# Managed funds - best option for someone clueless about the markets?!



## qprjames (14 January 2016)

Hi there, I have very little knowledge of trading shares and am the kind of person to leave it to the professionals, in the hope that they have my best interests at heart! So I am thinking of investing my money into shares. I have around 500-700k. I was going to buy an apartment (part investment property/part personal dwelling) but feel that the property market (for the area I want) is somewhat overheated and is due for a correction in the next few years (due to the number of new apartments being built).

I have always thought about investing, but have watched the share market go up and up over the last few years. Now however, watching it slide back down, I now have renewed interest in investing. I understand it could still slide further, but at least now might be a slightly better time to invest.

The problem I have is that I have no knowledge of share trading. So how should I consider parting with my money. I bank with comm bank, so the obvious choice was to just go to tHem and dump my money into a managed fund. Wave goodbye and go back and see them in a few years time (obviously meeting maybe a year to discuss the shares performance etc). I am a bit nervous about choosing an individual/private stockbroker as I am afraid I would choose the wrong person for the job etc.

So for a complete novice such as myself, who doesn't really want to get too involved and is happy to let the professionals do their job, should I sit back at and go for the managed find option, or is there another avenue I should look at pursuing?

Any feedback would be great. My term deposit matures this week so I am ready to make a decision with what to do with my funds.

Thanks


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## qprjames (14 January 2016)

....oh and in case it helps, I am mid-30's so I am (and always will be) a low income earner. So I would like a bit of money coming in each year from the investments as well if possible. The 700 k was just earns out of luck on the property market years back.


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## JTLP (14 January 2016)

qprjames said:


> ....oh and in case it helps, I am mid-30's so I am (and always will be) a low income earner. So I would like a bit of money coming in each year from the investments as well if possible. The 700 k was just earns out of luck on the property market years back.




Firstly...wow! $700k in cash is a pretty enviable position for someone who is mid 30s (let alone any age) so well done on this front.

Whilst nobody on here can give you specific investment advice, they can definitely point you in the right direction.
You can look at the performance of listed funds (AFI, ARG) as a starting point, or to stretch to the US you could always look at something like Berkshire Hathaway (they have a B share).

I've never invested in them personally, but I think if you were to go to a bank they would lick their lips at the prospect, most likely sell you something with a decent commission for them and away you go. The amount you have, you'd want to be pretty scrupulous about who you hand it over to!

Good luck


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## qprjames (14 January 2016)

JTLP said:


> Firstly...wow! $700k in cash is a pretty enviable position for someone who is mid 30s (let alone any age) so well done on this front.
> 
> Whilst nobody on here can give you specific investment advice, they can definitely point you in the right direction.
> You can look at the performance of listed funds (AFI, ARG) as a starting point, or to stretch to the US you could always look at something like Berkshire Hathaway (they have a B share).
> ...




Hi Jtlp, thank you for your reply  yes I got very lucky years back. Good timing in terms of housing market and exchange rate (never to be repeated I don't think). But given that, I will always be on a low income, I need to ensure this money works for me. 

Is AFI a managed fund? And if yes, how would I go about investing with them (online or in person?). I went to see a stockbroker a few years back, but never felt comfortable, and didn't end up investing any money. I just want to know that I am not being ripped off and genuinely trying to get me the best return they can.

Yes I totally get that comm bank would be licking their lips. I just thought they would be just as safe to use as someone like AFI or ARG in terms of trying to get me the best returns possible?


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## JTLP (14 January 2016)

qprjames said:


> Hi Jtlp, thank you for your reply  yes I got very lucky years back. Good timing in terms of housing market and exchange rate (never to be repeated I don't think). But given that, I will always be on a low income, I need to ensure this money works for me.
> 
> Is AFI a managed fund? And if yes, how would I go about investing with them (online or in person?). I went to see a stockbroker a few years back, but never felt comfortable, and didn't end up investing any money. I just want to know that I am not being ripped off and genuinely trying to get me the best return they can.
> 
> Yes I totally get that comm bank would be licking their lips. I just thought they would be just as safe to use as someone like AFI or ARG in terms of trying to get me the best returns possible?




AFI, ARG, MLT - all managed funds listed on the ASX. You can purchase them directly through an online broker.
Out of curiosity, who do you bank with? They should have an online system that you can sign up through and begin investing. Any of the majors do, or you can go outside of them to get cheaper brokerage.

I'd also suggest, this place is an absolute GOLD MINE for information, so keep trawling through the beginner's lounge and get some more info


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## So_Cynical (15 January 2016)

The link is to the ASX website managed funds page, click the tabs along to top of the spreadsheet to see all the different types - i imagine the brokerage fees for 700K would be kinda large. 

http://www.asx.com.au/products/etf/managed-funds-etp-product-list.htm


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## CanOz (15 January 2016)

Macro wise, the US is still the best horse at the glue factory....wait until there's " blood in the streets" then pick up some good US value funds....


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## Junior (15 January 2016)

Aside from that $700k, do you have much else in the way of assets?  Do you have a wife and kids?  Do you expect any inheritance at any stage?  Depending on the complexity of your situation it might be worthwhile sitting down with a good adviser.  Here's a starting point:  http://top10financialplanner.com.au/

If the answer to the above is 'no' and/or you want to figure it out for yourself, this forum is a great resource.

Exchange-traded funds are a good place to start in my opinion - here's one of the major providers: https://www.blackrock.com/au/individual/ishares ...and LICs as others have mentioned.

