# Financial Advisors? Why?



## matty2.0

Okay ... who here uses financial advisors to manage their wealth??
In light of recent events e.g. Storm Financial ... can you please enlighten me on why?
No disrespect, but I have never understood why you would actually need someone to tell you where to put your money with the wealth of information out there. 
Now considering that I work in the industry, I may be quite knowledgeable myself about the markets and investing compared to your average teacher, dentist, or soccer mum ... however you don't really need one ... honestly. 

How the industry works
Do you guys know what they actually do? All they do is try and get access to your hard earned money, and then distribute it to fund managers for a fee ... sort of like a middle-man. With the conflict of interest at stake, I don't know how they can actually really make money for you. 

Sometimes the advice and distribution they perform have ulterior motives to it because they get paid a fee (or kick back) by certain asset managers for distributing money to them, even though it's bad for you financially long term. For example, Storm Financial - they utilized gearing on your assets (in this case the mortgage) to promote/market savings via tax breaks. Often the leverage that some of these advisors ask you to take on is insane!!!
Me personally I don't think people should be leveraging beyond 20% of their net worth. 

Managing your own money
If you want to manage your own money it's simple:
1. if you know something about the markets then do your own research and invest accordingly with a broker
2. if you don't know anything, or have no time, you should just put it in an index fund that has shown to perform quite well over the past and don't touch it - set and forget - a bit like your super. Index funds are very low cost and effective - like less than 1% p.a in cost. 
For example the S&P 500 index - it has produced returns over the long term (10-20 years) of about 8-11%. Most index funds do better than 50-90% of fund managers out there ... and if you take into account all the fees that fund managers, financial advisors, and fund of fund advisors charge (probably like 3-5% altogether), then index funds will probably out perform 90% of the sincere "helper" strategy promoted by these advisors. 

Other forms of advice
If you need tax and estate planning advice, then you should just see an accountant or a lawyer. No need for financial advisor. 

So please enlighten me ... Why do you or any body use financial advisors? Is there any advantage at all?


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## Julia

Matty, we already have multiple threads about financial advisers, and/or the industry in general.
Maybe a moderator could merge this with one of those threads?

I'd say your message is 'preaching to the converted'  for 95% of members on this site.

For the other 5%, maybe consider that financial advisers are primarily sales people and evaluate their suggestions accordingly.  Always ask them how they get paid.


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## Ato

I dont use one, but I'm very new to all this. I havent had the time nor the inclination to learn about any of it until now. I think for many people the problem is that there is *too* much information out there and it becomes overwhelming. I've been doing my own study & research for about 4 months now, and I'm *still* feeling like I know hardly anything. Part of the problem with the glut of info out there is that it's often contradictory, so it's hard to know what to believe. For example, my current interest is in following the debate (in the US in particular) about what is likely to occur with all this QE - inflation or deflation. (Personally I'm on the side of inflation.)

Anyway, that might be one reason people use them.

A question for you, from this newb. How do you set up an index fund, as you've stated? And do the index funds really provide enough to offset inflation? I expect they go up & down, with those fluctuations and the rate, is it enough to deal with inflation? (Obviously index funds arent going to make you rich.)


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## trainspotter

Matty2.0. great riposte my man! Any advice is good advice if it works out. Would I trust my financial adviser to look after my life insurance and TPD. YES. And yes I would trust my financial adviser in regards to tax affairs in regards to wills etc (also would get my accountant to check) and generally they will offer the information to you for FREE. They get paid once you place your money with them. You don't have to do anything they tell you. Just listen. Many people out there are not capable at handling their own money and place it with FA's who will do their best to maximise the return. Usually they get paid more if the investment excels. Well, the way my stuff is geared it does. Better for me and him. Win win situtation.


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## awg

matty2.0 said:


> Okay ... who here uses financial advisors to manage their wealth??
> I:




Dont use them anymore

Matty2.0,

please estimate the amount of hours of information gathering you have done b4 feeling you knew what you are doing regarding financial management.

time would be an issue I think, and inclination, some people dont even mow their own lawn, even though they probably need the exercise!


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## Julia

trainspotter said:


> Matty2.0. great riposte my man! Any advice is good advice if it works out. Would I trust my financial adviser to look after my life insurance and TPD. YES. And yes I would trust my financial adviser in regards to tax affairs in regards to wills etc (also would get my accountant to check) and generally they will offer the information to you for FREE.



Only because they're getting paid by whomever they persuade you to place your business with!



> They get paid once you place your money with them. You don't have to do anything they tell you. Just listen. Many people out there are not capable at handling their own money and place it with FA's who will do their best to maximise the return.



Sure they do.   Maximise the return to themselves, that is.
A large amount of the problem with financial advisers (epitomised by Storm debacle) is that they will place your funds in whatever vehicle provides them with the most commission.

I'd suggest it's a major mistake to assume that a financial adviser is putting your interests ahead of his own.  There will be exceptions, of course.

There's a strong impetus around at present for trail commissions and entry commissions to be abolished in favour of upfront fees.  I doubt Joe Public will be too keen on paying a few grand up front though, particularly if the quality of the advice is as poor as it has been in so many instances thus far.


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## trainspotter

Those days are gone Julia. Nearly all of the FA's I deal with have to disclose their upfront fees, trailing comissions and percentage bonuses on a document which you will sign and get a copy of. They also have to provide you with comparisons of the other companies they represent. Not just a Prudential package. Also have to perform a wealth portfolio recommendation with a 30 day cooling off period. A strategic analysis as to WHY they are recommending these products and on what BASIS they arrived at these conclusions is usual as well. Something to do with the prefessional indemnity insurance requirements, or so I am told.

The ones I deal with are generally reputable guys that I have a hit of golf with as well. Which helps.


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## Julia

trainspotter said:


> Those days are gone Julia. Nearly all of the FA's I deal with have to disclose their upfront fees, trailing comissions and percentage bonuses on a document which you will sign and get a copy of. They also have to provide you with comparisons of the other companies they represent. Not just a Prudential package. Also have to perform a wealth portfolio recommendation with a 30 day cooling off period. A strategic analysis as to WHY they are recommending these products and on what BASIS they arrived at these conclusions is usual as well. Something to do with the prefessional indemnity insurance requirements, or so I am told.



Well, I'm sure that wasn't the experience of the Stormers!



> The ones I deal with are generally reputable guys that I have a hit of golf with as well. Which helps.




Obviously a personal relationship makes a difference.  They're going to be a tad uncomfortable on the golf course with you if your investments have gone belly up.   Glad to know you're happy.


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## Mr J

A few reasons:

1. People assume FAs know what they're doing.
2. People can't be bothered, feel they don't have the time, or assume it is beyond them to be able to manage it themselves.
3. Pressure from other occupations, such as banks or accounts referring people to FAs.
4. The general financial industry scam of encouraging other people to manage your money, be it banks, FAs, brokers, hedge funds, mutual funds etc. I say it is a scam because the vast majority of these are just happy to pick up fees/commissions, but they're more than happy to imply that it is something you should leave to the 'professionals'.


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## Buckeroo

trainspotter said:


> Matty2.0. great riposte my man! Any advice is good advice if it works out. Would I trust my financial adviser to look after my life insurance and TPD. YES. And yes I would trust my financial adviser in regards to tax affairs in regards to wills etc (also would get my accountant to check) and generally they will offer the information to you for FREE. They get paid once you place your money with them. You don't have to do anything they tell you. Just listen. Many people out there are not capable at handling their own money and place it with FA's who will do their best to maximise the return. Usually they get paid more if the investment excels. Well, the way my stuff is geared it does. Better for me and him. Win win situtation.




Looks like your part of the 5% Transpotter

I don't use them myself but as you said, I do know people that use them because they don't have the confidence themselves. I do know also some of these people got an absolute pissling last year - they have since moved away from advisers.

Trouble with advisers, even if they see storm clouds coming, they can't do anything about it, as it means divesting money from the hand that feeds them.

Cheers


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## trainspotter

It never fails to surprise me at peoples greed. Despite all the warnings in regards to ridiculous % returns that are not possible people still flush their hard earned $$$ down the sh!tshute. Rule number 1 :- If it looks too good to be true ... THEN IT IS. End of discussion. If some FA promised to eat razoblades and excrete cucumbers I would be a very wary person indeed. If he calmly explained that the logic behind his recommendations is based on 100 years or so of company research then I would probably listen. YOU decide in the end whether or not to place your money with them. No one else. Chasing high yields is bordering on the movie "Wall Street" and like Gordon Gekko said "It's not a question of enough, pal. It's a zero sum game, somebody wins, somebody loses."


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## matty2.0

Ato said:


> A question for you, from this newb. How do you set up an index fund, as you've stated? And do the index funds really provide enough to offset inflation? I expect they go up & down, with those fluctuations and the rate, is it enough to deal with inflation? (Obviously index funds arent going to make you rich.)




