I'm feeling somewhat disillusioned with the whole 'financial advisor' industry.
I signed up with my current financial advisor in mid 2006. Preparation of my statement of advice (SoA) was about $5000. To me, preparation of the SoA seemed like typing a few details into pre-prepared word document and pressed 'print'. Most of the soa seemed like a generic document that was included in every soa they prepared, and a lot of 'padding' pages - to make it look like a big important document I guess. Why does this cost $5000?
I also have a problem with financial services guides - trying to make sense of exactly how much money the advisor makes out of you with all the commissions and what-not is not exactly easy. Which begs another question - if an advisor takes commissions on the products they sell, how can you ever really trust that they are advising you with regard to your best interests (and not their own)?
Maybe I'm just angered by the state of the current market - having signed up for a margin loan I have lost tens of thousands of dollars, and it doesn't look like I'll be making that money back any time soon. I am actually planning to return to university next year which doesn't help, since it means I will be struggling to pay interest on my margin loan. Yet still I am paying $120 in financial advisor fees on top of the loan interest... To watch my money disappear... I honestly dont understand why it is necessary to pay an ongoing management fee? The advisor hasn't changed their advice, so why am I paying them this money? What do they actually do to earn it?
Does a financial advisor exist where they are payed by the hour to simply advise you what to do with your money, without directly handling it? I've scoured a few local advisor web sites and they all seem to have clauses about trailing commissions and kick-backs etc. Wouldn't it make more sense just to charge people on an hourly rate by consultation?
Better yet, does a financial advisor exist where they only make money if their advice works? i.e. I'll pay you 10% of the profits that I make on the advice that you give?
I am currently paying roughly $800 per month interest on my margin loan. Everyone tells me this is not a good time to be selling it down, so I'm prepared to keep up the interest payments in the hope that the market will recover. As mentioned earlier I'm also paying $120 in fees per month to my financial advisor. Can I simply 'cancel' my agreement with the f/a, and thereby stop the monthly fee? The investment account is managed by Asgard, what would happen if I did cancel the agreement? Would I simply take over all the paperwork myself? What would happen with all the trailing commissions?
What would you do in my situation? I realise most of you are investment gurus so you would probably take control of it yourselves but what would you advise a friend if they were in this situation? (a friend who currently knows little about the stock market / economy but is willing to learn...)
Not all financial advisers are the same, just like in any other profession!
I personally use SoA templates but I spend considerable time tailoring the SoA to the client and I do not fluff up the SoA with lots of generic material that you can find elsewhere at little or no cost.
If you are not sure what fees and commissions you are paying to your financial adviser, contact them and ask for a summary of all the fees and commissions they are receiving.
Some financial advisers do charge fee for service at an hourly rate. Personally, I leave it to the client to decide how I charge my fees - with the key being do you receive value for the advice being charged for.
Quote:
Originally Posted by BJKS
Better yet, does a financial advisor exist where they only make money if their advice works? i.e. I'll pay you 10% of the profits that I make on the advice that you give?
With regard to the above quote, what about advice that has no dollar value - such as peace of mind - 10% of what? Please understand that investing is just one component of financial planning.
You can request your financial adviser to cease charging ongoing fees and refund commissions. In this scenario, you would look after the investments, the financial adviser would have no involvement and you would look after any paperwork.
Educate yourself by buying some books on financial planning that cover investing, super, insurance, tax, debt and so on.
Good luck with your financial planning.
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Andrew Newman - Financial Adviser CMP Financial Planning Pty Ltd Create, Manage, Protect - Your Wealth
The information provided above is general in nature, does not constitute financial advice and should not be construed as being specific to your investment objectives, financial situation or particular needs.
As Andrew said, every financial planner charges differently. This amount was agreed on by you and your f/a.
The Financial Services Guide (FSG) gives you more important information like who the licensee is, what services they offer, any existing relationships, how the licensee and adviser may get paid, what to do if you have a complaint and privacy information. If you want to "try to make sense of exactly how much money the advisor makes out of you with all the commissions" you should be able to find this in the Statement of Advice (SoA).
Maybe you are, the risk of losing funds being magnified should have been explained by the f/a and in the SoA. You are paying ongoing advisor fees for ongoing service. You can walk back in and say, hey, my situation has changed, what are we going to do about it?
They do exist, though can cost alot on an hourly basis (like lawyers). This would probably drive the cost up considerably of financial advice with clients being billed in 6 minute increments. Also the probably here is alot of client's wouldn't get the ongoing service which they need.
I haven't heard of any advisers which charge on the profits made by clients, this would be great in the up years, but not so great in the down years. Not a business model which would last long in down years.
