Financial Planner

Hi Financial Guru's

After a bit of guidance.

Backstory: My Mother in law was asking my advice this Christmas after she attended he local financial advisor at the commonwealth bank. She is a widow, late 50's, retired, 300k in Super, 600k in term deposits. Approx 30k in the bank with she uses for day to day spending. PPOR paid off. Spends approx 20k p.a.

Now my first thoughts were I dont like the idea of advice from a Bank, who seem to prioritise there own products. They didnt even pick up on the fact she somehow has 3 super accounts.

So my question is, who would you go see for better advice? Would you try and structure it yourself? My first thought are i dont want that responsibility with a family member if the next GFC hits the day after i tell her to invest somewhere. But i want to help here make this money last, as its all she has for the rest of her life.

 

There are some amazing financial people on PC - I'm sure you'll be pointed in the right direction very quickly. Good luck.

 

IMO she needs to see an independent Financial Planner. (if only for a second opinion).

 

Some quality independent advice is needed. As KayTea suggested there are some qualified planners around PC that would be an excellent place to start.

With 600k in a term deposit her balance is only going down. With the right product she should be able to find something that will provide a more suitable return (her $20k living expenses) without drawing down on capital as much.

For ideas/comparisons check what Vanguard offers with their wholesale funds, they are low cost and well diversified all in one simple product that isn't going to do something crazy with her money. Something like the Vanguard Balanced Index Fund (Investment Products)

 

I did a similar thing with my parents years ago. At the time, they were retired, weren't getting the pension and were paying tax. I was horrified.

I got them to go to an independent Financial Planner. He looked at their situation, wrote a report on how to structure their affairs which I reviewed with my parents and they implemented (after some minor adjustments). So, I was their second opinion.

After their re-structure, they got the full pension and paid no tax. I was more than happy with the outcome.

The funny thing was:- every so often, Mum would ring me to tell me that their pension was being reduced by something like 25 cents/fortnight (due to their income levels being higher than forecasted) and she was requesting another re-structure.

I use to laugh as I pointed out to her it was $13 per year. If she didn't calm down, I would threaten to send her the $13. Then she always would laugh (she well and truly knew how big a tight arrse I was and realised she would never see the funds).

Oh, don't you love your parents!!!

 

Heads up that many financial planners will offer the first discussion free so talk to a few and find one she likes

 

Yeah that is what I'm worried about. The $1500 p.a fee that want to charge to basically sit it in her super seems excessive to me as well.

 

Thanks for the story. In some ways I think it would be easier with my parents. Different relationship with a mother in law. Not something I want strain with financial advice. Not worth the troubles.

If it was just shares or other investments, I am reasonably knowledgeable. But the whole super / retirement business is out of my area of expertise.

 

Yeah I am pushing here to do just that. Its hard when she is extremely low risk to start with. Asked me earlier what happens to her $$ when CBA goes bankrupt. Believes it will happen one day. All i could reply was that we will probably all be screwed,no matter what company your in, if that happens.

Just noticed Paul@PFI does financial planning as well. I use him for accounting. Always been impressed. I'm assuming this is something you would look at?

 

I understand how you feel. I have had to help my in-laws as well and it wasn't as easy as with my parents.

In situations like this, I use one of my favourite saying, should things get difficult, and that is:

"I am not going to apologise for loving you".

 

Hi Foreshadow
You did not say if the $300k already in super was in a union-controlled industry fund or one controlled by the big bank. Regardless, she can continue to use that existing fund or start her own. If she has relatively cheap life cover with her existing super this needs to be considered.

Here’s the thing. Regardless of whether she goes to a bank FP or an independent one, you can bet your bottom dollar they are both going to push her to switch the full $600k into super, and then want to invest it all for her (that’s how they roll). Nothing particularly wrong with that either, but in my book the best answer may be to contribute less than half that amount. I reckon she will feel more ‘in control’ holding back a chunk in her own name outside of super, at this stage of her life. She can always drip-feed more in over the next 5-6 years as she gets more comfortable with things.

As she is under 65 she would be within her rights to contribute three times the annual non-concessional cap to her super this year – ie contributions you don’t get a tax deduction for. Under all the recent changes she will be told she can still contribute $540k (3 x $180k) this way prior to 30 June 2017. She will also be told that if she fluffs around and tries to do the same thing beyond that date she can only plonk in $300k using the same rule as the annual cap drops to $100k under Mr Morrison’s new changes – and so time is of the essence. BUT having said all that, she may actually be best served only switching say $200k to super anyway and keeping the rest in in her own name for direct investment as her effective tax-free threshold exceeds $20,500. So if she achieved 5% on her $400k direct investment its tax-free anyway, is what I’m getting at. I doubt very much the planners will mention this part. You / she needs to do the sums. General observation only – not personal advice. Like others have suggested I would test out a couple of planners for free initial advice as quality and ongoing costs can vary.

 

Thanks for the suggestion Wylie, I will look into that.

 

Ok so I've since learn that when my father in law passed away about 5 years ago, my mother i law saw her local westpac bank advisor who set up her current super with colonial, and arranged the term deposits. All for a fee of $1300 a year. Seems excessive for a very generic recommendation.

 

Warning! Warning!! Warning!!!

Red Flag! Red Flag!! Red Flag!!!

 

Is the fee from the bank, or is it the annual fee from the super fund?

 

It's called an advisor service fee, which is coming off the account balance at a bit over $100 per month.

I'm unsure how they justify this when they have only made 1 phone call to her in about 2 years to check in.

 

So, a fee from the bank not the super fund?

 

From what I can understand yes, thats correct.