Use of financial planners

[Ghetto23]

I recently paid $2750 to have a financial planner to create a Statement of Advice for me in terms of setting up a long-term financial plan.

The cost of implementing it will be somewhere in the region of $10K - and I'm baulking at it a bit. Plus $5K annually to keep reviewing it and making sure that it suits me.

I like the fact that they aren't trying to flog me any products to get comissions etc but it is a lot of money. I know that the benefits that they can pick out in terms of income protection and tax benefits will probably end up paying for itself - it's just that I'm a bit put off by the initial amount.

I just wonder whether I can do this myself and save the money...

Thoughts?

For some background I'm 29 with a high income ($150K+)

 

[beamstas]

I recently paid $2750

The cost of implementing it will be somewhere in the region of $10K. Plus $5K annually to keep reviewing it.

I like the fact that they aren't trying to flog me any products to get comissions etc but it is a lot of money.

Looks like they don't need to do that, as they have already flogged you on fees

That's one heck of alot of money to be paying someone who probably isn't going to outperform the index

The question you really need to be asking yourself is whether or not you have the time to trade for yourself, if not then stick with the fund/whatever. But if you do it is something you should really consider

That is my opinion anyway..

Cheers,
Brad

 

[alwaysLearning]

man what a joke...that's so expensive

I hope they are giving you your money's worth.

 

[weird]

I recently paid $2750 to have a financial planner to create a Statement of Advice for me in terms of setting up a long-term financial plan.

The cost of implementing it will be somewhere in the region of $10K - and I'm baulking at it a bit. Plus $5K annually to keep reviewing it and making sure that it suits me.

I like the fact that they aren't trying to flog me any products to get comissions etc but it is a lot of money. I know that the benefits that they can pick out in terms of income protection and tax benefits will probably end up paying for itself - it's just that I'm a bit put off by the initial amount.

I just wonder whether I can do this myself and save the money...

Thoughts?

For some background I'm 29 with a high income ($150K+)

Income is one thing, savings you currently have for your trading/investment is another ... all expenses will have drag on your overall performance.

If you currently only have 100K , and 5K drag you are already down 5% ... I assume there are other expenses if trading shares directly such as brokerage, or are you going to be put into different managed funds ? I guess there is a time saving benefit, where you write a cheque each year, and everything is done for you ? So the next suggestions I have will be more hands on, and will require your involvement and commitment time wise than the other.

With any investment endeavor, and coming from a place of knowing nothing, checking forums or friends that are successful in that endeavor can be very useful.

For shares, I have no problem recommending Nick Radge from the Chartist, and have also heard good things about Gary Stone, from Sharefinder. I would be surprised if the initial and ongoing fees from either are not significantly less than what you have quoted.

For property education, I have heard very good things about Jan Somers. In her last book, she has a very interesting write up on her thoughts towards Financial Planners.

 

[Ghetto23]

I'm with you guys - I though what they spelled out in the SoA would be really smart stuff that will really help me avoid paying so much tax.

What they recommended was pretty much:
-Borrow against my current homeloan to invest in Blue Chip shares with a high div/share (free capital growth)
-Get income insurance (already have it)
-Get a will
-Salary sacrifice some more super
-Start investing a certain amount per month in the Black Rock platform to put it in the sharemarket.

Now I'm already putting a lot of money into the sharemarket, and have been doing quite well lately (in terms of capital growth), and all of the above looks like pretty simple stuff to me...

Call me crazy, but I can just do all of this myself.

I used these guys to do my tax last year and they found me a lot of extra money. I was impressed with their job.

I'm think that having a long-term plan is important, but can't justify spending the money for what I can see is very little return (that I can't do myself).

 

[Ghetto23]

Does anyone have experience with these type of planners i.e. pay for a SoA to work out how much you want to have at retirement? Implement and review the plan as you go forward?

Has it been worth it?

 

[Julia]

Ghetto, from what you say they offered you for the $2750, it seems very expensive indeed. I'd have thought that stuff was automatic to most people.
Do you feel they suggested anything there that you hadn't already thought of or were doing?

What would the "Plan" costing $10K include? Would they completely take over all your investments, monitor everything, and just send you a report? Would it include all brokerage?
Would you want that? I surely wouldn't.
Not saying these people wouldn't make you money, but handing everything over was what got the Storm investors into trouble.

Re working out how much you will need for retirement, there are plenty of calculators on the net that will do this for free. It's not something you need to pay anyone to do!

 

[nomore4s]

I agree with Julia it all seems a bit expensive for pretty basic advice (on the surface at least). I'd be at least going to see another financial advisor to get another quote & opinion (but not paying another $2750).

 

[The_Bman]

I think it comes down to your financial Intelligence.

I went to a FP about 10 years ago who put me on a path to financial freedom and I haven't looked back. I needed help.

Sure, you don't know what you don't know but if they're going to tell you something you already know is it money well spent? And if they tell you to put cash into agribusiness and mortgage trusts is it money well lost.

 

[kincella]

sounds a bit like Storm...taking commissions of 7% upfront....
my 2 cents worth...on an income of 150k...there is quite a bit of employer super that is going into investments currently....do you own a property...your own home ??? paying rent or a mortgage ???
salary sacrifice some into a good superfund.....or plan a budget where you buy shares for the long term, or trade xxx amount per month...
use the strategy of 33% into each asset class, ie shares, property and cash..
I like to manage everything myself...so I am not inclined to pay others
for advice or management of my assets....
you have the freedom to do different things....I think you have enough going into super now....so would not advise tying up too much into super at your age.....plenty of time later....

