is involved in the ongoing management of your SMSF via our Free SMSF Learning Centre here.

If you want to learn more about SMSFs, download an information pack today.

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