Putting funds with financial planner vs ETFs

My parents' financial planner charges 2% to manage their superannuation investments (shares). They are about to have some more money to invest.

Is there any use paying a financial planner 2% to manage shares for you if you can just buy an ETF where management fees are like 0.2%? I doubt the financial planner is guaranteed to beat the market by 1.8%, right?

EDIT: This article suggests it's hard to beat ETFs especially when you take into account their "management" fees.
The Dirty Little Secret Investment Advisors Don't Want You To Know

 

I believe the financial planner handles the SMSF.

My parents will soon have about $4m which we need to figure out what to do with (they are retired and want low risk) - meeting Accountant in the next couple weeks to discuss but my view is that 2% for a financial planner to buy shares for you is not good value.

 

An asset based fee of 2% is outrageous. On $4m that’s 80k pa for nothing basically. At that level, if an asset based fee is employed market price is around 0.5%.

 

Interesting, thanks. When you say market price is 0.5%, who would that be with? Are there any groups you'd recommend to manage $4m worth of funds over buying a few different ETFs?

 

You can't control the investment returns, but you can control the costs.
Why do they need someone to manage it?

 

Dont some financial planners get a commission by selling a particularly type of managed fund / etf. Double dipping? Getting the upfront fee from the client and then the commish on the backend from the investment company, on the transaction?

Not say all financial planners operate like this, but could be a possibility?

 

They are elderly and have never bought shares before.

 

Do they need the ongoing handholding though?

 

You already have the answer
I hope you can convince "them" that its really quite simple

 

How old are they? It makes a difference if they are in their 70s, 80s or 90s. If I was in my 70s I would consider a basic simple VAS/VGS/LICs type investment. In my 90s I'd be in high interest savings accounts. No financial planner needed, and certainly not worth the 2%.

 

60's and 70's

 

I'm in my 60's and can assure you that 60s is DEFINITELY NOT ELDERLY

Back to topic: why not guide them through the process of buying and owning shares. For example:

- Set up a NABTrade account.
- Transfer a starter amount, say $10k to this account.
- Buy $5k VAS and $5k VGS ETFs.
- Wait for first quarterly distributions.

This will step them through the process of buying and receiving distributions, what statements you get and tax implications. Then come the reason why you are doing this:

Go out for a nice lunch with the quarterly distribution. It will be around $100 for a quarterly distribution on $10k at 4%. At the end of the lunch, decide where you will go for the next quarterly distribution. Discuss what you could do if the whole $4M was invested, i.e. you've just received a $40k quarterly distribution. How about return business class flights to London for a week of lunches there? It's about getting used to the process, and also why you are doing it.

* Not advice, just the ramblings of an elderly old fart...