Financial Planners....confusion

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

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  1. BillyN

    BillyN Well-Known Member

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    This is overdramatising the reality of the situation.

    If you're willing and able to DIY and unravel the world of investing, superannuation, personal insurance etc. etc. then you generally will not benefit from a Planner. And this describes a big %% of members of this forum. For the remainder of the population it's a different story.
     
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  2. Islay

    Islay Well-Known Member

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    You are right. "If you are willing and able to DIY and unravel the world of investing, superannuation, personal insurance etc etc then you generally will not benefit from a Planner". This too has been my experience. For larger sums of money wholesale funds are available eg Vanguard. They advertise $500k per fund but if you contact them they have agreed to direct investments with $100k in their managed funds. Consolidated reports - it makes little difference to the accountant if the reports are consolidated or summarised or not - a lot less than platform fees. My stories of Asgard go back to the 80's and they are not good. A quick look on google tells me the product reviews are still not good. Maybe some of us oldies had to learn to unravel the world of investing as you say.
     
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  3. Nodrog

    Nodrog Well-Known Member

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    @Junior thanks for your responses. Forums like these mostly populated by self directed investors can at times be a savage environment for FPs. There will always be a need for good FPs. Even the likes of well known sharemarket educator Peter Thornhill who spent his lifetime working in the industry has a financial planner.

    I still think one of the most important reasons for having a “good” FP other than the usual areas of Estate Planning, Super, Insurance, Investments etc is that they can help “KEEP ONE OUT OF TROUBLE”. That is in protecting the investor from one of their most dangerous enemies being THEMSELVES.

    Even on this forum there are threads that demonstrate some individuals are just not comfortable in managing their own investments despite numerous members here trying to assist them in finding their way. For those interested the following thread has all the elements of a soap opera / drama / suspense / thriller:D but in the end it appears the OP reached out to a FP to save him:

    My portfolio. Does this look ok?
     
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  4. Nodrog

    Nodrog Well-Known Member

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    He he, not one to hold back:D. Or knowing you perhaps you were:eek:?

    I agree given that @Big Al has very successfully navigated his way through the murky world of Unlisted property (would do my head in) I reckon once he sees the light in regard to equity investing it will be child’s play for him to manage it himself.
     
  5. Nodrog

    Nodrog Well-Known Member

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    And periodic Bpay top ups can be much smaller that what’s advertised.

    But with the release of Vanguards wholesale Diversified and other Funds as ETFs (with same or lower fee than wholesale Unlisted funds) large initial amounts are irrelevant now if one I’d prepared to invest through an online broker.

    As a core or only investment for an investor wanting a hands off approach it’s hard to go past their diversified funds. The following is their Diversified Growth Fund ETF for example:

    https://api.vanguard.com/rs/gre/gls/1.3.0/documents/11893/au
     
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  6. Islay

    Islay Well-Known Member

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    yes, also Vanguards summary of core satellite for example Core-satellite Approach
     
  7. kierank

    kierank Well-Known Member

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    When we started out on our investment journey last century, I thought I knew it all and thought no-one could do it as well as I could.

    I set a goal of $1M in our SMSF and aimed for a 5% Pension (or $50K per year).

    Then life got really busy, had kids, started running multiple businesses, ..., I just didn’t have enough hours in my day to keep on top of everything.

    For our SMSF, we engaged a FP. I knew he wouldn’t be an equal to me (no-one could be that good :D) but I just didn’t have the time to do it all.

    Roll the clock forward 20 to 25 years.

    The $1M balance in our SMSF is a distant memory. We have nearly that number in cash.

    The $50K Pension is also a distant memory. That number is now our annual budget for overseas travel.

    As I get older, I realise I am not as smart/intelligent as I once thought I was. As each day passes, I realise the smartest thing I did was to hire someone who was a lot more knowledgeable, a lot more experienced, a lot more educated, a lot more smarter than me.

    In 2018, we paid our FP more than $16,000 in fees (mainly for a couple of review meetings, a couple of seminars, a couple of emails, a couple of phone calls, ...).

    Geez, I spent nearly that much buying good red wine. I know which was the better investment from my financial, physical and mental well-being.

    I realise that probably 90+% of PC members are self-directed investors who are a ******** smarter than me BUT, please take it easy on old dumb ****s like me who need a good FP so we can enjoy the good life :eek:.
     
