A retail superannuation fund has dropped the investment fees on three options by 10 bps to 19 bps, with its chair saying the cuts will help it be more competitive.
Australian Ethical will now charge 40 basis points instead of the prior 50 bps per year as investment fees for its defensive option, which had $55 million in assets under management at the end of June.
The advocacy option is seeing a similar fee cut, taking it from 1.30% p.a. to 1.20% p.a. This option had $93.6 million at the end of June.
The biggest fee drop is in Australian Ethical's international shares option, which will go from charging 1.29% per year in investment fees to 1.10 % p.a. This option had about $56 million in assets under management.
"We have always said that we will share the benefits of our growth with our shareholders but also with our customers. It is also to be more competitive," chair and acting chief executive Steve Gibbs told Financial Standard.
The changes came into effect December 1.
The fee cuts also apply to two pension options, in addition to the above accumulation products.
The cost of fee cuts
Australian Ethical had $2.82 billion in funds under management at June end; this includes its superannuation and managed fund options.
During the year it reported an underlying profit after-tax of $5 million from $36 million in revenue.
Its FUM, revenue an inflows grew over the year but FUM-based revenue margin has continued to fall over the years, from 1.40% in FY16 for its superannuation options to 1.26% for the year ending June.
Gibbs declined to comment on the total loss of fee income from the December 1 fee cuts.
"We will expect that over time these [FUM-based revenue margins] will continue to tick down, but it will be more than offset by the increase in the FUM," Gibbs said.
Gibbs is currently also the acting chief executive, after Phil Vernon left the company in August after nearly nine years.
Gibbs said the process of appointing a permanent replacement chief executive is still underway.