Commsec do up to $600 free brokerage for new accounts, that could be a starting point.


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## Big A (15 January 2016)

OP,

I'm in similar situation to you. Mid thirties made some good money in property over the last few years and have a substantial amount sitting in a term deposit looking for a better return. Started researching over the past month and also looking at managed funds or ETFs. Problem is the market at the moment is looking shaky and I'm questioning wether diving into the market at such a Volitile time is a good idea. I'm thinking of sitting back for the next few months and see what the market does. 
I actually have a meeting with the CBA private bank advisors next week and will be interested in there opinion and what they have to offer. 
I will also be sitting with a private financial advisor in the coming weeks to also get there opinion. 

Something that caught my attention as I have been property focused on my investments to date was a-reits. Problem is that they have had a great run over the past few years and it look like that run might be coming to an end short term at least. 
I'm looking into a non listed a-reit called sentinel property group that appears to have some good solid investments with strong returns. This is an option if you don't need the funds short term and are looking for a good income. 

I'll keep you posted on any useful info / opinions that I come across.
Cheers.


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## Junior (15 January 2016)

Big A, be wary of the CBA adviser.  They are often restricted as to what products they will recommend (i.e. all CBA owned products) so may not give you the most impartial advice.  What to look for is an adviser who considers strategy first, and products are only secondary.  

If they are desperate to move around your superannuation just for the sake of it, into a more expensive product, this is a red flag.  Or if they want you to buy a sh!tload of insurance without solid justification.

You sound like you're pretty switched on, seeing two advisers is a good move.


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## adam01 (15 January 2016)

Big A

Chk out opinion on AE


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## Big A (15 January 2016)

adam01 said:


> Big A
> 
> Chk out opinion on AE




Hey mate, been following that thread. Did you pull of that trade with Sto?


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## Big A (15 January 2016)

Junior said:


> Big A, be wary of the CBA adviser.  They are often restricted as to what products they will recommend (i.e. all CBA owned products) so may not give you the most impartial advice.  What to look for is an adviser who considers strategy first, and products are only secondary.
> 
> If they are desperate to move around your superannuation just for the sake of it, into a more expensive product, this is a red flag.  Or if they want you to buy a sh!tload of insurance without solid justification.
> 
> You sound like you're pretty switched on, seeing two advisers is a good move.




Thanks junior.
I'm only a month into my learning journey but I when I get into something I really like to immerse myself in it and learn as much as possible. 
I was reluctant to go see the bank advisors as I'm sure there advice is bias, but they kept pestering me and I figured there's no harm I. Seeing what they have to say. 
The way I'm seeing the current market it looks a safer bet to say that the market is more likely to experience falls this year than any significant gains. So unless something convinces me otherwise it might be best just to hold the capital and sit on the side line this year. If the market stays steady through out the year then I'll bite the bullet and dive in or if there's a significant decline at some point in the year then that would be the time to jump in I would think. 
I'm have never been a gambler. Would loose to much sleep trying to play the market. But I think with the current market not offering many other decent return options there are going to be any like the OP and myself looking for options.


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## adam01 (15 January 2016)

Big A said:


> Hey mate, been following that thread. Did you pull of that trade with Sto?




Bought but held as didnt mve as much yesterday
Dump 2 day


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## CanOz (15 January 2016)

One of the more useful things an adviser should speak to you about is risk and tolerance to loss. You need to try and determine as best as you can, how much you feel comfortable losing. You can't really control how much you gain, despite how much BS you'll hear, we cannot control the future, but you can control how long you play. The longer you can play, the greater the chance that you'll realize a significant increase in an equity, fund, or other asset.


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## Big A (15 January 2016)

CanOz said:


> One of the more useful things an adviser should speak to you about is risk and tolerance to loss. You need to try and determine as best as you can, how much you feel comfortable losing. You can't really control how much you gain, despite how much BS you'll hear, we cannot control the future, but you can control how long you play. The longer you can play, the greater the chance that you'll realize a significant increase in an equity, fund, or other asset.




I don't feel comfortable loosing anything, much more comfortable making  . 
I'm happy to look at this as a long term thing. I'm still fairly young and earning good money. Mortgage paid of no other financial commitments. 
So could afford to take some risk but at the same time am quite comfortable which makes me think why take risks. Could just play safe and collect my 3% interest in the bank with nothing to worry about. 
I guess with more research comes more certainty on the best way forward.


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## CanOz (15 January 2016)

Big A said:


> I don't feel comfortable loosing anything, much more comfortable making  .
> I'm happy to look at this as a long term thing. I'm still fairly young and earning good money. Mortgage paid of no other financial commitments.
> So could afford to take some risk but at the same time am quite comfortable which makes me think why take risks. Could just play safe and collect my 3% interest in the bank with nothing to worry about.
> I guess with more research comes more certainty on the best way forward.




At this moment there are families with Super and other equity investments looking at a loss of asset value between 10-20% due to the recent market sell off. You need to ask yourself, even as a long term investor, can you handle the pain? If you can, thats fine, your losses are only on paper, as you say because you will not sell and be in it for the long term. But....what IF the sell off deepens and you were one of the investors looking at a 50% loss, the news media is calling for 'blood in the streets', "sell everything, go to cash before its all gone!"....This is likely when most successful investors come out of cash and start buying with ears pinned back....and the weak holders are selling to them....


