SMH August 9, 2003 Australia’s banks have proven themselves to be world beaters in dreaming up new fees and charges. Faced with tightening margins on their profitable mortgage business in the 1990s, the banks responded admirably by dreaming up ways to boost revenue. Just look at the range of fees that can be charged on the average transaction account.
Indeed, a champion of the home loan comparison rate, the research company Canstar, has worked for a couple of years to produce a similar figure for investment products. It concentrated its efforts on so-called “platforms” like wrap accounts and master trusts where the
true costs are often murky. Canstar Chairman Andrew Willink says the firm’s annual average percentage expense amortises all the administration costs (but not investment management costs) of these products over a five-year investment. To date, the results have not been ones the industry wanted to hear. Willink says these products
typically cost 1.5 to 2 per cent a year in administration fees and charges alone. But the model would seem to be a reasonable starting point for those who wanted to get a better grip on disclosing investment costs.