Is a super wrap account worth the high fees?

My wife and I are 72 and 73, retired, own our home and have $520,000 each in super, which provides our retirement income. We have a financial planner who seems very committed to a super wrap account and its many investment options. Product costs are $13,200 while advisor fees are $5830 a year. The fees seem high and do not include costs that are taken before the earnings are deposited into our accounts. Also, there is no obvious or regular value check against the wrap account. What is your opinion on super wrap accounts, the fees we are being charged, and if could we do better elsewhere?

Most planners act as portfolio managers, so instead of simply offering advice, they manage money in a platform such as a wrap account, an individually managed account or a separately managed account. All require fees charged directly to the client and taken out of the account. Since commissions from fund managers were abolished, this is the way most planners survive.

Though super wrap accounts tend to be among the more expensive platforms, some people want individualised service and are prepared to pay for it.Credit:Simon Letch

That said, I’m not a fan of wrap accounts, they tend to be among the more expensive platforms. You are paying some 1.8 per cent a year in direct fees although, as you say, this may not include fees paid within managed funds, before unit prices are calculated.

Some people want individualised service and are prepared to pay for it. Others accept one or two balanced funds, such as those in AustralianSuper, or a spread of half a dozen balanced and diversified funds as in, say, the Colonial First State Wholesale fund. It’s horses for courses.

My wife and I are both healthy 80-year-olds with two children who will inherit equally. Our son is in Melbourne while our daughter is married to a fine Englishman and living in the UK. They wish to buy our home in three years’ time, allowing us to move into a retirement home. Your recent article talks in part about death benefits going to an overseas beneficiary. Can you clarify the treatment of our assets comprising our home, a share portfolio of $220,000 and an SMSF of $650,000, should we die within the next three years, or if we live longer? We particularly want our daughter and son-in-law to buy our home as they both love our house and would love to live in Australia.

Superannuation death benefits are taxed the same, whether the beneficiaries live here or overseas – the taxable component is taxed 15 per cent plus 2 per cent Medicare if it goes directly to the children, or 15 per cent if it passes to the estate. However, as I have mentioned before, the last survivor of a couple should aim to withdraw all super before they fall off their perch.

If your daughter is not still an Australian citizen then, as non-residents, they will be unable to buy an established dwelling here. Check the FIRB website. Otherwise, the house can be sold tax-free to your daughter, but if you bequeath it to her, it will be subject to CGT.

Your Melburnian son can inherit shares, with your cost base, subject to CGT only when he sells. Your daughter’s shares will be subject to CGT based on the market value of the asset at the date of death, with the tax being reported in the deceased’s date of death tax return.

Plan to live for at least another three years.

• Advice given in this article is general in nature and is not intended to influence readers’ decisions about investing or financial products. They should always seek their own professional advice that takes into account their own personal circumstances before making any financial decisions.

If you have a question for George Cochrane, send it to Personal Investment, PO Box 3001, Tamarama, NSW, 2026. All letters answered. Help lines: Australian Financial Complaints Authority, 1800 931 678; Centrelink pensions 13 23 00.

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