    Last edited by a moderator: 8th Jan, 2019
  8. Big A

    Big A Well-Known Member

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    Some really good points in this thread. @Nodrog @The Falcon , thank you for your vote of confidence. I have no regrets having engaged an advisor. I think he has taught me a lot about the equities game. In saying that I’m not sure how much value he has to offer me moving forward to justify a $8-$10k annual fee. I wouldn’t mind keeping him on for an annual review or a consult if there was a major market shift and we need to re asses stratagey. But that will come down to wether he is willing to do that for a much more competitive fee. After this thread though he might be charging me more for the changes I want to make in simplifying my portfolio. Definetly want to drop some of the actively managed funds that are not performing well and add a few vanguard index funds. He is not back to work till next week but I already sent him a lengthy email summarising the discussions in this thread.
    @kierank well done on achieveing and surpassing your initial targets. Hopefully I can be here in 20 years time saying the same thing and passing on my knowledge / experiences to the next gen of investors.
     
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  9. Big A

    Big A Well-Known Member

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    So the advisor has returned from the break and responded to my email about my portfolio.
    The key things I raised were the platform fees on the BT wrap being excessive. I researched the new BT panorama platform and found that the fees are capped at $1mill asset value plus a $540 annual fee per account. Benefit is I can combine my personal wrap account with both the wifes and my super wrap which will total well over the $1mill value and bring down the fees significantly. We agreed to move across to Panorama immediately.
    Second point was regarding shifting towards index funds and dropping some of the active managers who have not performed so well in the last 1-3 and some 5 years.
    While he is a fan of index funds just as much as active managers he doesn't believe 15 funds is too many for over $2.5 mill plus in capital. He thinks we need to give more time to the funds that have not performed so well recently to fairly judge them. While I agree 3 years is not a substantial time frame to judge, some I have looked back as far as 5 years on there performance compared to a similar index and they still don't fair great.
    There is one Bennelong fund that has performed poorly over the last few years and there high performance fee is ridicules and is only bench marked against the RBA cash rate. I expressed my concern about that fund and a few others based on there performance and fee structure. If he still believes we should hold firm in those funds I raised concerns about then I will probably hold onto them for now but will re direct the dividends they pay across to the index funds.
    Lastly keeping with simpler is better theme I said from here on I would like to set a monthly investment plan where we inject a fixed amount every month into the different index funds regardless of what the market is doing. Then only in a significant downturn will we do lump sum injections to take advantage of the lower entry points. In the mean time I might actually build up a cash holding for when that next market down turn arrives. Haven't been a fan of holding cash to date as I see it as unproductive but maybe a 10% cash holding for use in a downturn might be a good idea.
    Any opinions?
     
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  10. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

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    Why didn't he advise you on this without being prompted?
     
  11. Big A

    Big A Well-Known Member

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    I agree. We did touch on it late last year and he said he was reviewing for all his clients and would advise. Though it did take my email to him after much learning in these threads to get the ball rolling.
     
  12. BillyN

    BillyN Well-Known Member

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    Some thoughts:

    * Yes, right move on Panarama.

    * RE Active Funds, I think it's wise to give them another 6 - 12 months. Many of these funds should outperform the index in a falling & choppy market. I'd let the current rout play out for a while and see who outperforms well, and re-assess after 30th June and then again later in the year.

    * RE Bennelong I'm assuming it's the Absolute Return fund, we use this for clients and are considering culling it...as you say it's been a chronic under-performer. Again though, could be wise to give it another 6 months and see if it bounces back a little before selling out.

    I guess what I'm saying with active funds, is that many have struggled in the current bull market, because there has been strong correlation within asset classes....ie. it's been very tough for stock-pickers as all asset prices have been moving higher for several years with no major corrections. Now that we are finally having a decent sell-down, some of those active managers should be able to prove their worth.

    * RE investing monthly in index funds, and building a cash holding. I like it.
     
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  13. Big A

    Big A Well-Known Member

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    Thank you for your feedback @Junior . You must be an advisor because you pretty much echoed what my guy said. That is a key consideration in giving it more time is the possible bounce back after a significant underperformance period.
    I agree that active managers should do there best in a rocky market and that's why my advisor recommends holding both active and passive.
    And yes that fund is the Bennelong absolute return fund. Though the Pengana Aus equities core fund which I also hold hasn't performed too well lately and also charges high performance fees using the RBA cash rate as the hurdle. When I went in these funds 3 years ago I had no idea about managed funds or the stock market in general. Now that I am a little wiser ( thanks to the shared wisdom of individuals on forums like this one ) things like these silly performance fees that use the cash rate as the hurdle are erking me.
     
  14. Nodrog

    Nodrog Well-Known Member

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    In theory absolute return / market neutral funds should prove their worth in turbulent times. But luck of the draw perhaps.

