# Professional Financial Adviser Fees



## Kayman

Hi all. This is my first post here and hope that the subject matter is of an appropriate nature to this particular forum.

My financial portfolio, an allocated pension fund, which consists mainly of managed funds, is within a wrap account. Because of my limited knowledge in relation to financial matters the f/portfolio is since 6 years under the wings of a financial adviser.

The wrap account and financial adviser charge monthly fees (administration and ongoing advice respectively) which are based on the total value of my assets in my wrap account. Both fees are automatically debited to my cash account within the wrap account.

The ongoing advice fee includes a six-monthly formal review, recommended portfolio changes, long term strategic modelling - ensuring I am on track in terms of asset allocation of my f/portfolio.

I do realize that for quality professional services appropriate fees apply and need to be paid. I am not opposed to these payments. However, I begin to question the necessity of monthly fees for ongoing advice as my f/portfolio only gets reviewed twice a year and feel that the ongoing advice fee rather undermines the cost effectiveness of the wrap account.

I am now contemplating switching to another professional financial adviser who charges me a professional fee (hourly rate) for finacial advice. 

Presumably, since an hourly rate is not tied to the value of my investments, or generated by the purchase of any specific investment, couldn't I be confident to expect & receive objective advice for a more moderate fee? Though I'd expect to pay a higher hourly rate for an experienced adviser.

I hope receiving some good comments, recommendations and/or guidance from participants of this forum who have more savvy in this matter that I have.

Kind regards...


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## awg

*Re: Professional Financial Adviser Fees.*



Kayman said:


> I am now contemplating switching to another professional financial adviser who charges me a professional fee (hourly rate) for finacial advice.
> 
> Presumably, since an hourly rate is not tied to the value of my investments, or generated by the purchase of any specific investment, couldn't I be confident to expect & receive objective advice for a more moderate fee? Though I'd expect to pay a higher hourly rate for an experienced adviser.
> 
> I hope receiving some good comments, recommendations and/or guidance from participants of this forum who have more savvy in this matter that I have.
> 
> Kind regards...




Been thru this. 

Good luck finding one

At that time, 3-4 yrs ago,  there was virtually nothing, even in Sydney.

I believe such service is now available, you dont mention your location?

I see no good reason why at least some financial advisors should not be fee for service, exactly like accountants, solicitors.

Hopefully the recent enquiry into financial planners fees will lead to a more competitive stucture.

I guess another consideration, is has your portfolio outperformed?


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## Julia

*Re: Professional Financial Adviser Fees.*



awg said:


> Been thru this.
> 
> Good luck finding one
> 
> At that time, 3-4 yrs ago,  there was virtually nothing, even in Sydney.



I believe you.
A friend has been looking for this sort of impartial adviser, being dissatisfied with the fees being charged on her underperforming Super.

I ran it by my accountant to see if he could recommend anyone.  This is his response:



> Financial Planning””wonderful industry!!!  I am not a financial planner now.  Was, but pulled out, as the Licensed Dealers would only accept plans based on the sale of products that were on their product lists””all commission based.  So I could not provide an authentic service that was truly unbiased, so I got out of it””I have to sleep soundly at night.
> 
> Her dilemma is common””where do I get genuine financial planning advice””answer””it does not exist to my knowledge.  I don’t know any financial adviser who I would trust to do the right thing.  They are all under the control of licensed dealers and I don’t know any licensed dealers that are in it to serve their client’s best interest.





To the original poster:  educate yourself so you can manage your own investments.  It is absolutely not as difficult as you might imagine.
Read through the Beginners' Lounge on this forum.
Go to www.asx.com.au and work through their very clear Education modules.

Good on you for at least being aware of what you're paying in fees.

I, too, would be interested to know what return they have been getting for you, net of fees?


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## Kayman

*Re: Professional Financial Adviser Fees.*



awg said:


> Been thru this.
> 
> Good luck finding one
> 
> At that time, 3-4 yrs ago,  there was virtually nothing, even in Sydney.
> 
> I believe such service is now available, you dont mention your location?
> 
> I see no good reason why at least some financial advisors should not be fee for service, exactly like accountants, solicitors.
> 
> Hopefully the recent enquiry into financial planners fees will lead to a more competitive stucture.
> 
> I guess another consideration, is has your portfolio outperformed?




My financial adviser is located in Sydney but I don't. Location is not important to me. The *ongoing advice* fees my financial adviser is charging are competitive and I am not suggesting that his investment recommendations are substandard; I am satisfied that my financial portfolio has performed well during the global financial crisis.


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## Kayman

*Re: Professional Financial Adviser Fees.*



Julia said:


> I believe you.
> A friend has been looking for this sort of impartial adviser, being dissatisfied with the fees being charged on her underperforming Super.
> 
> I ran it by my accountant to see if he could recommend anyone.  This is his response:
> 
> 
> 
> 
> To the original poster:  educate yourself so you can manage your own investments.  It is absolutely not as difficult as you might imagine.
> Read through the Beginners' Lounge on this forum.
> Go to www.asx.com.au and work through their very clear Education modules.
> 
> Good on you for at least being aware of what you're paying in fees.
> 
> I, too, would be interested to know what return they have been getting for you, net of fees?




Considering the global financial crisis, the return of my investments basically equalled my cost of living expenses, in other words growth was negligible. I firmly believe that the current situation will improve and look forward to better times and 'returns' in the future. Thanks for tips in relation to managing my own investments....something to ponder about.


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## tech/a

Question

If you had an advisor who charged a fee on a performance basis.
IE no profit no fee.

What % of profit would you feel acceptable and why?

Mind you I dont know of one but am curious.


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## Julia

tech/a said:


> Question
> 
> If you had an advisor who charged a fee on a performance basis.
> IE no profit no fee.
> 
> What % of profit would you feel acceptable and why?
> 
> Mind you I dont know of one but am curious.



Yes, I'm similarly curious.

It is, however, a salient point.  Much is made of the need to beat the index, something with which we'd mostly agree, I'd guess.

But isn't it going to depend on the individual circumstances of the investor?
i.e. someone already in retirement with more than adequate capital to see them out (ghastly phrase!) may feel to accept the returns from cash on capital guaranteed is just fine, as a compromise from the anxiety of being fully invested in volatile times when - if we have another GFC like the recent one - could see that capital halved.

I know people who are accepting returns which are quite poor derived from e.g. managed funds recommended by their financial advisers because they are not prepared to educate themselves and take control of their own outcomes.  For many it's 'just way too hard'.


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## skc

tech/a said:


> Question
> 
> If you had an advisor who charged a fee on a performance basis.
> IE no profit no fee.
> 
> What % of profit would you feel acceptable and why?
> 
> Mind you I dont know of one but am curious.




In an ideal world here's what I would like to see.

A basic performance threshold equal to the RBA rate and on a benchmark, say ASX200 cumulative index, whichever is higher.

A 15% performance fee on the profit above the threshold plus 10% performance fee above the benchmark.

So if I have say $1m fund and it returned 15% ($150K), vs RBA rate of 4.5% and ASX200 cumulative index of 11%, I pay 15% on 4% (being my return minus the threshold, in this case the index return) which is ~$6K. In addition I pay 10% on another 4% (being my return minus the benchmark) which is $4K. Bring the total to $10K

In this case, the adviser is being modestly rewarded for beating the benchmark.

If my $1m returned 10% ($80K) vs RBA rate of 5% and index return of -10%, I pay 15% on 5% (my return minus the threshold, in this case the RBA rate) which is ~$7.5K. Plus I pay 10% on another 20% (being my return minus the benchmark) which is 2% or $20K. So in total I pay $27.5K.

In this case, the adviser is being rewarded for making good positive return despite the market downturn (which would see my lose $100K based on the benchmark).

If my $1m returned 8% ($80K) vs RBA rate of 5% and index return of 12%, I pay no performance fee. In this case the adviser is not rewarded for underperformance.

I've never used a financial adviser before so no idea if these fees are way off the mark or not. 

To be fair a minimum annual fee of $2-3K might be justified to cover basic admin and other services.


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## El Toro

Kayman said:


> I am now contemplating switching to another professional financial adviser who charges me a professional fee (hourly rate) for finacial advice.




What advice do you want? What hourly rate would you be prepared to pay for that advice?

I know of some Financial Advisers that work with industry funds and they charge between $220-$250 per hour. But then the advice is really limited to the industry funds that they deal with. They wouldn't look at anything outside of the industry superannuation, such as other investments or personal insurances.

There is also this link. http://www.aifa.com.au/ 

I haven't used either of these so I can't evaluate them for you.

The question is what type of advice you are looking for and who can deliver that advice to you in the best and most cost effective way.


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## Garpal Gumnut

Look up the definition of all four words.

Pick some key attributes you seek, and print the words that match on an A 4 page.

Leave your house and begin a walk around Australia in a counterclockwise direction.

On your return to your home I would bet London to a brick, you will not find an fp who will match your tattered page.

Professional
Financial
Adviser
Fees.

What a joke applied to fp's.

gg


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## awg

I manage my own investments now.

This requires a very steep learning curve, and much time and work.

I outperform the relevant benchmarks.

The saving on advisor fees is an annual 5 figure sum, 

entirely compounding, and as I am relativly young, just this alone should eventually add up to be worth a VERY large amount, leaving aside any potential improvement in my own performance.

I did find some guys that were licenced financial planners who would give me advice, for between $250-350 per hour...but I didnt think I needed it.

At the end of the day, these guys are working X hours per week, and it seems the business model is entirely stuctured to be more profitable on a commission basis...you may be seen as a less profitable distraction.

My hugely experienced accountant has a loathing of fin P fee stucture, but that is mainly cause he wishes he could charge like that.

IMO there will eventually be fee-for-service, but I have been saying that for years.


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## breaker

Been down that road we are still paying for professional advice we recieved two years ago and have since found out all advice given was based on kickbacks ,do yourself a favour and take control of your own destiny and save yourself a motza


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## Kayman

tech/a said:


> Question
> 
> If you had an advisor who charged a fee on a performance basis.
> IE no profit no fee.
> 
> What % of profit would you feel acceptable and why?
> 
> Mind you I dont know of one but am curious.




Well, the best to my knowledge no adviser has control of the fund(s) and/or other investments he or she recommends. The performance of a particular investment (managed fund) is usually under control of a fund manager whom your are paying a Management Expense Ratio (MER) or Internal Cost Ratios (ICR).
The adviser job is among other things to recommend an investment to suit your financial goals. Experienced and good advisers study prospectuses, reading and interpret the fine print including technical lingo. They have a good handle on selected funds in terms of past performance alas non of them has a crystall ball  

I am in for the long run and rarely switch funds but ensure that the asset allocations are adhered to. Pushing aside the current gfc, I'd expect to earn about 12% plus.


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## Kayman

El Toro said:


> What advice do you want? What hourly rate would you be prepared to pay for that advice?
> 
> I know of some Financial Advisers that work with industry funds and they charge between $220-$250 per hour. But then the advice is really limited to the industry funds that they deal with. They wouldn't look at anything outside of the industry superannuation, such as other investments or personal insurances.
> 
> There is also this link. http://www.aifa.com.au/
> 
> I haven't used either of these so I can't evaluate them for you.
> 
> The question is what type of advice you are looking for and who can deliver that advice to you in the best and most cost effective way.




To review my existing f/portfolio annually (maybe semiannually), recommends portfolio changes, long term strategic modeling - ensuring I am on track in terms of asset allocation of my f/portfolio.
I'd be prepared to pay $350.- to $500.- per hour.
Thanks for the link.


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## Kayman

awg said:


> I manage my own investments now.
> 
> This requires a very steep learning curve, and much time and work.
> 
> I outperform the relevant benchmarks.
> 
> The saving on advisor fees is an annual 5 figure sum,
> 
> entirely compounding, and as I am relativly young, just this alone should eventually add up to be worth a VERY large amount, leaving aside any potential improvement in my own performance.
> 
> I did find some guys that were licenced financial planners who would give me advice, for between $250-350 per hour...but I didnt think I needed it.
> 
> At the end of the day, these guys are working X hours per week, and it seems the business model is entirely stuctured to be more profitable on a commission basis...you may be seen as a less profitable distraction.
> 
> My hugely experienced accountant has a loathing of fin P fee stucture, but that is mainly cause he wishes he could charge like that.
> 
> IMO there will eventually be fee-for-service, but I have been saying that for years.




Interesting post awg! 
I currently am paying a similar large sum of fee pa, excluding MERs/ICRs and wrap account fees. Any chances communicating with your contacts to kick-off a similar venture? I am prepared transferring an appropriate retainer.


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## Kayman

breaker said:


> Been down that road we are still paying for professional advice we recieved two years ago and have since found out all advice given was based on kickbacks ,do yourself a favour and take control of your own destiny and save yourself a motza




Easy said, I'm retired and knew how to make motza, it's a different kettle of fish keeping it 

How did you get enlightened and savvied up, what tools were or are available to you?


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## awg

Hi Kayman,

I will reply online, but feel free to PM me if you wish

I dont have the contact details anymore of the advisors I found that were prepared to do fee for service, it was 4yrs ago.

I went the low-cost SMSF route instead

If you want a fee for service advisor, Google and phone them, is my best advice.

At the time, Mark Bouris?, the loan fellow was bleating about setting up something called Yellow Brick Road ( or similar, which was supposed to be f-f-s, but I dont know what happened )

I am not sure from your post what your intentions are, but in my case I use ASF as a sort of Open University, and there is so much material available on the Internet, and I find it surprising that more retired pople dont take an active interest.

An easy transitional strategy is to replicate your advisors portfolio setup in a low cost SMSF.

If you have a properly setup wrap, that is formerly reviewed, then you should have documentation that outlines the investment strategies?

You can get exposure to all sectors via direct shares and ETF shares

any person find themselves paying excessive advisor/wrap fees for an account that holds a large cash component...well it must make them feel like self-harming.

my total fees went from over 1% to < .07%

MER is still present, as I cant utilise an ultra low-cost broker.

I must admit it feels great to shed the leaches and ticks, low tax pension and minimal fees means a long term compounding build (hopefully)


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## Julia

Kayman said:


> Easy said, I'm retired and knew how to make motza, it's a different kettle of fish keeping it



Kayman, I'm puzzled by this, unless you mean you made the 'motza' via your job, rather than investments in financial markets?



> How did you get enlightened and savvied up, what tools were or are available to you?



Investing in retirement is essentially no different to investing at any other time of your life:  you still need to grow your capital to cope with cost of living, inflation etc.  One expense you won't have if you're retired is tax.  Presumably you're drawing a pension from your Super which doesn't attract any tax?

It's a bit hard to offer anything more until you let us know whether your 'motza' has come from financial markets or whether in fact in retirement you are effectively starting all over again with investing.


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## Kayman

awg said:


> Hi Kayman,
> 
> I will reply online, but feel free to PM me if you wish
> 
> I dont have the contact details anymore of the advisors I found that were prepared to do fee for service, it was 4yrs ago.
> 
> I went the low-cost SMSF route instead
> 
> If you want a fee for service advisor, Google and phone them, is my best advice.
> 
> At the time, Mark Bouris?, the loan fellow was bleating about setting up something called Yellow Brick Road ( or similar, which was supposed to be f-f-s, but I dont know what happened )
> 
> I am not sure from your post what your intentions are, but in my case I use ASF as a sort of Open University, and there is so much material available on the Internet, and I find it surprising that more retired pople dont take an active interest.
> 
> An easy transitional strategy is to replicate your advisors portfolio setup in a low cost SMSF.
> 
> If you have a properly setup wrap, that is formerly reviewed, then you should have documentation that outlines the investment strategies?
> 
> You can get exposure to all sectors via direct shares and ETF shares
> 
> any person find themselves paying excessive advisor/wrap fees for an account that holds a large cash component...well it must make them feel like self-harming.
> 
> my total fees went from over 1% to < .07%
> 
> MER is still present, as I cant utilise an ultra low-cost broker.
> 
> I must admit it feels great to shed the leaches and ticks, low tax pension and minimal fees means a long term compounding build (hopefully)




Hey awg

Thanks for the option communicating with you directly, I appreciate that and may take you up on your kind offer if I get 'bogged down' in search of a suitable adviser. 

