Australians are paying big money to save for their future but exorbitant fees could be affecting their retirement plans.
The Murray Report, as part of the Financial Services Inquiry, has highlighted the excessive fees being tacked on to superannuation schemes, which is draining self-managed super funds (SMSFs) and savings accounts across the country.
It's been 16 years since the federal government implemented a financial system inquiry. For some, the Murray Report will be welcomed as providing well-overdue advice.
The report found Australia's superannuation sector fees are some of the biggest in the OECD, with little evidence of powerful fee-based competition, explained cloud-based investment adviser and fund manager Stockspot.
Are Australians paying too much?
"Just 15 percent of financial advisers are fully independent and consumers are being taken for granted. An [Australian Securities and Investments Commission] study found 39 percent of advice examples were poor and they could only find two example of good quality advice," said Chris Brycki, Stockspot Founder.
A number of competition concerns have been raised, with just "modest" fee declines over the past 10 years. Despite this, Australia's financial advice sector is proving to be too expensive for many – 42 percent of the country's adult population has never employed financial advice services.
Superannuation fees aren't much better. Since 2004, fees have taken up more than a quarter of returns, Brycki noted.
There is plenty of pressure on individuals, couples and families to start dedicated savings and retirement accounts earlier rather than later. Some people will want to top up their Age Pension allowance with extra income. However, it appears that exorbitant fees and financial barriers to financial advice could be holding people back.
What's the solution?
Brycki agreed with the Murray Report's finding that technology can help drop consumers' costs, improve access to financial advice, raise the quality of financial advice and decrease risk.
As the founder of the nation's first cloud-based fund management and investment advice service, it's no wonder Brycki is praising the report's findings. The service is available to anyone with at least $2,000 to invest.
"40% of Australians either can’t afford advice or would like to receive scaled advice online, and fortunately technological change is now allowing companies like Stockspot to deliver a fair go for consumers," he said.
Other ways to cut costs
There are other ways to slash banking costs – and these tactics are not limited to SMSFs.
For instance, undertaking a credit card comparison could help cut costs significantly. For those who pay off their credit card balances within the interest-free periods, switching to a low-rate card could be smart. For those paying off significant credit card debt, switching to a low-interest card with an introductory no-interest balance transfer rate might be a wiser move.