Best strategy for investing $3mil + into shares?

I thought I would start a new thread here as my current one is in the property forum, and I have now decided that I’m not investing into direct resi property.

I’m having a lot of problems with my current FP (I haven’t switched FPs only because I’ve spoken to several, and in my opinion, they all seem very similar).

My FP keeps coming up with a plan, and then when I question it, instead of them tweaking it, they overhaul it, and then we start all over again…

I don’t feel I have the experience to invest on my own, but I would appreciate views on what people think would be a good portfolio for me (in case I have no choice but to do the investing myself).

Some background info:

• I’m in my early 60s and retired.
• I have around $3.5mil to invest into shares.
• I currently have no super but I will be investing just over $500K into super over the next few years -taking advantage of the bring forward rule, concessional and non-conc contributions (this is on top of my shares).
• My income goal is $100K pa (after tax) -anything beyond $100K is to go toward growth.
• I don’t want to invest in managed funds (at least not to begin with) -I don't believe they produce better outcomes.
• I have a $200K buffer (in a low interest savings account).
• The goal is for this money to grow so that there's more than enough for me, my children and grandchildren (I have no desire to provide for further future generations -I really just want to mostly see my kids enjoy it).
• Investment term will be at least 20 years.
• I wish for a simple portfolio -a set and forget (I would like an FP to review it once a year max).
• I wish to minimise admin/management fees (and FP fees).

A couple of SOAs ago, my FP recommended the following plan:

To create a family disc trust and purchase all shares in the trust (I'm still not sold on a trust, but anyway).

Asset allocation: 50% defensive and 50% growth

I do think this sounds a little conservative, but I’m happy to start a little more cautiously (as I’m new to shares) and then to shift the focus more toward growth at a later date.

Super:
Vngd Balanced Index Fund

Non-super shares:
VBND 30%
VAF 20%
VAS 20%
VGAD 9%
VTS 11% (I don’t want this)
VEU 10% (I don’t want this)

Plan: DCA $3.5 mil over 18 months (someone made the great point that there is likely no need to DCA into VBND and VAF).

My FP said the above should yield a return of approx 4.3%.

Initially my FP was adamant that I shouldn't switch my super to pension phase and draw down on it, but recently they changed their mind on this. Now they're saying I should draw down on my super, that way my non-super shares can focus more on growth.

In relation to the above portfolio, VTS and VEU are US domiciled and I don’t want any US domiciled funds, so I am excluding VTS and VEU.

Someone suggested I consider VGS or VGS with a small serving of VGE.

I’m also not sure about VBND and VAF. I have been speaking to different people and reading different threads, and some people are against bonds/fixed interest and advise to keep some cash in a low (preferably high) interest account instead. The % return for VBND is 3.58 and that of VAF is 3.81. These returns are pretty good, certainly better than any current term deposit/savings account.

What do you think of the above portfolio? How would you change it? (thank you to those who have shared their advice already in my other thread).

 

What do you not like about the family trust?

the advantage is income streaming, but that might mean giving it to your children and over 18 grandchildren.

But the trust assets will not form part of your estate so cannot be put into a testamentary trust.

have you considered the structure as to how easily it can be divided in the future?

also what happens if you need care or go into a nursing home?

you need a lawyer even more than a financial planner.

 

What I might do in your situation ;

Simplest solution is Vanguard VDGR (70/30 Growth / Fixed interest) which is a multi asset product and a "high interest" savings account. You dont need anything more imho. I wouldnt use a trust unless you intend to stream capital / income to other beneficiaries while you are still alive. Do you have a good accountant (tax advisor), you could chat with them around super planning (if not forum might have some names) imho it is lowest tax environment so worth getting what capital you can in there. I'd suggest you look at an industry super fund. Choose from the multi asset funds (conservative, growth, high growth) based on what you think appropriate.

You will only need to think about 3 assets ; Vanguard VDGR (either ETF or the unlisted fund version, i'd suggest the latter), your high interest bank account, and your industry super fund. All in your name, all on the single tax return each year. Low fees, diversification and simplicity achieved.

I dont see much/any value from an FP in your case now....very poor performance from them.

None of this is advice, opinion only on hypotheticals. Good luck.

 

I find family trusts very difficult to comprehend (at least the way my FP has explained them). I have read a lot of Terry's posts in this forum but they seem to confuse me further.

Two of my three children are likely to be non-residents in the near future. And my grandchildren are just babies at the moment. Also, I do not want to give any income to my children just yet. The income is for me and the growth is for them.

My FP has recommended a family trust to minimise tax. They said it would be beneficial to income stream to any Aus-resident children and also creating a company (for streaming) if necessary.

I find it all very complicated.

I am setting up three TTs for my children and I just want them to get one third of everything each. Apparently family trusts make it difficult to divide my assets in the future. Is that right? I want something simple that is going to allow me to divide my assets into three equal parts. That is my number one priority.

I don't really understand just how much a family trust will save me when compared to investing all the shares in my name. If it doesn't save me a huge amount, I'd much rather go with keeping things simple and investing all the shares in my name. When I ask my FP how much it's likely to save me (ie. a family trust), I just get a vague answer.

What did you mean about what would happen if I have to go into a nursing home? Are you referring to a POA?

 

I think what @The Falcon Suggested makes sense.

$1.7 mils in super as pension will earn you at 4% will give you $68k tax free.

the remaining balance invests outside of super combining with pension income will earn you in exceed of the $100k you want abd not much income tax to be paid.

Keeping $200k in cash helps your SANF. I am not sure either if you need the family trust in your situation.

