The end of financial year is fast approaching and we wanted to share some good news in regards to fee reductions we have negotiated for you.
You may remember we have talked about the ‘scale’ benefits in the group and that as we grow we are able to discuss deeper discounts for our clients within the platforms and with the underlying fund managers in our models.
With five practices within the licence (Australian Advice Network (AAN)), we now collectively provide advice on over $1billion.
The licence was created in May 2015 and at that time we were able to provide discounts in both the Investment Exchange and Praemium platforms as well as a number of the underlying fund managers in our model portfolios.
The Praemium platform is seen as a ‘next generation’ platform and offer functionalities that have made it increasingly attractive for our clients.
This has seen an increase in the funds we hold with them and in 2015 and 2017 we were able to reduce fees for our clients to well below their standard retail offer.
We are very pleased to be able to announce that on 1 August 2019, we will be further reducing Praemium administrative costs (see table below).
Additionally, within ‘AAN Models’, our investment committee have also been hard at work on cost savings as we have grown. Clients within the AAN investment models will see further cost reductions on 1 July 2019 (detail below).
Centaur Financial Services is one of the three founding members of AAN and when we started this licence the ability to remove unnecessary margins was a key driver for our change.
The Royal Commission highlighted areas where institutional licensees have let the consumer down and Centaur’s growth and that of our licence is indicative of investors looking for a better solution. We thank our clients for the many colleagues, friends and family they have introduced to our practice and who collectively drive costs down for the AAN family.
Praemium Platform Fees
Platform administration fees are usually built in tiers where the first portion of your balance is charged at a certain rate and as you reach each tier, the additional funds are charged at a reduced rate.
The table below shows you the standard version of the tiered Praemium administration fees, the rates we had previously negotiated and the rates as they will apply from 1 August 2019.
| Praemium Retail PDS Pricing | Praemium current Pricing for AAN Clients | Praemium Pricing for AAN Clients from 1 Aug 2019 | Percentage saving Retail vs AAN | |
| 0-$250,000 | 0.48% | 0.37% | 0.29% | 39.6% |
| $250,001 – $500,000 | 0.40% | 0.25% | 0.22% | 45.0% |
| $500,001 – $1,000,000 | 0.30% | 0.15% | 0.13% | 56.7% |
| $1,000,001 – $2,000,000 | 0.20% | 0.10% | 0.00% | 100.0% |
| $2,000,001 – $3,000,000 | 0.09% | 0.05% | 0.00% | 100.0% |
| More than $3,000,000 | 0% | 0% | 0% | |
| Operating Risk Levy | 0.06% on Superannuation Accounts | 0.06% on Superannuation Accounts | 0.06% on first $1mil Superannuation Accounts (Capped) | Dependent on the balance |
To put this in dollar figures:
- A client of Centaur’s investing $500,000 through our negotiated pricing in Praemium will pay administrative fees of $1,275 vs a client investing directly paying $2,200 – a saving of 42%.
- A client of Centaur’s investing $1,000,000 through our negotiated pricing in Praemium will pay administrative fees of $1,925 vs a client investing directly paying $3,700 – a saving of 48%.
- A client of Centaur’s investing $2,000,000 through our negotiated pricing in Praemium will pay administrative fees of $1,925 vs a client investing directly paying $5,700 – a saving of 66.2%.
100% of these savings are passed to our clients and neither Centaur nor AAN receive any incentive from Praemium to use their platform.
MORE GOOD NEWS…. AAN Investment Model Fees
The investment committee of AAN Asset Management construct portfolios for the clients of AAN, and therefore Centaur, based on a rigorously agreed investment philosophy. The ‘active’ portfolios look to utilise best of breed investment professionals to achieve capital appreciation and reduce capital depreciation. This can mean we give up some upside in growth markets to minimize the impacts of a market reversal or correction.
We do have two index model options (Index Core and Index Growth) that simply reflect market movement based on the agreed strategic asset allocations. These are cheaper options.
The committee takes its responsibilities to investors very seriously and will not blindly chase growth at the risk of magnifying capital losses in a reversing market.
At the time of writing this release (19 June 2019), the investment markets have had another solid financial year, though the October to December 18 quarter was a testing time.
The models have performed well and in line with expectations, our clients will now benefit from some additional cost savings in the active models as the underlying investment managers have had the same scale advantages we have been able to create in the platform space.
From 1 July 2019, investors in the active models will benefit from the following changes:
| Models impacted | Current Model Fee | Model fees from 1 July 2019 | Percentage saved |
| AAN Core | 0.50% | 0.48% | 4.0% |
| AAN Growth | 0.60% | 0.52% | 13.3% |
| AAN Australian | 0.80% | 0.65% | 18.8% |
To put this in dollar figures:
- A client of Centaur’s investing $500,000 through our AAN Growth Model within Praemium will pay annual investment fees of $2,600 vs the existing fees of $3,000 – a saving of $400 or 13.3%.
- A client of Centaur’s investing $500,000 through our AAN Australian Share Model within Praemium will pay annual investment fees of $3,250 vs the existing fees of $4,000 – a saving of $750 or 18.8%.
Combined savings
The combination of these savings can be very substantial for clients within Praemium and the AAN models.
A client with $1 million in Praemium invested through the AAN models (example calculation 50% AAN Core and 50% AAN Australian), will have combined administration and investment fees of $7,575 vs current fees of $10,200. This is a saving of $2,625 in one year (25.7%).
Fees are only one part of the equation and of course, performance is the real driver of your investments, however, we can guarantee fees but we can’t guarantee performance. We believe these savings can make incremental improvements – especially over any extended period.
We are all in this together and as AAN and Centaur continue to grow we will continue to look for opportunities to eliminate unnecessary margins and pass on the benefits wherever we can.
Happy New Financial Year
Hugh Robertson
Director
Centaur Financial Services Pty Ltd