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## Big A (15 January 2016)

CanOz said:


> At this moment there are families with Super and other equity investments looking at a loss of asset value between 10-20% due to the recent market sell off. You need to ask yourself, even as a long term investor, can you handle the pain? If you can, thats fine, your losses are only on paper, as you say because you will not sell and be in it for the long term. But....what IF the sell off deepens and you were one of the investors looking at a 50% loss, the news media is calling for 'blood in the streets', "sell everything, go to cash before its all gone!"....This is likely when most successful investors come out of cash and start buying with ears pinned back....and the weak holders are selling to them....




Thanks for your insight. That's what I'm thinking, wait till the market drops further this year then jump in.


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## shouldaindex (15 January 2016)

Just going to illustrate a point with some data:

Rolling 20 year returns since 1926 in the U.S:

69 of 71 times it has made between 6% and 17% P.A.

Also let's say Australia has an extra 1.5% in Franking, and apply that to the data.

That suggests that if you use this data set as a guide to Australian returns in the future there's a 97% chance of making 7.5% to 18.5% PA over 20 years from one of main index ETFs (VAS, STW, IOZ all the same in nature).

However at some stage during most of those 71 periods there was a 40-80% decline.

So that indicates for this data to work for you and guide your strategy you'd need to - Believe it'll be a comparable sample to the future of the ASX, Buy and Hold and Reinvest Dividends for 20 years, and be ok with a highly likely 40-80% decline at some stage.


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## Bill M (15 January 2016)

shouldaindex said:


> Just going to illustrate a point with some data:




Hi shouldaindex, here is some extra data for readers that might give them something to think about.

Generally, when it is a Presidential Election year in the USA, the S&P 500 does pretty well. Since 1928 there have been 22 Presidential Elections, only 3 have had negative results and the last negative result was in 2008. At the link here there is a table at the bottom of the page showing the results for the last 9 decades, cheers.

Link: http://moneyover55.about.com/od/howtoinvest/a/electionmarket.htm


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## systematic (17 January 2016)

I haven't read all the replies as closely as I normally would...but from what I skimmed; no one seems to have given you the advice I would give to a friend, so I'm going to go for it.

You said, and to me this is key:

"So for a complete novice such as myself, *who doesn't really want to get too involved and is happy to let the professionals do their job*, should I sit back at and go for the managed find option, or is there another avenue I should look at pursuing?" 


I'm basing my answer on that bit in bold.  You need something either set-and-forget...OR very close to it (nothing more than an annual rebalance, for example).  At least that's what I hear, going from what you said.  If I'm hearing you right, you just need something like Vanguard.  They do index funds, have been around forever and are the big guys in this arena (ask anyone).  They'll match (not attempt to beat the index and end up losing).

If you want diversification and true set and forget...check out their diversified managed funds, or "life stage" funds.  You can pick your mix of income / growth.  You will pay stuff all fees.  If you were to invest 500k or more in one of those funds, you could go wholesale:

https://www.vanguardinvestments.com.au/retail/ret/investments/managed-funds-wholesale.jsp#fundstab

scroll to the bottom for the funds i'm talking about.  Click on the one you're interested in (e.g. the growth fund at 30% income, 70% growth) and you can see how diversified they are:
https://www.vanguardinvestments.com.au/retail/ret/investments/funddetailVGIF.jsp

No rebalancing or anything with this one...just set and forget (or change it to higher or lower income option when requried)



If you wanted to play around with your own mix, and just rebalance every so often...you could use their retail funds:
https://www.vanguardinvestments.com.au/retail/ret/investments/managed-funds-retail.jsp#fundstab

or even ETF's 
https://www.vanguardinvestments.com.au/retail/ret/investments/etfs.jsp#etfstab

where you could pick some high yield or income funds etc for the income side of things etc.


Honestly - unless you meant to say that you wanted to be more active than that - you dont need anything else more than the above, and you would be a better investor than many by simply doing the above.

If you wanted to play around with more interesting stuff, like maybe you find some boutique fund that you'd like to try or to give trading a go yourself...if you do that (and you dont need to), you can always just limit yourself to say, 10% of funds to begin with; in case it doesn't work out etc.


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## qprjames (18 January 2016)

Thanks systematic. That is most helpful. you are right. Some users obviously have a high degree knowledge of share trading, so the kind of responses were a little bit past my comfort zone. As you mentioned, I am looking for a set and forget product. I won't pretend to know what I am doing, or that I have the time to understand.

The vanguard index fund you mentioned. Should I contact them directly. And is it best to go in with the 500k to attain the wholesale rate? Would they make a big difference?

How sercure would my money be there if there was a crash in the market? Might it do a leihman brothers?!
Obviously I know my shares etc might drop as normal, I just don't want to lose my whole investment amount!


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## qprjames (18 January 2016)

Junior said:


> Aside from that $700k, do you have much else in the way of assets?  Do you have a wife and kids?  Do you expect any inheritance at any stage?
> 
> Exchange-traded funds are a good place to start in my opinion - here's one of the major providers: https://www.blackrock.com/au/individual/ishares ...and LICs as others have mentioned.
> 
> Commsec do up to $600 free brokerage for new accounts, that could be a starting point.



Hi junior thanks for the response. I have a budget motel as an asset. I own the freehold. It will be leased soon, but the money I make on it will be gobbled up by the mortgage repayments so didn't really think to mention it. However, It will have a fully paid off motel in 30 years time (fingers crossed). No wife, no kids. No inheritance.

