Opting out of ongoing financial adviser service

[Jonty11]

Hi all,

Long time lurker, but first time poster here. I'm learning so much from this forum, it's fantastic.

A couple of years ago, I engaged a financial adviser to help me restructure my super and setup some decent life/income protection insurance. Overall very happy with the service and it was communicated quite clearly from the beginning that he would receive ongoing commission on these insurance premiums as payment for his services (fine by me).

What wasn't that clear is that it's also mandatory to take on their 'ongoing client service', which includes annual meetings to review your situation, ongoing review/monitoring of super and insurance etc. For this service, they are taking 0.5%pa (plus GST) from our super investment portfolio, which I have barely used in 2 years. While my super is doing much better than it was before their help, it still irks me watching their fee come out every month for an ongoing service that I'm not really interested in using.

Under the ASIC rule changes a few years ago, financial advisers now have to give us the option to opt-out of their ongoing service every 2 years. So we have just received their letter to opt-in or opt-out and obviously I would like to opt-out. What's concerning me is that they claim if we opt-out, they will be 'forced to sell down our assets', which I assume means they will convert all our units held in a managed fund (Vanguard High Growth Index) back to cash?

Has anyone ever heard of this type of practice from a financial adviser for opting out of their ongoing service? It seems pretty extreme to me!

Any info much appreciated.

 

[Junior]

Hi all,

Long time lurker, but first time poster here. I'm learning so much from this forum, it's fantastic.

A couple of years ago, I engaged a financial adviser to help me restructure my super and setup some decent life/income protection insurance. Overall very happy with the service and it was communicated quite clearly from the beginning that he would receive ongoing commission on these insurance premiums as payment for his services (fine by me).

What wasn't that clear is that it's also mandatory to take on their 'ongoing client service', which includes annual meetings to review your situation, ongoing review/monitoring of super and insurance etc. For this service, they are taking 0.5%pa (plus GST) from our super investment portfolio, which I have barely used in 2 years. While my super is doing much better than it was before their help, it still irks me watching their fee come out every month for an ongoing service that I'm not really interested in using.

Under the ASIC rule changes a few years ago, financial advisers now have to give us the option to opt-out of their ongoing service every 2 years. So we have just received their letter to opt-in or opt-out and obviously I would like to opt-out. What's concerning me is that they claim if we opt-out, they will be 'forced to sell down our assets', which I assume means they will convert all our units held in a managed fund (Vanguard High Growth Index) back to cash?

Has anyone ever heard of this type of practice from a financial adviser for opting out of their ongoing service? It seems pretty extreme to me!

Any info much appreciated.

No, I don't think they can do that if you are simply invested in an Index fund.

With a retail super fund (i.e. bank owned product), they are often structured such that you have to have an adviser attached to your account. However if you don't want any ongoing service from that adviser, they are able to dial their fee down to 0%. You shouldn't have to sell or change your investments. They can just stop providing ongoing service to you and stop charging.

They should be happy to do this, and if you need advice down the track call them up, and they can charge you a flat dollar amount for this....that's what we offer to our clients if they decide they don't need ongoing service.

If they are being difficult just call the product provider directly (i.e. whoever your super is with) and tell them you want to switch off the adviser fee.

 

[HelloU]

Broadly...the trustee 'owns' ur super, not really u - kinda sorta, liberties taken here but basically true. Nil info provided on who that is (or indiv or corp structure of ur trustee arrangements) so speak to existing/future trustee to get satisfaction here.
so......read who trustee is on your super docs and start there (if peeps u do not like then get quick advice from other trustee mobs). Good luck.

 

[Jonty11]

They should be happy to do this, and if you need advice down the track call them up, and they can charge you a flat dollar amount for this....that's what we offer to our clients if they decide they don't need ongoing service.

Thanks Junior. That's exactly my thoughts, if I need them again down the track, I'm more than happy to pay an hrly rate or flat fee for another discussion or review. I just can't see the value of them dipping into my super each year for basically nothing. That's not helping me get ahead!

