InvestSMART is the first to cap management fees in Australia. Costs are inevitable, but at the end of the day fees compound just like returns. From Alan Kohler's Great Investment Fee Scam:
"When it comes to investment management the more you pay, the less you get, for the simple but obvious reason that the price you pay comes off what you get.
Think about it. The “product” you buy is an investment return, and the amount you pay for assistance in achieving it reduces the return. The higher the price, the more it reduces the “product”.
There is no other thing on earth where that applies – where the price you pay for it eats into the product itself. Imagine if the more you paid for glasses, the less you could see!"
Research shows 75% of managed funds do not beat the industry standard benchmarks over ten years. The average underperformance percentage is 1.37%. The average fee charged by these funds is 1.39%. We do not believe this is just a coincidence.
Over the course of 30 years a 1% fee would see a reduction in your total investment return of 26%. This means you have built 26% less of a nest egg than you could have, as mentioned, fees are inevitable but you should try to minimise them as much as you can.
By capping the management fee, InvestSMART takes a negative of the industry and turns it into a positive. The difference? The gap between the InvestSMART portfolio performance compared to the peer group. More money in your portfolio means more income and more growth and a wider gap to the competitors.