If you’re wondering if our low fees are worth it then read on. We’re confident that our fees are a great value for the services we provide. So grab a seat, read what we have to say, and decide for yourself.
Clover sounds pretty good. Can you explain your fees to me?
Sure. We’re very transparent about our fee structure.
|Account Balance||Clover Fee|
|$2,500+||$5 + GST per month|
|$10,000+||0.65% + GST per year|
|$50,000+||0.60% + GST per year|
|$100,000+||0.55% + GST per year|
|$500,000+||0.45% + GST per year|
We charge the fee on a monthly basis by taking into account the average account balance for the month. Just FYI, the Clover Fee does not include the fee for the exchange traded funds (ETF) which is built into the ETF. You can learn more about ETFs here.
Hold up! What’s this inbuilt ETF fee you just mentioned?
All ETFs have a fee which is charged by the ETF provider. This fee is embedded into the ETF and the return on the ETF is net of this fee. This means you don’t pay this fee explicitly, but it is a cost you incur when investing in ETFs.
ETFs offer some of the lowest costs available to build diversified portfolios. For Clover portfolios, the weighted average cost of the ETFs range between 0.19% – 0.40% per year depending upon the portfolio.
So, what do I get from paying your fees?
The first thing you’ll get is your own customised investment plan which consists of a very sophisticated portfolio that’s tailored for you and is based on your tolerance for risk. Our investment team and advisors have decades of financial expertise behind them and have built our world-class diversified portfolios using low-cost ETFs.
Our investment strategy is based on the Nobel Prize winning Modern Portfolio Theory which seeks to optimise returns at each risk level through diversification. In plain English – we use highly transparent and low-cost ETFs to build diversified portfolios and target the best returns, at every risk level.
We believe that for the majority of Australians, these portfolios are the best way to invest.
But wait, can’t I buy the same ETFs you do and just pay the ETF fees?
Yup, you totally could. But you’d also have to calculate the right portfolio mix and then buy the ETFs yourself. Every time you added to your investments, you’d pay brokerage costs to buy additional ETFs. Moreover, these brokerage costs you’d pay would likely be significant. Clover does not charge brokerage fees, so you can contribute to your investments frequently. But that’s only part of the equation – the harder part would be maintaining the right portfolio mix.
One of the services we provide for all customers is something called portfolio rebalancing. Our portfolios put your money into different kinds of investments based on how risky they are, the types of industries, companies and countries the investments are composed of, and other factors. This is what’s known as asset allocation and it varies depending on what Clover portfolio you’re invested in.
Some portfolios have a greater allocation to fixed income assets like bonds, and other portfolios have a higher weighting to equity assets like emerging markets shares. Over time, some assets will perform better than others and this results in your portfolio ‘drifting’ from its optimal target allocation. We continually monitor your portfolio and rebalance it to maximise the potential for better long-term returns.
For example, let’s say you’re invested in our Balanced portfolio where 22.5% of your money is supposed to be invested in Australian shares. As the market goes up these shares will increase in value and will represent more than 22.5% of your total investment. That means your portfolio will be over-represented in Australian shares, so we’ll exchange some Australian shares for other assets that have become under-represented. This means your portfolio is buying low and selling high (which is good) and best of all you don’t have to do anything.
Rebalancing also gives better returns over the long-term. Forbes wrote a great article that shows how over a 25-year period, a $10,000 investment would be worth $97,001 if it was rebalanced once a year, and only $88,980 without any rebalancing. That’s a big difference.
Just a quick note – more rebalancing isn’t necessarily a good thing. We only rebalance when your portfolio needs it. Otherwise excessive trading costs and tax impacts would eat away at your gains. Also, we set rebalancing targets in a way which aims to give your assets ample headroom to perform in trending markets.
Rebalancing a portfolio on your own can be more frustrating than trying to assemble an IKEA Hemnes day-bed frame. (No really, this is actually very difficult – and it’s not just us who thinks this). So why not let Clover do the hard stuff for you?
Hmmm, that does sound like you do a lot. Do I get anything else for my fees?
Yes, we do something called dividend reinvestment. This means we take any dividend payments from your investments and put them back into your portfolio so they earn even more money for you.
We also provide a tax summary for your Clover portfolio soon after financial year-end, which can then be directly inputted into your tax returns or handed over to your accountant.
One more point – with Clover your assets are held in your name at all times. The ownership of your funds is not transferred away from you.
Hold on…a lot of other financial advisors perform the same services but they charge fees of 1.5% or higher. Does that mean they’ll get me higher returns?
Nope. Many advisors promising higher returns use what are called actively managed funds. There is ample research showing that these active funds underperform against the broader market. In fact, Warren Buffett famously won a $1,000,000 bet that passive investing would outperform active funds. We think if passive investing is good enough for arguably the world’s greatest investor, then it’s good enough for our customers.
Alright, this sounds good. But how much am I actually paying you?
Say on 1 January 2017, you invested $10,000 in our core Balanced portfolio. By 31 December 2017, you’d have paid us about $74 in fees. Your inbuilt ETF fees would amount to around $20. Your gains over the year, after taking the fees into account would have been around $800! And the number of hours you’d have spent researching, buying and selling ETFs, rebalancing your portfolio, reinvesting your dividends, and other exciting stuff? Zero.
We think our fees are extremely fair compared to what you’d pay to a big bank or when you factor in the time and effort you’d need to do it yourself. We believe good investing doesn’t have to be expensive or difficult for the average Australian. That’s why we keep our fees as low as possible.
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