Regarding the blackrock products.......someone else suggested a vanguard index fund. Is this similar? If not, what is the difference?

I think I need to see a financial advisor, but have a bad feeling I might get a bit ripped off, as have no idea how much they might charge me. One advisor has already said he doesn't work on an hourly rate, and it would depend on what advice I needed (ie basic or complex), but that still doesn't give me an idea of the coatings!


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## systematic (18 January 2016)

qprjames said:


> Thanks systematic. That is most helpful. you are right. Some users obviously have a high degree knowledge of share trading, so the kind of responses were a little bit past my comfort zone. As you mentioned, I am looking for a set and forget product. I won't pretend to know what I am doing, or that I have the time to understand.




Glad that helped.




qprjames said:


> The vanguard index fund you mentioned. Should I contact them directly. And is it best to go in with the 500k to attain the wholesale rate? Would they make a big difference?




Check the links to compare fees etc.  In the example I gave (the life stage funds) the difference is only that you pay a little more on the first 100k invested.  Their fees are so low - it's no biggie.

Yes, I would encourage you to contact them directly.  Check out their education page - read the plain talk series etc.  Or phone them up and say you are thinking of investing and please send me every bit of literature you can!

https://www.vanguardinvestments.com.au/retail/ret/education/overview.jsp

https://www.vanguardinvestments.com.au/retail/ordermarketingmaterials





qprjames said:


> How sercure would my money be there if there was a crash in the market? Might it do a leihman brothers?!
> Obviously I know my shares etc might drop as normal, I just don't want to lose my whole investment amount!




You're not investing *in* Vanguard, so to speak.  They are the company running the managed funds - and those funds are separate.  Ask them the question though - they might have a brochure on it.
Warren Buffett would happily put his wife's money in Vanguard funds after he's gone, so he has said.
Also: http://jlcollinsnh.com/2012/09/07/stocks-part-x-what-if-vanguard-gets-nuked/


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## systematic (18 January 2016)

qprjames said:


> I think I need to see a financial advisor, but have a bad feeling I might get a bit ripped off, as have no idea how much they might charge me. One advisor has already said he doesn't work on an hourly rate, and it would depend on what advice I needed (ie basic or complex), but that still doesn't give me an idea of the coatings!




It's good that you're wary!  You've got a lot going on, so getting some advice could be a good thing.

Disclosure:  I am a DIY'er, and I don't "vouch" for anyone on anything - except myself.

However, if I'm talking to someone interested in seeing a financial planner, I will encourage them to do so; moreover to see an independent financial planner - as you are referring to.

Nice summary article:
http://www.superguide.com.au/the-soapbox/truly-independent-financial-advisers-in-australia

http://www.ifaaa.com.au/

http://www.ifaaa.com.au/locate-ifaaa-member

That's where I'd send a friend or relative.  Best of luck!


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## qprjames (19 January 2016)

systematic said:


> However, if I'm talking to someone interested in seeing a financial planner, I will encourage them to do so; moreover to see an independent financial planner - as you are referring to.




Thanks systematic, I have taken your advice and arranged an appointment with a completely independent financial advisor. That way they won't try and push me into a product that they are going to earn commission on. I am just keeping my fingers crossed that the charge / quote won't be too high. I have no idea what to expect. My situation is highly unusual, but hopefully an advisor can make sense of it all!


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## Bill M (19 January 2016)

qprjames said:


> I am just keeping my fingers crossed that the charge / quote won't be too high. I have no idea what to expect. My situation is highly unusual, but hopefully an advisor can make sense of it all!




You didn't ask first? How much it would cost for a consultation? Not trying to be funny but you are leaving yourself open a bit.


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## DaveDaGr8 (19 January 2016)

Almost ALL financial advisors earn commisions based on your portfolio balance, It's what pays their bills. 

The upside is that these commisions are subsidised by the funds themselves, so rather than paying x% to the fund if you went their directly, you'll pay a%(fund)+b%(advisor)=x%.


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## PinguPingu (19 January 2016)

DaveDaGr8 said:


> Almost ALL financial advisors earn commisions based on your portfolio balance, It's what pays their bills.
> 
> The upside is that these commisions are subsidised by the funds themselves, so rather than paying x% to the fund if you went their directly, you'll pay a%(fund)+b%(advisor)=x%.





No, FOFA amendments to the Corp. Act mean Advisers cannot receive ANY commissions from investment products. Only grandfathered products that existing clients are already invested in can continue to pay commissions to advisers.


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## qprjames (19 January 2016)

Bill M said:


> You didn't ask first? How much it would cost for a consultation? Not trying to be funny but you are leaving yourself open a bit.




1st consultation is free, and then he said he would give me a statement of advice, but he would give me the price of that prior to proceeding any further.so if I didn't want to proceed I can still back out if I think the cost is too high.


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## systematic (19 January 2016)

qprjames said:


> Thanks systematic, I have taken your advice and arranged an appointment with a *completely independent *financial advisor.




Excellent!  And remember, you're in control.  If for some reason you don't gel with them...try another.  Like you said, initial chat is free.



qprjames said:


> I am just keeping my fingers crossed that the charge / quote won't be too high. I have no idea what to expect. My situation is highly unusual, but hopefully an advisor can make sense of it all!




Even if the advice cost you 10k (it won't)...it would be worth it...*if* it puts you on the right path, for you.

