Do you pay for ongoing advice?

My partner and I last year went to an independent financial advisor for some advice on insurances and super. They prepared a SOA which we followed and went with the insurer and super fund they recommended (for my partner). The fees for the SOA were covered by the insurance commission so we didn't end up paying anything for it.

Fast forward a year and we've had a follow up meeting, and they want to do an ongoing advice agreement. This seems to cover an annual review, an annual review of insurance and a review of my partners super, as well as having access to them if we have any issues... is this worthwhile? Just wanted to get feedback from anyone who did have an ongoing advice agreement with an advisor to see where they saw value in this. We haven't received any other advice from them aside from the insurance review and review of my partners super. Thanks in advance.

 

How much?

 

@Peppas , we pay fees to our financial advisors but I can’t tell you how much.

I would have to look it up.

 

The fee is a bit over 1k.

 

All good about the fee, more interested in where you see the value in engaging them on an ongoing basis?

 

Insurance is rather static. Super needs fiddling with a bit, but are you approaching 60?

 

We are self-funded retirees and we use ours to:

1. Review and fine-tune our investments, especially due to legislative changes. We get together once/twice a year, depending on what is going on. For example, if franking credit get the chop, we will definitely be catching up.

2. Forecast what our SMSF balance and pension income is likely to look like.

3. Attend “boardroom’ presentation on a regular basis. Going to one next week on the fallout from the Royal Commission; will go to one next month on the Federal Budget.

4. Receive their monthly newsletters which typically have some topics of interest.

5. Take my call if/when we have any questions.

6. Work in conjunction with our Accountants (and our Lawyers to a lesser extent) as our affairs are rather complicated (two heads are better than one).

 

No, I'm in my mid 30s

 

Thanks @kierank sounds like you're getting some good value out of yours!

 

We wouldn’t be where we are today without the advice/support/encouragement of our financial planners/advisers, our accountants and our lawyers.

IMHO, one needs a good team around you to get to the top of the wealth creation mountain .

 

I would be asking what exactly does an annual review for super entail and why it is necessary in your situation.

 

Well played, I wasn't quite that bad though!

 

Depends on the complexity of your situation, most people in their 30's are focused on paying down their mortgage - their not thinking about super / contributing yet. Couples approaching retirement would benefit more from the ongoing service. Unless you have the cash flow and a diverse portfolio that needs reviewing and re tweaking, an adviser could help. IMO I wouldn't deem it necessary otherwise...

 

Ongoing advice fees can be quite valuable. A good planner can help you stay on track when you get side tracked or a bit spooked (and we all do).

But how independent is the planner if they are taking commission?

1k is cheap for ongoing advice fees. Make sure you use the planner - otherwise you are just paying for something you did not get.

 

Say you pay them $250/hr - is it four hours effort? Doesn't sound like it.

An hour pre-work and an hour meeting would seem reasonable unless you have some massively complex situation.

What is the trailing commission that they are receiving? There are variations from 10% to 30% in the later years.

 

Cheers for that. That is exactly right, I'm just looking to get the mortgages paid down more. Though my partner and I do make extra super contributions up-to the 25k cap, there's not really anything else that requires any tweaking.

 

I am a bit confused with what you are concentrating on.....in terms of your financial strategy and solution ahead. You have mortgages to pay down but you contribute at around 30 years of age max CC to Super each?
If your mortgage is for PPOR that's not deducted debt so it would make sense to pay that ASAP or first, if for IP then deductible, then perhaps place into offset account.
While I applaud you for taking the initiative and investing more into Super and such young ages and really without knowing your total financial situation I would question why at such early age you are contributing so much to Super (this cannot be accessed for you until 60 years of age currently or maybe more), whereas why you wouldn't start to build investments outside Super first or in conjunction?
I advise my adult kids to build the wealth outside of Super first at young age as you can access the funds if required or if situations change.... in Super that control is gone, you funds are locked in.
I am wondering was it your family's idea to contribute max to Super at this stage or the financial planner's?
It is extremely hard to advise as we don't know your plan but IMO, just personally, I would not pay a financial planner for insurance review or mutual funds review (That's just me - I do my own insurance check and after years have never really changed it after many years, it remains quite static). Once did a review with alternate financial adviser, around 15 years ago and after $1.1K I paid for proposal I calculated I would be paying around $20K in premiums in 5 years time just for our insurances, when I really did not need to have that much, I had choices, I could sell, all it was mainly about insurance, etc...! So just be careful there what services are you really paying for?
If they advise direct investments say into shares or abroad or some complicated funds or private IPOs then it may be worth their fee, but just for insurance and Super allocation say top-ups for each year to me $1K seems a lot.
I would calculate this fee you are being charged as a percentage of your fund or net worth, say your Super total, or those investments total amount. Say you had $100K then $1k is about 1% fee, so then you should conclude is this a high or low fee for what advise you received? Each year how much extra wealth was generated and what % you paid in fees as a comparison of what you made? Imagine after a year making 1% and then paying again 1% fee.....?
I have no problem rewarding as long as I keep increasing otherwise what is the point, perhaps learn more about finances, read, gain knowledge....and act yourself!

 

They're upfront about the fees, and have actually reduced their ongoing advice fee by the trailing commission. Usually the ongoing advice fee is a bit over $2k. I had planned on taking out insurance regardless, so just got them to do some analysis and to give some advice on which policies might be best, etc.

 

Insurers premiums can change over time. Also as you get older (normally) your need for premiums reduces so it is a good idea to have somebody looking at it to keep costs under control.

If you do not watch insurance costs they go up quickly - the sum insureds rise with inflation and your risk rating rises with your age. So somebody on your side (who does not get commissions) is a a great outcome.

It is harder for the commission guys to actively work to reduce their business income. That is why I prefer an independent impartial and unbiased insurance guy.