I Googled and found a couple of interesting links which am currently pursuing. M.Bouris is in my humble opinion a bit too boisterous for my liking...(I realize that this is a rather subjective comment).

My aim is to rid myself of an ongoing advice fee based service. Mind you, my current adviser is really, really good but he takes a firm stand in charging ongoing advice although my portfolio is reviewed twice a year. I just can not see the value anymore for having ongoing advice.

Well, you are right of course - until recently I never paid much attention in relation to my investments other than during the time of portfolio review. Not all retirees are couch potatoes, there is golf, fishing, partying, red-wine...the list goes on  Considering your (fee) cost savings you achieved I probably will bite the bullet and eventually start managing my portfolio myself sacrificing some time on the golf course.
Yes, I am fully aware of the investment strategies which by the way are in conformance with my goals and have all documentation readily available. 

Thanks for your comprehensive post.

All the best
K


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## Kayman

Julia said:


> Kayman, I'm puzzled by this, unless you mean you made the 'motza' via your job, rather than investments in financial markets?
> 
> 
> Investing in retirement is essentially no different to investing at any other time of your life:  you still need to grow your capital to cope with cost of living, inflation etc.  One expense you won't have if you're retired is tax.  Presumably you're drawing a pension from your Super which doesn't attract any tax?
> 
> It's a bit hard to offer anything more until you let us know whether your 'motza' has come from financial markets or whether in fact in retirement you are effectively starting all over again with investing.




I made my 'motza' while in the work force. 

Your presumption is correct. 

My apologies for finding my original post ambiguous.


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## Julia

Kayman said:


> My aim is to rid myself of an ongoing advice fee based service. Mind you, my current adviser is really, really good but he takes a firm stand in charging ongoing advice although my portfolio is reviewed twice a year. I just can not see the value anymore for having ongoing advice.



Sorry if I seem to be continuing to be a bit confused by your posts.
Here you are saying that your current adviser is "really, really good", by which term we could assume he is getting you very good results.

How will you calculate whether you can either replicate or improve on these excellent results if you move to another adviser?  Have you been shown results which have demonstrated superior performance with Adviser No. 2?  What is your gut feeling about who is the more competent?
Has your potential No. 2 adviser given you a quote for what his hourly fees will run out to in order to provide you with the necessary advice to at least equate the results you are presently achieving?
How will you know how much to believe him?

It's fairly unusual to hear about someone wanting to fire an adviser whom they describe as 'really, really good', in order to move elsewhere.


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## Kayman

Julia said:


> Sorry if I seem to be continuing to be a bit confused by your posts.
> Here you are saying that your current adviser is "really, really good", by which term we could assume he is getting you very good results.
> 
> How will you calculate whether you can either replicate or improve on these excellent results if you move to another adviser?  Have you been shown results which have demonstrated superior performance with Adviser No. 2?  What is your gut feeling about who is the more competent?
> Has your potential No. 2 adviser given you a quote for what his hourly fees will run out to in order to provide you with the necessary advice to at least equate the results you are presently achieving?
> How will you know how much to believe him?
> 
> It's fairly unusual to hear about someone wanting to fire an adviser whom they describe as 'really, really good', in order to move elsewhere.




Nothing can be calculated in advance, nobody has a crystal ball! Results, either excellent or inferior, are driven by the market. I do recognise that my financial adviser was instrumental in selected the right funds for my specific needs according to my specified goals.  

I've paid for it,  DONE!!! 

Now, the selected funds in my portfolio have never changed since inception and I am fairly confident that apart from 'tweaking' my portfolio on a regular basis (annually or semiannually) ensuring the asset allocation is adhered to, the funds structure will remain as is.
There is, in my opinion, no need for ongoing financial advice i.e. paying a monthly fee for a six-monthly review. The ride on this particular 'gravy train' will have to terminate! If my current adviser refuses to see this from my perspective I will take my chances! The separation will be amicable;  After all, it's business - I eat humble pie if my escapade doesn't work out and always can rejoin his firm. Based on my current fees and future charges I am sure my 'business' is welcome.

I hope this explains my position to you.


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## Julia

Kayman said:


> Nothing can be calculated in advance, nobody has a crystal ball! Results, either excellent or inferior, are driven by the market.



I would dispute this for a start.  Different people with different skill levels will produce profits or losses from the same market.



> I do recognise that my financial adviser was instrumental in selected the right funds for my specific needs according to my specified goals.
> 
> I've paid for it,  DONE!!!
> 
> Now, the selected funds in my portfolio have never changed since inception and I am fairly confident that apart from 'tweaking' my portfolio on a regular basis (annually or semiannually) ensuring the asset allocation is adhered to, the funds structure will remain as is.



OK, I get this.



> There is, in my opinion, no need for ongoing financial advice



Yet, in your initial post you suggested:



> I am now contemplating switching to another professional financial adviser who charges me a professional fee (hourly rate) for finacial advice.




It was this statement that my last post addressed, and to which you have made no response.

I don't need to know.  Neither does anyone else on this forum.
I have simply been trying to put up the questions so you can clarify in your own mind your reasons for assuming a different financial adviser will bring you net overall improved results.



> Presumably, since an hourly rate is not tied to the value of my investments, or generated by the purchase of any specific investment, couldn't I be confident to expect & receive objective advice for a more moderate fee?



What basis do you have for this assumption if you haven't asked for some proof of No. 2 adviser's skills?
(Remembering all the time that you have described your current adviser as 'really, really good'.)



> Though I'd expect to pay a higher hourly rate for an experienced adviser.
> i.e. paying a monthly fee for a six-monthly review. The ride on this particular 'gravy train' will have to terminate! If my current adviser refuses to see this from my perspective I will take my chances! The separation will be amicable;  After all, it's business - I eat humble pie if my escapade doesn't work out and always can rejoin his firm. Based on my current fees and future charges I am sure my 'business' is welcome.
> 
> I hope this explains my position to you.



As above, I don't need any explanation, and don't either need the dismissive tone.  I frankly don't care what you do.  I've simply attempted to raise in your own mind the questions you should be asking and answering before you strut off in high dudgeon and outrage about your present fees (probably quite justifiably), on the unproven assumption that paying someone by the hour will ipso facto deliver a better result.

Your logic for this escapes me.  But hey, good luck.


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## Kayman

Julia said:


> Originally Posted by Kayman
> Nothing can be calculated in advance, nobody has a crystal ball! Results, either excellent or inferior, are driven by the market.
> 
> I would dispute this for a start. Different people with different skill levels will produce profits or losses from the same market.




Everything can be challenged - we could talk about this for a long and indefinite time.
Diversification (different funds and different managers) in a good financial portfolio is critically important.
See comment in one of my previous post:
"...and I am not suggesting that his investment recommendations are substandard; I am satisfied that my financial portfolio has performed well during the global financial crisis."



Julia said:


> OK, I get this.




Wonderful.



Julia said:


> Yet, in your initial post you suggested:
> "I am now contemplating switching to another professional financial adviser who charges me a professional fee (hourly rate) for finacial advice."
> 
> It was this statement that my last post addressed, and to which you have made no response.
> 
> I don't need to know.  Neither does anyone else on this forum.
> I have simply been trying to put up the questions so you can clarify in your own mind your reasons for assuming a different financial adviser will bring you net overall improved results.




See comment in my original post:
"I do realize that for quality professional services appropriate fees apply and need to be paid. I am not opposed to these payments. However, I begin to question the necessity of monthly fees for ongoing advice as my f/portfolio only gets reviewed twice a year and feel that the ongoing advice fee rather undermines the cost effectiveness of the wrap account."



Julia said:


> What basis do you have for this assumption if you haven't asked for some proof of No. 2 adviser's skills?




Did you notice the question mark at the end of my sentence?



Julia said:


> (Remembering all the time that you have described your current adviser as 'really, really good'.)




Yes, the Bentley I used to drive was really good as well. I switched to a Toyota which gets me to the same places quite comfortably.



Julia said:


> As above, I don't need any explanation, and don't either need the dismissive tone.




I can't control how you perceive my response(s). To me they are concise and straight to the point. I don't read 'between the lines' either.



Julia said:


> I frankly don't care what you do.  I've simply attempted to raise in your own mind the questions you should be asking and answering before you...




See comment in my original post:
"I hope receiving some good comments, recommendations and/or guidance from participants of this forum who have more savvy in this matter that I have."



Julia said:


> ...strut off in high dudgeon and outrage about your present fees (probably quite justifiably),




Huh, "high dudgeon and outrage - probably quite justifiably"
Read again...rather conflicting.



Julia said:


> on the unproven assumption that paying someone by the hour will ipso facto deliver a better result.




I am talking about advice and not performances of investments.
See comment in my original post:
"Presumably, since an hourly rate is not tied to the value of my investments, or generated by the purchase of any specific investment,..."

Isn't that a fair question?
"...couldn't I be confident to expect & receive objective advice for a more moderate fee?"



Julia said:


> Your logic for this escapes me.




"There are known knowns. These are things we know that we know. There are known unknowns. That is to say, there are things that we know we don't know. But there are also unknown unknowns. There are things we don't know we don't know." 
Donald Rumsfeld 



Julia said:


> But hey, good luck.




Thanks.


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## awg

IMO, if you want to self-manage

get out your Wrap docs and they will have the rationale that dictates your investment strategy spelled out

Risk tolerance and asset diversification/proportion being the obvious

Also what rate-of-return needed  + life expectancy table to help focus the mind:

If you have a sharp enough brain to have succeeded in business, it wont be rocket science.

(Your post is indicative you are satisfied with the makeup and performance of your funds but resent the fee structure)

Some Internet reseach will enable you to see that most porfolios can be easily replicated WITHOUT managed investment funds, or even a personal stockbroker.

Dont expect your FP to agree with this, and I doubt they will be much help to you in the transition stage either, despite years of fee paying 

btw, an accountant will provide tax advice about investments, but not investment advice, If getting a new FP, make sure the new one is an accountant as well, if possible

Disclaimer, I am not neccesarily advocating following yr advisors portfolio, no idea of yr circs, just that it might be a "less difficult" way to start


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## dragon8

I recently sacked my so called professional advisers (MLC) who returned me whopping -3.5%
They also had the audasity to charge me fees for "managing" my portfolio.
Wow lucky me. Perhaps I'll send them a bill for lost fees.  Anyone up for a class action suit? My 10 year old could have invested the monies for me and gotten  better than negative return at the bank.

I'm now taking control and opening my own super fund and investing directly.
No more fees for dubious "profesional" advisers.  Taking control myself has empowered me.

(Sorry may be a bit off topic but angry re these adviser fees.)


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## poverty

dragon8 said:


> I recently sacked my so called professional advisers (MLC) who returned me whopping -3.5%
> They also had the audasity to charge me fees for "managing" my portfolio.
> Wow lucky me. Perhaps I'll send them a bill for lost fees.  Anyone up for a class action suit? My 10 year old could have invested the monies for me and gotten  better than negative return at the bank.




Just wondering what was the time period of the -3.5% and how did the ASX200 do over that time?


----------



## Julia

Kayman, I apologise for being a bit terse in my last post.  Should have been more restrained in my comments.



> I am talking about advice and not performances of investments.



This is the sort of comment that confuses me.  Doesn't the 'advice' relate to your investments?   Or are you not looking for an adviser who gives you advice about actual investments, but rather about estate planning, tax matters, other stuff?
Could you perhaps describe what constitutes 'advice' in your mind?



> See comment in my original post:
> "Presumably, since an hourly rate is not tied to the value of my investments, or generated by the purchase of any specific investment,..."
> 
> Isn't that a fair question?
> "...couldn't I be confident to expect & receive objective advice for a more moderate fee?"



Honestly?   No.  You cannot be confident to receive competent advice simply because someone is not tied to commission based investments.
Sad, but true.  Read through the responses on this thread, and you'll see that no one disputes this.  That is not to say competent advisers don't exist.
Most of them, however, even if they claim to be 'independent' will be tied somehow to big commission paying organisations.

See my original response with comment passed on from my accountant.



> "There are known knowns. These are things we know that we know. There are known unknowns. That is to say, there are things that we know we don't know. But there are also unknown unknowns. There are things we don't know we don't know."
> Donald Rumsfeld



I'm not sure that Mr Rumsfeld's musings help much here, but I'm assuming the purpose of the quote is that you need someone who will tell you what you don't know, when you don't have enough knowledge to know what questions to ask?

Again, this is an interpretation on my part and may be incorrect.
Perhaps if you just said what you mean instead of quoting obscure obfuscations from Mr Rumsfeld we could more easily be helpful.





awg said:


> IMO, if you want to self-manage



awg, I can't see where the OP has said he wants to self manage.
I've just re-read the thread and it seems he wants to swap from an adviser who has produced good results, but whose fees he doesn't want to go on paying, to an adviser who charges by the hour for what is purported to be unbiased advice, unconnected to any commission based products.

I am sure the OP will correct this if I have once again drawn the wrong conclusion.

If moving to self managed, then of course it's a whole different situation but I can't see where he has suggested he wants to do this.

My point previously made was simply that to assume an adviser who says he is offering a 'fee for service'/objective advice is necessarily going to deliver advice that will render the OP's account more profitable than the existing (really, really good) adviser is questionable.

But if such an adviser exists, then I'm sure lots of people would be interested in hearing about him/her.


----------



## Kayman

awg said:


> IMO, if you want to self-manage get out your Wrap docs and they will have the rationale that dictates your investment strategy spelled out Risk tolerance and asset diversification/proportion being the obvious
> Also what rate-of-return needed  + life expectancy table to help focus the mind:




I will check on this. The best to my knowledge the wrap account is just an administration structure and has no bearings in relation to my investment strategy.
The investment strategy was developed by my adviser in conjunction with yours truly to suit my life style.
The administration structure is needed to hold the assets within my pension fund and somebody needs to be the Trustee of the pension fund. 
Moreover, my adviser used mostly wholesale investment funds which are inexpensively available when in a wrap account. For an individual investing in to wholesale funds would cost more more than 1/2 million dollars for each investment. So, if I were to leave the wrap account I would have to sell my various investments and start anew as I could not possibly afford paying $500,000.- for each fund. I am not saying that starting afresh couldn't be done but I am pretty comfortable in the wrap account set-up.
My risk tolerance is pretty conservative and asset diversification is firmly in its place since 2004 and am happy with the current set-up.
The rate-of-return required had been addressed though the GFC has put quiet a dent in it in terms of growth. My investments include enough liquidity to see me through. A life expectancy table his is also in place.



awg said:


> If you have a sharp enough brain to have succeeded in business, it wont be rocket science. (Your post is indicative you are satisfied with the makeup and performance of your funds but resent the fee structure)
> Some Internet reseach will enable you to see that most porfolios can be easily replicated WITHOUT managed investment funds, or even a personal stockbroker.