An index fund is already set up by an index fund provider and all you do is just buy-in. 
So for example, Vanguard, who specialize in index funds they have an Australian Equities index fund here, which mirrors the performance of the ASX300:
http://www.vanguard.com.au/personal_investors/investment/managed-funds-up-to-$500000/australian-shares/en/australian-shares.cfm

So the only thing you have to worry about is whether the market is up or down, and whether the economy is good/bad. No need to be an expert in anything at all, or even reading up on anything. 
The cost is 0.75% p.a., which is relatively low. Over 50K and you're looking at a total cost of less than 0.50% p.a. in fees to manage your money ... which is really cost-effective. 
Now considering you will be holding this over the long term and forgetting about it, you don't really have to worry about buy/sell spreads or taxes until you sell out and realize your capital gains.
Over the past 10 years the Vanguard Aussie-index  fund has performed 6.46% p.a. Obviously the last year has been a shocker which has caused performance to fall a bit, but prior to that I think performance was like 10-13% p.a. 
If you've developed any intelligence about the market at all then now is probably a good time to buy in to the index, considering how low it is, and conversely if you were smart you probably could have sold prior to the credit crunch and just hold cash and wait for the depressed prices we are seeing now ... or you could have rolled it into a money market or cash like index fund. 

Vanguard have other index funds too like International Equities index funds, or property index funds. 
Vanguard are not the only provider of index funds, you can also try ETFs and such from other providers like Barclays or State Street. 
But the moral of the story? Getting good performance on your money is not as expensive as it seems and is NOT hard as well.

No time-consuming tasks required at all really.


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## Mr J

> Despite all the warnings in regards to ridiculous % returns that are not possible people still flush their hard earned $$$ down the sh!tshute. Rule number 1 :- If it looks too good to be true ... THEN IT IS. End of discussion.




It's not the end of discussion, because there are exceptions to that rule. Seemingly ridiculous returns are possible, it's just unlikely that the person offering it is one of those that can actually achieve it.



> No time-consuming tasks required at all really.




People assume it is time-consuming. I had somebody suggest to me that it would take too much time, despite me saying that they could spend just an hour or less a week on it if they wished. They wouldn't have any of it.


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## trainspotter

Mr J said:


> A few reasons:
> 
> 1. People assume FAs know what they're doing.
> 2. People can't be bothered, feel they don't have the time, or assume it is beyond them to be able to manage it themselves.
> 3. Pressure from other occupations, such as banks or accounts referring people to FAs.
> 4. The general financial industry scam of encouraging other people to manage your money, be it banks, FAs, brokers, hedge funds, mutual funds etc. I say it is a scam because the vast majority of these are just happy to pick up fees/commissions, but they're more than happy to imply that it is something you should leave to the 'professionals'.




Too true Mr J. I note the same "professionals" carry profesional indemnity insurance. My advice is to test it.


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## trainspotter

Mr J said:


> It's not the end of discussion, because there are exceptions to that rule. Seemingly ridiculous returns are possible, it's just unlikely that the person offering it is one of those that can actually achieve it.




If the rate of returns were that good would you be sharing it? I think not. Those who can't do, teach. In my opinion that is.


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## Mr J

I would as long as it was more profitable for me to do so. I imagine people who achieve these rarely need to advertise though. 



> Those who can't do, teach. In my opinion that is




I would say 'sell' rather than 'teach' .


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## MRC & Co

Mr J said:


> *hedge funds*. I say it is a *scam* because the vast majority of these are just happy to pick up fees/commissions, but they're more than happy to imply that it is something you should leave to the 'professionals'.




Big call.  May want to check out Barrons list for last financial year:

http://online.wsj.com/public/resources/documents/BA_HF100_090511.pdf

Far superior returns in comparison to the index.

Add to that, anybody who thinks an equity index tracker is going to perform anywhere near it's long-term average over the next decade or two (not to mention, thinks it entails a lower risk profile in comparison to a good hedge fund), seriously needs to do some more research.


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## Ato

Mr J said:


> *People assume it is time-consuming.* I had somebody suggest to me that it would take too much time, despite me saying that they could spend just an hour or less a week on it if they wished. They wouldn't have any of it.




It is time consuming for us newbs though, that's the thing. 

Using myself as the example. I have begun to get interested in this investment stuff recently, and decided I'd like to educate myself about it before making any move. I've been doing what I can to research various things for the last 4 months, and I still had only the smallest idea of what an index fund was, and no idea how to get involved in one (hence I asked Matty above). 

While it might only take an hour once you have everything setup, it's getting setup that takes the time, at least for me. I want to know exactly what is going on with what I've chosen, etc. If I dont understand it, and havent done the research first, then I end up having to follow someone's advice. 

More concretely, I'm interested in ETFs, particularly gold, oil & commodities like water (or water company stocks). Thus far I've spent about one month doing research on various issues around these, and I'm still a long way off making any final decision to put money down. I want to know exactly what I'm doing. That's where the time comes into play. Once I have everything set, I'm sure the time required would be alot less.

*Caveat: I may just not be very bright


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## matty2.0

MRC & Co said:


> Big call.  May want to check out Barrons list for last financial year:
> 
> http://online.wsj.com/public/resources/documents/BA_HF100_090511.pdf
> 
> Far superior returns in comparison to the index.
> 
> Add to that, anybody who thinks an equity index tracker is going to perform anywhere near it's long-term average over the next decade or two (not to mention, thinks it entails a lower risk profile in comparison to a good hedge fund), seriously needs to do some more research.




Does Barron's have a worst 100 Hedge Funds list? 
I'm sure they would be far "superior" too ... wouldn't they? Some have performed 100 times better. 
Maybe they did so well that they closed up shop ... lol
The best fund would probably be the Madoff fund ... so aptly called because they "made-off" with your money. =D
Another great fund would have been one of those Bear Stearns funds in late 2008, with those exotic names to confuse you; "High-Grade Structured Credit Strategies Fund" or whatever ... lol

You take the worst performers in the industry and add them to the top performers and you'll find that they'll cancel each other out to the extent that the industry, as a whole, adds almost no value at all. 

Sure, an Aussie index tracker might not perform as well as it has in the past, but that shouldn't limit you. You could try emerging market index trackers or other areas that have long term growth potential. In any event, you don't need to pay exorborant fees to get good returns, which is my main point.


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## MRC & Co

matty2.0 said:


> Does Barron's have a worst 100 Hedge Funds list?
> I'm sure they would be far "superior" too ... wouldn't they? Some have performed 100 times better.
> Maybe they did so well that they closed up shop ... lol
> The best fund would probably be the Madoff fund.
> 
> Sure, an Aussie index tracker might not perform as well as it has in the past, but that shouldn't limit you. You could try emerging market index trackers or other areas that have long term growth potential. In any event, you don't need to pay exorborant fees to get good returns, which is my main point.




That's why you look at fund history and understand how they trade and don't just jump into anyone.  Or how about the Barclays Hedge Fund Average as shown as the bottom of that PDF link I already provided?  

Whatever index you choose to track, you still have high risk and extremelly limited knowledge in comparison to a good hedge fund.


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## matty2.0

MRC & Co said:


> That's why you look at fund history and understand how they trade and don't just jump into anyone.




Madoff had a great history didn't he? Over 40 years of good stable returns ... well ... so it seemed.


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## MRC & Co

matty2.0 said:


> Madoff had a great history didn't he? Over 40 years of good stable returns ... well ... so it seemed.




lol, 1 fund.  Hardly a clear representation of the industry and of 99% of money managers who have vast experience in their fields and do their best.  What index has returned the gains of Soros, Tudor Jones, Druckenmiller?  Finding a good money manager is where real wealth creation lies IMO.  

The fund I put my money into 5 years ago whom I trust, is up 100% over that period.

How is your index tracker going over the same period?


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## Ato

I believe one of my original points has been clearly illustrated here (with Matty & MrC), thanks guys.

That point being that newbs, like me, see *constantly* differing opinions and dont know what to make of it, without either saying stuff it I'll use a fund manager or spending alot of time doing the research ourselves.

That's one of the main problems I believe: overwhelming amount of contradictory information.


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## matty2.0

Ato said:


> I believe one of my original points has been clearly illustrated here (with Matty & MrC), thanks guys.
> .




Bah ... MrC knows he's wrong ... he just wants to pick a fight. 

If you're a normal average joe ... your way of making an income is probably not within finance ... so you should stick to what you know best. i.e. if you're a lawyer make money as a lawyer ... if you're in a different profession you should focus your time and energy on that ... 
With the income you make you would want to first and foremost, KEEP it and not lose it ... and only then would you want to grow the capital base. But YOUR financial advantage comes not from investing or trading, but your own profession. I think that's where I would spend my time and energy, and not trying to be a financial advisor. 

There's no point in losing the money ... doesn't matter how good the financial advisor or money manager "seems" to be. they'll take you to the cleaners if you give them enough rope. 

Because after all ... 1 x 1 x 1 x 1 = 1
And ... 1x 1x 1 x 0 = 0 ... or 1 x 1 x 0.5 = 0.5

If a hedge fund manager loses money, it is extremely hard to claw their way back up. 

Whatever you do, *you don't want to lose money*. You won't lose money with a tried and tested index fund *over the long term*. But then again you probably won't be rich either. But that's not your concern because you have your own career and profession through which you can make an income ... don't you? lol ...

Now, I may come across as a silly old index hugger. I assure you I am not. Quite the opposite. I don't own any index funds at all. 
However, when I see sh*t like Storm Financial and Madoff ... It just drives me nuts and makes me mad. Don't be stupid.


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## Mr J

MRC & Co said:


> Big call.




There are exceptions, which is why I said most, not all. Hedge funds will have more exceptions than the others (such as banks, brokers and FAs), since they operate on performance fees and not commissions, so their interests are usually somewhat aligned with the investors.



