Hasn’t there been a lot of noise about how the banks aren’t automatically passing on recent Reserve Bank reductions in interest rates?
What about the quiet pillaging the banks and fund managers are doing on wealth rates?
Where’s the noise on that?
For instance, according to the Australian Bureau of Statistics (ABS) Housing Finance Report of 2011, the average home mortgage size is $284, 400.
Therefore the recent 1/4 percent drop in rates announced by the Reserve December 6th would save approximately $710 per year for the average mortgage holder – not a bad saving and understandable why people are having a crack at the banks for explanations why it won’t be automatically passed on in future.
But, take a minute to look at the wealth rates people are most often unwittingly paying.
The ABS Survey of Income and Housing media release predicts average retirement balances for 2011/12 around $250,000.
If average total wealth fees is between 1.5% – 3.0% then this range equates to annual wealth fees of between $3,750 – $7,500.
So if the average wealth fees can vary by (at least) a factor of five times (i.e. 5 x $710) when compared to 1/4 percent mortgage rates, where are the headlines regarding wealth rates?
I’d challenge that despite financial services reform, most Australians with superannuation and investment balances flatly don’t understand the total wealth rate they are paying for all the costs associated with their wealth.
Understanding percentages for most people is like understanding the TV’s remote control i.e. they don’t get it.
CPA Australia believes the same with 75% of 1400 recently polled accountants concerned about costs associated with superannuation.
With 2012 looming as a repeat of 2011, don’t you think more people (and product competitors) will pay a bit more attention to the rates being charged on superannuation and investment balances?
(The executives running around at the moment making the frenetic merger activity within the industry funds look like a speed-dating night for a all-boy boarding school gives a hint how much they think that managing cost control by getting bigger is central to their long term survival and growth.)
Wealth rates matter more than people know and more people should know.
What do you think?