My grey matter need some honing, I relied too much on others (it's time to get my hands dirty again), oh well 
And yes, I do resent the fee structure and considering the circumstances (GFC) am happy with the makeup & performance of my investments.
I will dig into the Internet and check on tools available concerning self-managing financial portfolio. 



awg said:


> Dont expect your FP to agree with this, and I doubt they will be much help to you in the transition stage either, despite years of fee paying




Yes, I realise that the transition stage would be challenging if am unable finding an adviser who charges me a professional fee (hourly rate) for finacial advice. 



awg said:


> btw, an accountant will provide tax advice about investments, but not investment advice, If getting a new FP, make sure the new one is an accountant as well, if possible




Yes, my present accounted is pretty good but he won't give me advice on financial investments.



awg said:


> Disclaimer, I am not neccesarily advocating following yr advisors portfolio, no idea of yr circs, just that it might be a "less difficult" way to start




I understand and appreciate your concern. You provided some good points which I will pursue... thanks again for informative and helpful post!


----------



## Kayman

dragon8 said:


> I recently sacked my so called professional advisers (MLC) who returned me whopping -3.5%
> They also had the audasity to charge me fees for "managing" my portfolio.
> Wow lucky me. Perhaps I'll send them a bill for lost fees.  Anyone up for a class action suit? My 10 year old could have invested the monies for me and gotten  better than negative return at the bank.
> 
> I'm now taking control and opening my own super fund and investing directly.
> No more fees for dubious "profesional" advisers.  Taking control myself has empowered me.
> 
> (Sorry may be a bit off topic but angry re these adviser fees.)




It's topical post and good luck with your endeavour!


----------



## Kayman

Julia said:


> Kayman, I apologise for being a bit terse in my last post.  Should have been more restrained in my comments.
> 
> 
> This is the sort of comment that confuses me.  Doesn't the 'advice' relate to your investments?   Or are you not looking for an adviser who gives you advice about actual investments, but rather about estate planning, tax matters, other stuff?
> Could you perhaps describe what constitutes 'advice' in your mind?
> 
> 
> Honestly?   No.  You cannot be confident to receive competent advice simply because someone is not tied to commission based investments.
> Sad, but true.  Read through the responses on this thread, and you'll see that no one disputes this.  That is not to say competent advisers don't exist.
> Most of them, however, even if they claim to be 'independent' will be tied somehow to big commission paying organisations.
> 
> See my original response with comment passed on from my accountant.
> 
> 
> I'm not sure that Mr Rumsfeld's musings help much here, but I'm assuming the purpose of the quote is that you need someone who will tell you what you don't know, when you don't have enough knowledge to know what questions to ask?
> 
> Again, this is an interpretation on my part and may be incorrect.
> Perhaps if you just said what you mean instead of quoting obscure obfuscations from Mr Rumsfeld we could more easily be helpful.
> 
> 
> 
> 
> awg, I can't see where the OP has said he wants to self manage.
> I've just re-read the thread and it seems he wants to swap from an adviser who has produced good results, but whose fees he doesn't want to go on paying, to an adviser who charges by the hour for what is purported to be unbiased advice, unconnected to any commission based products.
> 
> I am sure the OP will correct this if I have once again drawn the wrong conclusion.
> 
> If moving to self managed, then of course it's a whole different situation but I can't see where he has suggested he wants to do this.
> 
> My point previously made was simply that to assume an adviser who says he is offering a 'fee for service'/objective advice is necessarily going to deliver advice that will render the OP's account more profitable than the existing (really, really good) adviser is questionable.
> 
> But if such an adviser exists, then I'm sure lots of people would be interested in hearing about him/her.




No apology needed as I really wasn't offended. I accept that different people have dissimilar mindset - communication through a forum such as this can gainsaying to say the least  

In relation to advice, look, there would be no issue if my current adviser would charge me for reviewing my financial portfolio once or twice a year on an hourly basis. Based on my particular investments, I firmly believe that an annual review is adequate. But I pay a monthly fee based on the worth of my total investments. I find this fee structure immoderate hence my quest for an alternative that meets my requirement.   

If my future adviser does not work out the way I envisage then I just have to look for another one. If am unlucky for not finding the right adviser and/or am unsuccessful for self-managing my pension fund, I always can re-join my existing adviser as I intend to conduct the split in an amicable way, besides he knows it is business and not personal. 

IMO, an adviser recommends investments and the fund manager (based on fund and market conditions) makes the money. It is highly unlikely that a fund like Vaguard or Platinum will bust however severe the market conditions.
Highly sophisticated investments require highly sophisticated people, my financial portfolio is not in this league by far!

And forget about the quote, it was just a silly attempt to be funny 

Also, See my response to awg dated 19th-November-2010, 07:54 PM.
"Considering your (fee) cost savings you achieved I probably will bite the bullet and eventually start managing my portfolio myself sacrificing some time on the golf course."

Peace!


----------



## Snagglepuss

Hi Kayman,

I remember Whittle & Skok winning some awards in SmartInvestor magazine some years back - they have operated on a fee-for-service model for years. Their website explains more about them.

I have no connection with them and I am not a client of theirs. I just remember them because of the positive publicity they received in SmartInvestor, and because I pass their premises almost every day (they're in Kew, Melbourne).


----------



## Kayman

Snagglepuss said:


> Hi Kayman,
> 
> I remember Whittle & Skok winning some awards in SmartInvestor magazine some years back - they have operated on a fee-for-service model for years. Their website explains more about them.
> 
> I have no connection with them and I am not a client of theirs. I just remember them because of the positive publicity they received in SmartInvestor, and because I pass their premises almost every day (they're in Kew, Melbourne).




Thank you kindly for the informative link, Snagglepuss. I'll contact them to find out if they are willing to consider my "predicament".


----------



## Sir Osisofliver

Hi Kayman,

On here I am anonymous...I like it that way - that way I don't have to preface every comment I make on here with... Do not take this as advice whilst I am RG146 compliant I do not know your persoanl circumstances and will not be held accountable if you do something based on general commentary that is not specific to your circumstances blah blah blah. I thought I would respond now that all the adviser bashing seems to be out of everyone's system and give you the inside scoop.

I will tell you that the company I am involved with incorporates a fee for service Financial Planning division (and has always been a fee for service business). We do exist! BUT running this kind of operation as opposed to a commission based structure however means that over 90% of our clients are sophisticated investors under the Corps Act definition. Net assets of 2.5M or an income greater than $250K per year. If you have this status the chances of being taken up by a fee for service FP are much improved.

Our plans usually cost between $2,500 for a simple plan to the most expensive one I've seen coming in at $12,000. (Multi-company, Multi-trust and complex ownership structure over $20M). We have multiple other revenue sources which means that FP division is run at break-even level, so that may well be below industry par. Of course we usually spend upwards of 30 man hours on a single plan - so its more comprehensive than most other plans out there.

Unfortunately for you I will not be marketing on this website...*ever*. I will not respond to a private message either. You will have to find us the way that all our other clients find us....word of mouth.

P.S. Managed funds are yucky. (None of our clients have them - for very good reasons) looks for my comments on these boards in relation to Managed Funds.
P.S.S. Education is easy.

Cheers

Sir O


----------



## Kayman

Sir Osisofliver said:


> Hi Kayman,
> 
> On here I am anonymous...I like it that way - that way I don't have to preface every comment I make on here with... Do not take this as advice whilst I am RG146 compliant I do not know your persoanl circumstances and will not be held accountable if you do something based on general commentary that is not specific to your circumstances blah blah blah. I thought I would respond now that all the adviser bashing seems to be out of everyone's system and give you the inside scoop.
> 
> I will tell you that the company I am involved with incorporates a fee for service Financial Planning division (and has always been a fee for service business). We do exist! BUT running this kind of operation as opposed to a commission based structure however means that over 90% of our clients are sophisticated investors under the Corps Act definition. Net assets of 2.5M or an income greater than $250K per year. If you have this status the chances of being taken up by a fee for service FP are much improved.
> 
> Our plans usually cost between $2,500 for a simple plan to the most expensive one I've seen coming in at $12,000. (Multi-company, Multi-trust and complex ownership structure over $20M). We have multiple other revenue sources which means that FP division is run at break-even level, so that may well be below industry par. Of course we usually spend upwards of 30 man hours on a single plan - so its more comprehensive than most other plans out there.
> 
> Unfortunately for you I will not be marketing on this website...*ever*. I will not respond to a private message either. You will have to find us the way that all our other clients find us....word of mouth.
> 
> P.S. Managed funds are yucky. (None of our clients have them - for very good reasons) looks for my comments on these boards in relation to Managed Funds.
> P.S.S. Education is easy.
> 
> Cheers
> 
> Sir O




Hey Sir Osisofliver,

Thanks for your informative post alas your inside scoop doesn't help me much in my particular circumstance other than that "education is easy" which more or less had been brought up here in this forum before. 
Well, I paid in 2004 about $7,000.- for my plan involving about $1.7million and my income was about $90K less than your criteria is suggesting. Let me be clear, I never 'bashed' my adviser, on the contrary, he is damn good, I just don't agree with the monthly ongoing advice fee he is charging which is based on my net worth under his management.
I made my nest-egg with hard work and my risk profile is reasonably conservative. Therefore my investments in managed funds suit me personally. I realise that there are more sophisticated and 'lucrative' investments available but since I am retired since '98 I prefer the less hectic approach and am happy with my lifestyle and income created in the allocated pension fund. I am not interested anymore making a 'bundle' and am satisfied as long my income is supporting my free living and my capital (eventually) doesn't erode and keeps up with inflation.  
Thanks again for your contribution, I shall keep my ears open and hope coming across a fee based adviser.

Kind regards...


----------



## Sir Osisofliver

Kayman said:


> Hey Sir Osisofliver,
> 
> Thanks for your informative post alas your inside scoop doesn't help me much in my particular circumstance other than that "education is easy" which more or less had been brought up here in this forum before.
> Well, I paid in 2004 about $7,000.- for my plan involving about $1.7million and my income was about $90K less than your criteria is suggesting. Let me be clear, I never 'bashed' my adviser, on the contrary, he is damn good, I just don't agree with the monthly ongoing advice fee he is charging which is based on my net worth under his management.




Hey I don't mind you adviser bashing. I do it myself...a lot. Most FP's I encounter are parasites and glorified salespeople. _"Would sir like his choice of managed funds."_ like picking items off a damn menu. I'm therefore looking askance at your comment that he is "damn good" when he's advised you into nothing but managed funds. What about other asset classes? Oh Let me guess he's used a variety of anaged funds to give you exposure to many different asset classes, right? Hmmmm can you see the problem with that?

I'd like to find out how good "damn good" is. Here are some questions to tease out some details about your current adviser. If he is a damn good Adviser he will either have told you this already or will know the answers.

1). In the 2003 Senate Inquiry into superannuation in Australia, Price Waterhouse Coopers did some financial analysis in relation to Superannuation funds. After tax, administration fees and adviser fees it was found that the *real rate of return* as an average across the industry since the introduction of mandatory super is..

a. 7.5%
b. 3%
c. 2%
d. 1%

The answer BTW is D. A study by PWC revealed that the level of return in superannuation over the longer term is consistent with the level of contribution indexed to inflation. IE Your superannuation fund is not making money, it is merely the amount you deposited keeping pace with inflation because of compounding effects. Guess where the moeny making income stream from your assets goes. *looks at comment about monthly management fees*

2) If you lined up all the thousands of managed fund products available to be purchased, how many of them outperform the All Accumulation index?

a. 100%
b. 80%
c. 50%
d. 20%

The answer is D. WTF? only 20% of funds can outperform the index?

3) Why?

a. Because funds have expenses like rent, salaries, advertising, research costs, schmoozie lunches and expense accounts, staff bonuses etc etc etc.
b. Because funds are managed by committee and the committee process means that slippage can occur.
c. Because there are two main forms of risk in the market, systematic Risk and non-systematic (or diversifiable) risk. The only way to eliminate diversifiable risk is to HEDGE the portfolio, and since this can be a considerable *expense* managed funds *do not have the ability *to manage this risk. Therefore when the market has a correction, so does the vast majority of managed funds.
d. all of the above.

The answer is d (and there are a bunch of other factors I haven't mentioned as well). If *anyone* wants to defend managed funds to me I will happily debate the issue. There is a LOT of reasons why I don't like managed funds and our current superannuation environment.I.E. Managed Funds are *yucky.*



> I made my nest-egg with hard work and my risk profile is reasonably conservative. Therefore my investments in managed funds suit me personally.




 There are known knowns......  or the way that I like to put it. You have no way of knowing what it is that you don't know...Like what is the risk of holding the assets directly at certain points of the economic cycle. If you can't answer that question...how can say it is outside your risk tolerance?



> I realise that there are more sophisticated and 'lucrative' investments available but since I am retired since '98 I prefer the less hectic approach and am happy with my lifestyle and income created in the allocated pension fund. I am not interested anymore making a 'bundle' and am satisfied as long my income is supporting my free living and my capital (eventually) doesn't erode and keeps up with inflation.
> Thanks again for your contribution, I shall keep my ears open and hope coming across a fee based adviser.
> 
> Kind regards...




If you are happy.....then you have no impetus to change what you are doing. You're obviously unhappy about the amount you are paying in management fees for little perceived value done by your current adviser. I'm not talking about you making a bundle with my above comments or previous response to you.  I get that you want to have a stress free retirement and work on your handicap, and that it is appealing to have someone "look after" your investments for you but finally let me ask you this question. If the market were to do *another* GFC and you were to lose *everything*, what pain does your adviser feel? or the fund manager feel?

You have given *control *of your finances to *someone else*....take control back.

Cheers

Sir O


----------



## Kayman

Sir Osisofliver said:


> Hey I don't mind you adviser bashing. I do it myself...a lot. Most FP's I encounter are parasites and glorified salespeople. _"Would sir like his choice of managed funds."_ like picking items off a damn menu.



This is my second adviser. The first one I had did fit your description spot-on. After a lot of search on the Internet, in 2003 I found an institution called Adviser Ratings which was run by a Mr. David Childs. For a very reasonable fee he provided all sorts of (no-nonsense) advice - because of his straightforwardness I really came to like this guy. He's view of some advisers and the industry was not dissimilar to yours. Unfortunately, he must have either retired or moved to another business venture as I can't locate him anymore. Anyway, he provided me with a list advisers he thought to be ethical and weren't commission driven. That's how I selected my current adviser. I guess salesmanship is one of the essential attributes of any business enterprises including financial services. I don't have a problem with this as long as the dealings are transparent from my point of view. And yes, I realise herein lies the problem - how on earth would I know what crucial question to ask in the first place? (No need to respond ) I mean if I were such a wizard then why would I handing my nest-egg to an adviser in the first place. I guess in hindsight I could've invested everyting in bonds or term deposit accounts and probably would be better of...     



Sir Osisofliver said:


> I'm therefore looking askance at your comment that he is "damn good" when he's advised you into nothing but managed funds. What about other asset classes? Oh Let me guess he's used a variety of anaged funds to give you exposure to many different asset classes, right? Hmmmm can you see the problem with that?



Yes, your are correct. With the exeption of a term deposit and cash holding account my financial portfolio is entirely made up of a number of managed funds. The asset allocation consists of about 4.5% cash, 26.4% fixed interest, 8.7% property, 37.3% Australian shares, 23% International shares. This is, according to my adviser, in conformance to my long-term goals. 
And no, I honestly can't see anything wrong with that, my finacial acumen is obviously inferior to yours as I am trained in a different field. Seriously, if I knew I'd talk to my adviser promptly.



