The Barefoot Investor has urged Australians to research their super funds to make sure they are not being charged ridiculous fees and missing out on higher returns.
Scott Pape warned the fees were often detailed in the fine print and that Australians would need a ‘magnifying glass’ to find it.
He used the food industry to draw a comparison between people who knew where their money was going, and people who did not.
Mr Pape said he was driving his son’s under-12s basketball teammates home when he asked one boy about his plans for the weekend.
‘Dad shot the family cow. Tomorrow we’re cutting it up. He says I have to wear gumboots,’ the boy replied.
The youngster admitted the task would be unpleasant.
‘It’s gonna be pretty gross,’ he said.
‘But we’re having spag bol for lunch. And steak for dinner!’
The Barefoot Investor has urged Australians to research their super funds to make sure they are not being charged ridiculous fees and missing out on higher returns
Pape admitted the details were ‘gross’, but said being informed put the boy in a better position.
‘Old Daisy was a lawnmower until Friday. But with beef up 13.5 per cent in a year, she’s grass-fed gold in a second-hand freezer,’ he said.
‘Their family beat inflation with a rifle and a chest freezer. Gross? Sure. But that kid knows exactly what’s on his plate, and what it costs.’
He contrasted this with his own children, who had little idea where their food came from.
Mr Pape recalled watching Dr Karl’s ABC series ‘How Things Work’.
He said one episode showed how lollies are made and that none of his children knew what gelatin, the main ingredient, came from.
‘Cow. Skin, bones, hooves. The lot. Chucked in a pot, soaked in chemicals, dried out and ground into powder. That’s what makes your snakes wobble,’ Mr Pape explained.
He argued that ignorance about the food process was similar to ignorance about super.
Pape compared food production with the need to understand how your super is invested (file)
‘The further your food gets from the paddock, the harder it is to know what you’re eating… your super works the same way,’ Mr Pape argued.
‘The further it gets from a basic index fund, the shinier the brochure, the more “sophisticated” the fund, the less you know what’s inside.’
He warned investors are often drawn to more complex investment products without fully understanding the costs involved.
According to Mr Pape, management fees can be buried deep within investment structures and are not always easy for ordinary members to spot.
‘Buried deep within it is the financial equivalent of that gelatin. A fee on a fee, on a fee, that you never knew you were paying,’ he wrote.
While such fees are typically disclosed, Mr Pape argued the details are often hidden in documents few people read.
‘It’s all disclosed of course, deep in the fine print,’ he said.
Mr Pape urged Australians to take a more active interest in how their retirement savings are invested and what charges might be reducing their returns.
‘The point guard eats better than most grown adults invest,’ he wrote.
‘He looks in the pot. So should you.’
