How to Avoid Trailing Commissions

We all have those nasty trailing commissions on our financial statements. These commissions generally average around 0.5% a year and are paid regularly to your fund adviser. If you pay these commissions it would seem fair that you should receive a level of advice in return. But be prepared, because although advisers collect their trailing commissions, many will not bother in offering advice or looking after their clients on an ongoing basis.

It is also important to realise that most fund advisers act in the best interest of the commission rate they will receive from the chosen fund. For instance, Fund A and Fund B both have the same risk profile  and administration fees, yet Fund A has a 0.7% commission rate and Fund B has a 0.3% commission rate, most likely your adviser will tell you that Fund A is a better choice as it is most beneficial for themselves.

Thankfully, in the recent decade there has been an explosion in commission rebate services. By acting as your fund adviser, these no-obligation services allow a fast and convenient way to receive a return/rebate on your trailing commissions. These services support almost all financial products ranging from superannuation, investment funds, insurance policies loans, and even mortgages.

YourShare.com.au, currently Australia’s leading commission rebate service, promises to refund 50% of all commissions collected up to $295 and then 100% of the remaining. Paul Brady, Director of YourShare states “we can save Australian families on average around $1500 a year”. 

Most commission rebate services also offer to refund 100% of the initial commissions and entry fees for managed investment funds and superannuation/pension funds. 

By Nancy Edbergsten - Financial Blogger