Financial Planners....confusion

Discussion in 'Financial Planning' started by MTR, 15th May, 2018.

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  1. Martinez22

    Martinez22 Well-Known Member

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    One of the cheapest and most competitive wrap platforms in the market is Mynorth as admin fees are ridiculously low (especially if you invest into their index options) your essentially paying for the ongoing investment fee and one off buy / sell fees for each managed fund. The old BT wrap platform is quite expensive, unless you move into the new BT panaroma platform (newly released and just as competitive as MyNorth). Also yes you can set this up and invest your funds on your own as you would with any other super/investment account. 15 options is abit excessive? but all the depends on your balance and whether your diversified across all options
     
    Last edited: 4th Jan, 2019
  2. Big A

    Big A Well-Known Member

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    Thanks for the feed back / info guys.
    The 15 funds are spread across oz / international shares, infrastructure funds, industrial shares funds and 1 index fund. Though a few of them look like they are duplicate themes. Total balance is currently sitting at $2.6m approx after the recent drops. Looking at increasing that over the next 12 - 24 months but still not sure I need 15 different funds to do that.
    In reviewing the different fund performances compared to index funds I’m going of the performance since I’ve been in them which is mostly the last 3 years now. I did look at each of the funds 3,5,10 and inception performance before going in.
    I believe I’m still in the original bt wrap platform but I was told it’s going to be transferred to the new bt panaroma platform.
    I don’t mind having a advisor to continue to guide me even though I’m starting to get a good grasp of things. Though in our last meeting he said that in the new year he will need to increase the annual fee. That got me thinking about the value I’m getting for that fee considering from here it’s just minor adjustments as we continue to build the holdings.
     
  3. Nodrog

    Nodrog Well-Known Member

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    The huge issue if the client leaves the FP to self invest is behavioural. The investment selection part is relatively easy. But how trusting are you of yourself to stay the course when the **** hits the fan? Do you need protecting from yourself?

    @Big Al having read your other posts here it sounds like behavioural issues are not so much of a concern given your experience?
     
  4. Nodrog

    Nodrog Well-Known Member

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    But then again how many options does one need given a number of Industry funds now offer direct choice? In @Big Al ’s case with 15 managed funds in the portfolio the good with the bad are likely cancelling each other out then with high fees added to the mix it’s unlikely over the long term to outperform index funds. Add in CGT as well and it’s likely even worse again. Also some of the property / infrastructure options available through industry funds are likely superior to many managed funds.
     
  5. Big A

    Big A Well-Known Member

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    Yeah holding firm through the market drops is not a concern for me. I look at my equities portfolio as a long game that will hopefully be a nice pot in 20-30 years time.
    Well thank you all again for your feedback. Definitely got me thinking about my portfolio stratagy and what I want and need from my advisor. I’m thinking he might have shot himself in the foot when he said he will be increasing his fees this year. That got me looking at the value of using the advisor at this point of my journey. The more time I spend learning and researching the more I’m realising sometimes the simple path works as good if not better when it comes to investing.
    Cheers.
     
  6. Martinez22

    Martinez22 Well-Known Member

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    It comes down to the super and investments you select, the net rate of return (net fees / tax) needs to be positive, in other words is the growth and income derived outweighing all the deductions, otherwise what is the point?

    Industry funds offer at most 10 investment options (mainly index) I know of many competitive property and infrastructure managed funds that are certainly outperforming industry options (e.g charter hall, Cromwell funds), their not just limited to equities. I think an ideal portfolio should consist of cash/bonds, equity funds (international/Australian), property funds (listed/unlisted), infrastructure funds and some index options.DIVERSIFY

    No harm in industry funds, they do the job but if your seeking a range of competive options then I’d go with a wrap account. Personal choice
     
    Last edited: 4th Jan, 2019
  7. Martinez22

    Martinez22 Well-Known Member

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    Has your net rate of return been great during your reviews? Sounds like your quite an aggressive investor? If you like the advisor maybe drop the service package your on to a lower cost package? Just be aware if your moving from bt to panorama, buy sell fees will apply. Get him to provide you a report on the investment fee savings from bt to panorama, the one off buy sell fees may not justify the move, especially if your selling down 15 investment options at 2.6m
     