> It is time consuming for us newbs though, that's the thing.




I shouldn't suggest that it isn't. You sound far more committed than most people out there, and I think you're spenting relatively little time on something that can really pay off in the longrun. It may seem like a lot of time to you, and certainly to many others, but you work hard for your money and it makes sense that you spend time working out how to make the most of it.

Most people are pretty ignorant about the financial markets, and no doubt that is partly due to it being in the best interests of the salesmen to keep it that way.



> lol, 1 fund. Hardly a clear representation of the industry and of 99% of money managers who have vast experience in their fields and do their best.




I'm sure most of them do have a lot of experience, but that doesn't guarantee good results. I don't believe very many are outright scams, but I would guess that many won't significantly outperform the market.



> The fund I put my money into 5 years ago whom I trust, is up 100% over that period.




That's about 16-17%pa. Does that including management and performance fees? I don't think I can give an unbiased opinion on this return. I'm sure many would be very happy with it.



> Finding a good money manager is where real wealth creation lies IMO.




For a trader it should be trading is where the real wealth creation lies!



> That's one of the main problems I believe: overwhelming amount of contradictory information.




You'll have to choose what you consider as helpful and what is rubbish. It's partly why I enjoy this - it isn't neatly laid out for us and we have to form our own opinions.


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## MRC & Co

Ato, only advice I can give, is find someone with a track record.

To be a professional football player, you have to proove you are great on the pitch.

To be a professional financial planner or stockbroker, you only need a piece of paper from a regulatory authority.  Where is the track record of past performance?

It blows my mind investors would listen to someone without a prooven track record.  

Certain funds, will have histories of outperformance.  If you like the way they have achieved it (i.e. low risk and consistent returns), then I would think that is simple logic.

Why not an index fund?  Because the global credit expansion phase looks to be coming into decline.  This alone, is probably the single biggest reason for the bull market is so many asset classes.  Trading will become the name of the game for superior returns from here on in (by buying index funds, you are effectively becoming the trader, without any track record).  Unfortunately, the only way to achieve that is from someone who actually knows how to do it!  Check past performance and look into how they achieved it.  

Hope that is not too conflicting and is pretty logical and straightforward.


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## MRC & Co

matty2.0 said:


> money manager "seems" to be. they'll take you to the cleaners if you give them enough rope.
> 
> If a hedge fund manager loses money, it is extremely hard to claw their way back up.
> 
> Whatever you do, *you don't want to lose money*. You won't lose money with a tried and tested index fund *over the long term*. But then again you probably won't be rich either. But that's not your concern because you have your own career and profession through which you can make an income ... don't you? lol ...




First point, wrong.  As MrJ stated, use one that has payment aligned with performance AND has a prooven track record.  They are not there to take you to the cleaners, far from it.  This is not the financial planning industry or stockbroking industry, funds HAVE track records.  If your that worried about a Ponzi scheme, perhaps you should just buy gold and put it in a vault.  

Second point.  Depends what index fund you invest in?  If you used the US equity market over the first few decades of the 1900s what would you have returned?  Probably, close to...........ZERO (or negative real returns)!  

How about someone who enjoyed the boom Japan was experiencing?  Of course, over-valued, but at the time, it was Japan, and not China, that was going to over-take the world as the leading superpower.  You would now, over 2 decades, be far in the red, even if you bought the dip.

MrJ, the returns I stated are after management/performance fees.


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## theasxgorilla

MRC & Co said:


> To be a professional football player, you have to proove you are great on the pitch.
> 
> To be a professional financial planner or stockbroker, you only need a piece of paper from a regulatory authority.  Where is the track record of past performance?




What is worse is that most of them have a rather broad range of funds that they can recommend from, and they're as likely to throw them in front of you with the benefit of full hindsight, to convince you those returns are what their clients have been achieving and that you can also achieve.  

Track record of the advisor and the fund is of course two different things.


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## matty2.0

Mr C ... look there will be some managers who beat the index. Just like anything in life you have your small outliers.

But if you're knowledeable at all about the industry you'll know that there have been clear studies done that show that 90% of fund managers *as a whole* ... do not outperform the indicies, especially if you take into account all the fees. 
You can go and read Bogle or whatever ... I'm not here to point you in the right direction ... you have to find your own information. 
But *as a whole* the industry does not outperform, especially if you take into account all the "helpers" who have gone bust, or lost money and closed up the funds that were in serious negative territory ...  and if you think otherwise you either have an agenda to push, or are ill informed.


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## MRC & Co

matty2.0 said:


> But if you're knowledeable at all about the industry you'll know that there have been clear studies done that show that 90% of fund managers *as a whole* ... do not outperform the indicies, especially if you take into account all the fees.




I guess that's why your an analyst and I'm a trader.

I look for outperformance against a market that CAN EASILY be beaten.  It is simply beating the average view + cost.

90%.  What about the other 10%?  Find them.


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## Mr J

MRC & Co said:


> MrJ, the returns I stated are after management/performance fees.




I assumed so. I know the figures are good, I think it's just hard for me to appreciate the performance of funds when a small day trader can achieve a far better return, even though it's not a fair comparison (really apples to oranges).



> To be a professional financial planner or stockbroker, you only need a piece of paper from a regulatory authority. Where is the track record of past performance?




Exactly. If they were so great, why are they not managing other people's money and grabbing the lucrative performance fees? I'm sure some brokers and FPs are great, but most shouldn't be advertsied as more than they are, that being glorified salesmen. In the end it probably doesn't make too much difference though, as I believe the majority of people are destined to part with their money, or at the portion of it they expose to the sharks.


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## MRC & Co

Mr J said:


> I assumed so. I know the figures are good, I think it's just hard for me to appreciate the performance of funds when a small day trader can achieve a far better return, even though it's not a fair comparison (really apples to oranges).




Yes, I can see your point.

But I think I found a way around that.

I have my money with 2 seperate hedge funds, have 1 small account for the odd punt and day trade a prop account.

Low risk, high reward, hedge funds generating my super just encase.  

Works for me, for now.


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## Mr J

Ah, yes. Good use as a secondary investment for unused capital.


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## tasmart

Ato said:


> I believe one of my original points has been clearly illustrated here (with Matty & MrC), thanks guys.
> 
> That point being that newbs, like me, see *constantly* differing opinions and dont know what to make of it, without either saying stuff it I'll use a fund manager or spending alot of time doing the research ourselves.
> 
> That's one of the main problems I believe: overwhelming amount of contradictory information.




One of the problems that I see -  and it is partly because of the clientele of these forums - is the narrow focus on making money as being the prime focus of Financial Planners! Ofen the focus seems to be more on making money for the Financial Planner than the client!

There is a lot more to it - and it really is the balance of individual financial situations (current and future) that should be basis of a financial planning relationship.

I personally don't use a FP but am undergoing education at a Masters level in FP from Deakin Uni. The broader focus, to me, is the important part. As an example this semester I am doing MAF709 (nicely summarised by ASIC). Investments are only one topic of 10. 

http://www.asic.gov.au/etraining/etrain.nsf/LUDocID/3C5E417ECD95B1C74A256C7D0009A6F0?opendocument

I actually don't plan to work in the industry, but the dissarray of the industry, my own personal (and family) financial situation and a warped interest in the area have lead me to focus my MBA in this area. The specialisation requires 4 subjects (as well as the other 8 MBA compulsory topics. I only have 1 subject to go after this semester.

BTW I highly recommend the Deakin MBA - in my case just to formalise and build on many years of experience and as a risk minimisation strategy for my future! I have been doing it for the last 4 years basically as one subject per semester.

http://www.deakin.edu.au/current-students/courses/course.php?version=1&course=M701


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## Krusty the Klown

Matty2.0, I see you are tagged as an analyst, is that a financial/investment analyst by chance??


----------



## Trevor_S

MRC & Co said:


> Big call.  May want to check out Barrons list for last financial year:




I see Buffett disagrees with you



> Over a ten-year period commencing on January 1, 2008, and ending on December 31, 2017, the S & P 500 will outperform a portfolio of funds of hedge funds, when performance is measured on a basis net of fees, costs and expenses.






> A number of smart people are involved in running hedge funds. But to a great extent their efforts are self-neutralizing, and their IQ will not overcome the costs they impose on investors.




and put his money where his mouth is.

http://www.longbets.org/362


----------



## skyQuake

Too many funds are managed by someone with a MBA, lots of charisma and a Distinction average Finance degree.
They have absolutely no idea what they're doing, so they rely on their quant guys and their brokers. Trouble is all the quant models do similar things, and the brokers send out the same stuff to everyone...
Thats why we can have 25 sigma events in funds managed by people who don't know what they're doing.

Having said that, you gotta look a little harder to find funds run by people who DO know what they're doing.


----------



## Gordon Gekko

If you have a financial adviser and you not sure if you are getting good service. Try to remember that first meeting when he seemed so interested in you, even had some pictures of his wife and kids on the wall which he pointed out. Then remember how he said he would be in contact with you ever 6 months or so for reviews on how your going. Remember that flash pen that with the push of a little button lit up highlighting the name of the company that he said you could keep! wow!!

