BT Financial has reacted to criticism that its 15bps asset-based fee doesn’t stack up with a new report of its own.
The Westpac-owned wealth business engaged research house Chant West to compare offerings specifically relating to full-menu superannuation platform fees and working cash account interest for a single account.
The BT research refutes a Bell Potter report that found BT’s new fee schedule – which it unveiled in July – “performs below-average overall”, because of its annual administration fee of $540 for its top-line offerings, a separate $80 cost-recovery fee and higher-than-average management fees.
The Chant West fee comparison ranks BT Panorama ahead of its competitors, including Macquarie, MLC, AMP, Hub24, Colonial First State and Netwealth.
The reports differ markedly in both what they measure and the way they measure it.
The Chant West research uses balances of $200,000, $380,000, $1,000,000 and $1,600,000 as baselines, with variable working cash amounts ranging from 8.3 per cent on $200,000 and 4.2 per cent at $1,600,000. In contrast, the Bell Potter report uses a 10 per cent cash allocation across all its sample balances.
The higher cash allotment measure Bell Potter uses theoretically accommodates pension drawdowns; meanwhile, a BT spokesperson says the variable cash percentages it uses are “average cash holdings in BT Panorama at each of the relevant balances”.
The benchmark balances in the Bell Potter report skew lower and go up to only $1,000,000. Meanwhile, Chant West’s research highlights BT’s better performance on higher balances by going up to $1,600,000.
While the Bell Potter report looks across super, non-super and basic platform offerings, Kathy Vincent, BT general manager, platforms and investments, contends the Chant West research looked only at the super platform because “there are more funds invested in retail super products than non-super platform products across the market overall”.
The Chant West study highlights that, on a $1,600,000 balance, a BT Panorama client would pay $2099 in “admin fees, less working cash account interest” per year, which ranks BT as the cheapest provider in the market. An AMP MyNorth Choice account would be next cheapest, at $2445, while the worst-performing platform on fees would be Hub24, at $4378, the Chant West study concludes.
Chant West also shows BT to be the cheapest provider at the other three balances it examines – even on lower-balance accounts, where the Bell Potter report states BT performs worst overall – with AMP the closest competitor and new market entrants Hub24 and Netwealth performing poorly.
Apples to apples
Vincent says BT asked independent researcher Chant West to prepare the report so the wealth management firm’s clients and advisers would have an accurate comparison.
“We disagreed with the Bell Potter report analysis and some calculations; for example, the assessment of minimum fees and standing fees,” she says.
Another notable difference between the Chant West and Bell Potter research is that the latter aggregates management costs on its basic platform comparison, “to avoid a platform appearing to have a low administration fee, only to capture it elsewhere,” Bell Potter states, while the BT-sponsored research did not compare basic offerings at all.
The cash accounts are also an important distinction between the two reports, in relation to both fees and interest-rate payments.
BT Panorama pays users of its platform a lower interest rate on working cash accounts (0.5 per cent) than its competitors, who pay up to 1.57 per cent (AMP North Choice). This is detailed in the original Chant West report, yet not in the graph published in a full-page advertisement that was published in The Australian Financial Review on Thursday. BT’s cash account fee is not favourable. At 21bps, it sits alongside AMP MyNorth Choice on the higher end of the scale.
BT’s Chant West report includes a breakdown of activity and transaction fees – where BT performs well against its competitors – Bell Potter does not include this. On this point, Vincent boasts that “outside of equity brokerage, which is consistent across the market, BT Panorama charges no other activity or transaction fees”.
Further, the Bell Potter research notes that BT separated the $80 annual cost-recovery fee from its investment fee, which the researcher stated “helps the company report a lower headline fee (15bps)”. BT responded by including the fee in its calculations and Vincent says separating the fee in this way is misleading.
“We’ve included all the standard recovery fees a customer would expect to pay and we believe it’s transparent to have it as a separate fee,” Vincent says.
Vincent says BT’s new pricing schedule has been a marked success, with the platform drawing plenty of attention and many new clients.
“We’ve seen a threefold increase in average daily adviser registrations on Panorama since the launch of the new pricing,” Vincent says. “We’re really pleased with the market interest.”