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  8. Big A

    Big A Well-Known Member

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    I never thought of myself as an aggressive investor. Just over 3 years ago I was only in residential property and had no intention of going into shares. I considered myself fairly conservative and even considered holding my capital in term deposits only. Over the last 3 years funnily enough I have done a 180. I hold nothing in bonds or fixed income / cash. I’m 100% invested between equities and unlisted property and a holding in Australian unity’s select income fund.
    I should say these holdings are not in super. My super is all equities set up the same as my BT wrap though it’s not significant and I just started building that up recently.
    The unlisted property has performed very well over the 3 years I’ve been in them. The BT wrap holdings has been doing reasonably well until recently. Problem is when I access the platform it shows me the return percentage of each fund but does not include divend ends. All divedends to date have been automatically reinevested. So currently it states I’m down over the 3 year period. But I’m ahead when I factor what I have contributed to what the balance is today. In saying that not by much and that doesn’t count taxes I have paid on income / gains over the 3 years which I cover from funds outside of the wrap.
    Will actually have to ask if he offers lower fee service options. Not keen on paying any more than the current 8k a year fee.
     
  9. Nodrog

    Nodrog Well-Known Member

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    Here ya go, bargain if you use Macquarie FP’s:
     
  10. Cityman

    Cityman Well-Known Member

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    Wonder what the fees were beforehand?

    Love to know how they justify this - I take it that only the extremely wealthy can invest with someone like Macquarie Private Wealth - and it flows that these people cant be totally silly so I wonder what type of returns they have generated in the past?

    half a percent I could cop if I had that much cash, and wanted it outsourced and fully managed by a team of professionals (are they?) across all asset classes with near unlimited research to back it up - but geezus $30 million is quite the threshold!
     
  11. Big A

    Big A Well-Known Member

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    Bargain. At that rate I’ll take two accounts with them.
    Problem is I’m just under the special rate threshold. Only have $29,900,000 to invest. Maybe they will make a special exemption for me.
     
  12. BillyN

    BillyN Well-Known Member

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    How much to invest, through which structure (super, trust, company, indv'l, joint), over what timeframe and spread across which asset class(es). These are the areas a good adviser can add value, rather than the misguided notion that they will be able to outperform an index.

    Many advisers recommend direct shares (we do), but due to compliance reasons & cost of administration/management, we are not set up to be trading on any sort of regular basis, so it's more for those larger balance SMSF clients where we want to be tax-efficient, we'll recommend a %% of funds are spread across a low turnover, portfolio of ASX50 stocks.
     
  13. Nodrog

    Nodrog Well-Known Member

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    Good points and as in my post I did suggest that many of the services you stated are valid reasons for seeking advice.

    Note also that given this is a property / sharemarket / general investing forum most here are not your typical man / woman in the street. Many here are interested in being / becoming self directed investors and this is the audience I’m assuming when discussing these topics on the forum!

    But what I’ve frequently seen is that after the structures / strategies / asset allocation etc are implemented and paid for clients then end up paying high annual fees over years mostly for the advisor doing little else other than looking after the investment portfolio which in many circumstances requires minimal maintenance and could be much simplier than the horrendously complex portfolios some advisors have their clients invested in through platforms.

    For better or worse personally if I was going to use an advisor it would be on an occasional one off fee for service basis. Then I would invest as per the agreed plan and only consult with the advisor again when there is a major change in circumstances.

    That’s just me but given the nature of this forum I don’t think I’m alone in wanting to self manage our assets. Structuring, Estate planning, complex taxation issues, SMSF strategy etc however is a different matter where getting advice can be very worthwhile. Then again I’m more likely to see a solicitor for structuring / Estate planning advice, specialist SMSF advisor for SMSF advice (did this recently) and an accountant for tax advice.
     