Sir Osisofliver said:


> I'd like to find out how good "damn good" is. Here are some questions to tease out some details about your current adviser. If he is a damn good Adviser he will either have told you this already or will know the answers.
> 
> 1). In the 2003 Senate Inquiry into superannuation in Australia, Price Waterhouse Coopers did some financial analysis in relation to Superannuation funds. After tax, administration fees and adviser fees it was found that the *real rate of return* as an average across the industry since the introduction of mandatory super is..
> 
> a. 7.5%
> b. 3%
> c. 2%
> d. 1%
> 
> The answer BTW is D. A study by PWC revealed that the level of return in superannuation over the longer term is consistent with the level of contribution indexed to inflation. IE Your superannuation fund is not making money, it is merely the amount you deposited keeping pace with inflation because of compounding effects.



I don't recall my adviser ever mentioning anything about the PWC study but I am not saying he hasn't. If he has then it went straight over my head. The total return of my financial portfolio (performance of asstets) from October 2004 to August 2010 is 5.80%. Not too bad IMO considering the GFC. However due to the amounts taken out (monthly pension payments, ongoing advice fees and wrap administration fees) my portfolio valuation is down 7.70%.


Sir Osisofliver said:


> Guess where the moeny making income stream from your assets goes. *looks at comment about monthly management fees*.



Totally agree!!! The ongoing advice has to go. Unfortunately I can't do anything about the wrap account and associated fees and my present investments. If I only knew how to re-allign my managed funds assets on a regular basis I would not hesitate giving my adviser a notice to withdraw from his services today. I am trying to join the Australian Investors Association, the contributers in their forum in relation to Managed Investments may be of additional assistance to my plight.




Sir Osisofliver said:


> 2) If you lined up all the thousands of managed fund products available to be purchased, how many of them outperform the All Accumulation index?
> 
> a. 100%
> b. 80%
> c. 50%
> d. 20%
> 
> The answer is D. WTF? only 20% of funds can outperform the index?
> 
> 3) Why?
> 
> a. Because funds have expenses like rent, salaries, advertising, research costs, schmoozie lunches and expense accounts, staff bonuses etc etc etc.
> b. Because funds are managed by committee and the committee process means that slippage can occur.
> c. Because there are two main forms of risk in the market, systematic Risk and non-systematic (or diversifiable) risk. The only way to eliminate diversifiable risk is to HEDGE the portfolio, and since this can be a considerable *expense* managed funds *do not have the ability *to manage this risk. Therefore when the market has a correction, so does the vast majority of managed funds.
> d. all of the above.
> 
> The answer is d (and there are a bunch of other factors I haven't mentioned as well). If *anyone* wants to defend managed funds to me I will happily debate the issue. There is a LOT of reasons why I don't like managed funds and our current superannuation environment.I.E. Managed Funds are *yucky.*



My adviser categorically states "we are in the business of ensuring our clients earn the market return (11.48% for the S & P 500), and not the average investor return (4.48%)." Quite true and achivable especially prior GFCT. Alas the mud hit the fan violently and the adviser hardly can be blamed for this.


Sir Osisofliver said:


> There are known knowns......  or the way that I like to put it. You have no way of knowing what it is that you don't know...Like what is the risk of holding the assets directly at certain points of the economic cycle. If you can't answer that question...how can say it is outside your risk tolerance?]



I suppose you are talking about correctly timing the markets. If so, this would have been the only way an investor would have done significantly better than I have done. Ie. sell out before the market drop, and buy back in before the market rally and/or chasing 'hot fundmanagers'. On average, is it possible to get consistently these decisions right? I mean the consequences of getting them wrong would be just as financially disastrous as another GFC, maybe even more so. Considering my age (62), and the absence of a crystall ball, isn't my alternative of investing my nest-egg less nerve-racking? And do I really need to try and outperform the market by timing in and out (and having the risk you get it wrong) instead of simply generating the long term lifetime) market rate of return? My adviser provided me with the Dalbar Study you maybe familiar with which indicates that the risk of getting it wrong is shown by the average investor getting far less than the market rate of return. The reason the average investor gets far less is that they try to do the timing in and out and they get it wrong. Then again, there maybe an other study around (the one who didn't my adviser sent me) which indicates the opposite and some top-notch advisers (better than the damn good ones) probably are getting it right most of the time  


Sir Osisofliver said:


> If you are happy.....then you have no impetus to change what you are doing.



The truth is I am happy because I don't know any other way to invest reasonably safe and not to jeopardise my nest-egg. I am too old to start all over again. 


Sir Osisofliver said:


> You're obviously unhappy about the amount you are paying in management fees for little perceived value done by your current adviser.



Right, the fee structure is out of balance and value component is overpriced IMO.


Sir Osisofliver said:


> I'm not talking about you making a bundle with my above comments or previous response to you.  I get that you want to have a stress free retirement and work on your handicap, and that it is appealing to have someone "look after" your investments for you but finally let me ask you this question. If the market were to do *another* GFC and you were to lose *everything*, what pain does your adviser feel? or the fund manager feel?.



I have read somewhere that the US share market has just completed its first decade since the 1930s where the market was lower at the end of 10 years than at the start. But even the great depression “was not different this time (GFC)” and even then, as it always does, the market recovered, and as Warren Buffet says, wealth was transferred from the impatient to the patient.
I'd be devastated if I were to lose everything!
It's clear to me that both the adviser and f/manager would feel no suffering whatsover.


Sir Osisofliver said:


> You have given *control *of your finances to *someone else*....take control back.



I'd like to. If for example I would stick to to my current investment strategy and fund managers in my wrap account say for another 20 years or so, I suppose all is needed is a regular (annual or semiannual) asset allignment. I think with some coaching I could eventually do the re-allignment of my managed fund myself. Maybe subscribing to publications which monitor the various fund managers would be beneficial as I wouldn't like to be last one to switch off the lights in their offices 
Thanks for a wonderful, stimulating and informative exchange of posts.

Kind regards...


----------



## Julia

Kayman, it is much less difficult or complicated to DIY than you probably imagine.   I have sent you a PM.  Check your PM inbox.


----------



## awg

Hi Kayman,

let me say first I cast no serious aspersions on FP

just doing their job

and very much needed by many

The objections I had were: 

too high fees
no sell side advice ( with most)
I should never pay a management fee on cash

From your brief description of your portfolio, I feel certain that you would be able to setup a SMSF for less than $1000 total cost all up per annum

and replicate that structure with no more than 10 ASX codes
( some may prefer 20)

Using ETF and Hybrids alone, it would track your indexs and volatility the same as present.

As Sir O mentioned, the f-f-s fellows are generally only interested in high net worth individuals

They are in business to make a profit after all!

( I did find one at least that was prepared to take on all-comers, his rate was $350 p hr as i recall)

I suspect you may feel very unsure of your ability to make a number of investment decisions and enact them. I would consider that to be normal.
That is what peronal investing is all about though


----------



## Sir Osisofliver

Kayman said:


> This is my second adviser. The first one I had did fit your description spot-on. After a lot of search on the Internet, in 2003 I found an institution called Adviser Ratings which was run by a Mr. David Childs. For a very reasonable fee he provided all sorts of (no-nonsense) advice - because of his straightforwardness I really came to like this guy. He's view of some advisers and the industry was not dissimilar to yours. Unfortunately, he must have either retired or moved to another business venture as I can't locate him anymore. Anyway, he provided me with a list advisers he thought to be ethical and weren't commission driven. That's how I selected my current adviser. I guess salesmanship is one of the essential attributes of any business enterprises including financial services. I don't have a problem with this as long as the dealings are transparent from my point of view. And yes, I realise herein lies the problem - how on earth would I know what crucial question to ask in the first place? (No need to respond ) I mean if I were such a wizard then why would I handing my nest-egg to an adviser in the first place. I guess in hindsight I could've invested everyting in bonds or term deposit accounts and probably would be better of...
> 
> 
> Yes, your are correct. With the exeption of a term deposit and cash holding account my financial portfolio is entirely made up of a number of managed funds. The asset allocation consists of about 4.5% cash, 26.4% fixed interest, 8.7% property, 37.3% Australian shares, 23% International shares. This is, according to my adviser, in conformance to my long-term goals.
> And no, I honestly can't see anything wrong with that, my finacial acumen is obviously inferior to yours as I am trained in a different field. Seriously, if I knew I'd talk to my adviser promptly.
> 
> 
> I don't recall my adviser ever mentioning anything about the PWC study but I am not saying he hasn't. If he has then it went straight over my head. The total return of my financial portfolio (performance of asstets) from October 2004 to August 2010 is 5.80%. Not too bad IMO considering the GFC. However due to the amounts taken out (monthly pension payments, ongoing advice fees and wrap administration fees) my portfolio valuation is down 7.70%.



 So for six years of perfromance you are down 7.70%???  I empathize with your situation Kayman, my actual response when I read this referred to your financial advisers as the wrong end of a mangy dog. I will say this once - you are getting screwed. 







> Totally agree!!! The ongoing advice has to go. Unfortunately I can't do anything about the wrap account and associated fees and my present investments. If I only knew how to re-allign my managed funds assets on a regular basis I would not hesitate giving my adviser a notice to withdraw from his services today. I am trying to join the Australian Investors Association, the contributers in their forum in relation to Managed Investments may be of additional assistance to my plight.
> 
> 
> 
> My adviser categorically states "we are in the business of ensuring our clients earn the market return (11.48% for the S & P 500), and not the average investor return (4.48%)." Quite true and achivable especially prior GFCT. Alas the mud hit the fan violently and the adviser hardly can be blamed for this.



 WHAT?! *Choking on my own rage here* Kayman you're making me old before my time. Go back to your Adviser, tell him you just found about about Listed Index Funds which charge a tiny freaking trail and give you a perfectly correlated market level of return and tell him if he can't do better than the market than WHAT THE **** ARE YOU PAYING HIM FOR?

You bet your little cotton socks that your adviser can be blamed for your current financial situation. What he did is he played hard fast and loose with *your money* with no protection in place. Oh he's not alone, the whole ****ing industry did the same stupid **** - but as I said before it's no skin off their nose if you are living on tinned baked beans in ten years time coz they screwed you because of negiligence or incompetence. 

Let me put it this way Kayman.  When you buy a house, the bank *make* you insure the property. To ensure the integrity of that asset (which while there is still money owing on it is essentially their asset) in case some truck driver falls asleep at the wheel and drives through your living room.

Shares (which are a *lot* more volatile an asset class than residential property) can also be insured in case the Global Financial crisis comes along parks itself in your portfolio.

Your Adviser *did not protect your assets correctly*

But how could he have known that the GFC was coming? He's not a soothsayer!!! 

Wow that's a great chestnut. We aren't fortune tellers, we can't tell the future. (It sound suspiciously like a black swan event kind of comment.) No profit without risk. Great! lets disavow all responsibility towards the people who entrust their life savings to us.... and hey it's not our money so lets not have any risk protection in place either.

So in August 2007 when BNP Paribus said it couldn't value the assets in two of it's funds because of a "complete evaporation of liquidity" in the market, or when the European Central Bank pumped 63 billion euros to try an improve liquidity and then added another 108 billion when that was enough a week later; Or when the Federal reserve cut interest rates and warned that the credit crunch "could be a risk to economic growth"..... how much of a fortune teller did you need to be to put risk protection in place?

How about September 07, when Northern Rock had to apply for Emergency financial support from the Bank of England as lender of last resort causing the biggest run on a Bank seen in a century... Did we still need to be fortune tellers to put risk protection in place?

Perhaps October 07 when UBS announced losses of 3.4 Billion dollars from sub-prime related investments...did we need to be fortune tellers then?

Mind you our market *was still rising whilst this was occurring!!* So shouldn't we have locked in some PROFIT!!!!

When exactly during the storm of negative overseas announcements over the next three months would it have been appropriate to protect the assets under our control?

The firm I worked for Eether liquidated portfolio's or protected them in JANUARY 2008. To give you a comparison our client are up in their portfolio's *after fees* by over 35% since the start of the GFC.

THAT is why you got screwed.

Cheers

Sir O


----------



## Kayman

Julia said:


> Kayman, it is much less difficult or complicated to DIY than you probably imagine.   I have sent you a PM.  Check your PM inbox.




Thanks Julia,
I'll respond to your PM shortly.
Kind regards...


----------



## Kayman

awg said:


> Hi Kayman,
> let me say first I cast no serious aspersions on FP just doing their job and very much needed by many



Yes, alas many advisers will take advantage of the 'inexperienced' and 'not-so-savvy' investors  



awg said:


> The objections I had were:
> too high fees
> no sell side advice ( with most)
> I should never pay a management fee on cash
> 
> From your brief description of your portfolio, I feel certain that you would be able to setup a SMSF for less than $1000 total cost all up per annum and replicate that structure with no more than 10 ASX codes (some may prefer 20)



My investments are within a wrap account, the cost of my pension fund (investments) in terms of administration and investment is 0.63%, the MERs/ICRs are about 0.35% and transaction fees for managed funds are $30.25 per transaction.   
Most of my investments are wholesale funds which are only available for participants in the wrap account. If I were to leave the wrap account environment I would have to redeem my existing wholesale funds (which are inexpensive) and re-purchase retail managed funds (which are more costly).  
In my particular case, redeeming the funds, winding up my pension fund and start anew without professional assistance would be an insurmountable task! I'd lose money hand over fist!


awg said:


> Using ETF and Hybrids alone, it would track your indexs and volatility the same as present.
> 
> As Sir O mentioned, the f-f-s fellows are generally only interested in high net worth individuals. They are in business to make a profit after all!




All of Sir O's comments are very revealing. In fact right now I feel pretty gutted as he basically confirms my suspicion that I'm ripped off (again)! And I thought "this time I got one of the better adviser", oh well. From most of other professions like engineers, dentists, doctors etc. one can get a handle on in terms of performance. There is generally a good chance recuperate to fees and other financial losses from these professionals when proven wrongful conduct.
The obvious question is 'where or how on earth can one find an good adviser'? The do-it-yourself approach is suited not for everyone. Having said that, I most probably terminate my business relationship with my current adviser but keep my investment portfolio as is in the wrap account. I understand that investors are now able to access a wrap account directly without a financial adviser.   


awg said:


> ( I did find one at least that was prepared to take on all-comers, his rate was $350 p hr as i recall)



Today, I too have been advised of such an adviser with the assistance of an employee of 2020 DIRECTINVEST. I still have to contact him and may shoot him a message over weekend. He's based in Sydney and charges $300.- per hour for a minimum of 6 hours.


awg said:


> I suspect you may feel very unsure of your ability to make a number of investment decisions and enact them. I would consider that to be normal.That is what peronal investing is all about though



Yes, the uncertainty in relation to these particular investment decisions is causing me considerable distress. 
Have a wonderful weekend, awg.


----------



## Kayman

Sir Osisofliver said:


> So for six years of perfromance you are down 7.70%???



Yes, but only due to the amounts taken out (monthly pension payments, ongoing advice fees and wrap administration fees). I guess if I hadn't withdrawn any funds then the performance would be up by 5.80% (this is the explanation my adviser came up with).


Sir Osisofliver said:


> I empathize with your situation Kayman, my actual response when I read this referred to your financial advisers as the wrong end of a mangy dog. I will say this once - you are getting screwed.



