Last week, ING Direct launched a new superannuation product called Direct Living Super which it claimed will shake up the whole industry. CEO, Vaughn Richter said, "Australians are seeking to take more control of their investments, and their future, but are struggling to find products with the accessibility and transparency to make this a reality … Living Super provides members with control, fee transparency and simplicity…".
The key features of the offering are said to be low fees and a high degree of control allowing customers to select investment options and to manage their account on-line.
There are four investment categories of which two, the Safe and the Smart categories, have zero fees. 'Safe' offers the option of holding money as cash or in term deposits and 'Smart' is the balanced option with 50% in cash, 30% in Australian shares and 20% in international shares.
The third category offers the ability to invest in various managed funds, each with a different style such as growth, listed property or international fixed interest. Note that there are administration and management fees if you go this way and that investments in the managed funds have a buy/sell spread. These are up to 0.31% when buying and 0.26% when selling depending on the fund and apply whether you choose the fund specifically or whether it is used as part of the balanced option.
The final category allows you to make specific direct investments in S&P ASX 200 shares, selected ETFs and Listed Investment Companies. This option also comes with administrative fees plus you pay brokerage costs of $20 minimum or 0.13% of transaction size.
ING Direct believes that this is the first product with a balanced option available with no administration or management fees although other companies such as AMP (ASX: AMP) and BT Investment (ASX: BTT), the wealth management arm of Westpac (ASX: WBC), do offer low cost superannuation. When asked how ING Direct would make any return on investment if the balanced option doesn't have any fees, Chief Operating Officer Anne Myers explained that ING was a bank and would lend the money in the cash investments in the normal way banks do to make money.
Foolish takeaway
Being cynical, when someone claims no fees, we half expect to find hidden fees and charges but in looking through the documentation, it all looked pretty reasonable. The term deposit rates were the same as ING Direct offers any prospective investor and the percentages used to calculate fees are unexceptionable.
The government forces you to put money into superannuation and, if you don't have enough contributed to make an SMSF viable or you simply don't want the bother, then you have to use someone to manage that money. If that is your situation, this seems to offer lower costs and a lot more control than most. As always, make sure you look at the Product Disclosure documentation before doing anything.
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Motley Fool contributor Tony Reardon owns shares in AMP. The Motley Fool's purpose is to help the world invest, better. Take Stock is The Motley Fool's free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. Click here now to request your free subscription, whilst it's still available. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.