On that last bit - as above - make a judgement call.  If they are not confident in your situation, they should say so...and if you don't gel, go elsewhere.

Very best of luck, I really hope it works out great.


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## systematic (19 January 2016)

DaveDaGr8 said:


> Almost ALL financial advisors earn commisions based on your portfolio balance, It's what pays their bills.
> 
> The upside is that these commisions are subsidised by the funds themselves, so rather than paying x% to the fund if you went their directly, you'll pay a%(fund)+b%(advisor)=x%.




No asset based fees:
http://www.ifaaa.com.au/what-is-the-gold-standard


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## christianrenel (20 January 2016)

systematic said:


> No asset based fees:
> http://www.ifaaa.com.au/what-is-the-gold-standard




If you are looking at gettiing advice from a Financial planner, have look to see if they are independent. They will be able to provide advice which best suits your needs. Some advisior charge by the hour (fee for service). this way you know exactly what you are paying for.


Kind Regards 

Christian Renel


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## Big A (23 January 2016)

Junior said:


> Big A, be wary of the CBA adviser.  They are often restricted as to what products they will recommend (i.e. all CBA owned products) so may not give you the most impartial advice.  What to look for is an adviser who considers strategy first, and products are only secondary.
> 
> If they are desperate to move around your superannuation just for the sake of it, into a more expensive product, this is a red flag.  Or if they want you to buy a sh!tload of insurance without solid justification.
> 
> You sound like you're pretty switched on, seeing two advisers is a good move.




Hey guys,

Just wanted to follow up on this post. I met with the cba advisors. I went in wary as stated above with them possibly trying to push particular products. First thing they tell me is they don't push any of there own products. There strategy is they recommend a particular portfolio of stocks which are all owned directly by me. So I guess it's similar to going into a managed fund except it's individual and you own the fund. The portfolio is split with a percentage of direct Aus equities, Aus equities through managed funds, international equities, property equities, fixed income and a category they call alternatives which is a infastructure fund and some global fund.
There job is the to continually asses the portfolio and adjust and balance as they see fit. They also spend time with you looking at strategies to minimise tax on gains and all other aspects of your financial health. So it looks like sound all round advice they offer. 
Now for this service they take a fee of 1.1% of your investment starting with a minimum $1 million investment amount. The 1.1% fee seems a bit high to me but did I mention you get to meet with them in a fancy city office and they have waiters who come in  and offer you lunch and drinks while you receive your advice . Not sure if that is a reasonable fee for such a service as it really looks like a managed fund on a slightly more personal level but with a significantly higher fee.

Thoughts?


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## So_Cynical (24 January 2016)

Big A said:


> Direct Aus equities, Aus equities through *managed funds*, international equities, property equities, fixed income and a category they call alternatives which is a infrastructure *fund *and some global *fund*. Now for this service they take a fee of 1.1% of your investment
> 
> Thoughts?




All those funds will also pocket a fee of around 1% and then often performance fees as well, it's a great gig - 1% regardless of profit or loss, to be fair a surgeon gets paid regardless of the outcome of the surgery.


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## Big A (24 January 2016)

So_Cynical said:


> All those funds will also pocket a fee of around 1% and then often performance fees as well, it's a great gig - 1% regardless of profit or loss, to be fair a surgeon gets paid regardless of the outcome of the surgery.




Yes I was thinking that. So really I would be paying fees twice in the portion they invest into other funds. Which makes me think is it not better to just invest in a managed fund that holds a diversified portfolio and would achieve a similar result that just eliminates the middle man and there 1.1% fee.


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## Vixs (24 January 2016)

Big A said:


> Hey guys,
> 
> Just wanted to follow up on this post. I met with the cba advisors. I went in wary as stated above with them possibly trying to push particular products. First thing they tell me is they don't push any of there own products. There strategy is they recommend a particular portfolio of stocks which are all owned directly by me. So I guess it's similar to going into a managed fund except it's individual and you own the fund. The portfolio is split with a percentage of direct Aus equities, Aus equities through managed funds, international equities, property equities, fixed income and a category they call alternatives which is a infastructure fund and some global fund.
> There job is the to continually asses the portfolio and adjust and balance as they see fit. They also spend time with you looking at strategies to minimise tax on gains and all other aspects of your financial health. So it looks like sound all round advice they offer.
> ...




Is that with Commonwealth Private? Doesn't sound like regular CBA adviser arrangements, which the regular planners and senior planners would all need to follow.


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## Vixs (24 January 2016)

Big A said:


> Yes I was thinking that. So really I would be paying fees twice in the portion they invest into other funds. Which makes me think is it not better to just invest in a managed fund that holds a diversified portfolio and would achieve a similar result that just eliminates the middle man and there 1.1% fee.




The middle man is the one helping you make the decisions and providing you advice on what you should do and when to do it. If you don't value the assistance then you can do it yourself without paying the fee, but you're on your own.

You don't need to pay a tax agent or accountant to lodge your taxes, but a good tax agent will save you more money than they cost you, and even if they don't it's sure easier than lodging it yourself.

You don't need to pay for a will either, you can get a will kit at the post office. Doesn't always work out so well for people though when the crap hits the fan.

Could probably get away with not going to the Dr and diagnosing yourself based on googling your symptoms, but the penalty is pretty severe when you get it wrong.

I think you get the point.