    Richard Fish one of the founders of Bennelong with an outstanding track record resigned from his role not all that long ago. In theory the remaining team (inc Shepard) should be able to take the reigns but there’s no doubt Fish was a “key” person. Add to that increased FUM over time, greater “smart” competitors then perhaps any potential advantage is no longer there or less so. But there’s also the fee hurdle!

    Then there’s the question of why is one investing in absolute return funds in the first place? If investing for dividend income then why pay exorbitant fees to a Mgr in an attempt to smooth “capital” volatility / reduce drawdowns? In the decades I’ve invested dividends removed most of the focus from capital volatility very successfully.

    Then again not everyone has enough capital to live off dividends alone.

    Uummm, perhaps that’s why many need the assistance of a FP. But me being stubborn and pigheaded I carry on investing content with average returns! Less chance of big wins but much less chance of nasty surprises!
     
  15. BillyN

    BillyN Well-Known Member

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    The Absolute Return fund did -10% last year.....very poor in the context of a choppy market, where Aus Equities returned -3%. The Fund invests in Australian Shares, and holds both long & short positions, the last 6 months in particular should be where they outperform.
     
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  16. Big A

    Big A Well-Known Member

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    That’s why I’m thinking of moving out of it. I only hold a $50k allocation in it. Though after 3 years including all dividends re invested it’s still sitting at $50. Might give it another 6 months to see if it bounces.
     
  17. Nodrog

    Nodrog Well-Known Member

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    Hence my remark about luck of the draw perhaps:).

    This likely applies to the vast majority of active fund Mgrs. Be it due to luck, fees, increased size of FUM, crowded trades, increased competition, loss of key stock picker(s) etc today’s star fund Mgr is likely to be tommorrow’s Dud. Along the way investors or their FP’s are likely moving funds from one Mgr to another in the hope of achieving outperformance. After tax, transaction costs, fees etc I really have to wonder if it’s worth it? And as for time frames when investing in risk assets 6 months, one year, three year, five years is meaningless. A much longer focus is needed and that’s when the poor performance of the vast majority of active Mgrs really becomes glaringly obvious.

    I’d like to believe otherwise but after 3 decades of having tried investing in just about everything at some stage I can’t help but conclude that it’s hard, extremely hard, over the long term for active Mgrs to beat a simple low fee, passive approach.

    But as usual I’d appreciate others here putting forward their experience in proving otherwise over the long term.
     
    Last edited: 19th Jan, 2019
  18. Nodrog

    Nodrog Well-Known Member

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    That is a shocker. A loss of $49,950:D.
     
  19. Big A

    Big A Well-Known Member

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    @Nodrog . I’m sold on your strategy. I think index funds is the way to go moving forward. Might continue to hold the active managers I’m in at the moment with the hope of a bounce in the ones that underperformed recently. But all capital allocation from here on will go to index funds.
    There are a few managed funds I’m in that are doing well. Luckily one of my largest holdings is in the Magellan global fund, which is doing well. Also the Walter Scott global equities fund has performed nicely. Hold a few reputable managed funds and the rest in index funds.
    Thanks @Nodrog . Your feedback has really helped opened my eyes with regards to my investment strategy.
    Cheers
     
  20. Nodrog

    Nodrog Well-Known Member

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    Hi mate.

    I’m not trying to sell a strategy (which isn’t mine to claim anyhow) to anyone per say but merely stating my experience having tried many things over the years which should be noted is that of an amateur.

    The other view I have is that unless a fund is a reasonable size of one’s portfolio it is generally meaningless to the overall outcome. Say if one has a $2.5 mil portfolio is a $50 - 100K allocation to a fund really going to make much of a difference in the overall scheme of things?

    Simple Index funds have given investors a magnificent gift in that it not only dramatically reduces fund Mgr fees but has enabled investors to manage their own investments also saving on significant advisor fees. However if one is investing in a simple index portfolio (could be as little as a single fund) but still paying advisor fees it in part negates the advantage of it.

    I believe that for many people a FP can be invaluable in sorting out issues relating to Estate, Super, Insurance, Goals, psychology etc. This generally requires one off “infrequent” fee for service consults rather than ongoing annual fees. But one has to ask is it worth paying a sizable fee to an advisor simply to oversee a mostly core index portfolio with a few active satellites where the amount invested won’t really make an overall difference hence optional? As for Magellan they’re hardly a secret known only to advisors. Whether Magellan can continue to outperform in the future especially given the size of FUM now remains to be seen! Also from memory they generally hold a concentrated portfolio which can significantly increase risk.

    I expect a challenge (hopefully) from someone here shortly and that’s the beauty of discussion forums.
     
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