Financial Planner or good accountant?

@The Falcon probably used the 40% average tax to deduce rather than guess.

You're Financially Independent (FI - IMO) and I would advise you to spend as much time with your child as possible. You can be a degenerate or even learn about investing when he's at school. Work only when you want to. Take him on holidays to broaden his horizons and consider taking the family to live overseas for a year or so while he is young (obviously there are constraints such as your wife's business).

Given that you are FI there is no need to expose yourself to high risk. An appropriate allocation to bonds/cash to cover a crash and the remainder passively in equities is suitable.

As you are near 60 I'd be looking at getting as much as possible into Super.

Not advice.

 

Do you need a caddy?

 

Having thought about this a bit, however, there is the issue of my wife’s youth.

If I chuck as much as possible into my current industry super I can start drawing down almost straight away if needed (although I would plan not to).

My wife, however, couldn’t start drawing down hers for 20 years. So, as I understand it, any money in her name is locked away until then.

Does an SMSF during accumation phase give you a common pool (up to $3.2M I guess) of which you can then allocate any proportion to pension phase when you want while the rest accumulates?

Or do my contributions stay with me and hers stay with her?

 

No different to pooled funds in terms of member interest. You have yours, she has hers. Lots of complexity with SMSFs depending upon various factors especially regarding segregation of pension vs accumulation.

Given the windfall I didn’t think having a relatively small part of the portfolio locked away in your wife’s Super would matter especially given the tax benefits.

 

Just out of curiosity this $16K what % of fee would this represent? Do your own calculation as a % fee and compare to what is out there!
We manage our SMSF since 1995 and decide ourselves where we invest, so for some time now, and just looking at our accounting fee for TY2018, as a % of $ Super value we hold...this would represent around 0.11%. Now, I am sure that low fee makes a huge difference to our $ bottom line. However, I would say we are 0.01% exception to 99.99% the way most invest via SMSF.
We may from time to time decide to pay once off fee seeking a SMSF strategists advise and implementations (these were Reserves or other), so for much more complex advise then where to invest your money. We decide really where we invest, including insurance, the accountant assists with SMSF investment strategy, compliance and auditing.

 

The way this FP gets paid is as a percentage of the total funds managed by them. It is a sliding scale depending on the amount you invest.

For us, this would work out to .33%. Lower amounts get up to 1% or so in their fees.

On top of this there would be any fees from any fund you pick, brokerage, and (if you choose something like Macquarie Wrap) their fees as well.

As I type this out I start to realise quite how much this potentially is.

Say you chose to invest in the Perpetual Industrial Fund via Macquarie Wrap,

1% from Perpetual, .7% from Macquarie, .3% from adviser.

That's a hefty chunk.

I'm doing a very good job of talking myself out of this.

 

fees based on funds under management! RUN! Do not look back. There are so many better ways you can look after yourself than this

 

By now you should be breaking the sound barrier.

 

Geez that platform fee is damn expensive. With an overall fee of 2% in this instance simply throwing your money in a set and forget index fund(s) would likely have you dramatically better off over time. That’s without even taking into account the high turnover in the Perpetual fund and resultant CGT. Should Labor policy to half the CGT discount get legislated it’ll get even more painful. Outside Super in particular low turnover index funds / older style LICs will be even more highly desired.

 

Well, we coughed up the money to get specific recommendations from the adviser.

It was both interesting and somewhat predictable.

He is suggesting we get as much into super as possible using non-concessional payments brought forward.

The structure would be a discretionary trust distributing to the lowest taxpayer (me at the moment).

I raised the issue of the ALP 30% tax in all trust distributions but didn't get a fully satisfying answer.

He's recommending we use a Macquarie Wrap for everything (two super funds and non-super) but not a SMSF.

I was wrong about the fees I mentioned earlier. The total fee for the Wrap is .28%. This actually compares favoutable to my Australian Super, since I was unaware they charge a .66% investment fee on top of the admin fee.

He's suggesting we do not buy another house and rent instead, and also that I sell my IP since the yield is abysmal.

His investment recommendations are the classic 60/40ish split. More specifically 28% Oz equities, 17% International, 10% property, 12% Fixed Interest, 8% Hybrids and 25% cash.

He's suggesting direct holding of 17 Oz shares, 3 managed funds for the International (including a private equity fund), VAP for the Real Estate, 4 funds for the bonds, direct hybrids and bank Term Deposits.

I'm not convinced hybrids are actually a defensive asset class as opposed to equity by stealth and I think there is far too much in cash.

They charge .33% to manage and advise on these investments.

So you pay .5% over the cost of the funds/ETFs.

My thinking is that the asset allocation is very close to what I get through the Balanced Option from OzSuper, and close to VDGR (minus property and hybrids).

I'm struggling to see how what he has suggested is going to outperform a similar mix of index funds, or VDGR or the Vanguard Managed Payout Fund which has a very similar mix.

That said, he hasn't made any concrete predictions about returns other than to project a the usual 7% return going forward.

Unresolved were my questions about how this would hold up to a severe correction and Sequence Risk.

I mentioned the idea of a hybrid Thornhill/TR approach where we have an income bucket in Oz shares, and a 'growth' bucket using a portfolio along the lines of his suggestions.

Overall, interesting and probably worth the money to find out their thoughts, but I'm not sure that his advice is worth paying 20K a year for plus transaction costs.

 

No one could give you a satisfactory answer on this, not even Bill Shorten himself.

 

Until Labor’s franking credit outcome is known I’d be wary of a number of hybrids. Then again I wouldn’t touch them anyhow. I divide the portfolio into risk vs risk free. Hybrids and numerous fixed income products fall somewhere in between and often don’t behave as advertised often ending up with negative consequences.

Can’t say I’m all that impressed with the advice given. There’s much simplier / cheaper ways of achieving as good and more likely better outcome.

 

Like...?

 

Index ETFs and cash/tds.

You don’t need a wrap or an advisor. Just a commitment to self education and discipline.

This is all just blowing smoke, the advisor picks direct stocks? Some managed funds? Some ETFs? Some hybrids? Give me a break. Complexity to make you think you are getting something special and then make it difficult to unwind ensuring annuity like earnings for him. Job done. Hook line and sinker.

 

20k is a lot to pay for in fees each years and the estimate of 7% is sensible however you could achieve that return by investing in ETFs/index funds yourself.

Too many selections imo.

 

No expert here but you could spend that $1800 dollars to buy few books from a list compiled by the true experts @The Falcon and @Nodrog that will give you the knowledge, tools and confidence to manage your money in a much simpler and way more profitable manner.

The only thing required from you is genuine intention and time to read those books and learn.

Everyone knows investing is zero sum game. The market average returns are a function of simple arithmetic where some participants outperform while others underperform resulting in the average market returns.

Over the long term this average is around 9% mark. Now this is the gross returns of the market. The investor would normally get net returns which are gross returns minus fees. The lower the cost of your fees the higher your net returns will be.

So in your above example they assumed long term returns of 7% and were charging you 2% fees. So your net returns will be like 5%. The active management industry claims to be able to outperform the average index inspite of their high fees.

Let's do the sum just to earn that extra 2% in turn to match the index return we are not even talking about outperformance yet they need to earn 9% return which is 28% higher than 7%.

In the world of intense competition does anyone really believe a manager can do that over long period consistently?

I invest in index ETF mostly with some diversification and couldn't be more happier with returns I have achieved with minimal effort and stress.

Cheers,
Oracle.

 

He he. Never considered myself an expert by a long shot. However I thought I knew a bit until @dunno arrived. So now I’m back in school: