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Tower tells investors their fees are too high

Tower Retirement Investment has launched a low-fee insurance bond product aimed at lump sum investors.

Thursday, March 4th 1999, 12:00AM

by Philip Macalister

Tower Retirement Investments (TRI) is directly pitching for lump sum investors with a revamped insurance bond range of funds under the EnRoute Gold name.
A TRI company, Tower Direct, is wooing potential customers with an aggressive letter headed "Your fees are too high".
Its pitch is aimed at people with $40,000 or more to invest, and is based on EnRoute's tied fee structure and Tower Asset Management's excellent past performance.
In a letter to investors Tower Direct general manager Mark Sheldon says that big investors are subsidising small investors.

"Small investors are less profitable than big investors. The crazy thing is most managed funds charge the same fee no matter how much you invest."
EnRoute Gold has only one fee, and it is charged annually on a tied basis.
It charges a pre-tax management fee of 1.49 per cent for amounts from $40,000 to $99,999, which reduces to 1.34 per cent for amounts between $100,000 and $249,999, 1.19 per cent for $250,000 to $499,999 and fees are given on request of amounts of more than $500,000.
TRI says there is no sales commission, entry or exit fees, switch fees or establishment fees. However, each fund has a management expense ratio.
En Route Gold invests in the same underlying range of insurance bond funds used in TRI's Investment Account (launched last year and promoted in the Between The Lines campaign).
The funds involved are the $83 mill MortgagePlus fund, the $47.7mill VIP Balanced Fund and the $712 mill International Companies fund.
Although market trend figures from the two managed fund research houses show insurance bonds are out of favour since the Superannuation Surcharge has been scrapped, TRI managing director Stuart Fish says there's still a place for them.
TRI is using insurance bonds as the underlying funds have a long and good track record, plus En Route Gold is targeted at people on the top tax rate, who pay the same rate as the funds.
Using insurance bonds was "a convenience thing," Fish says.
The adoption of a direct selling is part of Tower's desire to have a multi-channel distribution approach.
"We want to allow customers to choose how they access products," Fish says. Some will want to deal directly with some products, but will seek advise in other areas.
Currently 90 per cent of TRI's business comes through brokers and Tower Financial Advisory Services.
Fish acknowledges a direct strategy can create conflict, however Tower Direct is trying to minimise fallout.
"We'd be crazy to upset all of (the advisers)," Fish says.
« Tower becomes the hunterGet your tax questions answered online »

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