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  14. Big A

    Big A Well-Known Member

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    Structure wise i didnt need any help from the advisor. My investment structure was already set up in consultation with my accountant.
    @Nodrog , pretty much what you said. The advisor was great for setting me up on the BT wrap platform and picking the most suitable fund managers to be invested in. Now that we have done that it’s just a matter of reviewing which funds we continue to top up in with additional funds that become available through out the year.
    Is that review process and advise worth $8000 a year? If I was purely to work it out on how many hours in the year we would need to achieve that I would say not much more than say 20 hours a year at most. And that’s probably over stating it. At $400 an hour I would say it’s not worth it. Funny thing is he wants to increase the fee this year.
    I actually emailed him over the weekend saying I would like to re think our stratagey moving forward. Minimise the amount of different funds we are invested across ( currently 15 ) and look at moving towards more index tracking funds.
     
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  15. Nodrog

    Nodrog Well-Known Member

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    Will be very interested in the outcome. Familiar FP strategy, make it sound complicated whilst locking the client into a platform is not uncommon. Then collect ongoing fees.

    Core & Satellite is a popular theme. Majority of clients cash in index funds across major asset classes as the core and active Mgrs supposedly capable of outperforming the index as satellites. Spiva reports for example suggest that locally the best chance of outperformance lies with quality active “small” cap Mgrs.

    There’s also a lot of research out there that suggests that the one greatest thing that gives the investor the best chance of success is minimising investment costs. Minimising tax is perhaps next in importance. Hence perhaps the most important thing an investor can do overall is to control costs.

    The rest is a bit of a lottery when it comes to trying to pick the best active fund Mgrs / stocks. Mathematically the odds are against them even before fees are factored into the equation. The talent pool in Funds management out there nowadays is frightening high in number. Competition is extremely fierce. It gets harder as each year passes. Data is readily available. Today’s winner is tomorrow’s loser.

    Active fund Mgrs can generate a great deal of capital gains from trading. FP’s trying to pick the latest best performing Mgrs recommend portfolio changes which generate even further capital gains. Depending on the structure resultant taxes may savage returns. Costs eat into returns. Again controlling costs / taxes is paramount.

    In the end is all this complexity and costs likely to outperform a simple, low cost, well diversified passive portfolio?

    Bear in mind I’m just a simple amateur investor who for better or worse decided to go it alone. We don’t appear to have done too badly but perhaps we could have done better with an advisor? As the BareAr*e Investor (or whatever his name is) says, thread your own path.

    Just reread my post. Very disjointed. Currently depressed as I turned 59 today with my wife stating that somehow means I’m in my 60th year:(. That combined with a meal at the pub and some refreshments has dulled my brain into submission. Hence best ignore all previous dribble.
     
  16. Big A

    Big A Well-Known Member

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    Happy Birthday @Nodrog.
    Hey im 38 and I feel the same sometimes. I got 2 young kids running me ragged.
    The more of your posts I read the more I’m seeing that I have over complicated my portfolio. My advisor is the wife’s friends husband. So I knew him before I signed up with him through the family catch ups. Though I wouldn’t say he is a close friend. He is a straight shooter which is what I liked about him.
    The plan is to shrink down the active managers but continue to hold some of the stronger performing ones ( IFP with Macquarie bank, Magellan global equities fund e.t.c ) and add a few more index funds to the mix. Only last year added vanguards aus equities fund.
    I know over at boglehead they spruik the holding only 2 or 3 index funds in your portfolio. Though would you still recommend such a strategy regardless of the size of capital held? Would only 2 or 3 index funds still be a good strategy if you had say a $10 million dollar portfolio or larger?
     
  17. Nodrog

    Nodrog Well-Known Member

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    Thanks.

    I was hoping others including FP’s would comment more particularly if it means challenging what I, as an amateur investor, is rabbiting on about.

    If holding multiple funds I suppose one good thing about using a platform is the consolidated reporting. But there’s a cost of course.