Interesting to note the ASIC Moneysmart website notes that if we ignore the opt-in statement, our adviser has to stop charging us within 60 days after the notice was issued. That may be the simplest way out of this...

https://www.moneysmart.gov.au/inves...you-getting-the-financial-advice-you-paid-for

 

[Jonty11]

Broadly...the trustee 'owns' ur super, not really u - kinda sorta, liberties taken here but basically true. Nil info provided on who that is (or indiv or corp structure of ur trustee arrangements) so speak to existing/future trustee to get satisfaction here.
so......read who trustee is on your super docs and start there (if peeps u do not like then get quick advice from other trustee mobs). Good luck.

Not quite following what you're saying sorry...

It's a Macquarie Super Manager and looking at the account details online, my adviser is definitely listed under the 'Adviser' section. My wife is then listed as the 'Beneficiary', but I can't see anything about a trustee. Maybe it's on the paper forms at home.

 

[Junior]

Thanks Junior. That's exactly my thoughts, if I need them again down the track, I'm more than happy to pay an hrly rate or flat fee for another discussion or review. I just can't see the value of them dipping into my super each year for basically nothing. That's not helping me get ahead!

Interesting to note the ASIC Moneysmart website notes that if we ignore the opt-in statement, our adviser has to stop charging us within 60 days after the notice was issued. That may be the simplest way out of this...

https://www.moneysmart.gov.au/inves...you-getting-the-financial-advice-you-paid-for

Correct, what may happen is they will keep following you up to sign the opt-in, so you'll keep telling them you don't want to. I'm not sure how they can threaten to actually liquidate your investments....that doesn't sound right to me.

Perhaps just tell them that they can't sell your investments without your authority, and you'll just call the super fund directly and instruct them to turn off the ongoing service fee if they aren't going to do it for you.

 

[Jonty11]

I'm not sure how they can threaten to actually liquidate your investments....that doesn't sound right to me.

Yes seems pretty unethical to threaten it, and I'd be surprised if it's even legal.

Thanks again for the advice. Will get it sorted out

 

[HelloU]

u said that 'they will sell down the assets' or similar, my response was surrounding that......so I say again.....ur 'ownership' of ur super is not as straight forward as I think u think it is. It is contained in a 'trust' for which there is a 'trustee' that is the legal controller of the money. My point is that u need to ensure that the trustee is not about to do something that u do not want to happen. Good luck.

 

[Jonty11]

u said that 'they will sell down the assets' or similar, my response was surrounding that......so I say again.....ur 'ownership' of ur super is not as straight forward as I think u think it is. It is contained in a 'trust' for which there is a 'trustee' that is the legal controller of the money. My point is that u need to ensure that the trustee is not about to do something that u do not want to happen. Good luck.

OK, but I get the impression a trustee of a super fund is required when it's a SMSF, which mine isn't. So I am pretty confident that the owner of my super (while I'm alive) is me

I will definitely check if there's anything about trustee listed in the original documentation when I set it up. But I don't recall anything like this other than the adviser and beneficiary being setup.

 

[pixel]

Is it possible that you joined a (corporate) Superfund that is managed as such? If you don't know your Trustee, that is a highly likely scenario. Ask them for the Trust Deed and take it to an Accountant or Lawyer whom you trust (and need to pay for advice) to translate the Deed into plain English.
Just as there are the Industry Superfunds, promoted on TV as paying no commissions, there are Hundreds and Thousands of corporate Superfunds that are managed by professional trustees on behalf of members. If you were in one of those, canceling your membership could indeed end your membership - depending on the terms of the Deed - and lead to you being turfed out into a less well-managed cash fund.

 

[Junior]

I don't think there's any Fund where you are forced to pay asset-based fees to a financial adviser. Unless it's an older fund with an inbuilt commission, which it doesn't sound like it is.

 

[PinguPingu]

It's a Macquarie Super Manager

You're in what's called a 'Wrap' account. It's a type of platform that combines managed investments, (funds, direct share, etc. a cash account, insurance, etc. all under the one 'roof' (i.e 'wrapped' together)and can be inside or outside the super environment. Obviously, you're in super, however the Trust Deed for Macquarie Wrap or their product rules probably states something like they require an active advisor for you to use the product. Usually because of the complexity of the product and the fact sit only allows advisers to transact/operate on it.

