Wraps and master trusts

Wraps and master trusts can provide convenience and choice, but beware high fees and adviser kick-backs.
 
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02.How a master trust works

A master trust is an administration structure for all of your investments (such as shares, managed funds and term deposits):

It provides a central ‘hub’ account, is often accessible online, and gives you a single report at tax-time.

Consumers can invest in master trusts through financial planners or sometimes direct; but you may have to pay the full entry fee if investing directly.

The investment ‘menu’ includes a choice of fund managers and funds. You get a central account to invest in a diverse range of funds and managers, spreading your money around without having to go to lots of fund managers separately.

Your choices range from conservative funds that invest mainly in deposits or government bonds, to balanced, growth, property or riskier Australian and international share funds. Share trading isn’t possible with ‘lower end’ platforms (they offer less choice and fewer features than some full-service wrap platforms).

You can switch your money around different funds as your preferences change but switching fees may apply.

Fees: Typically you’ll pay:

  • entry fee (up to 5% or more of your investment, but that’s negotiable)
  • annual management fee depending on the investments chosen. Of that, up to about 0.6% goes to the planner as an ongoing trail commission each year. The management fee may cover the master trust's admininstration costs, as well as fee charged by the underlying managed funds you choose within the master trust. With other master trusts, the administration and management fees are split up.
  • annual 'adviser service fee': up to 2% may be 'dialled up' by the adviser as his/her additional fee (again, negotiable).

For more, see What are the fees?

 

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