Financial Planners....confusion

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

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  1. geoffw

    geoffw Moderator Staff Member

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    The $14k isn't so bad for $1.4M, except that the management funds come in on the top of that. That might bring your fees to 2 to 2.5%, on investments bringing a planned 6% return before fees.

    I had similar advice but with higher fees.

    I paid the initial advice fee, and I was happy enough to do that as it included some specific advice on selling a property which saved me a lot. I then ditched the advisor and the wrap fund, and took the advice on the spread of funds and applied it to ETFs (from within the SMSF, no wrap) instead of funds.
     
  2. MWI

    MWI Well-Known Member

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    I disagree about the fee being not so bad. It should be irrelevant of the amount, not a % fee IMHO.
    So if I have say $7M to invest from our SMSF (2 members) I would need to pay $70K just for advice, am I understanding this correctly?
    Also having a spread of 16 investments....really...on $1.4M, I wonder what spread would be suggested on $7M?
    I must be an exception to this...as had taken direct control of our Super since 1995 and investments. And if I just calculate our last year management fee it comes to about 0.10% (yes that low).
    I truly feel sorry for people that don't understand and just trust others to invest their hard earned money...!
     
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  3. Intrigued_again

    Intrigued_again Well-Known Member

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    I find it difficult to believe $14K for what.
    Not advice but, lets see how this goes over the next few years.
    They could have simply bought WBC @ todays price $28.75.

    That’s a take home pay of $130,638.75
    costing $1500 brokage
     
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  4. geoffw

    geoffw Moderator Staff Member

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    Brokerage would be $9.50 with SelfWealth.

    Banks have been good for dividends, not so good for growth.

    Also, eggs, basket.
     
  5. Coconutwheels

    Coconutwheels Well-Known Member

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    Just found another little nugget in their SoA, $3.5k in brokerage for the initial set up.....hidden away on one of pages.

    Really starting to think......Could I do any worse just getting them into some LICs and ETFs for a dividend approach.....
     
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  6. Intrigued_again

    Intrigued_again Well-Known Member

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    You sure
     

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  7. geoffw

    geoffw Moderator Staff Member

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    Longer term some are not bad. But WBC, CBA and ANZ have gone nowhere in the last five years. I sold NAB in 2003 for a higher price than the current price. Macquarie is the only one with decent growth.

    A retired couple won't be very happy with a share price which has performed substantially worse than the index over five years.
     
  8. Hodor

    Hodor Well-Known Member

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    If they are aware.

    My parents are self funded and retired with only modest means. They have good ideas of budgeting however portfolio construction etc is beyond them.

    Recently I have been given power of attorney for when they are unable to look after their affairs so I have been brought up to speed with their situation.

    Without going into too much detail I was shocked at the fees and portfolio construction. I don't disagree with the conservative portfolio, just the instruments used. The FP proudly pointed out a fund that made a profit/increased in value, they didn't mention that it underperformed the index it tracked by between 30 and 40% for the period.

    Surely in a conservative portfolio active management risk and cost should be a consideration.

    Now I am been asked what I think of the portfolio etc. I managed to escape the meeting without vomiting, pretty sure the FP got the idea I wasn't impressed and stated they were happy to discuss changes etc. I went in with the idea I was just there to listen and not be involved in decisions at the first meeting.

    There are other complicating factors too. Now I am considering engaging a FP to have a discussion with an impartial professional so that I can process everything.

    I would be keen to have people's thoughts on this. Do I wait until such a time as my parents might incapable, they are already asking for my opinion on things.

    Current plan is have a discussion with another FP and then see what my parents think of my concerns and then bring them to the current FP if appropriate.
     
  9. geoffw

    geoffw Moderator Staff Member

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    FPs seem to want to push you into managed funds, with high ongoing charges. They also like platforms, also with high fees.

    There's a good article here talking about all the extra costs involved. For me, ETFs (or LICs) are a good way to get a balanced portfolio with small annual fees - they only just rated a me room in this article.

    Or check out this which gives you some hints.

    Sound out an FP, to see how they view ETFs vs managed funds. That may give you some guidance about the advice you might receive.
     
  10. Intrigued_again

    Intrigued_again Well-Known Member

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    dIVS.png
    The above shows the dividend return % every year since 09

    If each company’s valve was $1.1 at March 2009 until today the total dividend return for the period would be as follows.

    CBA: $1,230,271.72
    WBC: $ 1,047,272.76
    MQG: $ 799,645.29

    So, I think the retired couple couldn’t get the smile off their faces every time the dividend cheque arrived and really couldn’t give a **** what the index did
     
    Last edited by a moderator: 3rd Aug, 2019
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  11. geoffw

    geoffw Moderator Staff Member

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    I had already stated that banks were good for dividends, not good for growth.

    Macquarie has had a growth rate much better than that of the other banks.

    If you pick 2009 as your start point, the growth rate has been good. If you pick 2014 as you start point, then not all have been good.

