Is a super wrap account worth the high fees?
My wife and I are 72 and 73, we are retired, we own our homes and we each have $520,000 in super, which provides us with retirement income. We have a financial planner who seems very keen on a super global account and its many investment options. Product costs are $13,200 while advisor fees are $5,830 per year. The fees seem high and do not include fees taken before winnings are deposited into our accounts. Also, there is no obvious or regular value check against the wrap count. What’s your opinion on super wrap accounts, the fees we’re charged, and if we could do better elsewhere?
Most planners act as portfolio managers, so instead of just offering advice, they manage money in a platform such as an integrated account, an individually managed account, or a separately managed account. All require fees that are billed directly to the customer and taken from the account. Since fund manager fees were abolished, this is how most planners survive.
That said, I’m not a fan of wrap accounts, they tend to be among the more expensive platforms. You pay around 1.8% per year in direct fees although, as you said, this may not include fees paid in managed funds, before unit prices are calculated.
Some people want personalized service and are willing to pay for it. Others accept one or two balanced funds, such as those of AustralianSuper, or half a dozen balanced and diversified funds such as, for example, the Colonial First State Wholesale fund. These are horses for lessons.
My wife and I are both healthy octogenarians with two children who will inherit equally. Our son is in Melbourne while our daughter is married to a good Englishman and lives in the UK. They want to buy our house in three years, which will allow us to move into a retirement home. Your recent article talks in part about death benefits paid to a foreign beneficiary. Can you clarify the treatment of our assets including our home, $220,000 stock portfolio and $650,000 SMSF, should we die within the next three years or if we live longer? We particularly want our daughter and son-in-law to buy our house as they both love our house and would like to live in Australia.
Superannuation death benefits are taxed the same whether recipients live here or abroad – the taxable component is taxed at 15% plus 2% Medicare if it goes directly to children, or 15% if it passes to the succession. However, as I mentioned before, the last survivor of a couple should aim to take out all the supers before they fall from their perch.
If your daughter is not yet an Australian citizen, as a non-resident she will not be able to purchase established accommodation here. Check out the FIRB website. Otherwise, the house can be sold tax-free to your daughter, but if you bequeath it to her, it will be subject to CGT.
Your Melburnian son can inherit shares, with your base price, subject to CGT only when he sells. Your daughter’s shares will be subject to CGT based on the market value of the assets at the date of death, with the tax reported on the tax return at the date of the deceased’s death.