Product proliferation, layered fees and overlapping strategies have made investing more complex than it needs to be. In our experience, added complexity usually adds cost without improving results.
Australian investors can choose from a very wide range of investment products. When the Productivity Commission examined the superannuation system in 2018, it found that in the choice segment “a proliferation of little used and complex products ... increases fees without boosting net returns”.¹ The Commission put the number of those products in the tens of thousands. Its inquiry covered superannuation, but the same pattern appears in many portfolios that have been added to over a number of years.
Complexity of this kind usually builds up gradually. A fund may be added to fill a gap, a structure may be kept because selling it would trigger capital gains tax, or a strategy may stay in place after the reason for buying it has passed. Each decision may have been reasonable when it was made, but together they can produce a portfolio that is difficult to explain and that few advisers would design from the beginning.
The cost of added layers
The most visible cost is fees. Each layer of management, platform and product has its own charge, and those charges compound over time in the same way that returns do. The Productivity Commission estimated that fees just 0.5 percentage points a year higher could leave a typical full-time worker with about 12 per cent, or around $100,000, less at retirement.¹ ASIC’s Moneysmart gives a similar example: a 30-year-old on $50,000 with $20,000 in super who moves from a fund charging 2.5 per cent in fees to one charging 1 per cent, for the same level of performance, would have $81,000 more at 65.²
There are other costs as well. Several funds can hold similar investments, which can increase exposure to a single sector without anyone intending it. Rebalancing across many holdings takes more work to manage. A portfolio with many underlying funds is also harder to review, because an adviser may need to combine several fact sheets to see, for example, how much of a client’s money is invested in Australian banks.
Growth in managed accounts
Some clients do need tax-aware construction, alternative assets or more than one manager. The question is whether each part of a portfolio justifies its cost, and in our experience that question is not always asked.
Managed accounts are one way advisers have sought to simplify implementation. Funds under management in Australian managed accounts reached $292.9 billion at 31 December 2025, a 25.8 per cent increase on a year earlier, according to the Institute of Managed Account Professionals.³ That growth has brought a larger number of models and variations. A managed account can make implementation more efficient, but the portfolio itself still needs to be designed simply.
How we approach simplicity
In our view, a simple portfolio is one in which every holding has a defined role, every layer of cost is justified, and anything that does not add value after fees has been removed. We apply the following principles:
- We concentrate on asset allocation, which a widely cited 1986 study of large US pension plans found explained most of the variation in their returns over time.⁴
- We take active risk only where there is a reasonable basis to expect it to add value after fees, and use low-cost exposures elsewhere.
- We start from the outcome a portfolio is meant to support, rather than from its existing holdings.
- We aim to be able to explain each portfolio in a sentence.
A simpler approach has limitations. A portfolio with fewer components will at times miss a part of the market that is performing strongly, and a lower-cost approach does not remove market risk or guarantee a better result. It can make a portfolio easier to understand and govern, and it can remove costs that are not adding value, so that the risks in the portfolio are ones that were chosen deliberately.
What this means for advisers
For advisers, a portfolio with fewer and clearer components is easier to explain to clients, easier to document and easier to monitor. It also allows more of the review conversation with a client to focus on whether the portfolio is meeting their objectives.
Sources
1. Productivity Commission, Superannuation: Assessing Efficiency and Competitiveness, Inquiry Report No. 91, Overview, 21 December 2018, pp. 14 and 18. https://assets.pc.gov.au/inquiries/completed/superannuation/assessment/report/superannuation-assessment-overview.pdf
2. ASIC Moneysmart, “Choosing a super fund” (example: “Savannah chooses lower super fees”), accessed 29 September 2026. https://moneysmart.gov.au/how-super-works/choosing-a-super-fund
3. Institute of Managed Account Professionals (IMAP), “IMAP’s FUM Managed Accounts Census reports FUM total for 31 Dec 2025”, March 2026. https://imap.asn.au/imap-news.html?view=article&id=1307:fumcensus-update-dec-2025&catid=126
4. Brinson, G.P., Hood, L.R. and Beebower, G.L., “Determinants of Portfolio Performance”, Financial Analysts Journal, vol. 42, no. 4, July/August 1986, pp. 39–44. DOI 10.2469/faj.v42.n4.39. The study measured the variation in quarterly returns of 91 large US pension plans, 1974 to 1983.