Well, this is not the first time, and believe me it's not easy getting used of this.
In reference to my previous post: "If for example I would stick to to my current investment strategy and fund managers in my wrap account say for another 20 years or so..." is this something I could contemplate or should the thought be dismissed outright. (I'm not asking for advice just an educated opinion). 


Sir Osisofliver said:


> WHAT?! *Choking on my own rage here* Kayman you're making me old before my time. Go back to your Adviser, tell him you just found about about Listed Index Funds which charge a tiny freaking trail and give you a perfectly correlated market level of return and tell him if he can't do better than the market than WHAT THE **** ARE YOU PAYING HIM FOR?
> 
> <cut by Kayman to shorten post>
> 
> THAT is why you got screwed.




As you would imagine, I am completely overwhelmed by your posts. I unfeignedly appreciate your downrightness. Your quality of doing what is right and avoiding what is wrong is admirable, it's a real shame (IMHO) that only a selected few have access to your professional guidance.

Thanks again for write-ups which without doubt will other forum members  find most benefitial as well.

Kind regards...


----------



## Julia

Kayman said:


> I guess salesmanship is one of the essential attributes of any business enterprises including financial services.



And  here you have the essence of why so many people are being screwed by so called advisers.
I think you initially told us that your present adviser is 'really, really good'.
I would agree 100%:  at selling you on what he wants you to believe.



> how on earth would I know what crucial question to ask in the first place?



Quite.  And hence the appropriateness of your quoting of Mr Rumsfeld's musings about known unknowns.

Your 'adviser' is counting on this.  I am putting 'adviser' in quotes advisedly because I do not believe he deserves the term in any professional sense.

(     




> Yes, your are correct. With the exeption of a term deposit and cash holding account my financial portfolio is entirely made up of a number of managed funds. The asset allocation consists of about 4.5% cash, 26.4% fixed interest, 8.7% property, 37.3% Australian shares, 23% International shares. This is, according to my adviser, in conformance to my long-term goals.



I suppose you know that in addition to what you are actually being charged, your 'adviser' is receiving trail commissions on all the managed funds.  This is obviously a pretty good reason for him to recommend that you stay fully invested in these funds during the GFC, don't you think?
If he'd even suggested you protect your capital by moving to cash when he *should have seen the GFC coming*, then he would have adversely affected his own self interest, i.e. cut off his commissions.
Did  he care about how you were affected by the GFC?   Fairly obviously not, given he clearly had no strategies in place to either hedge your investments as suggested by Sir O, or simply protect any profits that you may  have had prior to then.

You were invested during a strong bull run prior to the GFC.  The returns quoted are simply abysmal, even allowing for fees.



> And no, I honestly can't see anything wrong with that, my finacial acumen is obviously inferior to yours as I am trained in a different field. Seriously, if I knew I'd talk to my adviser promptly.



And herein lies a very good reason for educating yourself, even if you decide not to totally DIY, at least you should know enough to know when some crappy individual is making money at your expense.



> My adviser categorically states "we are in the business of ensuring our clients earn the market return (11.48% for the S & P 500), and not the average investor return (4.48%)." Quite true and achivable especially prior GFCT. Alas the mud hit the fan violently and the adviser hardly can be blamed for this.



Oh wow.  But if it's any comfort, Kayman, all the 'advisers' and economists that were paraded through the media throughout the GFC said similarly.
They pretty much all said "just hold on in there, it will all be fine in the end'.
Whacko!  Fine for them, they meant in that they continued to receive their revenue streams!  
The impending GFC was clear to see.  It is simply unconscionable for so called advisers not to have taken protective action on behalf of their clients.



T







> he truth is I am happy because I don't know any other way to invest reasonably safe and not to jeopardise my nest-egg. I am too old to start all over again.



As I said earlier, it is much easier than you may think.



> I'd be devastated if I were to lose everything!



Of course you would, and there's no reason that you should be losing at all.
Do not allow what you don't at this stage know to become an impossible barrier to learning some basic tools for looking after what you have worked for.



> It's clear to me that both the adviser and f/manager would feel no suffering whatsover.



Exactly.

Sometime, when you're feeling stoic, have a read through the Storm Financial thread on this forum, Kayman.
You will see how trusting investors lost everything they had, including their homes via trusting a persuasive salesperson in the form of an 'adviser'.
It is a thread every client of a financial adviser should read, painful though it may be.




Sir Osisofliver said:


> :
> 
> You bet your little cotton socks that your adviser can be blamed for your current financial situation. What he did is he played hard fast and loose with *your money* with no protection in place. Oh he's not alone, the whole ****ing industry did the same stupid **** - but as I said before it's no skin off their nose if you are living on tinned baked beans in ten years time coz they screwed you because of negiligence or incompetence.



Quite so, and I'd add because of their own greed.







> Your Adviser *did not protect your assets correctly*
> 
> But how could he have known that the GFC was coming? He's not a soothsayer!!!
> 
> Wow that's a great chestnut. We aren't fortune tellers, we can't tell the future. (It sound suspiciously like a black swan event kind of comment.) No profit without risk. Great! lets disavow all responsibility towards the people who entrust their life savings to us.... and hey it's not our money so lets not have any risk protection in place either.



And the incredibly sad thing is that many of these clients still do not realise how screwed over they have been.



> How about September 07, when Northern Rock had to apply for Emergency financial support from the Bank of England as lender of last resort causing the biggest run on a Bank seen in a century... Did we still need to be fortune tellers to put risk protection in place?
> 
> Perhaps October 07 when UBS announced losses of 3.4 Billion dollars from sub-prime related investments...did we need to be fortune tellers then?



Yep, it simply beggars belief that so called experts could experience all this stuff, even the falling over of Lehmans, and still deny there would be any problem.


Kayman, I'm really feeling for you at present, as it seems Sir O's comments have come as a complete revelation to you.  It's always immensely disheartening to realise that we have been done.
But it has happened to many before you, and will happen to many more.

You are clearly still in a quite OK position, unlike many of the Storm investors who were duped utterly.

It's not too late to acquire some very basic understanding and start to take control.  There is much useful information on this site.  Sir O's thread for beginners is an excellent start.

All the best
Julia


----------



## Sir Osisofliver

Kayman said:


> Yes, but only due to the amounts taken out (monthly pension payments, ongoing advice fees and wrap administration fees). I guess if I hadn't withdrawn any funds then the performance would be up by 5.80% (this is the explanation my adviser came up with).




Kayman. Where was the market at the time you invested? Where was the market six months before the fecal matter hit the windmill? This is the level of *capital return* you should expect from a halfway decent adviser. This is not to mention the level of income stream coming from those assets...

With interest rates high 6's and low 7's for a large portion of that time if you'd simply had your 1.7 million in cash your income would have been $102,000+ pa before tax. 

If the adviser is not doing better than that....... 



> Well, this is not the first time, and believe me it's not easy getting used of this.
> In reference to my previous post: "If for example I would stick to to my current investment strategy and fund managers in my wrap account say for another 20 years or so..." is this something I could contemplate or should the thought be dismissed outright. (I'm not asking for advice just an educated opinion).




I had a client come to me last year in a similar situation to yourself (except they were not in pension phase). Their very large super account (+3M) was down over 40% during the GFC. Their adviser (who worked for a major bank but I shall name no names), did a forward projection on how long it would take for the managed funds to return to pre-GFC levels. The bank's projection? 25 years for the assets to build back to their previous levels (and this is without them drawing a pension). If you really want an exercise in frustration ask your adviser to tell you how long it will be before your account is back to where it was just before correction,  you'll probably get a similar answer.

You can probably tell that I don't like managed funds. As a simple rule the more people between you and the asset - the lower your return. Whilst this should not be construed as advice in any way, I would seriously lresearch opening a SMSF (self Managed Superannuation Fund) and purchasing appreciating, income producing assets directly.



> As you would imagine, I am completely overwhelmed by your posts. I unfeignedly appreciate your downrightness. Your quality of doing what is right and avoiding what is wrong is admirable, it's a real shame (IMHO) that only a selected few have access to your professional guidance.
> 
> Thanks again for write-ups which without doubt will other forum members  find most benefitial as well.
> 
> Kind regards...




Cheers

Sir O


----------



## tech/a

Reading through this thread has me confirming that managing my own super---indeed financial security is the best decision.

But I ask *THIS*

*What do you/or would you expect of a Financial Adviser??*

*This is my answer*

(1) I expect they can advise and position you on the right side of *ANY* major move in the market which would severely positively or negatively effect your/my portfolio.

(2) I expect that their grasp on economics and the cause and affect of major turns in economics will enable them to alert me to emerging opportunities early enough to take advantage of them

(A) The widely un balanced housing market in 1995 to 2003 would have been nice where it was IMPOSSIBLE to negatively gear a 4 bedroom house on 20% down (fortunately I saw this when none of my friends 3 F/A's).

(B) Gold when it was $275 and ounce would have been nice---one I know DID
point this out---I watched!

(C) AUD at 53c would also have been nice.

(D) Oil on its way from $12/Barrel to $140/Barrel then Back down to $30? barrel.

(E) Zinc 2003 - 2007 $800/T to $4500/T

(F) Silver $5 to $20.

Any one of these could have been potentially life altering.
With correct Risk management (Id have thought an F/A *would be widely versed in Risk Management and Portfolio Management-*--Unfortunately I know more than most I know---They in general when asked have the blankest look you could see on their face----Risk *WHAT?*)

If they cant put you in front of these economic opportunities then they IN MY OPINION are hardly Financial advisors.

As we know Managed fund sales people.


----------



## Kayman

Sir Osisofliver said:


> Kayman. Where was the market at the time you invested?



About $1.7 million (my market)


Sir Osisofliver said:


> Where was the market six months before the fecal matter hit the windmill?



About $2.3 million (my market)

FYI
An exchange of e-mail messages, (the names have been obfuscated)
-----Original Message-----
From: Kayman 
Sent: Thursday, 9 October 2008 8:14 PM
To: Financial Adviser
Subject: Pension Fund.

Hi Financial Adviser 
"AUSTRALIA is faring well in the global financial crisis but the bottom
line is bad for investors,"  Prime Minister Kevin Rudd said today.

Mr Rudd, who gave a press conference just after 1.40pm (AEST) [Oct. 9
'08] said the global financial crisis would strike a "really bad" blow
to Australians' superannuation savings.

"This is one of the really bad developments and bad impacts of what's
happening out of a series of bad news from, bad news announcements from
the global economy," he said.

"... Let's be absolutely clear about it. What is happening in the global
economy and what people see daily on their television screens and the
impact on stockmarkets affects people's superannuation earnings, it
really does.

"It hits the bottom line and it's bad, it's really bad. Let's not mince
words about it."

My questions to Financial Adviser: - how bad is all this with respect to my pension fund?  Allprevious provided models in the Strategy & Portfolio Review such as Allocation Pension Illustrator etc. are obviously no longer valid and have become meaningless. Whilst I don't expect an outright doomsday scenario (i.e. 1929 depression) it is in my view bad enough considering my age and relative small (and shrinking) pension investment.

My gut tells me that things are getting worse and the value of the funds
in my portfolio are declining rapidly which can't be good when it comes
to paying dividends/distributions. Although I may have enough cash on
hand to keep me going for a while, the real worry is, as far as I am
concerned, the recovery period;  Listening to some of the financial
experts on Australian ABC, CNBC and CNN,  this period (bringing my
portfolio back to pre Sep 08 status) could be 10 years or even longer. The financial journalists writing in the Wall Street journal are of similar view.

Considering the existing uncertainty in the financial environment, I am
inclined redeeming all existing funds and investing the proceeds into a
Term deposit account (similar to Westpac or any other Australian bank)
for 60 months (I believe special rates for larger deposits are available
on request).

I understand that the Australian banks have strong balance sheets and
are well regulated thus making them a pretty safe haven to invest.

In my view this would be a better/safer investment than the existing
arrangements. This may not be agreeable to some parties but in the end
it is me who is affected by all this - getting a job is unrealistic.  I
know this is an almost  'all-eggs-in-one-basket' investment proposition
but in my view much safer and less headache considering existing
conditions.

During an interview aired on CNBC (8 Oct 08) with John Bogle (founder of
the Vanguard Group of mutual funds) stated that he'd advise holders of
(American) 401k pension fund to cash-in to cut and avoid further losses.
(I do realize that this comment was directed to American citizen but
since the the entire fiasco is global and not restricted to the US this
advice may well apply to pensioners like me).
Apparently, John Bogle has a reputation for being always concerned about
small time investors.

Please have a close look at my request and, if applicable convince me
otherwise and comment accordingly in due course.
Rgds...Kayman. 

From: "Financial Adviser" <XXXXXX.com.au>
Sent: Wednesday, 15 October, 2008 1:43 PM
To: "Kayman" <XXXXXXX@XXXXX.com>
Subject: RE: Pension Fund.
Hi Kayman, 
Your comments are correct, the last few weeks have seen significant
volatility in global financial markets, including property markets,
share markets and currency markets. While the comments from Kevin Rudd
are accurate, we need to remember that the nature of share and property
market assets is bull and bear. Such short term volatility is the price
for a higher long term return on our assets. Clearly this has worked in
your favour in your pension fund, I have attached some information in
relation to the short term returns (last 12 months) and longer term
returns (since the fund was established in October 2004 - so almost 4
years). This shows that through to the end of September 2008 (ie. this
includes the present market correction), your fund's average annual
return was 7.98% per annum. On this basis, I have to disagree with your
assertion that all previous models are no longer valid, at present they
are more valid than ever. 
In fact, the starting point for such an analysis of "should I sell and
move to cash" must start with a review of your objectives. I have
attached a page from our initial planning exercise in July 2004, with
your stated objectives, which I assume have not changed. Unless your
objectives have changed significantly, then there is absolutely no
reason why a temporary market correction should cause us to change our
asset allocation and position, assuming we have widely diversified
assets, as you do. While I do not have a transcript of Jack Bogle's
interview, I have attached an article from Vanguard CEO Bill McNabb
which makes for interesting reading.
The crux of the issue is your assertion that the "recovery" to bring
your portfolio back to its position in say November 2007 (the height of
the market) could take some time. I believe this is the wrong issue to
focus on. It is not the time to get back to where we were at the top
that is the issue, but from where we are right now (40% off our highs),
do we expect a higher return from our diversified portfolio of 70%
growth assets and 30% conservative assets, or from a term deposit asset.
As noted, we need to bear in mind that these assets are now close to 40%
off their highs of November last year. I have attached a chart showing
the returns on the Australian and US sharemarket for each decade since
1926 (1950 for Australia). You will note that even during the great
depression, equity markets still gave a strong return for the full 10
year time frame of the 1930s. In fact, in US markets alone, the last 8
years has been the worst period for an Australian investor (after
allowing for currency). So unless there is a reason why we will deviate
from our long term plan (5 - 10 year) we very strongly advocate no
change whatsoever to you portfolio.
I have attached a few pages of what we call tough market quotes put out
by our Melbourne affiliates, which clearly shows the need to maintain
your position.
I reiterate our very strong view not to make any changes to your pension
portfolio.
Kind regards,
Financial Adviser 



Sir Osisofliver said:


> You can probably tell that I don't like managed funds. As a simple rule the more people between you and the asset - the lower your return.



I shall keep this rule in mind!


Sir Osisofliver said:


> Whilst this should not be construed as advice in any way,...



For the sake of clarity I won't take any of your posts in relation to my queries concerning my financial position as an advice.


Sir Osisofliver said:


> I would seriously lresearch opening a SMSF (self Managed Superannuation Fund) and purchasing appreciating, income producing assets directly.



