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

[systematic]

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.

 

[qprjames]

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!

 

[qprjames]

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!

 

[systematic]

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.

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

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/

 

[systematic]

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!

 

[qprjames]

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!

 

[Bill M]

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.

 

[DaveDaGr8]

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%.

 

[PinguPingu]

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.

 

[qprjames]

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.

 

[systematic]

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.

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.

 

[systematic]

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

 

[christianrenel]

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

 

[Big A]

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?

 

[So_Cynical]

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.

 

[Big A]

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.

 

[Vixs]

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?

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.

 

[Vixs]

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.

 

[Big A]

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.

 

[Vixs]

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.

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.