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## Big A (24 January 2016)

Thanks vixs. Yes I do agree with your line of thinking. I'm not a risk taker and just getting into the share market is a big leap for me risk wise. I would rather pay slightly more fees and get more sound advice to minimise risk. At the end of the day I'm getting 3% on my money at the moment in the bank. So as long as I'm ahead of that after fees it's better I play safe and pay for that advice.
Yes the advisors I'm dealing with are part of the cba private bank. They even look at things like wills and the best arrangement with regards to your asset management in such a circumstance as I have two young kids. 
I'm thinking of going with these guys with the initial minimum investment amount. Then spread the rest of my capital into possibly a vanguard type diversified managed fund, I'm also liking the look of a non traded property trust called sentinal property group and then leave the rest in a term deposit until one of those investments appears to be a better choice to move further cash into. 
The thing I did tell the advisors is that I would like to sit back over the next 3-6 months or possibly even up to 12 months and watch if the market keeps sliding or its stabilises. I know you can't time the market but I don't want to be the guy who dives in just before a major market adjustment. 
I'll also be speaking with another advisor in the next week or so to get there opinion as a comparison to the cba people. 

Cheers.


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## Vixs (24 January 2016)

Big A said:


> Thanks vixs. Yes I do agree with your line of thinking. I'm not a risk taker and just getting into the share market is a big leap for me risk wise. I would rather pay slightly more fees and get more sound advice to minimise risk. At the end of the day I'm getting 3% on my money at the moment in the bank. So as long as I'm ahead of that after fees it's better I play safe and pay for that advice.
> Yes the advisors I'm dealing with are part of the cba private bank. They even look at things like wills and the best arrangement with regards to your asset management in such a circumstance as I have two young kids.
> I'm thinking of going with these guys with the initial minimum investment amount. Then spread the rest of my capital into possibly a vanguard type diversified managed fund, I'm also liking the look of a non traded property trust called sentinal property group and then leave the rest in a term deposit until one of those investments appears to be a better choice to move further cash into.
> The thing I did tell the advisors is that I would like to sit back over the next 3-6 months or possibly even up to 12 months and watch if the market keeps sliding or its stabilises. I know you can't time the market but I don't want to be the guy who dives in just before a major market adjustment.
> ...




With regards to spreading your investments around, I know it's not uncommon for people at the private wealth/family office to have investments in more than 1 place. Don't mistake this as being necessary for diversifying your investments however. Your investments will already be diversified to avoid any specific manager risk or falls in a particular asset class. You're just diversifying your adviser relationships in case you're not happy with one of them or don't trust them fully.

With regards to waiting, yeah, if you don't have a pressing need to be invested and you're not comfortable there's no harm waiting. I'd also considering investing part of the money now and part over the next 3-12 months so that you're averaging across the year.

One things is for sure: the bank and most others advisers won't take the time to assist you until you're ready to make a decision. That's when they get paid, and business is business, not charity.

I apologise that I haven't read all the facts of the thread, it was just a few posts that stuck out at me as I flicked through.

Good luck with the decision you make, and keep in mind that the individual adviser or team you are working with are more important than the logo on their business cards. There are quality advisers in all different types of businesses, just find one that you believe has a genuine interest in helping you achieve your goals.


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## luutzu (24 January 2016)

So_Cynical said:


> All those funds will also pocket a fee of around 1% and then often performance fees as well, it's a great gig - 1% regardless of profit or loss, to be fair a surgeon gets paid regardless of the outcome of the surgery.




Difference is a surgeon does not get extra pay if you're all healthy again after the surgery. That and they'd be sue if you go in for a bypass and come out missing a leg or two. That and just about all surgeons actually know what they're doing - financial advisors, well, you'd just have the take the word of the guy's uncle's friend and his boss that he know what he's doing.

Financial advisors get pay either way, more pay if it goes well; and if it tank you're the one wearing it.


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## Vixs (25 January 2016)

luutzu said:


> Difference is a surgeon does not get extra pay if you're all healthy again after the surgery. That and they'd be sue if you go in for a bypass and come out missing a leg or two. That and just about all surgeons actually know what they're doing - financial advisors, well, you'd just have the take the word of the guy's uncle's friend and his boss that he know what he's doing.
> 
> Financial advisors get pay either way, more pay if it goes well; and if it tank you're the one wearing it.




Here's an idea... if you'd like to know whether someone knows what they're doing you could look into their experience, their credentials, their qualifications, and think about whether or not their advice makes sense to you if you're concerned about them knowing what they're doing. If someone isn't comfortable with the advice they've been given they should get a better understanding before agreeing to proceed with anything. They can ask their adviser to explain it in more detail to see if they're full of **** or not, or they can seek advice from another adviser to get a second opinion. If the first one couldn't explain to you what you're doing and why you probably shouldn't deal with them anyway.

If your opinion is that a financial adviser should prevent you from losing any of your money at all, ever, and should work for free if you do have an investment that falls in value you must be very difficult to please. Those expectations are impossible to meet and if they could be met, how much would you pay? There isn't an active investor on this forum that has made the right calls 100% of the time, and yet that is your expectation just because you pay someone a fee.