In my particular case, redeeming the funds, winding up my pension fund and start anew without professional assistance would be an insurmountable task! I'd lose money hand over fist! I'm not game to do all this by myself.


----------



## Julia

Kayman said:


> While the comments from Kevin Rudd
> are accurate, we need to remember that the nature of share and property
> market assets is bull and bear. Such short term volatility is the price
> for a higher long term return on our assets. Clearly this has worked in
> your favour in your pension fund, I have attached some information in
> relation to the short term returns (last 12 months) and longer term
> returns (since the fund was established in October 2004 - so almost 4
> years). This shows that through to the end of September 2008 (ie. this
> includes the present market correction), your fund's average annual
> return was 7.98% per annum. On this basis, I have to disagree with your
> assertion that all previous models are no longer valid, at present they
> are more valid than ever.



This bloke could give any politician a run for their money in the spin stakes.




> The crux of the issue is your assertion that the "recovery" to bring
> your portfolio back to its position in say November 2007 (the height of
> the market) could take some time. I believe this is the wrong issue to
> focus on.



I just bet he doesn't want to focus on this!  See Sir O's earlier post about expected time for such a recovery.



> It is not the time to get back to where we were at the top
> that is the issue, but from where we are right now (40% off our highs),



In other words, just don't you worry about having lost about half your asset value, just forget it ever reached the previous high and it will be just fine, baby.

.







> I have attached a chart showing
> the returns on the Australian and US sharemarket for each decade since
> 1926 (1950 for Australia). You will note that even during the great
> depression, equity markets still gave a strong return for the full 10
> year time frame of the 1930s. In fact, in US markets alone, the last 8
> years has been the worst period for an Australian investor (after
> allowing for currency).



You started your fund, I think you said, in 2004.  The market essentially doubled from then to the peak at November 2007 in Australia.

Your p/f, if appropriately placed, should have at the very least done likewise.



> So unless there is a reason why we will deviate
> from our long term plan (5 - 10 year) we very strongly advocate no
> change whatsoever to you portfolio.



Translation:   we will fight like hell for you to maintain our income stream from these managed funds.  We don't give a stuff about your personal situation.



> In my particular case, redeeming the funds, winding up my pension fund and start anew without professional assistance would be an insurmountable task! I'd lose money hand over fist! I'm not game to do all this by myself.



OK, so you'd rather continue being screwed over gradually, year by year,in order to maintain the income of your so called adviser?

You only think it's an insurmountable task to take control yourself because it's an area new to you.  Also, because you have become accustomed to this 'adviser' talking at you with all his obfuscating terminology and undoubtedly a confident and assertive tone, your own common sense (which is clearly depicted in your email to the adviser) is being undermined.

He has created for you the impression that you are receiving top advice and the absolute best returns available in a difficult market.  
  He is conveniently leaving out the strong bull market from 2004 to end of 2007.

He has utterly and completely failed to protect your profits achieved in that period (assuming such profits actually to have accrued?).

Your decision entirely, of course, Kayman, but you would not have been posting this info up on this forum if you were not significantly disquieted and anxious about what is actually going on here.


----------



## burglar

Julia said:


> ... posting this info up on this forum if you were not significantly disquieted and anxious about what is actually going on here.




After reading this thread, I am "significantly disquieted and anxious" *insert appropriate smiley*


----------



## burglar

Sir Osisofliver said:


> As a simple rule the more people between you and the asset - the lower your return.
> 
> Cheers
> 
> Sir O




Sir O,
Congrats, you've scared the burglar! 
I have been following some of your threads/posts.
I have no wish to be castigated, but it would be illuminating.
And not just for me, but also for others who pass this way.
I would like to post my dilemma/position. 
Can I use company names, it's easier for me?


----------



## Kayman

Julia said:


> ...we will fight like hell for you to maintain our income stream from these managed funds.  We don't give a stuff about your personal situation.



I tend to agree with your 'translation' especially when looking at the projected professional fees for the next 25 years which add up to about $750,000.-...


Julia said:


> OK, so you'd rather continue being screwed over gradually, year by year,in order to maintain the income of your so called adviser?



No Julia, I've had it! I am going to terminate the existing 'ongoing advice' agreement but give him the opportunity and invite him to quote for a 'fee for service' arrangement ('knowing the devil...'). This type of arrangement would personally suit me as the 'changes' would not be as sudden and drastic and give me more time taking control over my investment gradually. If he declines my proposal than so be it! 


Julia said:


> You only think it's an insurmountable task to take control yourself because it's an area new to you.  Also, because you have become accustomed to this 'adviser' talking at you with all his obfuscating terminology and undoubtedly a confident and assertive tone, your own common sense (which is clearly depicted in your email to the adviser) is being undermined.



In hindsight I should've joined up with a forum such as this a very long time ago. The different perspectives from all your participants are invaluable, educational and eye-opening!


Julia said:


> He has created for you the impression that you are receiving top advice and the absolute best returns available in a difficult market. He is conveniently leaving out the strong bull market from 2004 to end of 2007.
> He has utterly and completely failed to protect your profits achieved in that period (assuming such profits actually to have accrued?).



I suspected so for quite some time but somehow never was able to prove my theory (intuition). Other than emotions or instinct I guess I never knew how to compose an intellectual/rational reply to my f/adviser's responses.


Julia said:


> Your decision entirely, of course, Kayman, but you would not have been posting this info up on this forum if you were not significantly disquieted and anxious about what is actually going on here.



You Julia, Sir O and awg given me the encouragement to initiate appropriate changes and thank you for this wholeheartedly.

With all good wishes...


----------



## awg

Kayman said:


> I tend to agree with your 'translation' especially when looking at the projected professional fees for the next 25 years which add up to about $750,000.-....




think of that compounding in your account, although didnt you mention to be in your late 60s?..your FP really is an optimist..:



Kayman said:


> I am going to terminate the existing 'ongoing advice' agreement but give him the opportunity and invite him to quote for a 'fee for service' arrangement ('knowing the devil...'). This type of arrangement would personally suit me as the 'changes' would not be as sudden and drastic and give me more time taking control over my investment gradually. If he declines my proposal than so be it! .




I suspect you may as well spit in his face, sorry



Kayman said:


> In hindsight I should've joined up with a forum such as this a very long time ago. The different perspectives from all your participants are invaluable, educational and eye-opening!.




Lots of good threads can be searched, researched.

I have changed many aspects of my investment style, that would not be used by 99%? of FP, ie investing in many smaller cap shares.

At the same time I have taken measures to balance risk and volatility across my entire portfolio



Kayman said:


> I suspected so for quite some time but somehow never was able to prove my theory (intuition). Other than emotions or instinct I guess I never knew how to compose an intellectual/rational reply to my f/adviser's responses.
> 
> You Julia, Sir O and awg given me the encouragement to initiate appropriate changes and thank you for this wholeheartedly.
> 
> With all good wishes...




You may wish to consider drawing up a business-style plan for how you intend to proceed. 

One needs to be honest and realistic about what is desired and expected

btw, what exactly are you expecting?

continuous buy/sell advice on all classes + regular asset allocation advice, accounting and banking package, that is boutique service ole mate, you would be expected to pony up


----------



## Kayman

Kayman said:


> Thanks Julia,
> I'll respond to your PM shortly.
> Kind regards...




Hi Julia,
Response to your PM sent off today.

Cheers...


----------



## newbie trader

This is probably one of the main reasons why I am trying to learn how to invest and manage my money, so as I don't have to rely on others and fork out thousands in fees. I'm still somewhat unsure about the differences between the various financial services available to individuals as I have never used any myself. I remember reading about Stefan and his action...

http://www.brisbanetimes.com.au/que...s-giant-for-lost-millions-20100802-1132c.html


----------



## Kayman

awg said:


> think of that compounding in your account, although didnt you mention to be in your late 60s?..your FP really is an optimist..:



Precisely 


awg said:


> I suspect you may as well spit in his face, sorry:



I'll keep you informed 


awg said:


> Lots of good threads can be searched, researched.



Yes indeed, a wealth of good quality information! 


awg said:


> I have changed many aspects of my investment style, that would not be used by 99%? of FP, ie investing in many smaller cap shares. At the same time I have taken measures to balance risk and volatility across my entire portfolio.
> You may wish to consider drawing up a business-style plan for how you intend to proceed.
> One needs to be honest and realistic about what is desired and expected
> btw, what exactly are you expecting?.



Some of my objectives:
To retain an adequate cash reserve fo immediate access as required for emergencies.
To preserve flexibility by choosing some (liquid) investments which are readily redeemable.
To maintain an investment portfolio that has a solid overall long-term security with a time horizon of at least five years.
To maintain a spread of both direct investments (shares) and managed investments (funds) which do not require my personal active day-to-day attention.
To maintain appropriate diversification across asset classes within asset classes across countries or regions and across management styles.
To obtain a positive rate of (after tax) return of investments and protect the value of investment capital against the effectives of inflation.
To prevent erosion of capital outlay.
To achieve capital growth over the long-term at least in the line with the rate of inflation.
To generate an annual after-tax income of $xxxxxx to cover my living expenses. This amount excudes professional fees/charges for financial adviser and tax accountant and Australian income tax payments.

Cheers...


----------



## awg

The light bulb went on when I realized that "fees" were actually 
jostling with tax and food as my No1 expense.

When I analysed what I was getting for that fee in regard to by far the biggest asset in my families life
.

No specific buy or sell advice at all !
No regular review
An admin service
A couple of clever young fellows to chat to about asset allocation
A fairly long list of restrictions

Then I realised I was lazy, and had not taken proper responsibility for my situation

For a smirk, try telling a lawyer that self-representation is a good idea


----------



## prawn_86

This is a truely great thread.

Thanks to all the posters who have contributed so far, its threads like this that make ASF what it is.


----------



## Julia

awg said:


> I suspect you may as well spit in his face, sorry



Quite so.  Having placed your money into managed funds, Kayman, that is simply all it takes for him to continue receiving trail commissions for the rest of your life, should you stay so invested.
If you were, however, to move to a different 'adviser', then that new adviser can write to the managed funds and say "Whacko, we are now handling Kayman's affairs, so please transfer the trail commission to us".  How good is that, Kayman?  They didn't even have to do a thing, other than tell a secretary to fire off a form letter !



> I have changed many aspects of my investment style, that would not be used by 99%? of FP, ie investing in many smaller cap shares.



I also completely reject the groupthink of asset allocation and investment style so beloved of all the managed funds and 'professional advisers'.
I expect it is much easier for them to put all their clients into similar stuff across the board.  Even less need to think about personal objectives if they do that.

I think there is way more sense in being more heavily invested in sectors that are doing well at any given time, then moving funds when that changes, than having diversification just for the sake of it.  e.g. why would you have your funds in international shares if global markets are falling?  Just makes no sense.  You need to be prepared to move your money around in accordance with where it is going to work best for you.  This is not difficult.






Kayman said:


> Some of my objectives:
> To retain an adequate cash reserve fo immediate access as required for emergencies.
> To preserve flexibility by choosing some (liquid) investments which are readily redeemable.
> To maintain an investment portfolio that has a solid overall long-term security with a time horizon of at least five years.
> To maintain a spread of both direct investments (shares) and managed investments (funds) which do not require my personal active day-to-day attention.
> To maintain appropriate diversification across asset classes within asset classes across countries or regions and across management styles.
> To obtain a positive rate of (after tax) return of investments and protect the value of investment capital against the effectives of inflation.
> To prevent erosion of capital outlay.
> To achieve capital growth over the long-term at least in the line with the rate of inflation.
> To generate an annual after-tax income of $xxxxxx to cover my living expenses. This amount excudes professional fees/charges for financial adviser and tax accountant and Australian income tax payments.
> 
> Cheers...



Kayman, forgive me if I'm being unkind, but the above sounds like a direct copy and paste of what your 'adviser' will have provided you with in a Statement of Advice.  It is more of the spurious groupthink they run off by the thousand and hand out to everyone.

It sounds pretty good, huh?
Only tiny problem is that they are totally and utterly failing to fulfill this.


----------



## Julia

Kayman said:


> Hi Julia,
> Response to your PM sent off today.
> 
> Cheers...




thanks, Kayman.  Reply sent this evening.


----------



## burglar

I always knew I was being shagged but didn’t much care.
Thought it was beyond my control anyways.
Put very little into Super cos I expected to live on the pension. 
Never in my wildest dreams did I think I could become well off (*and I didn’t*)! 
I was brought up in poverty. 
As Billy Connolly would say, I didn’t know, I had nothing to compare it to. 

I started Super with Company X on a Rainbow Policy. 
It changed hands several times til it ended up with Company Y
I arranged to meet their financial advisor.
He advised me to rollover all but the foundation units into Company Z. 
Exit fee for foundation units are apparently extreme. 
Why would I reward Company Y’s non-performance with a whopping exit fee?

My productivity super was with the Fed Guvnmnt with 9-10% p.a. return. 
On becoming redundant, I was told I need to roll it over into a private super fund. 
To this day I don’t know why I passively accepted this. Rolled over into Company K.

In the lead up to Global Financial Crisis, I met with financial advisor
I showed him Company K’s performance. 
We agreed it was flagging compared to Company Z. Rolled over into Company Z.

I daren’t look now, but when I last looked they were doin’ just Ok

I withdrew 30k and put it in speculative mining juniors. 
Losing half in the downturn and then getting it back. 
Only to lose some again with two bad picks and the stoopid new tax. 
No big deal, I was prepared to loose some, knowing it would bounce back.

From what I’ve read at ASF, I have probably done far worse I could imagine. 
(I don’t know what I don’t know) 
Here’s the rub. 
Where do I go to from here?


----------



## Julia

Burglar, perhaps work your way through the Beginners' Forum, especially Sir O's thread which offers a great introduction and basic education.
The ASX website also has some quite good educational modules that you can work through in your own time.  Most online brokers have similar.

Maybe if you derive some educated base from which to make decisions, that might be more useful than what seems to be a series of 'stabs in the dark'.


----------



## burglar

Julia,

Thankyou for your response. 

I'm not a beginner and I actually believe that I'm good at trading. 
You ran to cash (any port in a storm) A wise choice. 
I put out a sea anchor and hoped for the best, but sustained a little damage.

My Good picks to Bad picks Ratio stood at 26:03 before the GFC
My Good picks to Bad picks Ratio stands at 26:12 after the GFC

One of my worst and earliest picks was MGK which gapped down. 
...
...
Tell you what ... I'll see what's already here on ASF on SAMAG, PAL Pima, MIL Magnesium International, MGK Magnesium International et al 
... or I'll start a thread.


----------



## basilio

prawn_86 said:


> This is a truely great thread.
> 
> Thanks to all the posters who have contributed so far, its threads like this that make ASF what it is.




Echo your thoughts prawn.  Just excellent thinking and contributions from almost all participants. Certainly reflects and clarifies my experiences. In fact with a light edit this thread could be a *Dummies Guide to investing with Financial Advisers (not).* _(That is NOT a slur. These books are clear, incisive and very useful)_


----------



## burglar

> One of my worst and earliest picks was MGK which gapped down.
> ...
> ...
> Tell you what ... I'll see what's already here on ASF on SAMAG, PAL Pima, MIL Magnesium International, MGK Magnesium International et al
> ... or I'll start a thread.




"My Worst Pick Ever"
https://www.aussiestockforums.com/forums/showthread.php?t=21130

Want to share your worst nightmare?