This means that if you opt-out and remove your adviser, you basically need to sell down your investments to cash and then either in cash or move superfunds.

https://www.moneysmart.gov.au/inves...h-a-financial-adviser/master-trusts-and-wraps

 

[Faramir]

Have you considered rolling over into an Industry fund? You have been happy with the recent performance but most Super Funds performed well over the past few years. "A rising tide lifts all boats." Was the poorer performance with your Super prior to you engaging an Advisor due to the GFC or were you not managing your own Super as well as you wanted to and that an Advisor really helped you?

Good luck with sorting this out. I went mental when I started investigating my Super 5 1/2 years ago. It was just after GFC, so the performance looked poor leading up to that time I was investigating my Super.

This was a good place me to start investigating:
http://www.selectingsuper.com.au/

 

[Junior]

Not quite following what you're saying sorry...

It's a Macquarie Super Manager and looking at the account details online, my adviser is definitely listed under the 'Adviser' section. My wife is then listed as the 'Beneficiary', but I can't see anything about a trustee. Maybe it's on the paper forms at home.

Hi Jonty,

I have contacted Macquarie for you to confirm how this works, in relation to the Super Manager product.

I have been advised that you do not need to close your account or sell your investments.

I'd suggest you contact your adviser, and tell them you wish to opt out of ongoing service, and request that they reduce your ongoing fee to 0% but remain as the listed adviser to your plan. That way if you want/need advice down the track they still have visibility to your investments.

IF they refuse to do this, and stick with their line that you'll need to move super funds, tell them you have already spoken to Macquarie and confirmed that this is untrue.

Macquarie told me you can submit to them a letter requesting that they remove the adviser from your plan and cancel the ongoing service fee. Your investments and super plan will remain as is, without an attached adviser. However, they did tell me they recommend having an adviser, as this is an 'adviser-driven' product, and it is difficult for you to make changes without one - you will have to write a letter to them if you want to change investments or make any other changes.

I hope this helps.

 

[Jonty11]

Thanks everyone for the great information and feedback.

Junior - I really appreciate you spending the time to speak to Macquarie about this for me. Reducing the fee to 0%, but leaving them as the adviser is fine with me as it's quite possible I will engage them again to assist further down the track.

The main reason I changed super funds is that I'd been in the same fund (MLC) since my late teens and had never touched it or tried to set it up to improve my returns (typical young/silly person's attitude to super and retirement ). The fees were around 1.51% and it's investment performance was only returning around 6%. So the adviser recommended the Macquarie Wrap Super Manager with the majority of funds invested in the Vanguard Wholesale High Growth Index fund, for much lower fees and better returns. So far, so good aside from this ongoing adviser fee I wasn't expecting to pay.

There may be better options out there again now and can review again in the future.

 

[peter2]

@Junior I'm pleased to be in a community with people like you that do a little bit extra.

 

[WRiley]

Yes, this is indeed a great thread,.. you guys call this service fee. I am a private banking client myself,...

I'm hearing in this thread, the following charges :-
1) ongoing insurance premium commission
2) ongoing client service fee

For my bank, I have to pay something else, it's called Custody Fees. This Custody Fee is charged every quarter, and is calculated by taking a certain percentage of the total value of our assets inside the private bank we are with. This calculation is done on the last day of the month every month, then three months' calculations would be totalled-up as one quarterly charge to be billed against us at the end of the quarter.

Has anyone heard of this Custody Fee please ?

 

[pixel]

Not the Custody Fee, but given the inventiveness of companies when it comes to fleecing their clients, it's unsurprising.

I have come across a nice little earner when you open a Trading Account. Online traders will usually be required to have a bank account linked to their trading setup. There are some requirements that names must match and the Broker needs of course direct access to settle trades via direct debit an credit. The easiest is then to let the Broker set up both from their screen - copy, paste, done.
Right? Right.
But that arrangement may also earn them an ongoing commission from the Bank, who is obviously happy for the broker to direct business their way.
I am one of the lucky who has an honest broker. At the beginning of every month, shortly after the Bank credited last month's interest, I receive an extra "Rebate of Advisor Commission".