Financial Planning Fees.

Discussion in 'Financial Planning' started by Foreshadow, 27th Mar, 2017.

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Fees ???

  1. In Line

    0 vote(s)
    0.0%
  2. Outrageous

    92.9%
  3. A little High

    0 vote(s)
    0.0%
  4. No idea

    7.1%
  1. Foreshadow

    Foreshadow Well-Known Member

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    Hopefully this is the correct section.

    I know the fees can vary depending on the kind of advice given, but was hoping some one in the know can tell me if these fees sound reasonable.

    Situation:
    Advise is for my mother who live interstate. Recently divorces, Early 60's. Has approx $50k left on PPOR, $350k in bank, $100k super. Went to a local planner for advice.

    Advice:
    Without going into to much detail, involved moving super account to one with lower fees, and commence a transition to retirement strategy, setting up a secondary super account, Redraw from home loan and contribute this to the 2nd super account to invest into a number of managed funds.

    Quesiton:
    The Statement of advice provided was done free of charge. (which i believe is unusual, usually $2k+?) It is quiet detailed, providing scenario's and cash flows. My main concern is the fee structure.

    Upfront: $18920
    Ungoining $5200 p.a

    Maybe I'm wrong, but that sounds crazy high. What also concerns me, is the adviser saying his partner mortgage broker will re-finance the house at 3.6%, a deal my mum wont be able to get anywhere else. Sounds like high pressure tactics to get her to sign.

    Anyone have any opinions?
     
    Perthguy likes this.
  2. Peter_Tersteeg

    Peter_Tersteeg Mortgage Broker Business Member

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    For the financial profile and requirements described, almost $19k upfront and $5.2k ongoing is outrageous. There's plenty of firms that will do this for a fraction of the cost.

    I'd also question the quality of advice in getting a new mortgage in your 60s. This would be considered a fairly high risk strategy. It is a low rate, so low I'm wondering if it's a low/high rate OO/INV combo loan.
     
  3. Foreshadow

    Foreshadow Well-Known Member

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    Thanks Peter,

    Was my initial impressions as well. Im just reading through the 70+ page statement of Advice now, it seem they are recommending a type of debt recycling with the new mortgage.
     
  4. Terry_w

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

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    Friggen ridiculous!

    a 70 page statement of advice is too long. It would be a computer generated one probably and padded out to make it look longer and make the client more impressed.

    It should be 5 pages or so.

    The ongoing is also very high - what does that provide?
     
  5. Corey Batt

    Corey Batt Well-Known Member

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    Well above the norm - and some interesting recommendations considering the client profile from what you've said.
     
  6. Simon Moore

    Simon Moore Residential & Commercial Mortgage Broker Business Member

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    Potentially pulling money out of the house now and repaying via tax-free pension payments might make sense, you would have to look at the SOA.

    The fees sound very high, I don't really understand what would justify those sort of fees for such a simple situation

    The loan is with Citibank and you can get the lower rate if you have $250k investment in managed funds. Sounds like the adviser is pushing an active strategy. I would think at that age a low-risk, low fee passive fund would be fine.
     
  7. Foreshadow

    Foreshadow Well-Known Member

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    On closer look, the mortgage is with Mortgage Easy at 3.69%.

    Super is with MyNorth
     
  8. Foreshadow

    Foreshadow Well-Known Member

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    I should note, he determined my mother to be in the "Growth" risk profile. Or the 2nd highest in their model. Which is probably close to being correct. My mother is willing to take on more risk to secure her retirement.
     
  9. Foreshadow

    Foreshadow Well-Known Member

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    So what would be the average cost you would expect for this level of advice?
     
  10. Terry_w

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

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    $2000
     
  11. dabbler

    dabbler Well-Known Member

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    I suspect money may do a magic style dis appearing act :)
     
  12. Scott No Mates

    Scott No Mates Well-Known Member

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    At her stage in life, she may be able to access an FP through her super fund.

    Has she retired or transition to retirement?

    Drawing on her super will most likely be tax free. She can draw down or use cash to pay out her mortgage - using cash may be more effective.

    She may qualify for the part pension or near full.
     
    Perthguy likes this.
  13. Foreshadow

    Foreshadow Well-Known Member

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    Shes still working. And planning on for another 5 years.
     
  14. Ethan Timor

    Ethan Timor Well-Known Member

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    The whole thing smells very bad to me.

    I would definitely seek another planner, preferably one that comes recommended from trusted sources.
     
    Anthony Brew and Terry_w like this.
  15. Paul@PAS

    Paul@PAS Tax, Accounting + SMSF + All things Property Tax Business Plus Member

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    Contact our office (ask for William and explain its from PC) and we could review the advice issued under our 1 hr free consult so you at least get some impartial review of the issues.

    Generally a free or very low cost SOA may be given based on expected trail product income from recommendations and then you might expect no fee. Did she think it was a free SOA and now they quoted $20K ? Thats bad.

    A recommendation to borrow against a house in retirement seems a high risk for the personal profile. Borrowing in retirement is not something normally recommended as it exposes the person to financial loss if markets correct yet the bank will still expect the debt to be services AND repaid. Borrowing to put $$ into super seems strange but then you havent explained what the $350K cash is used for...You would only borrow if the expected return to be generated will well exceed the costs after interest and the adviser fees or why bother ?? Also can you accept that risk that is proposed ? Normally super is not a single risk asset but a balanced portfolio that may even include cash etc which provides some stability and income and growth esp aged 60+. This leveraged investment seems to be all risk and may be overexposed to market risks. If a correction occurs she may have a debt shortfall that cant be fixed.

    The upfront fees seems very high as does the risk. I didnt understand why two super accounts would be needed. One maybe a minor accum balance and other pension. Maybe.
     
    legallyblonde, flyhere and Perthguy like this.
  16. Foreshadow

    Foreshadow Well-Known Member

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    I beat you to it Paul, I called yesterday :)
     
    legallyblonde, tobe, neK and 2 others like this.
  17. neK

    neK Well-Known Member

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    Strategy looks a little sub par.
    Also, redrawing from home loan to make a contribution to super to invest??
    Last I checked, borrowing to make a non concessional contribution to super IS NOT tax deductible.
     
    Perthguy likes this.
  18. Foxy Moron

    Foxy Moron Well-Known Member

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    Oh dear. I didn't know Storm Financial were still operating Lol.
    I've long thought that FPs should take a hippocratic oath and repeat it to themselves several times per day.
     
  19. Masih

    Masih Well-Known Member

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    Having worked for a couple of the big super companies, I can tell you she's getting ripped off big time if that's all the adviser is doing. Her super will not last that long with that type of ongoing fees. I've never seen anyone charge $18k for a simple strategy like that.

    If an adviser charged ongoing fee, it was usually around 0.5% and the greedy ones would charge 1%. Most of the clients hadnt spoken to their adviser in years and they were still getting charged. But this guy is charging 5%! Up front is usually between $2000 to $5000 for personal advice depending on how complex the case is and general advice less. The most I've ever seen anyone getting charged was $7k by a bank adviser for some very simple advice. Never go to bank advisers!
     
  20. Masih

    Masih Well-Known Member

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    He couldve probably made her salary sacrifice in to her super to save on income tax and also make non concessional contributions using her cash. Redrawing to put in to super makes no sense. Also does she need extra money from her super to supplement her income? If no then why create a TTR? That's going to reduce her balance by 10% every year until she reaches retirement age.
     

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