Advisers query competitiveness of Vanguard Super’s fees

Mike Taylor

Managing Editor/Publisher, Financial Newswire

14 November 2022

Early financial adviser reaction to the launch of Vanguard Super suggests the global index manager is going to have to work hard to gain significant traction in the Australian superannuation funds sector.

Financial advisers, while welcoming another entrant into the superannuation market, suggested that the fees being quoted by Vanguard were competitive but not exceptional when compared to those on offer from other players including Colonial First State and the Australian Retirement Trust (ART).

Vanguard announced the launch of its fund on Friday prompting suggestions that it would lead to a fees war in the superannuation sector.

However financial advisers quickly pointed out that the Vanguard’s 0.58% for the default option needed to be compared against the CFS FirstChoice index option at around 0.35%.

Vanguard announced that it was bringing to market an accumulation product -Vanguard Super SaveSmart – which includes a MySuper default fund called Lifecycle, as well as a range of index-based diversified and single sector investment options as part of the choice menu.

Vanguard also published a fee benchmarking analysis undertaken by major consultancy, Deloitte, which suggested that its 0.58% or $290 fee was lowest with respect to a member with $50,000 and ranked no worse than third lowest for a member with $250,000.

As part of the launch, Vanguard emphasised that was making its fee arrangements more transparent by presenting them in annual terms.

“Vanguard Super’s fees are deliberately structured to be transparent and competitive,” he company said. “The fund’s fees are presented on a yearly fee basis which incorporates the investment cost, administration fee and transaction costs.”

West Australian adviser, Steve Blizard was amongst the first to point out that the Vanguard fees were not the lowest in the industry but said that did not mean he would not be taking the fund into account in his discussions with clients.

Superannuation sector consultants have welcomed Vanguard’s entry into the market but expressed doubts about media suggestions that it will quickly gain market share in a sector where there has already been significant fee compression.

They said the advantage delivered to major industry superannuation funds through stapling and the absence of significant consumer awareness of the Vanguard brand represented significant hurdles to the new superannuation fund offering.