The Pit - IMI Trust

For as long as financial service providers have been operating there has been debate on fees.  The focus in the trade press has been on keeping fees ultra-low for the ‘public interest’.  To highlight how interested the public are Newspoll conducted a survey recently identifying that 60% of investors had no idea how much commission they pay. 

The current market sentiment is that fees they pay have to be low.  Fund managers, financial advisors and superannuation managers are striving to keep their fees low because ‘high’ fees are perceived to not represent value.  However, this philosophy is misguided.

Low fees mean that service, diligence, research, endeavour, expertise, good management and a host of other desirable qualities have to be sacrificed. 

The supporters of low fees, time and again, use the arguement that high fees erode returns massively in the future because of compouding and low fees give you, the investor, the service user, the client, more money in your pocket. 

This though is making the incorrect assumption that both services, the high fee service and the low fee service are delivering the exact same product.  They are not.

I Couldn’t Believe I Was Able To Buy A Convertible For Under $5000

We specialise in web and marketing for the financial services industry.  So here are a few questions about web costing. 

• Would you expect the same value or performance from a website that cost $1,000 to a website that cost $100,000? 
• Or a website that cost $100,000 to a website that cost $1,000,000? 
• Or a website that cost $1,000,000 to a website that cost $10,000,000? 

In all three cases the answer would be a clear and resounding ‘No’.  If you pay more money for more features, more scope and more functionality your results end up being a lot different.  In terms of marketing, here are a couple of other questions:

• Would you use your marketing budget to make one television advert that appeared once?
• If you answered Yes, how would you then market to people who missed that advert?

Again, with marketing you have to spend time and money on strategy, management and research to get optimum results.

How can a financial service provider operate with such restrictions?  They can’t.  Not well enough to for you to be confident that you money is being managed well.  The square peg doesn’t fit in the round hole in this instance.

And if you are the discount chaser and you want low fees, are you disappointed when the value delivered is low and performance less than expected?  You should be but really you only have yourself to blame.