Then look at your statement, have a look at all the individual costs. I.e contribution fee's, MER fee's, Maybe margin loan fees, fund manager fee's. And then think about if these fees go down when you are not getting good performance on your portfolio.(they don't)

 Has he been in contact with you ever? Or maybe he sends you an email during periods of high volitility to say hold hold hold.
Then think about how much money he would make if you sold, paid off some of your margin loan,(no conflict of interest there, do you think they will say go to gold? How would they make there commissions)
Where would he get the money for those flash pens?

Have a look at the make up of the top 10 or so companies in your recommended fund and you will most likely notice that it is an index huger, so why are you paying all the cost to track an index? Where is the added value?

Then school up and go your own way. If you don't want to spend much time at it get an index fund period!


Best

G


----------



## Glen48

Trouble is like Real estate you just assume doing what every one else does is the way to make money only when you find out the truth you then look and find out what the real figures are and do some research.. I bet there are a lot of Storm and other Scam victims who could make good advisers and now know a lot more about how our system fails the genuine Australia's
Sadly as we read this there is another scam getting under way and just like 1930 we will continue to make the same mistakes. Just like the Blokes who got caught by CSA trying to get the $900 greed will get a lot in.


----------



## rossCaruso12

Ato said:


> It is time consuming for us newbs though, that's the thing.
> 
> Using myself as the example. I have begun to get interested in this investment stuff recently, and decided I'd like to educate myself about it before making any move. I've been doing what I can to research various things for the last 4 months, and I still had only the smallest idea of what an index fund was, and no idea how to get involved in one (hence I asked Matty above).
> 
> While it might only take an hour once you have everything setup, it's getting setup that takes the time, at least for me. I want to know exactly what is going on with what I've chosen, etc. If I dont understand it, and havent done the research first, then I end up having to follow someone's advice.
> 
> More concretely, I'm interested in ETFs, particularly gold, oil & commodities like water (or water company stocks). Thus far I've spent about one month doing research on various issues around these, and I'm still a long way off making any final decision to put money down. I want to know exactly what I'm doing. That's where the time comes into play. Once I have everything set, I'm sure the time required would be alot less.
> 
> *Caveat: I may just not be very bright




The last sentence Ato wrote in comparison to the rest definitetely got a chuckle out of me.


----------



## tech/a

rossCaruso12 said:


> The last sentence Ato wrote in comparison to the rest definitetely got a chuckle out of me.




Most Financial Planners get a Chuckle out of me!


----------



## brty

Tech/A, "Most Financial Planners get a Chuckle out of me!"

I can understand that.

I personally know a few Financial planners. They always seem to be asking me about different stocks and what I think. (they know I've been trading/investing for decades)
Whenever I have questioned them about putting their clients into something that is doing well, they start quoting all sorts of rules and regs they have to follow with their 'advice'. Basically they can't give any good advice to anyone, just general industry BS

I prefer to talk Sports, Holidays, what the kids are doing etc with Financial Planners I meet in society/outings, because they seem to know bugger all about stocks, commodities and real estate, plus if they insist on talking investments, I get a bit aggressive in pulling their industry apart.


----------



## tech/a

Brty

 Cant agree more.

95% of these guys are operating under a licence held by someone like Zurich that offer managed funds. All these guys can do legally is place you in a fund. Which they receive an on going fee for giving you a report.

They can’t give you anything more than basic financial rehetoric.
They don’t know anything else.
Of the Three I know 2 would love to be in the financial position that the larger majority of their clients are in. Mind you those clients who use them can’t be THAT smart —— They use them!

The knowledge these guys have in Macro and Micro economics is a joke.
I was at a dinner party when the 2009 crisis was in full flight.
One of these guys was asked about his take on the situation. Never heard so much drivel.
After a few minutes I slipped in a question

But isn’t this all about Credit Default Swaps?

The answer—— What?

And people give these guys 1000s to manage——

Run Forest Run!


----------



## Junior

Your adviser mates aren't very good at explaining what they do.  A financial adviser is not an economist or a financial analyst.  Playing around in stocks and commodity markets is a full time job - it's not what a financial adviser does and nor do they have time to dedicate to that sort of area.

You guys are in the minority of people who are across their financial situation and have strategies in place to improve your situation over time.  You have an understanding of the tax system and the means and desire to grow your wealth over time.  You guys can see the bigger picture and think long term.

Many Australians are financially illiterate and/or disinterested and derive great benefit and peace of mind, by having a professional to provide them with education and guidance around their money.  As mentioned above, most people think about this month's bills, not about how they are going to fund their lifestyle when they quit working at 65 years old and then live for another 35 years.                            

There are others who are great at developing their careers and growing their income over time, but are in occupations that are high-stress and time consuming - they don't have the drive or time to look after their financial affairs so they will outsource this to professionals.  Doctors & surgeons are a classic example of this.  They work long hours and earn great money, but then end up with very expensive lifestyles and plenty of debt, and don't even utilise basic tax planning or set aside cash to invest.

It's all very well assuming everyone will DIY when it comes to money and planning for their future, but it's simply not realistic....these days information is so accessible online, in many ways it's detrimental as you have to wade through so much b/s to find reliable and useful information.


----------



## Knobby22

You are right Junior.
But its like everything, you have to find a good one, like you do with accountants.

My parents were lucky. they were recommended an advisor and he got all their life savings (which wasn't that much) out of the stock market as the GFC started. I am still grateful to him and would recommend him but he has retired now.


----------



## brty

I didn't think it would take long for Tech/A's and my own comments to meet with some opposition.

My opinion is and always has been that no-one is going to look after my money as well as I will. Therefore at a young age I decided that I needed to become educated about investments. There was not much information a few decades ago, certainly no internet. Books about investing were horrendously expensive and in very limited locations. Basically I had to learn to take care of myself the hard way, by experience.

Today there is plenty of information. It is very easy to learn many different aspects of trading/investment, then test them and find most useless.

I don't know of anyone that has done well with the financial advice from the industry. I do know people that have lost a lot following advice. 
If those that don't want to know much about their own money, just spent as much time on learning a little as they spend on their next car purchase, would quickly learn that buying an ETF like STW or AFI etc, adding every year or 2 with more savings, whenever there is a large pullback, or something like that, is going to earn them a LOT more than following some plan by a highly regulated FP, that as an average knows nothing about investing, but charges lots of fees.

Sorry, rant over.


----------



## tech/a

Oh My---Rant to continue!!!



Junior said:


> Your adviser mates aren't very good at explaining what they do. A financial adviser is not an economist or a financial analyst. Playing around in stocks and commodity markets is a full time job - it's not what a financial adviser does and nor do they have time to dedicate to that sort of area.




Wow seriously?
If I was a 50-60 yrs old with $500,000 to $1,500,000 and a Financial planner told me this --- Id run and so should anyone else.



Junior said:


> There are others who are great at developing their careers and growing their income over time, but are in occupations that are high-stress and time consuming - they don't have the drive or time to look after their financial affairs so they will *outsource this to professionals*. Doctors & surgeons are a classic example of this. They work long hours and earn great money, but then end up with very expensive lifestyles and plenty of debt, and don't even utilise basic tax planning or set aside cash to invest.




Your first Paragraph certainly doesn't describe a professional. I know 1 surgeon and 3 doctors male and female and all of them certainly know about tax and investing. They didn't get where they are from other peoples financial advice and they most certainly wouldn't trust a Dollar with someone who leases their Porsche, Rents their Mc Mansion and asks them their "Risk Tolerance". These are the Wannabe's that should be avoided at all costs---They want to be in the financial position their clients are!!

There are the *ODD* good advisers but they are as rare as a Trader that can turn a profit consistently, or a builder who turns a profit in boom OR bust, or a Business owner who consistently grows their business year in year out.

*So what's wrong

Back to here----*Playing around in stocks and commodity markets is a full time job - it's not what a financial adviser does and nor do they have time to dedicate to that sort of area.

If advising on Financial wealth creation and accumulation isn't the job of a financial adviser then they must be Managed Fund Sales people.
If that's the case then don't make yourself out to be an adviser in anything. Tell them as it is. You do anything other than sell managed funds and the managed funds that are held by your dealer principal.
Here is THE problem right here! They cant advise---they don't know what to advise. They aren't *QUALIFIED* to advise.
Qualified to me is being in a position where they are Financially secure for the rest of their life and a few other lives.

I know of people who have been talked into changing funds from Industry Funds to Financial Planners Managed funds which have historically done worse than the industry funds and continue to do so.
The F/P gets a fee from $500-1000 to do this plus his "Management fees' each year. He's not looking after YOU he's looking after only one person--guess who?

*Lets determine your Risk profile*

What's a stupid question/thing to do!

To any F/P *How do YOU handle risk*
Standard answer---diversification.
So dilution of potential profit = dilution of risk.
That's their idea of handling risk!---F33cking brilliant.



brty said:


> I don't know of anyone that has done well with the financial advice from the industry. I do know people that have lost a lot following advice.
> If those that don't want to know much about their own money, just spent as much time on learning a little as they spend on their next car purchase, would quickly learn that buying an ETF like STW or AFI etc, adding every year or 2 with more savings, whenever there is a large pullback, or something like that, is going to earn them a LOT more than following some plan by a highly regulated FP, that as an average knows nothing about investing, but charges lots of fees.




Isn't that the truth.
One thing I definitely know.

*Learn how to handle risk* and you can maximize your return and minimize your exposure to risk. Well beyond any Financial planners profiling---infact you'll teach them something they *NEED* to know.