    I have heard FP’s say at times that another reason for using their platform service is that there are fund Mgrs that are not generally available to self directed retail investors. Often these Mgrs even if their base fee is discounted through the platform have substantial performance fees. If an investor feels the need for a heap of active Mgrs including some not directly available to retail investors in a single fund of funds package then these charity focused LICs are available to all investors with a fee (donation) limited to 1% and have a highly experienced board sourcing / selecting Mgrs. In addition to the Mgrs offering their funds pro-bono most of the board and service providers do also:

    Local (FGX)
    https://www.asx.com.au/asxpdf/20181214/pdf/4417c06gzf83py.pdf

    International (FGG)
    https://www.asx.com.au/asxpdf/20181214/pdf/4417t00mvq26j8.pdf (Magellan is one of the Mgrs)

    Whether all these Mgrs as a group can outperform the relevant index over the long term remains to be seen. To date the performance appears to have been fine and because in part of the absolute return funds in the portfolio this has been achieved with less volatility than the index.

    As for the question on having a large amount of capital in a small number of funds I can’t legally provide recommendations hence anything I say is my personal view only. This has been the direction I’ve taken with a sizable amount of capital invested. But I will admit that holding only two equity funds (Boglehead three fund portfolio has a Bond index fund) is a stretch too far for my sleep at night factor. So I hold a few LICs in addition to a local and international index ETF.

    @Big Al if you did choose to reduce the number of portfolio holdings or even go it alone, given your interest in property funds (and love of income) I would have thought that would be a nice additional diversifier and further spread the capital across Mgrs. In fact it’s not uncommon for even Bogleheads to add a listed property Fund to the other three funds giving what many refer to as the Core 4 portfolio. The reasoning being that the main cap weighted indexes under represent property given its economic footprint. Although unlike listed international property the local index is very concentrated. Some also argue that’s a reason for overweighting small caps given small business in general is under represented in the index given its economic footprint. Others go even further by overweighting Infrastructure and more.

    Anyhow more dribble from me. Hoping that others will comment whether they agree, differ, savagely disagree, suggest I’m an idiot or whatever. Varying opinions are critical in helping others formulate their own view and for me to continue to learn. Where is everyone?
     
    Last edited: 8th Jan, 2019
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  18. Big A

    Big A Well-Known Member

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    @Nodrog Thank you once again for your opinion / input. I find your thoughts on this topic very insightful and will use this as part of the plan moving forward. Will probably discuss this with the advisor over the next few weeks and make some changes at our next meeting in late feb.
    Will update on the final outcome once we are done.
    Cheers
     
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  19. BillyN

    BillyN Well-Known Member

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    With regards to using a platform, this gives you access to hundreds of managed funds at wholesale prices, and with consolidated reporting.

    Many fund managers will charge much higher fees if you want to invest directly, or they will require a high minimum initial investment. If you are building a portfolio of several managed funds, it is very cumbersome in terms of administration to try and invest directly.

    Through a platform you don't have minimums and you can easily switch between funds. You can gain exposure to many different managers, investment styles and sub asset classes. You receive one tax statement to give to your accountant each year and can easily view CGT Reports, Transaction History, Performance reports etc.

    The above can be achieved through ASX-listed entities with Index & Active ETFs, and LICs, but you will be more limited in what you can access, and of course you pay retail brokerage rates on all buys & sells.

    Platform costs fell dramatically this year, with Asgard slashing their admin fees to 0.25%. I hear that AMP will be following suit very soon for their MyNorth platform.

    So platforms certainly have their place, for those wanting to diversify into overseas funds, direct property funds etc.
     
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  20. The Falcon

    The Falcon Well-Known Member

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    @Big Al I am loving watching the scales slowly fall from your eyes. Frankly, someone with your interest will soon learn the great hoax perpetuated on the masses by the large majority of the finance industry. Planners, wraps, a basket of "the best" managed funds etc. This is a grand scam. Continue down this path at your own pace, and soon enough all will be pretty clear. You just need a good accountant and a lawyer. You are smart enough to work this out yourself.
     
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