Professional Financial Adviser Fees

[Julia]

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

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

 

[burglar]

Julia,

Thankyou for your response.

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

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

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

 

[basilio]

This is a truely great thread.

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

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

 

[burglar]

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

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

Want to share your worst nightmare?

 

[awg]

To the OP, ( and others)

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

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

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

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

The others , I just glanced at

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

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

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

 

[burglar]

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

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

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

Cheers!

 

[ROE]

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

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

Nothing but goodness come out of it ...

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

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

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

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

 

[burglar]

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

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

Looked again, they were doin’ just Ok

Fees 10% Administration

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

How do they dare?

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

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

not enough for SMSF
not enough for retirement

burglar sees 2 alternatives

invest in equities or
a bloody good hangover

Cheers,

 

[burglar]

Hi Julia,

burglar apoplogises unreservedly to Julia if he was offensive

Burglar, ...

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

burglar does his best work in the dark. lol


Cheers,

 

[Sir Osisofliver]

Hi Kayman - back from holidays

About $1.7 million (my market)

About $2.3 million (my market)

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

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

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

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

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

-snip- post too long


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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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



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

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

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

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

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

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

Cheers

Sir O

 

[Kayman]

Hi Kayman - back from holidays

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

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

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

*No pension deductions but result is net of fees.
Your 1.7 ish million therefore would have been roughly 2.423M. (Before deductions) See the difference not protecting your assets made to your level of return? Kayman - look at the date....by now the majority of the damage is done, you've had almost a year of falling share market. Ouch! Kayman - I would also have told you not to put all your money into a TD at that time. We started our major purchasing for clients in November '08.

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

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

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

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

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

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

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

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

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

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

I feel pretty stupid now.

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

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

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

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

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

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

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

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

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

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

7. Consider an industry fund which is non profit.

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

Thanks for your comments, support and suggestions.

Cheers...Kayman.

 

[Julia]

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

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

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

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

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

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

I feel pretty stupid now.

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

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

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

So already you're several steps ahead.

Just keep it up.

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

All the best.

 

[Sir Osisofliver]

Ok Kayman lets see.......

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

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

That doesn't surprise me.

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

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

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

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

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

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

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

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

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

I feel pretty stupid now.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Good luck

7. Consider an industry fund which is non profit.

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

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

Thanks for your comments, support and suggestions.

Cheers...Kayman.

Hope that helps.

Cheers

Sir O

 

[Kayman]

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

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

For your information:

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

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

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

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

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

Cheers...Kayman.

 

[Julia]

Hello Kayman,

What is it about this adviser that so impresses you?

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

What makes the new one so different?

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

 

[Kayman]

Hi Julia,

What is it about this adviser that so impresses you?

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

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

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

What makes the new one so different?

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

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

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

Cheers...Kayman.

 

[davede]

Hi Kayman et al.

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

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

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

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

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

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

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

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

 

[basilio]

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

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

Investment funds: hidden fees wipe a third off returns

Former City grandee attacks fund management industry for sharp practices and a lack of transparency over charges


Patrick Collinson
guardian.co.uk, Friday 4 November 2011 22.58 GMT
Article history

Small investors are paying nearly £8bn a year in hidden charges on their Isas and investment funds, which finance lavish salaries and bonuses in the City but deprive investors of about a third – or even more – of their gains, according to the former boss of a major asset management firm.

An investor who puts £10,000 into the stock market over 20 years, and sees share prices grow at an average of 7% a year, will get back around £22,770. But the fund managers, financial advisers and up to 16 layers of other fee chargers – such as stockbrokers, lawyers, accountants and custodians – will take £15,927 from the fund over the same period.

The figures come from David Norman, formerly chief executive of Credit Suisse Asset Management (UK), who is campaigning for transparency and fairness in fund management. He exposes a raft of practices in the industry which are leaving small investors short-changed:

• Fund managers tell investors the annual management charge is 1.5% but, in reality, the average annual charge to investors is 2.8%.

• Costs borne by British investors are higher than in the United States, Germany or France.

• UK fund managers have increased their fees by around 9% a year over the past decade.

• Badly performing funds are left out of the performance tables, giving a false picture of typical returns.

• So-called soft commissions – freebies and backhanders – are still rife in the industry.

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

 

[todasec]

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

 

[tech/a]

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

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