----------



## awg

To the OP, ( and others)

I typed into Google....."Fee for service financial advice"

Just to see what would happen, and also cause I am often surprised that people dont do that first..anyway

I didnt read them, but I can recall that Travis Morien has a interesting website and I liked the cut of his jib

http://www.travismorien.com/ffsadvantage.htm

The others , I just glanced at

http://www.2020directinvest.com.au/investment-opportunities/financial-advice.aspx

http://www.financialspectrum.com.au/

ps. remember most FP are inherently akin to salesmen, which makes interacting with them tricky


----------



## burglar

Julia said:


> Burglar, perhaps work your way through the Beginners' Forum, especially Sir O's thread which offers a great introduction and basic education.
> The ASX website also has some quite good educational modules that you can work through in your own time.  Most online brokers have similar.
> 
> Maybe if you derive some educated base from which to make decisions, that might be more useful than what seems to be a series of 'stabs in the dark'.




I have worked my way through loads at the Beginners' Forum, especially Sir O's thread, which I enjoyed immensely. Can't wait to catch up with him as I have some questions. 
The ASX website will have to wait, even burglars have to sleep!

Cheers!


----------



## ROE

I have used independent financial adviser and never have any issues with conflict of interest.

I pay them for the hour they put in regard to different matters of affairs.

Nothing but goodness come out of it ...

A lot of negatives on this industry due to un-ethical behaviors but there are good people out there and if you read Dr Stanley "The Millionaire next Door"

the vast majority of the individual with great wealth 
still use accountants and advisers for their tax and money affairs

(these are the guys that use food coupon and cut cost on their groceries but have stack of cash and willing to pay lot of money for good advices)

and most of them encourage their children to go into law, medicine and accounting because these are the services they use themselves and rarely cut back


----------



## burglar

burglar said:


> I daren’t look now, but when I last looked they were doin’ just Ok
> 
> From what I’ve read at ASF, I have probably done far worse I could imagine.
> (I don’t know what I don’t know)
> Here’s the rub.
> Where do I go to from here?




Looked again, they were doin’ just Ok

Fees 10% Administration

I have zero changes to plan
I have zero contributions
I have zero withdrawals 

How do they dare?

I intend to withdraw to the max, not only now, but when I turn 61 years old,
and again when I turn 65/67 retirement age and I go on the pension!

it was never $1.7Mill, 
its only 69k. left now.

not enough for SMSF
not enough for retirement

burglar sees 2 alternatives

invest in equities or 
a bloody good hangover

Cheers,


----------



## burglar

Hi Julia,

burglar apoplogises unreservedly to Julia if he was offensive 



Julia said:


> Burglar, ...
> 
> Maybe if you derive some educated base from which to make decisions, that might be more useful than what seems to be a series of 'stabs in the dark'.



burglar does his best work in the dark. lol


Cheers,


----------



## Sir Osisofliver

Hi Kayman - back from holidays 



Kayman said:


> About $1.7 million (my market)
> 
> About $2.3 million (my market)




So not protecting your portfolio cost you 26% of your superannuation net wealth. As opposed to a cost of 6%-10% for "Insurance" purposes.

However you need to consider the following.  If you had hedged, hedging your portfolio generates funds. (The instrument when sold) you then have these funds to invest into the market. (At guess what...close to the bottom of the market). These funds then enjoyed an almost 50% increase. To demonstrate I went and found a client who joined the firm in January '04. During the same period of time as yourself the client returned 142.53%*

*No pension deductions but result is *net of fees. *
Your 1.7 ish million therefore would have been roughly 2.423M. (Before deductions) See the difference not protecting your assets made to your level of return? 







> FYI
> An exchange of e-mail messages, (the names have been obfuscated)
> -----Original Message-----
> From: Kayman
> Sent: Thursday, 9 October 2008 8:14 PM
> To: Financial Adviser
> Subject: Pension Fund.



 Kayman - look at the date....by now the majority of the damage is done, you've had almost a year of falling share market. Ouch!







> -snip- post too long
> 
> 
> Please have a close look at my request and, if applicable convince me
> otherwise and comment accordingly in due course.
> Rgds...Kayman.



 Kayman - I would also have told you not to put all your money into a TD at that time.  We started our major purchasing for clients in November '08.

Similar to Julia I will interpret for you given my own perspective







> From: "Financial Adviser" <XXXXXX.com.au>
> Sent: Wednesday, 15 October, 2008 1:43 PM
> To: "Kayman" <XXXXXXX@XXXXX.com>
> Subject: RE: Pension Fund.
> Hi Kayman,
> Your comments are correct, the last few weeks have seen significant
> volatility in global financial markets, including property markets,
> share markets and currency markets. While the comments from Kevin Rudd
> are accurate, we need to remember that the nature of share and property
> market assets is bull and bear.




Never trust a broker when he speaks about other asset classes. I'm kind of a gumby attaching stuff to the forum but have a look at the attachment. For everyone else reading - I really don't want this thread to derail into a discussion about property. Go visit the property thread for that. Now Kayman, show me where the property cycle is bearish and compare that to the asset class of shares for me.....  



> Such short term volatility is the price
> for a higher long term return on our assets.



 Wanker! Such short term volatility is because I don't know how to DO MY JOB PROPERLY! 







> Clearly this has worked in
> your favour in your pension fund, I have attached some information in
> relation to the short term returns (last 12 months) and longer term
> returns (since the fund was established in October 2004 - so almost 4
> years). This shows that through to the end of September 2008 (ie. this
> includes the present market correction), your fund's average annual
> return was 7.98% per annum.



 I gave you a comparison above - are you grumpy yet? 







> On this basis, I have to disagree with your
> assertion that all previous models are no longer valid, at present they
> are more valid than ever.



 I also disagree that all previous models are no longer valid. I disagree because I know that the market is cyclical and that 08 was just an expression of the cyclical nature of market and is nothing new. I'm not sure if he gets that. 







> In fact, the starting point for such an analysis of "should I sell and
> move to cash" must start with a review of your objectives.



 Hey I'm only doing what you told me to do - can't blame me for the market!!  







> I have
> attached a page from our initial planning exercise in July 2004, with
> your stated objectives, which I assume have not changed. Unless your
> objectives have changed significantly, then there is absolutely no
> reason why a temporary market correction should cause us to change our
> asset allocation and position, assuming we have widely diversified
> assets, as you do.



 Mmm Compliancy goodness. Look this is what you agreed to and signed on the dotted line for...can't blame me that the market went down. Now lets keep doing what we've always done so I can keep sucking that sweet sweet commission out of you.







> While I do not have a transcript of Jack Bogle's
> interview, I have attached an article from Vanguard CEO Bill McNabb
> which makes for interesting reading.
> The crux of the issue is your assertion that the "recovery" to bring
> your portfolio back to its position in say November 2007 (the height of
> the market) could take some time. I believe this is the wrong issue to
> focus on.



 Oh really? The wrong issue to focus on?  Now if Kayman was *gambling* I would agree. You only count your stack of cash at the end of the night. However you are meant to be investing - which means we really should be looking at things like risk management. Dip****. 







> It is not the time to get back to where we were at the top
> that is the issue, but from where we are right now (40% off our highs),
> do we expect a higher return from our diversified portfolio of 70%
> growth assets and 30% conservative assets, or from a term deposit asset.



 You know that annoying uncle you had Kayman who always did the trick with the coin and pulled it out of your ear?  Guess what he is doing? No no don't look at what you've lost, lets look at what you have compared to what is the lowest performing asset class over the longer term.  Hey we look good now right?  







> As noted, we need to bear in mind that these assets are now close to 40%
> off their highs of November last year. I have attached a chart showing
> the returns on the Australian and US sharemarket for each decade since
> 1926 (1950 for Australia). You will note that even during the great
> depression, equity markets still gave a strong return for the full 10
> year time frame of the 1930s. In fact, in US markets alone, the last 8
> years has been the worst period for an Australian investor (after
> allowing for currency). So unless there is a reason why we will deviate
> from our long term plan (5 - 10 year) we very strongly advocate no
> change whatsoever to you portfolio.



 Look at the market. Your eyes are getting sleepy. See the rises and falls and feel your breathing slowing down to match. You're now deeply asleep. Repeat after me. Managed funds are good. I like managed funds. I like paying fees.



Hey what about other asset classes since Term Deposists are so bad. What about property! What did *it* do during any ten year period? I'll refer you to the attached chart again Kayman. 







> I have attached a few pages of what we call tough market quotes put out
> by our Melbourne affiliates, which clearly shows the need to maintain
> your position.
> I reiterate our very strong view not to make any changes to your pension
> portfolio.
> Kind regards,
> Financial Adviser



 If you aren't sure exactly what he's done here Kayman - it's a sales technique. Recency. It's to do with the fact that we remember more clearly the last thing we hear or read. What was the last thing he said? *I reiterate our very strong view not to make any changes to your pension portfolio.*  They say repetition is very important when conditioning people.



> In my particular case, redeeming the funds, winding up my pension fund and start anew without professional assistance would be an insurmountable task! I'd lose money hand over fist! I'm not game to do all this by myself.




Really?  Ok know what critical path analysis is?  Break the task into smaller extremely difficult tasks. Further break it into many challenging tasks. Further break it into a great many small things to do and do them one after the other.

The first thing is education. It seems difficult and insurmountable because you simply don't know what to do. Keep reading and asking questions Kayman.  (Notice what my Recency comment is Kayman?)

Cheers

 Sir O


----------



## Kayman

Sir Osisofliver said:


> Hi Kayman - back from holidays



Welcome back Sir O!
I can sense the break has replenished you with the additional energy needed responding to the posts here in this forum. A service many here appreciate, I am sure!


Sir Osisofliver said:


> So not protecting your portfolio cost you 26% of your superannuation net wealth. As opposed to a cost of 6%-10%for "Insurance" purposes.
> 
> However you need to consider the following.  If you had hedged, hedging your portfolio generates funds. (The instrument when sold) you then have these funds to invest into the market. (At guess what...close to the bottom of the market). These funds then enjoyed an almost 50% increase. To demonstrate I went and found a client who joined the firm in January '04. During the same period of time as yourself the client returned 142.53%*
> 
> *No pension deductions but result is *net of fees. *
> Your 1.7 ish million therefore would have been roughly 2.423M. (Before deductions) See the difference not protecting your assets made to your level of return?  Kayman - look at the date....by now the majority of the damage is done, you've had almost a year of falling share market. Ouch! Kayman - I would also have told you not to put all your money into a TD at that time.  We started our major purchasing for clients in November '08.



To be precise, the worth of my investment portfolio in the allocated pension fund cost me 26.65%. On 12 Oct 07 my total financial portfolio was worth about $2.3 million, on 08 Oct 08 1.7 million. As of today it is still hovering around in the high $1.6 million mark.
With my e-mail message dated 09 Oct 08, I basically forced my adviser to comment on the then financial situation as he never contacted me on his own volition in relation to the crisis.


Sir Osisofliver said:


> Similar to Julia I will interpret for you given my own perspective.
> Never trust a broker when he speaks about other asset classes. ,
> <cut to shorten post>
> Go visit the property thread for that. Now Kayman, show me where the property cycle is bearish and compare that to the asset class of shares for me...



The return of my Vanguard Property Security Index Fund from 01/10/04 to 31/08/10 was minus 4.48%.


Sir Osisofliver said:


> <cut to shorten post> Repeat after me. Managed funds are good. I like managed funds. I like paying fees.



 I know your position with respect to managed funds and appreciate your simple rule "the more people between you (me) and the asset - the lower your (my) return." In order minimising withholding tax liabilities I need to reinvest the procceeds of my wound-down pension fund fairly quickly. As far as I am concerned I have no other option but to look at term deposits or bonds. These type of investments are easy, straight forward and even I can follow and understand. Once or if I ever get the financial savvy required I then will look at more sophisticated financial products.
Alternatively, an active share broker may also be worthwhile to consider, this would eliminate the number of people between me and the assets. I know of a 'high quality' firm in Brisbane who take on clients with a minimum of $1 million. 


Sir Osisofliver said:


> Hey what about other asset classes since Term Deposists are so bad. What about property! What did *it* do during any ten year period? I'll refer you to the attached chart again Kayman.



As mentioned above, the return of my Vanguard Property Security Index Fund from 01/10/04 to 31/08/10 was minus 4.48%.


Sir Osisofliver said:


> If you aren't sure exactly what he's done here Kayman - it's a sales technique. Recency. It's to do with the fact that we remember more clearly the last thing we hear or read. What was the last thing he said? *I reiterate our very strong view not to make any changes to your pension portfolio.*  They say repetition is very important when conditioning people.



My adviser is obviously well trained to take (legally) full advantage of those who are not familiar to this game (industry). 


Sir Osisofliver said:


> <cut to shorten post>
> The first thing is education. It seems difficult and insurmountable because you simply don't know what to do. Keep reading and asking questions Kayman.  (Notice what my Recency comment is Kayman?)



I feel pretty stupid now.

Well Sir O, you made it more than clear that I (again) have been had and am gradually going to do something about it. Education takes a long time, especially if one doesn't know which diretion to take in the jungle of investments opportunities.

One of the forum contributers has contactet me, giving me support and advice of which I am most grateful; I shall keep in touch.

Without intention and because it happen only recently, I omitted in previous posts that I am no longer a resident of Australia and reside abroad. As a non-resident, I am no longer liable for capital gains tax upon the sale of any shares purchased after the date you became a non-resident for tax purposes. My cash account however attracts a withholding tax.

I am presently in contact with my tax accountant and he confirmed that:-

1. My particular wrap account can only be accessed by an registered financial adviser and can not access myself.

2. The investment products (which make up my Allocated Pension Fund now renamed Account Based Pension fund) themselves are not tied to my current wrap account, I could transfer them to another administration service, such as Macquarie, MLC etc. But those administration services are more expensive and still would require an adviser to access the account. 

3. There are self-managed wrap accounts available but he is unsure if my existing assets can be transferred and the fund managers would agree to that (because of prior adviser/fund manager 'understanding'?).

4. My adviser has used wholesale investment funds, which I can only purchase on my own if I have more than $500,000 for each investment. If I were to wind-down my pension fund I would have to redeem these funds as well. Having said that, to sell the assets and withdraw would incur total costs of $30.50 x 12 = $366.00, plus any interest penalty on the term deposit (assuming I break it before March next year).

5. As a non-resident I am precluded for running a self managed super fund SMSF).

6. Tell (adviser) to reduce adviser fee or you will change funds.

7. Consider an industry fund which is non profit.

Oh boy, got to go - my head is spinning.

Thanks for your comments, support and suggestions. 

Cheers...Kayman.


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## Julia

Kayman said:


> ith my e-mail message dated 09 Oct 08, I basically forced my adviser to comment on the then financial situation as he never contacted me on his own volition in relation to the crisis.



Goodness!   That's so surprising!  (not!)



> Alternatively, an active share broker may also be worthwhile to consider, this would eliminate the number of people between me and the assets. I know of a 'high quality' firm in Brisbane who take on clients with a minimum of $1 million.



Kayman, what is it about this 'active share broker' that assures you he would have your best interests at heart?  Just the fact that he doesn't handle clients who only have a few hundred thousand to invest?  If so, I can't follow that logic particularly.
I'm sure I told you about my long ago experience of consulting a full service broker, whose twelve recommendations I accepted, but fromwhich at the end of a year in a raging bull market, ten had lost me substantial amounts.