*Im a duck* and I know that investing in a maximum of 5 sound stocks like A2M,Breville (off the top of my head) and understanding how to manage the maximization of return on your trades while minimizing your risk
youll do infinitely better than any managed Fund a Financial Salesman puts you into.

*If you can buy housing* with rent paying your mortgage and its the worst house in the best street and you understood that the best money you'll make is in the front end in an area that's in or going to be in demand. Then Buy it!
If you have the capital, have a bent for calculation, do the hard yards discovering areas and agents in those areas who you can trust---develop a relationship with a good Project builder---*do the math---all good---* start building and selling off plan!
*OR*
If your young Build 2 or 3 on a block live in one for a year---sell it--live in the other for a year---sell it---rinse and repeat.

*If your in business or want to get into business*
Dominate your field
Be different
Understand your margins
Instil passion.
Mediocre will return mediocre

Lastly if *you do nothing else*
Get yourself in a position where you DONT need a financial Advisor its not that hard ---a duck can do it!

For this duck most F/Ps rate as highly as the next get rich scheme.---zero.


----------



## Junior

brty said:


> Would quickly learn that buying an ETF like STW or AFI etc, adding every year or 2 with more savings, whenever there is a large pullback, or something like that, is going to earn them a LOT more than following some plan by a highly regulated FP, that as an average knows nothing about investing, but charges lots of fees.
> 
> Sorry, rant over.




A good adviser will include a simple strategy like the above as a part of their advice.


----------



## Junior

tech/a

The strategies you talk about require dedication, experience and commitment. I applaud you for taking control and for your success. You are in the small minority in this respect. 

Would you recommend a portfolio of 5 small/micro cap stocks to someone seeking advice on what to do with their savings?  Good luck with that, you are massively overestimating how the average person would handle even a small dip in the value of their capital. when a market meltdown hits, you will be sued. 

To the average punter with kids, a mortgage and in a salaried job, if they can be set up so they are saving 20% of their net income and investing in managed funds, ETFs, shares or otherwise and a plan to be debt free well before retirement age -  they will be far better off in the long run than someone with no advice. 

The 'no advice' family will refinance back up to 80% to spend on holidays, reno', school fees and a new car every 5 years then start to panic at 55 years old when they realise there's still 20 years left on the home loan and bugger all in super. 

I know you'll deride the above 2 scenarios but that's what reality for many folks!

The strategies you've outlined are great for someone willing to dedicate time and energy to really get ahead. Most will not do it, or often do not even have a basic grasp of mathematics to run the numbers. 

Also re medicos, my comments are a generalisation.  But the specialists I've dealt with work 70 hour weeks and spend no time on their finances. They rely heavily on an accountant for tax structuring and that's about it.


----------



## tech/a

Junior said:


> tech/a
> 
> The strategies you talk about require dedication, experience and commitment.




Anything worth while does.



> Would you recommend a portfolio of 5 small/micro cap stocks to someone seeking advice on what to do with their savings?  Good luck with that, you are massively overestimating how the average person would handle even a small dip in the value of their capital. when a market meltdown hits, you will be sued.




No
Those I suggested would hardly be seen as Small caps.
Good luck suing anyone in a meltdown. 



> To the average punter with kids, a mortgage and in a salaried job, if they can be set up so they are saving 20% of their net income and investing in managed funds, ETFs, shares or otherwise and a plan to be debt free well before retirement age -  they will be far better off in the long run than someone with no advice.




The average punter doesn't put away 20% of his earnings.
Its not advise on its own its the quality of the advice.

A bit of mine---
Learn to recognise opportunity 
Learn what to do with it when you see it
THEN DO SOMETHING



> The 'no advice' family will refinance back up to 80% to spend on holidays, reno', school fees and a new car every 5 years then start to panic at 55 years old when they realise there's still 20 years left on the home loan and bugger all in super.




Id rephrase that.
The live for NOW family---advice or no advice. 1000s of them.



> I know you'll deride the above 2 scenarios but that's what reality for many folks!
> 
> The strategies you've outlined are great for someone willing to dedicate time and energy to really get ahead. Most will not do it, or often do not even have a basic grasp of mathematics to run the numbers.




Not only is it worth it in the long run but it alters the way you view life in the Now and the shorter term.
Its not all scrimp and save and when you do get out on the other side life takes on a whole new outlook
for you and everyone around you. 
Evidently I'm in the .06% group of society and I didn't even pass year 11! My first job was pumping gas.
Maybe one person hears my message!



> Also re medicos, my comments are a generalisation.  But the specialists I've dealt with work 70 hour weeks and spend no time on their finances. They rely heavily on an accountant for tax structuring and that's about it.




*Smart people employ smarter people!*
F/As by and large don't fit in that category in my opinion.


----------



## brty

Junior,


Junior said:


> A good adviser will include a simple strategy like the above as a part of their advice.




A good adviser would recommend people read at least a couple of good books to get themselves educated, even partially. However there is no profit, nor trailing fees in doing so.

It takes an absolute minimum of education, reading or whatever to find that first people need to start saving, then start investing. They will then ALWAYS be better off by implementing there own plan, being in charge of their own money, while continuing to learn.

Everyone learns and usually earns very little by having others doing the basic understanding for them.

 I have too many relatives that have ignored what I have been saying to them for years about looking after their own money, while they sought 'professional' advise. All of them that sought professional advise are still struggling, the funds that they get put into all seem to suffer hugely with the various crashes that come along, and then never recover to just index performance. This occurred after the '87 crash and the '08 crash. 

There are a couple of former 'niche' but highly regarded (at the time) financial advisers that on another forum (now closed) that I use to have very heated discussions about their 'free' advise, plus they ran courses etc (and had all the appropriate licenses), that put people into risky investments. I was threatened with legal action for calling their 'advise' risky, and eventually banned from that forum. Both ended up bankrupt and took many good peoples life savings away from them.
Remember they were widely regarded as 'good' and successful financial advisors.

I take it Junior you are in the industry, just from your comments, apologies if I'm incorrect.
Can you name any FP or adviser that has a stop loss on anything as part of the overall plan? 



Junior said:


> To the average punter with kids, a mortgage and in a salaried job, if they can be set up so they are saving 20% of their net income and investing in managed funds, ETFs, shares or otherwise and a plan to be debt free well before retirement age - they will be far better off in the long run than someone with no advice.




That is not the average couple with a couple of kids!!. 
Anyone that is already saving 20% of their net income, already has some type of plan. They are already slightly educated and more likely to be working on their future. The last person they should go and see is some FP or advisor that takes a cut of their earnings, especially as most FP/advisers have not even got to that stage themselves!!

Just realised that Tech/A has noted exactly the same point!!


----------



## Junior

You guys are talking about advisers who drive around in a Porsche and recommend high-risk 'complex' investments for which they earn commissions.

These guys existed pre-2008 and fortunately most of them have been weeded out of the industry.  They give the industry a bad name.  It has and is changing significantly for the better.  Commissions on investment products were banned in 2009, the banks are offloading and separating from financial advice due to the inherent conflict of interest in being an advice provider and product provider, and education standards for advisers have been raised significantly.


----------



## tech/a

Junior said:


> You guys are talking about advisers who drive around in a Porsche and recommend high-risk 'complex' investments for which they earn commissions.
> 
> These guys existed pre-2008 and fortunately most of them have been weeded out of the industry.  They give the industry a bad name.  It has and is changing significantly for the better.  Commissions on investment products were banned in 2009, the banks are offloading and separating from financial advice due to the inherent conflict of interest in being an advice provider and product provider, and education standards for advisers have been raised significantly.




Absolutely not.
These guys don't own a lot in particular the Porsche.
These are wanna be's

They believe that looking the part makes them the part.
They are nothing but Sales people
Selling Managed Funds.
While they may make investment Look complex
There is nothing complex about their planning.



> education standards for advisers have been raised significantly




But they can still work under a dealer principal licence with very little educational requirement.

Simply
Get as much money into the Funds they are flogging for commission (Read Fee) and continued Advice.
The advice is a print out and risk evaluation questionnaire---That will be $500 thanks.

There are very few Solid Financial "Planners"

The industry is not in my view capable of guiding anyone toward financial freedom. Parking Funds sure.
Planning is limited to what you can do with the funds you now have.

Id have thought a good F/P could point you in the direction of opportunity OR if you thought you had found an opportunity --- guide you to what to do with it.

So in reality my expectations are wrong?


----------



## tech/a

*I found this on the Web.*

*One of the best answers I have seen on the topic.


*
One way to get a sense is to look at this Certified Financial Planner topic list.

Another idea is to look at this book (my favorite I've read) which covers roughly a similar topic list in a concise form: http://www.amazon.com/Smart-Simple-Financial-Strategies-People/dp/0743269942 It could not hurt at all to read that before deciding to visit a planner, so you have baseline knowledge.

By the way, look for the CFP certification which is a generalist certification. A CFP might also have a deeper cert in certain topics or connect you with someone who does. For example:


someone with a CPA or Enrolled Agent certification could help with taxes (note: your average tax prep place just has people who know how to type into the computer program, they have minimal expertise; a CPA or EA does have expertise)
an estate planning lawyer would be an expert on setting up beneficiaries, writing your will, trusts, etc.
a Chartered Financial Analyst (CFA) would be an investment expert
there are insurance certifications and retirement plan certifications also
there are garbage certifications that mean very little out there ... I've tried to mention some that mean something
You really want a generalist (CFP) who may have an additional credential as well. The idea is to holistically look at what you're trying to accomplish and all finance-related areas. Especially because there may be tradeoffs. The CFP would then refer you to or work with lawyers, accountants, etc.

