Super Fund Exit Fee Ban Dents Wealth Managers’ Incomes

The budget reform aimed at banning exit fees charged by superannuation funds will likely dent the revenue streams of large wealth managers.

The government announced it will ban exit fees charged by super funds when savers close an account or move funds.

The average member in a low-fee MySuper fund is charged $68 to exit a fund. A total of $52 million in exit fees was collected by the superannuation industry last financial year — an increase of $37m on the year before.

Last year, exit fees collected by the super industry accounted for 0.6 per cent of all fees charged.

Link Group, the ASX-listed fund administrator, is thought to be most impacted by the new measure, while wealth manager IOOF and the AMP will also likely suffer as a result of the government’s move to end fee gouging in the super sector.

Citi analyst Nigel Pittaway said abolishing exit fees should accelerate account consolidation.

“At the margin this could be slightly negative for Link Group, while it could also potentially accelerate the closing of the back book premium to front book fees for the likes of AMP, and IOOF, again a negative, though potentially only small,” Mr Pittaway said.

Ord Minnett analysts said the banning of exit fees could be a negative for all wealth managers and could encourage churn.

“But we think the cost is small,” the analysts said.

By Michael Roddan

The Australian Business Review

10 May 2018

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