It's a great time to buy, not such a great time to sell. What was your original timeframe? Most timeframes to borrow to invest are 5 to 10 years at least. The fees are being collected by the product (Asgard), you would have to change things through them. Asgard has to have an adviser attached, as it's an adviser driven product. The ongoing fee sounds a bit high, you can go into your local St George Bank/Bank SA and discuss with the financial planner to negotiate a better ongoing fee. You can log online Investor Online Redirection to look at your account in more detail.
Again as Andrew said, read alot of books to get a better understanding.
Cheers,
Dan
PS Speak to an FPA registered Financial Planner before making an investment decision.
I haven't heard of any advisers which charge on the profits made by clients, this would be great in the up years, but not so great in the down years. Not a business model which would last long in down years.
I personally can't get my head around the idea that Financial Planners in essence are glorified salesmen that push clients towards products where they earn commision, ie insurance and managed funds. I'm not saying that either are bad products I just can't help but feel this conflict of interest would see most financial planners being not much more than glorified salesment rather than profit maximising advisors.
If financial planners were worried about not making money in the down years why not charge on their ability to beat the market, or at least get close to the market?
I personally can't get my head around the idea that Financial Planners in essence are glorified salesmen that push clients towards products where they earn commision, ie insurance and managed funds. I'm not saying that either are bad products I just can't help but feel this conflict of interest would see most financial planners being not much more than glorified salesment rather than profit maximising advisors.
If financial planners were worried about not making money in the down years why not charge on their ability to beat the market, or at least get close to the market?
Hi Chris
It may be true that some financial advisers may be product pushers but to say that all financial advisers act in this way is an injustice to the ones who act in the best interests of their clients.
Financial advisers advise on many different areas and investing is only one of those areas. For example, if I recommended a superannuation strategy that saved a client $2,000 tax per year, what has that got to do with beating the market? I think many people have a misconception about financial advisers thinking that they are investment advisers. In fact there are some financial advisers who do not deal with investments at all.
As I mentioned earlier, the key is do you receive value for the advice being charged for - if not, discuss this issue with the financial adviser and perhaps re-negotiate the fees and commissions being paid.
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Andrew Newman - Financial Adviser CMP Financial Planning Pty Ltd Create, Manage, Protect - Your Wealth
The information provided above is general in nature, does not constitute financial advice and should not be construed as being specific to your investment objectives, financial situation or particular needs.
I completely concede that not all financial advisers would be out there to push products in which they have a vested interest, and I am also willing to concede that financial planning is not just about investment strategies.
My point simply was that a significant part of the industry earns its money off giving sub optimal advice. I'm not saying the advice would produce results worse than what the client could have produced, on the contrary, in vast majority of cases the advice financial planners give will result in a significantly better outcome for the client than they could have achieved themselves, but I can't get my head around the idea that most financial planners must still know that it is sub optimal...
Chris, if a client is not happy with their financial adviser with regard to receiving commissions from products, then the client can always do it themselves or find a new financial adviser.
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Andrew Newman - Financial Adviser CMP Financial Planning Pty Ltd Create, Manage, Protect - Your Wealth
The information provided above is general in nature, does not constitute financial advice and should not be construed as being specific to your investment objectives, financial situation or particular needs.
If financial planners were worried about not making money in the down years why not charge on their ability to beat the market, or at least get close to the market?
Hi Chris,
I think your getting financial planners mixed up with fund managers.
Financial planners tailor financial strategies to clients needs.
Fund managers chose investments to "beat" the market.
There is no investment for financial planners which are always going to out perform the market year after year, this is because investments have cycles (If you do find one let me know ).
Not quite sure what you mean by sub-optimal, my most recent client is save over $25,000 pa in tax! With his funds invested in 100% government guaranteed cash.
1. Find yourself a good accountant. Rely on your accountant for tax planning advice. Much cheaper than going to a financial adviser & in my opinion you will get better quality advice.
2. Ask any financial planner that you deal with in the future to tell you what they are invested in themselves. Check the performance of their investments. Nobody should take advice from a financial planner who is not managing their own money well.
It is important to understand that things in the economy happen in cycles. It appears to me on the face of it that you have been advised by your financial planner to make a leveraged investment (hence your margin loan) in the sharemarket towards the top of the cycle, without a lot of thought to your future plans (going back to Uni). I understand your frustration.
If you can successfully demonstrate that your planner has not taken your personal circumstances into account then there will be a complaints procedure that you can follow (all financial planners are legally required to have a procedure in place). This might be worth a shot, at minimum it might get you a reduction in the ongoing fee or a waiver for a while.
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