 

[Ghetto23]

Yeah their plan was to put an extra $12500 a year into super - for the tax breaks and to bolster it so I can go into self-managed super sooner rather than later (I'm told I need 100K+ to do this?).

It's not a Storm thing as far as I can tell - they charge a fee because they don't take commissions - they refund commissions back to you off future bills - it means that they have your interests at hand rather than trying to get commission.

 

[Ghetto23]

The sharemarket platform that they invest through is called Blackrock Sperately Managed Account Service - ever heard of it?

 

[Kez180]

Have you raised these concerns with your financial planner?

Did they work the fee out on a charge per hour basis? Did they increase the fee because you have a substantial income?

I get the impression that the same firm does your accounting work? Were they open about how the fee structure would be applied when you had that work done?

Also you are liable if the accountants have dodged up the tax return, you signed it... Just be careful, the biggest deductions might not always be legitimate....

Most of the cases where financial planners have been acting dishonestly have involved large fees....

If you explain to them that while you are willing to pay, you need value for your money, you might find you wind up with either a more experianced planner or reduced fees!

Here is one of the MAJOR problems with financial planners... it is too easy to become one...

 

[Ghetto23]

Kincella - to answer your question, I am paying off the mortgage of the unit I live in.

I split my money up (about 50/50) between the mortgage and shares

 

[Ghetto23]

Thanks for the reply Kieran.

Actually no, they weren't clear about the fees when doing my tax, however the guy who did my tax is a former tax lawyer for the ATO and that's how he built the business. The business has a good reputation, and I was happy with the job they did on my tax.

Don't they sometimes say 'You have to spend money to make money'? It makes sense that quality advice/help costs more - that's why I paid the $2750.

I have a meeting with them next week to let them know my concerns, I am looking for some outside opinions so I can go in there and have a productive (for me) meeting.

 

[Timmy]

I had a mate who studied to become a financial planner. He was working full-time (60+ hours per week) and studying evenings. Finally completed the course and went to work for a big firm of financial planners. The head honcho who owned the business had his face on TV every second day doing interviews telling people to go to financial planners etc. Anyway, took my mate about five days to realise that for about 95% of the people coming to see him the absolute best advice he could give them was to pay off their mortgage first. Paying off the mortgage is not what people want to hear… not sexy enough. No commission for the advisor either. He lasted another couple of weeks in the job and then left, pretty disillusioned with the whole thing.

Anyway … I have been known to rail against the lack of ethics (IMHO) involved with the commission/ trailing-commission business model employed by most planners, but Ghetto your posts show why it is the most-used model. Very few people want to pay for the service.

On a more practical front – ask what are the expenses involved in setting up your plan that involve an initial outlay of 10k. Get these expenses itemised. And then 5k to review each year … again get this itemised and ask what their hourly rate is, sounds like its going to be a lot.

Kez180 has shown how you can get qualified to do the job for as low as $1997. Might be worth going down that route so you can DIY?

Oh, and pay off your mortgage first.

 

[Mr J]

At the end of the day, many of the jobs in our society are just sales. If someone is trying to sell you something, they shouldn't be trusted until they prove otherwise. That doesn't mean completely ignoring what they say, but just take it for what it is - an opinion.

Some sales people are very good and honest, but many are biased, poorly informed, incompetent or just dishonest. I think this can be faily applied to any sales occupation, including the one we're talking about here.

Kez180 has shown how you can get qualified to do the job for as low as $1997. Might be worth going down that route so you can DIY?

I doubt there's anything they'd teach that one couldn't learn on the internet.

 

[Timmy]

Some sales people are very good and honest, but many are biased, poorly informed, incompetent or just dishonest. I think this can be faily applied to any sales occupation, including the one we're talking about here.

Agree with you Mr J, I would only add that it needs to be made clear to the punters out there that fin. planners ARE salespeople.

 

[kincella]

its been good advice so far on this thread....so far you have paid 2750...can you get it back if you change your mind ???

at one stage surveys found the advice given by the ATO was wrong 50% of the time...they were playing the game of the fox, as the protector of the chickens...
but apart from that...the financial planning industry has been a pretty easy profession ??? not the right term imo...to get into with easy money as the spoils
I am against tying up your money into super at such an early age....look at 2007, the olds could dump a million dollars into super in one lump sum that year....
you may want to go into business in the future...and need funds for a start up, or a buy in...so two ways to go there, have substantial equity in your own home to tap into, or liquid assets...the cash and the shares etc....
the main thing you need to do...is have a budget and a regular savings plan...

I would not be paying anyone 5k or 10k a year...to review or monitor...my investments.....I know people who do, but they have still lost 50- 80% just like everyone else in the recent fiasco...

 

[nomore4s]

Agree with you Mr J, I would only add that it needs to be made clear to the punters out there that fin. planners ARE salespeople.

I also agree with this.

The big problem is alot of them are "brainwashed"(for lack of a better word) into believing the products they are selling really are the best for the client when in fact it is only best for the company they work for - think Storm financial and how many of the planners actually got caught up with their own money.

I also have a friend who became a fin planner and after a few conversations with him about the market and economics in general I couldn't believe just how little he actually knew and more importantly understood. He was told what to sell and his outlook was distorted by the company he worked for and the companies whose products he sold.
He is a top bloke who would never intentionally mislead anyone but he just didn't know any better.