Importantly, some advisors are fiduciaries (must act in your interests) and some are _not_. In particular many stockbrokers are neither qualified planners (no CFP or equivalent) nor are they fiduciaries. Stay away.

There are several models for paying a financial planner, including:


loss-leader for an institution like Fidelity or Vanguard. If you have enough money with them they may give you free or discounted planning. They will of course always pick investments offered by their company, which is probably OK for say Vanguard and pretty bad for some other companies. Also this is probably on the phone, not in person, if that matters to you.
commissions. (or a mix, "fee-based"). These planners are in part salespeople, for either investments or insurance or both. I'd stay away but some people are comfortable with it.
percentage-of-assets fee-only. These planners get a fee from you, but as a percentage of investment assets managed. This creates an overemphasis on investing perhaps, though arguably an incentive not to lose your money, too. It also comes out to kind of a lot of money. One advantage is someone is doing rebalancing and other "investment maintenance" for you. This can be good if you lack the time and willpower, as many of us do.
hourly fee-only. Like many lawyers and CPAs, just charge you for time spent. This money will be a more visible check you have to write but is probably cheaper than percentage of assets over time. But you don't have someone managing your money for you, this is more of a "get advice, then DIY" approach. There's a franchise Garrett Planning Network that has this kind of planner.
There's an organization called NAPFA (napfa.org) for fiduciary non-commission-based planners. Membership there is a good thing to look for since it's a third party that defines what fee-only means and requires the no-commissions/fiduciary standard.

Finally, the alternative I ended up choosing was to just take the CFP course myself. You can do it online via correspondence course, it costs about the same as 1 year of professional advice. I also took the exam, just to be sure I learned the stuff. This is the "extreme DIY" approach but it is cheaper over time and you know you are not going to defraud yourself. You still might do things that are counterproductive and not in your interests, but you know that already probably ;-) Anyway I think it's equivalent to about a quarter's worth of work at a decent college, or so. There are about 6 textbooks to dig through. You won't be an experienced expert at the end, but you'll know a lot. To get an actual CFP cert, you need 3 years experience on top of the courses and the exam - I haven't done that, just the book learning. Someone who puts "CFP" after their name will have the 3 years on top of the training.

Some editorial: many planners emphasize investing, and many people looking for planners (or books on finance) emphasize investing. This is a big mistake, in my view. Investing is more or less a commodity and you just need someone who won't screw it up, overcharge, and/or lose your money on something idiotic or inappropriate.

Some people are in plain-bad and inappropriate investments, don't get me wrong. But once you fix that and just get into anything decent, your biggest planning concerns are probably elsewhere.


Some big picture understanding of your life goals and how money fits into them and what you need to do to get there.
Few people are properly insured. (Disability, life, umbrella, etc.)
Budgeting, spending, and saving.
Estate plan, at least a will and setting up proper beneficiaries on retirement accounts and insurance policies. Especially if you have kids, this is must-do.
Getting all the tax benefits you can, especially if self-employed or you own a business or real estate.
On investments, I'd look for a planner to just get you out of overpriced annuities and expensive mutual funds you may have been sold (*anything you were sold by a salesperson is probably crap*). And look for them to help you decide how much to invest, and how much in stocks vs. bonds. Those are the most important investment decisions


----------



## Junior

tech/a said:


> *I found this on the Web.*
> 
> *One of the best answers I have seen on the topic.
> 
> 
> *
> One way to get a sense is to look at this Certified Financial Planner topic list.
> 
> Another idea is to look at this book (my favorite I've read) which covers roughly a similar topic list in a concise form: http://www.amazon.com/Smart-Simple-Financial-Strategies-People/dp/0743269942 It could not hurt at all to read that before deciding to visit a planner, so you have baseline knowledge.
> 
> By the way, look for the CFP certification which is a generalist certification. A CFP might also have a deeper cert in certain topics or connect you with someone who does. For example:
> 
> 
> someone with a CPA or Enrolled Agent certification could help with taxes (note: your average tax prep place just has people who know how to type into the computer program, they have minimal expertise; a CPA or EA does have expertise)
> an estate planning lawyer would be an expert on setting up beneficiaries, writing your will, trusts, etc.
> a Chartered Financial Analyst (CFA) would be an investment expert
> there are insurance certifications and retirement plan certifications also
> there are garbage certifications that mean very little out there ... I've tried to mention some that mean something
> You really want a generalist (CFP) who may have an additional credential as well. The idea is to holistically look at what you're trying to accomplish and all finance-related areas. Especially because there may be tradeoffs. The CFP would then refer you to or work with lawyers, accountants, etc.
> 
> Importantly, some advisors are fiduciaries (must act in your interests) and some are _not_. In particular many stockbrokers are neither qualified planners (no CFP or equivalent) nor are they fiduciaries. Stay away.
> 
> There are several models for paying a financial planner, including:
> 
> 
> loss-leader for an institution like Fidelity or Vanguard. If you have enough money with them they may give you free or discounted planning. They will of course always pick investments offered by their company, which is probably OK for say Vanguard and pretty bad for some other companies. Also this is probably on the phone, not in person, if that matters to you.
> commissions. (or a mix, "fee-based"). These planners are in part salespeople, for either investments or insurance or both. I'd stay away but some people are comfortable with it.
> percentage-of-assets fee-only. These planners get a fee from you, but as a percentage of investment assets managed. This creates an overemphasis on investing perhaps, though arguably an incentive not to lose your money, too. It also comes out to kind of a lot of money. One advantage is someone is doing rebalancing and other "investment maintenance" for you. This can be good if you lack the time and willpower, as many of us do.
> hourly fee-only. Like many lawyers and CPAs, just charge you for time spent. This money will be a more visible check you have to write but is probably cheaper than percentage of assets over time. But you don't have someone managing your money for you, this is more of a "get advice, then DIY" approach. There's a franchise Garrett Planning Network that has this kind of planner.
> There's an organization called NAPFA (napfa.org) for fiduciary non-commission-based planners. Membership there is a good thing to look for since it's a third party that defines what fee-only means and requires the no-commissions/fiduciary standard.
> 
> Finally, the alternative I ended up choosing was to just take the CFP course myself. You can do it online via correspondence course, it costs about the same as 1 year of professional advice. I also took the exam, just to be sure I learned the stuff. This is the "extreme DIY" approach but it is cheaper over time and you know you are not going to defraud yourself. You still might do things that are counterproductive and not in your interests, but you know that already probably ;-) Anyway I think it's equivalent to about a quarter's worth of work at a decent college, or so. There are about 6 textbooks to dig through. You won't be an experienced expert at the end, but you'll know a lot. To get an actual CFP cert, you need 3 years experience on top of the courses and the exam - I haven't done that, just the book learning. Someone who puts "CFP" after their name will have the 3 years on top of the training.
> 
> Some editorial: many planners emphasize investing, and many people looking for planners (or books on finance) emphasize investing. This is a big mistake, in my view. Investing is more or less a commodity and you just need someone who won't screw it up, overcharge, and/or lose your money on something idiotic or inappropriate.
> 
> Some people are in plain-bad and inappropriate investments, don't get me wrong. But once you fix that and just get into anything decent, your biggest planning concerns are probably elsewhere.
> 
> 
> Some big picture understanding of your life goals and how money fits into them and what you need to do to get there.
> Few people are properly insured. (Disability, life, umbrella, etc.)
> Budgeting, spending, and saving.
> Estate plan, at least a will and setting up proper beneficiaries on retirement accounts and insurance policies. Especially if you have kids, this is must-do.
> Getting all the tax benefits you can, especially if self-employed or you own a business or real estate.
> On investments, I'd look for a planner to just get you out of overpriced annuities and expensive mutual funds you may have been sold (*anything you were sold by a salesperson is probably crap*). And look for them to help you decide how much to invest, and how much in stocks vs. bonds. Those are the most important investment decisions




Thanks Tech/a.  This post articulates some of what I was unsuccessfully trying to communicate.

Financial Advice in Australia is not just about investment advice.

With regards to CFP:

Post-grad Financial Planning qualification will be compulsory for all new advisers from 2019, and for existing advisers by 2024.  This is the point I have been trying to convey.....things are changing!!

In Australia, to gain entry into CFP you must already have completed a Business undergrad degree with FP major, OR another degree + Graduate Diploma in FP.  CFP is tougher than you may think, and Investment Planning is not the key focus.  The information you have posted above is in the States, so it differs a bit there.

All advisers are now required by law to put the interests of their client ahead of their own.  i.e. we have the fiduciary duty here.


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## tech/a

*This is excellent.*

So brty and the duck aren't the only ones to recognise
the need for a massive change. Currently any idiot can find a dealer
principal and operate under them calling themselves a Financial Planner/Adviser

There is a place for experts.
But this industry is rife with incompetence.
Hopefully that will change.

*Even so* The course cannot replace experience.