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## luutzu (25 January 2016)

Vixs said:


> Here's an idea... if you'd like to know whether someone knows what they're doing you could look into their experience, their credentials, their qualifications, and think about whether or not their advice makes sense to you if you're concerned about them knowing what they're doing. If someone isn't comfortable with the advice they've been given they should get a better understanding before agreeing to proceed with anything. They can ask their adviser to explain it in more detail to see if they're full of **** or not, or they can seek advice from another adviser to get a second opinion. If the first one couldn't explain to you what you're doing and why you probably shouldn't deal with them anyway.
> 
> If your opinion is that a financial adviser should prevent you from losing any of your money at all, ever, and should work for free if you do have an investment that falls in value you must be very difficult to please. Those expectations are impossible to meet and if they could be met, how much would you pay? There isn't an active investor on this forum that has made the right calls 100% of the time, and yet that is your expectation just because you pay someone a fee.




If the financial "expert" know what they're doing with finance, they won't be diversifying it everywhere.

If someone need financial advise can properly judge whether the advice is sound, you think they would still need advising? If they ask a salesman whether the goods they're selling is sound, what will the salesman say? It suk?

Example, how would a typical client decide whether a listed managed fund is a good investment? The advisor recommended it, it's selling at $x at the moment. How do you or I or anyone know whether that advise is a sound one? Open up the annual report of each holdings that fund owns? Go through and analyse all of it? Or take the expert's word for it?

Yea, credentials, experience... I thought a bunch of financial advisors from Macquarie, from CBA, Westpac too if I remember right... all got fined for dodgy advice right? Or were they only need to repay their clients a bit due to a few bad apples?

Dude, i know people who do admin work for financial advisors. Most advisors, just about all of them, do not know anything about finance, and do not do anything beside making sales and sounding smart. They're worst than the typical fund managers.


Here's a smart investment advice: pssstt... we buy these assets in one portfolio and at each 12 months we analyse and "rebalance" it. What is rebalancing? Well it's where we cut the flowers and buy some more weed so one asset that's doing well shouldn't keep doing well.


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## Vixs (25 January 2016)

luutzu said:


> If the financial "expert" know what they're doing with finance, they won't be diversifying it everywhere.




Of course, you're right. If they had half a brain they would have recommend their clients go all in on Tesla in March last year, sold in July, sat on their hands for 2 months and then piled the portfolio back into the market in MTU in September. Great year they had with their crystal ball. Diversification is for wimps. Why would you manage risks when you can just be right all the time?



luutzu said:


> If someone need financial advise can properly judge whether the advice is sound, you think they would still need advising? If they ask a salesman whether the goods they're selling is sound, what will the salesman say? It suk?




They don't need to be able to analyse it all, but if the recommendations don't make sense to them they should ask for more information.

The 'salesman' doesn't get paid by commission from any managed fund under Australian law - they have no incentive to recommend one over another as long as it's on their approved product list, so what benefit is there to them recommending anything but the best available to them to suit the clients goals? Intentionally doing a poor job is rarely good for repeat business.



luutzu said:


> Example, how would a typical client decide whether a listed managed fund is a good investment? The advisor recommended it, it's selling at $x at the moment. How do you or I or anyone know whether that advise is a sound one? Open up the annual report of each holdings that fund owns? Go through and analyse all of it? Or take the expert's word for it?




Well someone looking for advice would be inclined to take the expert advice on it. That's the point, it's what they went and saw them for in the first place. If their adviser understands what they're trying to achieve, and it has been explained what they're doing, why they're doing it and what other options were considered then it shouldn't be an issue.

"I want to retire debt-free in 3 years on an income of $50,000 per year." "Excellent, I suggest you borrow against your nearly paid off home up to 80% of it's value and invest that all in Australian shares. I think it would be a shame to stop there, so we're going to take a margin loan to double the size of your portfolio. In 3 years you'll be a millionaire and can retire on a boat. Sign here." 

It seems like it misses the point doesn't it?



luutzu said:


> Yea, credentials, experience... I thought a bunch of financial advisors from Macquarie, from CBA, Westpac too if I remember right... all got fined for dodgy advice right? Or were they only need to repay their clients a bit due to a few bad apples?




What's your point, extrapolating to every adviser everywhere in the country again? You're making a link between negligent or fraudulent behaviour and sales incentives that have since been banned by law, and someone's ability to ask if the person they're dealing with has any relevant qualifications or experience doing what you need them to do.

Well hey, while we're making up straw man arguments my friend saw 7 doctors before she got diagnosed with ovarian cancer because her symptoms were repeatedly dismissed as pregnancy. Obviously all doctors are idiots, right?



luutzu said:


> Dude, i know people who do admin work for financial advisors. Most advisors, just about all of them, do not know anything about finance, and do not do anything beside making sales and sounding smart. They're worst than the typical fund managers.
> 
> Here's a smart investment advice: pssstt... we buy these assets in one portfolio and at each 12 months we analyse and "rebalance" it. What is rebalancing? Well it's where we cut the flowers and buy some more weed so one asset that's doing well shouldn't keep doing well




That's a big extrapolation to make based on some people you know that work in admin. Just about all of them know nothing about finance eh? Well I guess I'll take your word for it, you do after all have a reliable source and a balanced perspective. I believe there are probably a lot of useless people out there working as financial advisers, just like any other job. Some accountants are better than others, some chefs are better than others and some shop assistants are better than others. The fact that some advisers are better than others should come as no surprise.

You're projecting the goals and expectations of an active investor or trader like yourself onto an average person, uneducated and inexperienced with investments


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## luutzu (25 January 2016)

Vixs said:


> Of course, you're right. If they had half a brain they would have recommend their clients go all in on Tesla in March last year, sold in July, sat on their hands for 2 months and then piled the portfolio back into the market in MTU in September. Great year they had with their crystal ball. Diversification is for wimps. Why would you manage risks when you can just be right all the time?
> 
> 
> 
> ...