You may have over a million to invest, but brokers who handle 'sophisticated investors' will put the interests of clients with gazillions ahead of what is good for you.  Just try to understand that unless you are handling your own funds yourself, it all depends on where you come in the food chain.
Do not delude yourself that your financial outcomes actually matter to any so called adviser.

(With due respect to Sir O, of course, whom we know to be professional enough to actually work for his clients.)



> I feel pretty stupid now.



Don't waste time and precious energy on feeling stupid, Kayman.  You are no more 'stupid' than probably the majority of the population who, being nice, trusting people, have put their faith in the integrity and competence of people who do not deserve this faith.

Just move on, and educate yourself.  There are plenty of resources available, and help also from this forum.

Feeling stupid is about as useful as ever feeling guilty about anything.
It's pointless.  You have learned from what has happened.  You have not dismissed advice offered here on the basis that it's too painful to believe.

So already you're several steps ahead.

Just keep it up.

Do it a bit at a time.  Anyone can do that.  You do not need to become an expert in a week.

All the best.


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## Sir Osisofliver

Ok Kayman lets see.......



Kayman said:


> Welcome back Sir O!
> I can sense the break has replenished you with the additional energy needed responding to the posts here in this forum. A service many here appreciate, I am sure!
> 
> With my e-mail message dated 09 Oct 08, I basically forced my adviser to comment on the then financial situation as he never contacted me on his own volition in relation to the crisis.




That doesn't surprise me.



> The return of my Vanguard Property Security Index Fund from 01/10/04 to 31/08/10 was minus 4.48%.



 I know - disgusting isn't it? Do you see what the difference is in owning the assets directly is? If you'd bought a residential property during that period of time your money would have probably almost doubled.

There are also significant differences between residential property and commercial property. They have different drivers as to price and different volatility characteristics. Guess which one you're invested in?







> I know your position with respect to managed funds and appreciate your simple rule "the more people between you (me) and the asset - the lower your (my) return." In order minimising withholding tax liabilities I need to reinvest the proceeds of my wound-down pension fund fairly quickly. As far as I am concerned I have no other option but to look at term deposits or bonds.




You have plenty of options. You are in pension phase. Without knowing all your circumstances though..... you need to discover what these options are yourself as I cannot provide advice to you.

Do you understand bonds? What happens to the capital value of a bond when interest rates rise? Are we likely to see increases or decreases in interest rates over your investment period in bonds?

(I'm not asking this because I want to know - I'm asking to make sure you know). If you don't know... a rising interest rate environment degrades the capital value of a bond...and the reverse is true as well. 







> Alternatively, an active share broker may also be worthwhile to consider, this would eliminate the number of people between me and the assets. I know of a 'high quality' firm in Brisbane who take on clients with a minimum of $1 million.




I can't tell you if this is a good idea or not. Much will depend upon the individual adviser or broker. Be *careful*.


> I feel pretty stupid now.




As Julia said - there is no stupid, there is merely educated and uneducated. Am I stupid because I am ignorant of how to fly a plane? No, you are not stupid, you are better off than the majority that drink the koolaid. What's done is done - move forward with education. 







> Without intention and because it happen only recently, I omitted in previous posts that I am no longer a resident of Australia and reside abroad. As a non-resident, I am no longer liable for capital gains tax upon the sale of any shares purchased after the date you became a non-resident for tax purposes. My cash account however attracts a withholding tax.
> 
> I am presently in contact with my tax accountant and he confirmed that:-
> 
> 1. My particular wrap account can only be accessed by an registered financial adviser and can not access myself.




Yeah most of them are structured like that. Convenient isn't it? 







> 2. The investment products (which make up my Allocated Pension Fund now renamed Account Based Pension fund) themselves are not tied to my current wrap account, I could transfer them to another administration service, such as Macquarie, MLC etc. But those administration services are more expensive and still would require an adviser to access the account.



 They cannot restrict your ability to move the assets to another adviser (as much as they would like to). If you *want* an Adviser you will pay for it. 







> 3. There are self-managed wrap accounts available but he is unsure if my existing assets can be transferred and the fund managers would agree to that (because of prior adviser/fund manager 'understanding'?).




He's probably correct about moving your existing assets. Just because they can't stop you moving your assets to another adviser - it doesn't stop them from forbidding you from managing them yourself. If the funds are wholesale - *potentially* -  your only option to self managed would be to redeem and then purchase assets directly - which they then have 30 days to do so. 







> 4. My adviser has used wholesale investment funds, which I can only purchase on my own if I have more than $500,000 for each investment. If I were to wind-down my pension fund I would have to redeem these funds as well. Having said that, to sell the assets and withdraw would incur total costs of $30.50 x 12 = $366.00, plus any interest penalty on the term deposit (assuming I break it before March next year).




Why do you think your adviser made it difficult to manage these assets yourself? P.S. These are *your assets* you can stagger the withdrawal of them to suit YOU. If you would incur an interest penalty...leave it there 'till March. P.P.S. <- this isn't advice.







> 5. As a non-resident I am precluded for running a self managed super fund SMSF).



 Yes. yes you are. Now ask whether super is the right environment for the funds since you are a non resident. It's been a while and I'd have to check but I think from memory withholding tax is at the top marginal tax rate. Ask your accountant to do a cost benefit on taking the entirity of the funds out of super (which you should be entitled to do tax free) and using some kind of structure such as a company or trust to minimise your potential taxation implications. If the assets you hold directly have imputation credits this can largely offset your taxation burden. <- Not advice again. 







> 6. Tell (adviser) to reduce adviser fee or you will change funds.




Good luck 







> 7. Consider an industry fund which is non profit.




Um..... Whilst industry funds are non-profit - this does not mean that they do not have expenses which they are entitled to claim before charging an MER like any other Managed Fund.  (Expenses such as the $35m dollar advertising campaign with Bernie Fraser - the money fairy didn't pay for it - it came from contributions). The more people between you and an asset.......







> Oh boy, got to go - my head is spinning.
> 
> Thanks for your comments, support and suggestions.
> 
> Cheers...Kayman.




Hope that helps.

Cheers

Sir O


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## Kayman

*Finally, no more outrages and exuberant monthly ongoing adviser fees!* 

My quest for finding an authentic *FEE-BASED *financial adviser/planner who is willing to take on my existing investments has at long last come to a happy and successful conclusion. My FEE savings are going to be tremendous and I couldn't be a happier 'Vegemite' .

For your information:

If anybody is experiencing a similar plight as described in my original post than I highly recommend to contact Gavin Derapas of Financial Force based in Buranda QLD. 

e-mail:.gderepas@financialforce.com.au    
mobile:.0422 017 400
phone:..07-3335 6604

It doesn't matter where you are located, I live abroad.

He assisted me greatly to get normality in relation to professional fees of my financial portfolio and finally stopped the gravytrain ride my previous adviser was riding on.  

I am happy to provide additional details through this forum for all to read.

Cheers...Kayman.


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## Julia

Hello Kayman,

What is it about this adviser that so impresses you?

As I recall your original posts, you were in the beginning 'very happy' with your then adviser?

What makes the new one so different?

(not wishing to rain on your parade but am just interested in how your judgement is better this time than last?)


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## Kayman

Hi Julia,



Julia said:


> What is it about this adviser that so impresses you?




The non-salesmanship and down-to-earth approach, plain & moderate office environment.



Julia said:


> As I recall your original posts, you were in the beginning 'very happy' with your then adviser?




Yes, I know precisely what I said and am glad you remember that these posts refer to the *'beginning'* of a long, educational and interesting thread. It was you and Sir 'O' who (thankfully) gave me a different perspective of this matter. If you follow the posts sequentially than you'll see that my attitude towards this particular adviser had changed.



Julia said:


> What makes the new one so different?




The willingness to take on my existing investments on a fee-based advisory service which is negotiated in advance.



Julia said:


> (not wishing to rain on your parade but am just interested in how your judgement is better this time than last?)




No Julia, you haven't spoilt my enthusiasm. As far as I am concerned everything is A1 OK! 

Cheers...Kayman.


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## davede

Hi Kayman et al.

While I can't comment on your situation directly (as it wouldn't be legal). I thought it might be worthwhile to give my 2 cents on the topic title 'professional financial adviser fees' seeing as how I've had a lot of experience working with advisers, accountants, property agents, mortgage brokers etc. and have had some great exposure to their fee structure.

Firstly, yes the financial planning industry is very flawed in its remuneration structure. For those who don't know advisers are paid commissions from their dealer group based on the products they sell. In most cases these are managed funds and the adviser will be paid a commission based on the total Funds Under Management (FUM).

up FUM = up commission. Fin. planning is a business and as with any other business the value of the business is the discounted value of future cash flows. this means up FUM = up business value. This means that there is a huge incentive for fin. planning practice owners to push managed funds so that they may sell their practice eventually at a much higher value.

Secondly, this structure is so flawed that as has been already stated it has received a lot of attention in the press and so there are plans set to come into effect next year that will act to remove the commission payments from fund managers.

I have worked in several financial planning firms. One of which used a fee for service model. I actually worked there building strategies and reports that aimed to justify the fee . 

Be aware that the fee for service model does not remove any conflict of interest. After all they are still essentially supplying the same service (putting your money somewhere). Their dealer group will still remunerate them based on product sales (at least until next year). They'll now just be charging a fee up front instead of taking it from the fund overtime.

Lastly, There is a lot of selling in financial planning however this does not make financial planning an evil business. The business exists because it helps people manage their money. The bulk part of financial planners undertake tertiary qualifications, ASIC regulatory requirements and years of further industry education not to mention ongoing monitoring and assessment of markets and investments.

Most of the people on the forums here are DIY investors so a lot of them like to manage their own investments and money. Good on them. However if you are new to investing and managing money I would highly recommend listening to the advice of trained professionals. After all, you'd most likely call a plumber to do your plumbing - you wouldn't try and do it yourself. Aren't your hard earned dollars more important than your kitchen sink?


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## basilio

How much does the fund management industry take as fees when managing investors funds ?

Came across a story from UK which delves into the sticky fingers of fund managers. How applicable is this to Australia ? Obviously not sure but can't imagine it is that different. Just reinforces the messages from this thread



> *Investment funds: hidden fees wipe a third off returns*
> 
> Former City grandee attacks fund management industry for sharp practices and a lack of transparency over charges
> 
> 
> Patrick Collinson
> guardian.co.uk, Friday 4 November 2011 22.58 GMT
> Article history
> 
> Small investors are paying nearly £8bn a year in hidden charges on their Isas and investment funds, which finance lavish salaries and bonuses in the City but deprive investors of about a third – or even more – of their gains, according to the former boss of a major asset management firm.
> 
> An investor who puts £10,000 into the stock market over 20 years, and sees share prices grow at an average of 7% a year, will get back around £22,770. But the fund managers, financial advisers and up to 16 layers of other fee chargers – such as stockbrokers, lawyers, accountants and custodians – will take £15,927 from the fund over the same period.
> 
> The figures come from David Norman, formerly chief executive of Credit Suisse Asset Management (UK), who is campaigning for transparency and fairness in fund management. He exposes a raft of practices in the industry which are leaving small investors short-changed:
> 
> • Fund managers tell investors the annual management charge is 1.5% but, in reality, the average annual charge to investors is 2.8%.
> 
> • Costs borne by British investors are higher than in the United States, Germany or France.
> 
> • UK fund managers have increased their fees by around 9% a year over the past decade.
> 
> • Badly performing funds are left out of the performance tables, giving a false picture of typical returns.
> 
> • So-called soft commissions – freebies and backhanders – are still rife in the industry.




http://www.guardian.co.uk/money/2011/nov/04/investment-funds-hidden-fees


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## todasec

Underperformance of indexes by fund managers should not be charged any fees.


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## tech/a

todasec said:


> Underperformance of indexes by fund managers should not be charged any fees.




??????


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## Julia

This thread would have been a better choice for a post I put up a few days ago asking what is the going rate for financial advisers handling individual Super accounts.   A friend has been quoted 1.3%.  He currently has around $500K.  That's a pretty hefty $6500 p.a. in fees.  The adviser has assured him it will be 'no trouble' to generate $40K p.a. from his capital base.  That will be $46,500 including the fee.


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## Vixs

Julia said:


> This thread would have been a better choice for a post I put up a few days ago asking what is the going rate for financial advisers handling individual Super accounts.   A friend has been quoted 1.3%.  He currently has around $500K.  That's a pretty hefty $6500 p.a. in fees.  The adviser has assured him it will be 'no trouble' to generate $40K p.a. from his capital base.  That will be $46,500 including the fee.




That's not an unusual fund management fee, though higher than what I am used to seeing.

I would run far from any 'adviser' telling you any return of any sort is 'no problem'. The only return that is no problem is cash in government guaranteed accounts. Everything else comes with a risk.

I don't see any 8.65% term deposit rates going around, do you?


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## Julia

Vixs said:


> That's not an unusual fund management fee, though higher than what I am used to seeing.
> 
> I would run far from any 'adviser' telling you any return of any sort is 'no problem'. The only return that is no problem is cash in government guaranteed accounts. Everything else comes with a risk.
> 
> I don't see any 8.65% term deposit rates going around, do you?



Thanks Vixs.  That's exactly what I told him.  Unfortunately, he's financially illiterate, hears only what he wants to hear, and thinks I'm raining on his parade when I point out a few truths.


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## Vixs

Julia said:


> Thanks Vixs.  That's exactly what I told him.  Unfortunately, he's financially illiterate, hears only what he wants to hear, and thinks I'm raining on his parade when I point out a few truths.




Fees should also be considered as a whole and not on their own.

If his asset management fee includes statements of advice then that might be reasonable. If he is still paying full freight for everything else then you have to consider how much value the adviser is adding to his portfolio.

Not sure where it came from but the line "Sometimes you have to give up on people, not because you don't care, but because they don't."


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## Julia

Vixs said:


> Not sure where it came from but the line "Sometimes you have to give up on people, not because you don't care, but because they don't."



Yep, pretty much the conclusion I've reached.


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## Value Hunter

If you want to spend money on advice don't waste it on a financial planner. 

I believe based on how complicated your financial situation is get advice from a range of other professionals. You should be looking for advice in relation to admin, tax, insurance, borrowing, asset structuring, etc. I recommend strongly against getting advice on what to invest in. I therefore *advise against getting advice from* a financial planer, stockbroker or property buyers agent. Basically get advice on technical stuff and further your own knowledge to make your own investment decisions:

-If you need it get accounting/tax advice from an accountant/tax agent/tax consultant. Where necessary get one that specializes in super or property or small business, etc if need be. Can help with setting up and managing the admin/compliance (outsourced to an auditor they use) if you decide to set up a self managed super fund.
-Get advice from a conveyancer or solicitor when signing any important legal contract. This is useful for small business purchases, property purchases, commercial lease agreements, etc Can help with setting up trusts, buying property inside self managed super using a structured loan, etc
-Use a personal banker or mortgage broker, etc if you are looking to borrow for any investments, etc
-Use a business advisor if necessary for small business issues.
-Use an insurance broker where necessary e.g. looking to get life insurance paid from your super

Financial advisors are salesman and completely useless generalists who don't know enough about any one topic to be useful. 

Most of the plans they give you are a based on a cookie cutter template that is marginally adjusted/filled in by the para-planner at the office. 

If they are commission based they care only about getting commissions. If they get flat fees they are usually focused on getting somewhere around average results to stop you leaving because iof they do something different from the herd and massively under-perform or lose they will lose the steady fees you provide as a client. Whereas under-performing the average by the amount of fees charged isn't enough under-performance to entice most clients to leave.


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