Frankly I cant see a well heeled 60 yrs old sitting in front of an F/A who is qualified because he has passed the above course, seeking advise on how to place his $1-2 million.
Joe Bloggs who has placed his funds into XYZ Industry Fund may get some benefit in specific areas.
But those with SMSF wouldn't get a great deal from someone who has done the course. They got there doing things in their Super Far differently than those would advise----after doing the course.
Again personal opinon.


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## brty

Junior, you seem to be confirming that FP in the past was really bad, hence why things are changing in the industry.

Why will the changes make things any better? Just because people have a piece of paper from a university or a second one, does not necessarily add one iota about how to make money through trading/investing and setting themselves up for later in life.

A close mate who is a FP and principal of his firm, can hardly wait to get out of the system (sell his business) because of all the new rules and regs that basically stop him from giving anyone good "real" advise.

I notice you totally avoided the questions about giving people a book list to read/study and advice about a stop loss on investments.

Changing the industry is admittance there is a lot wrong with it!!

Great post Tech/A, nice simple book that should be what FP/advisers suggest people go and read.
I very much liked this in the summary.........
"To start with, she tells you to forget all the complicated stuff the financial industry sells. You don't need it, it costs too much, and some of it is downright bad. It's designed to make the banks, brokers, and insurance companies rich, not you."


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## Junior

tech/a said:


> *This is excellent.*
> 
> So brty and the duck aren't the only ones to recognise
> the need for a massive change. Currently any idiot can find a dealer
> principal and operate under them calling themselves a Financial Planner/Adviser
> 
> There is a place for experts.
> But this industry is rife with incompetence.
> Hopefully that will change.
> 
> *Even so* The course cannot replace experience.
> 
> Frankly I cant see a well heeled 60 yrs old sitting in front of an F/A who is qualified because he has passed the above course, seeking advise on how to place his $1-2 million.
> Joe Bloggs who has placed his funds into XYZ Industry Fund may get some benefit in specific areas.
> But those with SMSF wouldn't get a great deal from someone who has done the course. They got there doing things in their Super Far differently than those would advise----after doing the course.
> Again personal opinon.




Tech/a, I'm not suggesting the course alone is sufficient.  A good mentor and experience is also required.


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## tech/a

Personally I think there should be a course which *all students* do in Year 10
That early because those who need it most will be those who make year 10,11,12
and then leave school. It should be compulsory and pepped up so it ISNT
boring. Real live examples and studies the best being their OWN homes.

Their own personal budgets and planning.
Run a 12 mth paper of their own situation
and base it against a benchmark. disclosed
at the end of the year.
.
Clearly more advanced subjects past year 10.

Educate the population so they can better select and discuss their own
circumstances.


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## Cam019

Interesting to see all the comments here. I am currently completing a Bachelors degree with majors in financial planning and economics and the following link will give a good outline of how the industry is changing and and the education requirements of not only new entrants entering the industry (me in 2019), but also the education requirements of all existing financial advisers. Soon to be gone are the days where a Diploma or Advanced Diploma of FP is all that is required for entry into the industry.


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## Junior

brty said:


> I notice you totally avoided the questions about giving people a book list to read/study and advice about a stop loss on investments.




Brty if they were happy to read books and DIY, they wouldn't choose to make an appointment with a financial adviser.  As previously explained, an adviser is not just about managing a lump sum of money, it's higher level strategy and advice across a range of areas which pertain to someone's financial situation and planning throughout different life stages.  Risk management, estate planning and the use of different tax structures are example of other areas a good adviser will address as part of a plan.

Most advisers do rely on managed funds for most clients, because to manage a portfolio of direct shares with stop losses etc. requires daily monitoring of the portfolio = a lot of time and therefore significant cost to the client.  As in most professions there is a significant & growing burden in terms of administration and compliance in managing funds for a client.  For someone with a large portfolio to manage direct investing can make sense, but not so for the average portfolio under advice.  

There is nothing inherently wrong with managed funds in my view, as long as performance is above benchmark and fees are reasonable.

The days of an adviser recommending just one fund manager who their dealer group is aligned with are dying, thankfully.  Use of ETFs and index funds are more prevalent these days as well, to keep costs down for the client.


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## Junior

An example:

You would be surprised how many people out there are sitting on a large accumulation of cash, paying tax at their marginal rate on interest earned.  It's only once they retire, reality sets in that their capital will be eroded by tax (less so in retirement) and inflation.  Furthermore they have remained loyal to the bank they have used their whole lives - and the bank has not returned that loyalty in terms of offering a competitive interest rate.

You might say the answer is easy - buy some shares or an index fund.  Most people wouldn't know where to start, some aren't even computer literate and would be stressed out even setting up a broking account.  Then they wouldn't know what sort of volatility or returns to expect, and therefore what level of income to expect from their savings.

The scenario above is common as there are many who are not accustomed to such low interest rates and may have been taught by their parents to only trust cash and residential property.

A decent & ethical adviser can very easily provide good value for money with advice, which provides peace of mind and a regular income stream through retirement.  The advice will take into account tax and estate planning considerations, and the children can be involved in the process where appropriate.


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## brty

Junior, obviously none of us are going to change anyone else's opinion, but just couple of points...



Junior said:


> Brty if they were happy to read books and DIY, they wouldn't choose to make an appointment with a financial adviser.




Perhaps the correct financial advice is to sell some appropriate books, they probably don't know where to start. I agree with Tech/A that there should be education about money/investments etc in schools.



Junior said:


> There is nothing inherently wrong with managed funds in my view, as long as performance is above benchmark and fees are reasonable.




Hence why I mentioned stop losses. There is a litany of funds that have gone from outperformers, to underperformers, to losing nearly all of the (remaining) funds under management. FPs/advisers seem to be good at putting people into funds, but then do not manage how the fund performs.



Junior said:


> You would be surprised how many people out there are sitting on a large accumulation of cash




No I'm not!! These people have done very well for themselves over time (except for inheritances), so they do know how to make money. The problems always seem to arrive after they have sought professional advice on what to do with their cash, thinking the 'professional' adviser knows more than they usually do. These are the people that you could point to a good book or 2 and they would do very well by themselves, just like they have done, to get the large accumulation of cash in the first place.



Junior said:


> A decent & ethical adviser




Can you name ANY that don't claim to be?? How does a totally uneducated person know who is decent and ethical?? online testimonials? advertising? saw on TV??(LOL, sorry could not resist).



Junior said:


> A decent & ethical adviser can very easily provide good value for money with advice, which provides peace of mind and a regular income stream through retirement. The advice will take into account tax and estate planning considerations, and the children can be involved in the process where appropriate.




Assuming now the person has been lucky enough to find a decent and ethical adviser, the rest of this statement highlights the weakness of the adviser. As soon as retirement and tax planning are mentioned in association, out comes stuffing as much into super as possible, using TODAY'S rules. However the rules keep changing and will continue to do so. A good adviser would take this into consideration, but current rules/regs (and perhaps the new ones?) are not likely to allow him/her to take this into account.


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## Junior

brty said:


> Assuming now the person has been lucky enough to find a decent and ethical adviser, the rest of this statement highlights the weakness of the adviser. As soon as retirement and tax planning are mentioned in association, out comes stuffing as much into super as possible, using TODAY'S rules. However the rules keep changing and will continue to do so. A good adviser would take this into consideration, but current rules/regs (and perhaps the new ones?) are not likely to allow him/her to take this into account.




Brty, many of your points highlight the need for regular reviews and advice.  As the rules change the strategy will change, the performance of recommended managed funds will be monitored and changes made where required.

RE Super, yes the rules keep changing, but it's still a low-tax environment and for those approaching retirement it makes sense to load it up.  For clients who are 55+ they are within a few years of having full access to their super - funds can be taken as a lump sum if it makes sense to do so due to any rule changes.  Super is still completely tax free and unrestricted access for those aged 65+ and a balance <$1.6mill.

Finding a good and ethical adviser.....there are many of them out there these days.  There are some good guides online for ways to assess an adviser before signing up.


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## Junior

brty said:


> Junior, obviously none of us are going to change anyone else's opinion, but just couple of points...




I agree, that's fine.  I'm in the industry and I work with a great group of advisers.

However, in the past I've seen some very poor behaviour & average advice so I'm certainly not defending the whole industry.


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## greggles

*Financial planning 'doesn't have professional standards', resisting reform*

http://www.abc.net.au/news/2018-04-16/financial-planning-lacks-professional-standards/9664134

When is the government going to get serious about the financial planning industry? Too much greed and not enough concern for the financial health of the average person.

Is it because the government it too afraid to take on the powerful corporate interests that control the financial advice industry? If there was ever an industry that needed serious reform, this is it.


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## basilio

Perhaps another reason to be (very) careful about financial advisors and trusting your local for-profit superannuation machine.
 Print  Email  Facebook  Twitter  More
*IOOF plunges $900m as APRA moves to disqualify its top executives*
By business reporters Daniel Ziffer and David Chau
Updated about an hour ago



* Photo:* If APRA succeeds, Chris Kelaher and four IOOF senior executives will be disqualified.
(Supplied: Royal commission) 
*Related Story:* Royal commission accuses IOOF of making members pay compensation for a fund error
*Related Story:* ANZ sells wealth management business to IOOF for $1b
Space to play or pause, M to mute, left and right arrows to seek, up and down arrows for volume.

*Audio:* Royal Commission: IOOF used member funds to pay own compensation (PM) 
Australia's financial regulator has taken action against superannuation giant IOOF in the Federal Court and is trying to disqualify its top executives from managing people's retirement savings.