Sure mate, a few bad eggs. Not systemic at all. 

That's why it just so happen a bunch of them across a bunch of banks got caught and got sued. 

How did millions of people got their money lost during the GFC again? CDOs are as safe as houses right? Who needs to read what's in it when it's rated AAA yea? I bet you also think the people who lost their savings didn't seek advice but are traders and wannabe investors.

Mate, I got a Bachelor of Business, majoring in Applied Finance and a second Major in Financial Planning. So I'm more qualified than your typical financial planner - most of whom I read just yesterday might not want to stay in business if the gov't interfere in their work and require that all planners hold a university-equivalent qualification. 


So no, stop comparing planners to Doctors and Surgeons. If they can make mistakes going through all those qualifications at proper medical schools, the kind of mistakes and incompetence most financial advisors make aren't exactly a one-off.

-------

So tell me, how does a managed fund get on that list financial planners use to objectively advised their clients?
On merits I bet.

Sounds like you're a financial planner, but you definitely do not know how the industry really work.

Hint: It does not work as the glossy brochures you guys print said it does.

If you are paid to, say 1.1% of your clients assets... do you spend more time trying to get more clients with big bucks or do you spend hours and hours finding the best product for them so they'd be richer?

I guess most would just follow a company-wide checklist of things to do recommend, forms to sign and azz to cover and call in new pay checks.

-----------

This is what you guys are doing, you just dress it up nicer and speak more convincingly with jargons and big offices and free latte as props.

You check how much cash they got. And a guy on $50,000 a year income with no inherited fortune couldn't even get a seat in your reception area so let's stop with the bull right there shall we...

But say a rich but clueless potential clients come in and you're more than happy to help. 

You'd recommend Insurance - can't be too careful... Maybe have a few type of insurance - income protection, life, house, pets. 

Maybe a lawyer to set up a Will, some specialist consultants might be needed if the account is big enough etc. etc.

All good so far right? Let's get to the income generating investment options...

Bonds: gov't and corporate; Local and International.

Managed Fund: This guy and that guy; this style and that growth mix; domestic and international of course.

Real Estates etc. etc. etc.


When a patient go see their General Practitioner, they do not expect to be sent to have all the tests done and all the drugs prescribe - just in case.

Unless you could narrow things down a lot, don't call yourself a professional. You're just covering all bases with other people's money.

----

Yea, all investors buy only one or two stocks like you said.

You guys can't even read what's in front of you, forget about predicting the future.

It may surprise you that a person could buy a handful of prominent stocks across a few sectors and maybe a couple larger ones on the NYSE and they're just as diversified as all the rubbish you guys are recommending.

Heck, they could just buy Berkshire Hathaway and they're fully diversified. Top up with GE or Disney and go fishing.

But but... they don't know much about BRK or GE... as if you guys know. You got it from a list and have no clue where or how that list got to your desk.

But of course that kind of recommendation would make it wrong to "analyse" and "review" their financial health each year for a fee right?


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## Vixs (26 January 2016)

luutzu said:


> Sure mate, a few bad eggs. Not systemic at all.
> 
> That's why it just so happen a bunch of them across a bunch of banks got caught and got sued.
> 
> ...




You've missed the mark with your assessment of me personally, but sadly there's a good bit of truth in what you've said. It's a perfect example of why the most important thing for people to do is if they think the person they're dealing with is full of ****, get a second opinion. If it's not a good fit, see someone else.

On the doctor comparison, I wasn't trying to draw a parallel between advisers and doctors. The point was that mistakes are not unique to financial services.

Good luck to you, it's a shame you feel the way you do but a lot of change has already occurred and there is plenty more to come to shake things up further, I'm sure you'll be pleased. I'm personally not worried about education requirements as I've already completed a master of finance degree. I'm just looking to pay my bills and support my family. My biggest concern is that personalised financial advice and insurance advice will become more unaffordable for normal people.


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## luutzu (26 January 2016)

Vixs said:


> You've missed the mark with your assessment of me personally, but sadly there's a good bit of truth in what you've said. It's a perfect example of why the most important thing for people to do is if they think the person they're dealing with is full of ****, get a second opinion. If it's not a good fit, see someone else.
> 
> On the doctor comparison, I wasn't trying to draw a parallel between advisers and doctors. The point was that mistakes are not unique to financial services.
> 
> Good luck to you, it's a shame you feel the way you do but a lot of change has already occurred and there is plenty more to come to shake things up further, I'm sure you'll be pleased. I'm personally not worried about education requirements as I've already completed a master of finance degree. I'm just looking to pay my bills and support my family. My biggest concern is that personalised financial advice and insurance advice will become more unaffordable for normal people.




It wasn't directed at you personally, was at financial planning industry in general.

Mistakes is one thing, fraud and negligence is, was, a crime.

The way financial advise and investment management are conducted, losses are not a mistake, not even stupidity or incompetence - it's a systematic, deliberate collusion among the operators to provide plausible deniability. It's charging people for a "professional" service but take no responsibility for negative consequences of their negligence at all.

Why is it a shame to get upset at people who screw other people over?

Anyway, nothing personal. Good luck to you. Hope you'll be part of the effort to clean the industry up.


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