ING Direct Fees Rip Off!

Question


Hi Scott

ING Direct came to the market a few years back with great product called Living Super (you call this type of fund ‘SMSF Lite’ as it allows you to buy shares within super). If memory serves, it was the first super provider to offer a zero-fee balanced option and it really shook up the market. I was attracted by the ability to access low-cost index ETFs and construct a low-fee share portfolio within my super.

Fast forward a few years and everything has changed. There are now fees on the balanced fund option, and the annual trading fee is 0.50 per cent. It works out as a $700+ increase, negating the very reason for buying the ETFs over a standard fund.

I rang ING and was told the reason was that they have been absorbing costs for a number of years – sounds like a loss leader to me to capture market share. Is this legal? Further, the Morningstar report they commissioned to justify their changes is laughable. I am very angry, because moving super is a pain and you are exposed while you are out of the market! I know AustralianSuper have a similar product. Do you recommend it, are you aware of any others?

Also, I want you to share this with all your readers are aware of these very significant changes to the ING Living Super product.

Cheers,

Luke

Scott's Answer


Hi Luke,

When ING launched the zero-fee super option, I called them up and asked them, ‘what’s the catch?’.

After about twenty minutes of bulldust bingo, I basically worked it out: technically the product was ‘free’ … well, as long as you parked a certain amount of your super in a cash account that paid below the market interest rate.

Uh-huh.

That sort of marketing is too tricky for my liking — and it seems also for ASIC, which made ING Direct compensate 24,500 of their customers $5.38 million for their “potentially misleading” fee-free statements they made about their Living Super product.

That’s why I’ve never recommended ING’s Living Super product. There’s no such thing as a free lunch!

So, what should you do?

First, you need to look at the costs of switching: you’ll have existing insurance cover in place, and you’ll also have tax implications. However, if you do a bit of research you’ll find there are a range of low-cost industry funds that have dirt cheap “SMSF-Lite”, otherwise known as direct share investing options.

Scott