*Key points:*

IOOF paid compensation to its superannuation members out their own retirement savings
APRA accused IOOF of breaching its duty to act in their members' best interests
The company says its compensation scheme meets the "pub test"


Its managing director Chris Kelaher, along with four senior executives, failed to act in the best interests of superannuation members, the Australian Prudential Regulation Authority (APRA) alleges.

https://www.abc.net.au/news/2018-12...s-apra-moves-to-disqualify-top-execs/10593278


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## basilio

Junior said:


> I agree, that's fine. I'm in the industry and I work with a great group of advisers.
> 
> However, in the past I've seen some very poor behaviour & average advice so I'm certainly not defending the whole industry.




That is a tough gig Junior. From my observations quality, ethical, customer focused  financial advice in the financial services industry is* just not *what the industry is about. It should be but unfortunately industry greed, lax supervision and  toothless regulators have let the foxes run the hen house.

I posted the article about IOOF but  the current Royal Commission has thrown up  evidence that AMP and CBA and other larger organizations that employed many financial advisors were not acting in the interest of their customers.


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## Junior

basilio said:


> That is a tough gig Junior. From my observations quality, ethical, customer focused  financial advice in the financial services industry is* just not *what the industry is about. It should be but unfortunately industry greed, lax supervision and  toothless regulators have let the foxes run the hen house.
> 
> I posted the article about IOOF but  the current Royal Commission has thrown up  evidence that AMP and CBA and other larger organizations that employed many financial advisors were not acting in the interest of their customers.




Much of the poor behaviour discussed and observed through the Royal Commission, related to senior executives.  These people are not financial advisers.  For example, the IOOF case you have referred to, is in relation to the trustees of a super fund.  Likewise at AMP, the allegations were levelled at senior executives, not financial advisers.

There are plenty of great advisers out there.  You will never read about them, the media have no interest in hearing reporting on the time someone received life-changing financial advice, they only care about scandal.  Likewise with the Royal Commission, they are looking for the most shocking and reprehensible behaviour they can find.


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## tech/a

Junior.

I know your in the Industry.
Other than Insurance stories
Can you give an example or two of Financial Advisor
Life changing financial advice? I've never seen any and I know 3


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## basilio

Junior said:


> Much of the poor behaviour discussed and observed through the Royal Commission, related to senior executives.  These people are not financial advisers.  For example, the IOOF case you have referred to, is in relation to the trustees of a super fund.  Likewise at AMP, the allegations were levelled at senior executives, not financial advisers.
> 
> There are plenty of great advisers out there.  You will never read about them, the media have no interest in hearing reporting on the time someone received life-changing financial advice, they only care about scandal.  Likewise with the Royal Commission, they are looking for the most shocking and reprehensible behaviour they can find.




I can appreciate your desire to show the better side of financial advisors.  I am also quite sure there are people with the  skills to understand the various financial instruments in the market place,  make sense of what would be in the best interest of theirs clients and set up a good deal for them.

Unfortunately I don't believe that that is the basis of the industry. From my observations an overwhelming focus of the industry is generating commissions on the sale of financial products and creating further commissions on the ongoing management of peoples total investments. I know that often the dodgiest investments are sold by financial planners to clients because these offer the highest commissions. Timbercorp comes to mind for a start.

I am also aware that the organizations that employ  financial advisors (whether formally or not)  have created a structure that rewards the most profitable (for the company)  advisors and effectively sacks anyone who can't sell enough product to keep the figures looking good for the executives. I can remember the uproar from the industry when it was proposed that financial advisors should  *formally* work for the benefit of their clients.

Again I believe the concept of skilled, client friendly financial advisor is excellent. Perhaps now is the time to restructure the industry so that the  client does come first.
_
As previously explained, an adviser is not just about managing a lump sum of money, it's higher level strategy and advice across a range of areas which pertain to someone's financial situation and planning throughout different life stages. Risk management, estate planning and the use of different tax structures are example of other areas a good adviser will address as part of a plan.  Junior_


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## Junior

basilio said:


> Unfortunately I don't believe that that is the basis of the industry. From my observations an overwhelming focus of the industry is generating commissions on the sale of financial products and creating further commissions on the ongoing management of peoples total investments. I know that often the dodgiest investments are sold by financial planners to clients because these offer the highest commissions. Timbercorp comes to mind for a start.




On this point.  Commissions on investment products were banned in 2010, so this ugly element of the industry is dead.  I worked for a group who sold a large volume of Timbercrop and other MIS projects...and new many other advisers who sold this stuff.  Most of them were accountants/advisers.  Not only sucked in by the commissions, but also blinded by the tax benefits associated with those investments.

Where commissions are still a problem, is where someone who owns a financial planning practice, also has ownership interest with a property development group.  Their advisers then "advise" their clients to invest in off-the-plan property (this means commissions from developer, commissions on mortgage, commissions on Life insurance) .... I have seen this recently and it's highly unethical in my view.  The upcoming changes to minimum education standards, should largely kill this off, as the "advisers" who operate under this structure are typically poorly educated.


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## Junior

tech/a said:


> Junior.
> 
> I know your in the Industry.
> Other than Insurance stories
> Can you give an example or two of Financial Advisor
> Life changing financial advice? I've never seen any and I know 3




This short piece here is relevant.  Retirement planning is huge.  Most people have no idea how much they need.

https://www.vanguard.co.uk/adviser/adv/articles/research-commentary/practice-management/how-outburst-changed-my-perspective-on-money.jsp


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## Darc Knight

I searched and searched for good Financial Planner. Found a CFP who was a Public Prosecutor in a past life. Researched the company and found it had links to CBA. The speil about "approved list" took on a whole new meaning. Then they wanted me to subscribe to a platform, even though their "approved list" included funds such as Colonial First.

Even Noel Whittaker can't tell you how to find a good Financial Planner.


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## Junior

Darc Knight said:


> I searched and searched for good Financial Planner. Found a CFP who was a Public Prosecutor in a past life. Researched the company and found it had links to CBA. The speil about "approved list" took on a whole new meaning. Then they wanted me to subscribe to a platform, even though their "approved list" included funds such as Colonial First.
> 
> Even Noel Whittaker can't tell you how to find a good Financial Planner.




The fact they recommend CBA products isn't necessarily a bad thing in and of itself.  It depends if the advice focused on strategy and what you want to achieve first, or did they just launch straight into making sure all your wealth & insurance cover was moved into their products.

It also depends when the CFP was achieved, in terms of whether that carries much weight.  These days it's a tough course to get through, with a strong focus on ethics.  Back in the 90s it was a different story, and you didn't even need a degree as a pre-req.


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## Darc Knight

Junior said:


> The fact they recommend CBA products isn't necessarily a bad thing in and of itself.  It depends if the advice focused on strategy and what you want to achieve first, or did they just launch straight into making sure all your wealth & insurance cover was moved into their products.
> 
> It also depends when the CFP was achieved, in terms of whether that carries much weight.  These days it's a tough course to get through, with a strong focus on ethics.  Back in the 90s it was a different story, and you didn't even need a degree as a pre-req.




But if a CFP is advising to buy funds like Colonial why go to him in the first place, except for tax implications etc.
Also, why do I need to buy into the platform if he's doing all the buying etc. 3% in fees down the drain imo. Go straight to Colonial or Vanguard ( less than 1% in fees).


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## Junior

Darc Knight said:


> But if a CFP is advising to buy funds like Colonial why go to him in the first place, except for tax implications etc.
> Also, why do I need to buy into the platform if he's doing all the buying etc. 3% in fees down the drain imo. Go straight to Colonial or Vanguard ( less than 1% in fees).




If fees are 3%, then that is way too high, I agree just use Vanguard.  If you were just seeking straight investment advice, sounds like you can do it yourself through an Index Fund.

If he couldn't add value or provide you with advice to put you in a better position than before you walked in the door....then you don't need him.


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## sptrawler

This story is about someone who was cleaned out in the GFC, due to poor financial advice, but it does highlight how long and difficult it can be to recover.









						Naomi lost hundreds of thousands after taking investment advice. It nearly cost her her home - ABC Everyday
					

Naomi Halpern was left in hundreds of thousands of dollars of debt when investments recommended by her adviser collapsed.




					www.abc.net.au
				



From the article:
In 2007, during the early stages of the global financial crisis, Naomi Halpern was fielding calls from banks and debt collectors after her money.

In the years leading up to crisis, her financial adviser suggested she invest in the share market and timber and agricultural schemes — often with borrowed money.

When the values of her investments collapsed, she nearly lost her home. In the aftermath, ASIC found that her financial adviser failed to have a reasonable basis for the advice he gave to retail clients.

Now, 13 years later, Naomi is in her 60s and still paying off the debt.
How has this experience shaped your confidence with money?​Confidence wasn't the problem. I'd always managed the finances in my business.

The mistake I made was to accept so-called "independent, professional expertise" for tax and later personal investing.

I have not been in a position to invest since.


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## divs4ever

i escaped  a similar fate   , by realizing the Financial Adviser ( the group since penalized  by the regulators )  had  conflicted interests  , and having  a long time aversion  to leveraging in general ( on mortgage  was enough for me )

 so at worst for me   i was only looking at a small negative ( a total loss of cash  plus any fees )   but maybe i am more cautious than the average bear ( pun intended )


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