Trailing Commissions

Trailing Commissions on Superannuation & Investments  

Trailing commissions are ongoing fees charged to your investment funds (including your superannuation & allocated pension accounts) and are based on a percentage of the value of your investment. They are paid to the financial advisor who originally set up your account or policy. If you established the investment or super account directly with the super fund or investment provider (ie - no advisor was involved), the trailing commissions are retained by the investment managers - they are not given back to you!

In nearly all cases there is no way trailing commissions on superannuation, allocated pensions or managed investments can be avoided. They are built into and paid out of the management expense ratio (MER) of your investment regardless of how the account was set up or who it was set up by. It is just a question of who ends up pocketing them! 

The amount of trailing commissions charged to your super or investment is usually between 0.4% - 1.2% of your investment or super/pension account. This may not sound like much when it is phrased in percentage terms however consider a 1% pa trailing commission fee on a $200,000 super or investment is $2,000 per annum or $166 per month. Would you like to receive a physical bill for this amount every month?. Most people would prefer to see this in their own pocket rather than paid to an institution or financial advisor. 

Also, as they are a percentage based fee, the more money you have invested, the more you will be charged.

Read here the views and comments of esteemed and highly respected finance journalist Alan Kholer on trailing commission fees.



Trailing Commissions on Personal Insurance Policies 

Trailing commissions are also charged on most personal insurance policies (such as life, income protection & trauma insurances). This means every time you pay your insurance premiums, a portion of that payment is being paid to whoever established your policy. Trailing commissions generated by personal insurance policies are usually in the order of 10% - 30% of your annual premium payments.


Trailing Commissions on Home Loans 

Trailing commissions are also charged on any home loan which has been established with the aid of a mortgage broker. In this case, it is a slightly different scenario in that the trailing commission is paid to the mortgage broker by the bank out of their own funds - not from the borrower's repayments.


The Bottom Line

The bottom line is that when you do the maths, you could easily be paying $1,000's every year in ongoing trailing commission fees on the financial products you own. iRefund track down and reclaim these fees and commissions and refund them back to you.

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