    In the context of providing financial advice to retired people, I'd suggest that putting everything into a single stock might not be a prudent strategy, and any financial planner who recommended a strategy like that for a retired couple with $1.4M would be banned for life.


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    Last edited: 3rd Aug, 2019
  12. BillyN

    BillyN Well-Known Member

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    For an older, retired couple, it's worth paying for portfolio management, on $1.4mill in my opinion. I wouldn't manage it for them, if I were you.

    1% is too expensive for a conservative portfolio. The Defensive portion of the portfolio will be returning between 1% - 3% per annum, so the advice fee would eat up half the return. I think it's reasonable to pay up to 0.88% per annum for advice, but on the Growth assets only (i.e. on shares, property, alternative, infrastrucutre - NOT on fixed interest and cash). So that would come out to $6,160 pa if you base it on half of the $1.4mill.

    Sounds like he's taking a cut on the brokerage as well. That's unnecessary, and an outdated practice. They should be making money on the ongoing advice fee only, for transparency and to minimise any conflict of interest. If they take a cut on brokerage, they are incentivised to churn in and out of investments unnecessarily.

    With regards to using a platfrom or wrap, I have no issue with this. Administration fees have plummeted in recent years, so they aren't as expensive as they use to be, and it really does make administering the investments very easy. If you were to set up a portfolio of 10 ETFs for example, you will be drowning in mail and paperwork. Tax time is a nightmare.

    In terms of the number of investments, everyone has their view on this. I think 10 to 15 different investments is completely, as long as there is sound logic to support the way the portfolio is constructed.

    Do not just buy banks stocks, as some are suggesting here. They have benefited from 30 years of falling interest rates and credit expansion. They may not perform as well over the coming decade, as they have in the past. Dividends are good and well, but they need to be supported by earnings growth to be sustainable.
     
  13. Coconutwheels

    Coconutwheels Well-Known Member

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    Thanks for your insight there Junior, that's a very logical way of thinking of the advice fee....wrt the defensive portion of the portfolio.

    I'll ask about the brokerage, another good point on the conflict of interest if they are taking a cut.

    Personally, I've drank the "living from dividend" cool-aide and have my own portfolio constructed of a few LICs and VAS. I'll diversify into a couple of international ETFs once I sell the the last of my IP further down the track. Until that time, plan 60% of my income from dividends and the rest from several IP cash flow is enough diversity for me (I see many cringing at this).

    Funnily enough my parents situation is/could work exactLy the same, the bulk of their wealth is still in IPs. Me managing it would be a last resort. We are in the process of booking in with more advisors.

    Thanks for your input.
     
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  14. Intrigued_again

    Intrigued_again Well-Known Member

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    I was unaware of life bans for such advice, it’s the first time I have ever heard of it, must say I’m shocked considering some the advisers and shareholders I’ve met at company meeting.

    I wonder, what do they get for advice like the above with $14k price tag with a portfolio full of even more fees, suppose they just get rich.

    I’d be genuinely interested in hearing your thoughts about how you come invest in NAB back in 2003 why you made that selection in the first place what was behind the purchase.

    Anyway, we can see how this experiment goes over the next few years hopefully decades.

    $1.4m less your $9.50

    WBC @ $28.75 /$1,399,990.50

    48695 WBC shares 2/8/2019

    Next dividend due 20/12/2019
    See the prices is down
     
  15. Gunky

    Gunky Member

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    All these professionals have a place.
    Someone once said to me "he who has more $$ knows more" This has served me well for many years.

    (disclaimer yes it's not a black and white rule, use some common sense)
     
  16. Intrigued_again

    Intrigued_again Well-Known Member

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    in case you missed the question
     
  17. geoffw

    geoffw Moderator Staff Member

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    My apologies. If I had remembered I would have answered sooner. I think I invested in about four shares in my life before this year.

    I'd even forgotten I'd ever had NAB until I found that piece of paper recently.
     
  18. Intrigued_again

    Intrigued_again Well-Known Member

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    Cheers @geoffw
    Always keen to hear any science behind these investments if any, seems there wasn't much to this one, thanks
     
  19. Coconutwheels

    Coconutwheels Well-Known Member

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    Just thought I'd update this, have found a new advisor both my parents and me are happy with. The advisor fee is a fixed annual fee of $7700, which I much prefer than the % based one, and is already $5k cheaper than currently paying.

    The recommended investments are in line with an indexing approach. The overall MER is now 0.17%, compared to 0.9%, which is a massive difference.

    A lot of other advise and cost savings included, such as shutting down their SMSF, meeting the work test for further super contributions, more detailed assessment of their risk profile (which was different to what I had in my head).

    Also has spent prob over 6hrs directly with my parents and I in preparing the SOA and going through it (actually did this twice due to Covid19). There's a lot of bond index funds which I have not much clue about though.

    Cheers
     
  20. Terry_w

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

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    That is a nifty fee. One client per month would be enough. How did the planner justify that?
     

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