 

Thank you, I appreciate you sharing your opinion.

I am scared to invest 70% into growth. I used to have around $600K in super and it was in a 30% growth and 70% defensive fund. When COVID hit, I lost more than $70K, panicked and withdrew all my super. I have learned a lot since then and I know I made an epic mistake which I won't ever repeat. But I still didn't enjoy seeing my balance dip $10K a day. It could dip much more than that with a 70% growth fund.

I will certainly give your suggestion a lot of thought.

Is it a concern that the fund has only been around for a few years, or is that irrelevant?

I think my life would be simpler without a trust. I would only be able to stream income to one of my children while I'm alive, as the other two are likely to be non-residents. But my FP said I could also create and stream to a company.

No, I don't have a good accountant. My FP suggested their in-house accountant but I want to diversify my team. I will try and find a decent accountant asap (if anyone has any recommendations, please DM me).

Could you please tell me why you would suggest an industry super fund over say the Vngd Balanced Index fund which my FP recommended? (someone else in the forum once made the same recommendation) It is just simpler and lower costs?

I cannot seem to find the unlisted fund version of VDGR. I found the Vgd Growth Index and the Vgd High Growth Index, but I can seem to find an unlisted diversified growth index.

Based on your suggestion, would you incorporate a wrap platform or invest directly? (I understand that you would invest directly into an industry super fund).

My FP gets frustrated with me when I ask them questions. They say I ask too many questions, but I think the problem is that they never give me a straight answer. I don't think we will be working together much longer.

 

I can't get $1.7mil into super. I can only get in just over $500K as I'm starting my super investing very late in the game (and I'm in my early 60s).

 

I realised that after posting. Thanks for clarifying.

2.7mils @4.5% and after tax will give you $88k net plus topping up with your super pension of 4% of $500k will meet your spending need.

 

Based on your aversion to risks and rightly so I think the FP suggesting putting 30% into bond makes sense (in a sense that it is more defensive than shares.

Also having money in super at your age helps as taking a pension you won’t pay tax on the income and the investments within super will be tax free as well, which is beneficial in your situation

 

Personally I’d Sack your FP. But I’d understand I’d need to “own” this.

1. You can reduce your exposure to risk assets by holding a higher cash position in your high interest savings account. As an example, If you were to hold say 80% in Vanguard Growth index fund and 20% in your savings account, your asset allocation would be ;

56% shares
24% bonds
20% cash

2. I’m a supporter of industry funds vs for profit or SMSF in your case. Vanguards super product is not yet available.

3. This fund is unlisted equivalent. Established 2002
Investment products | Vanguard Australia Personal Investor

Not advice.

 

your fp doesnt sound very good.
Though a guess is that you are not asking the right questions and asking questions about the unimportant things.
You also need to increase your knowledge.

 

All in good time.

I didn't think of that -thank you.

Ok, thanks. Yes, I spoke to Vngd -they are hoping their super product will be up and running during the latter part of this year, but they can't guarantee it. I have to get my first concessional contribution in shortly, so I can't wait for Vngd to set up their super product.

Thank you.

 

@MsNewbieInvestor . I’m torn on giving you any more info at this point. I’d also echo above comments, you need to really increase your knowledge. Some of this stuff is pretty basic which leads me to feel you should have an advisor ; but obviously finding a decent one is not easy. Catch 22. There is every chance an advisor will stop you liquidating growth assets at the worst possible time, as you’ve done in the past. If you do “self manage” make sure you understand what you are commiting to.

 

I agree that I do have to increase my knowledge and learn to ask better questions.

However, the questions I have asked my FP thus far, haven't come from me, they've come from forum members who are years ahead of me.

I actually didn't ask my FP any questions initially (for months), I just nodded and agreed with their suggestions.

But then I started reading posts in this forum and I started asking questions.

I think they just preferred it when I didn't ask any questions.

 

I understand where you're coming from.

The problem is that if I spend months and months doing research, then there will be the opportunity cost to consider. I had hoped a FP would reduce the amount of research I had to do.

Finding a good adviser is definitely not easy. Perhaps I will just try to find another one who won't try to force specific platforms on me. And then just tell them what I'd like to invest in. It just hardly seems worth it (to get a FP) for such a simple portfolio (which I know mine will be).

I'm honestly not concerned about history repeating itself ie. me liquidating growth assets during a downturn. I didn't understand how things worked back then. Nor did I consult with my children at the time (they know more than me). If I had taken the time to discuss the matter with my children, the three of them would have told me not to liquidate. You live you learn.

Thank you.

 

An alternative to months of research, is to drip amounts into preferred investments, trying it out, not all at once.

 

Thanks for understanding where I’m coming from. Don’t want to see anyone burned.

 

It's all good -I'm still really grateful for your input. For the record, I would never pull the trigger on anything recommended to me by anyone in a forum, until I ran it past my children +/- a (decent) FP.

When I pulled my super out during the recent downturn, that money was mine. The money I'm now looking to invest is mine and my children's, so we all need to agree on all decisions relating to it.

 

I will, thanks, I just need to narrow down those investments first. Once I do, I will DCA very slowly.

 

You can look for a fees for service advisor. The one I will be using would cost us $4-5k/couple. For a single person would be $3k. My friends have been using him and he recommended sensible passive investing etc..

For the asset size I think it’s worth it and I will use him. A good thing is he wants to give the advice that by implementing it we get our fees back within 12 months. He told us to see him closer to the date we want to retire, for now he is happy with what we are doing. I have not paid any fees though