Retirement & Financial Planning

[Geoff]

After 45 years of pushing papers around various desks I'm off to retirement land tomorrow & looking forward to some mid week fishing.

Considering the weekend weather which has been pretty crappy over recent months mid week is looking good.

Changing the subject , what Raiders have had experience with a Financial Planner. I have recently visited a planner & received a detailed proposal all of which is looking very promising.

The sticking point at present is the proposed chargers , mainly in year one.

In checking around I have received indication from other planners of around 1.6%. The company I have received the plan from want 2.55%. 1% of this is a once off charge for setting up the investements into an allocated pension.

Now , 1% may not sound a lot but apply it to a reasonably sum of $$$$$ & it can be many thousands of dollars. Keep in mind they also receive an additional .70% for annual adminstration fee. ie 1.7% in year one then .70% of the total fund value in subsquent years.

Would appreiciate any experience or feed back you have had in this area

Tks

Geoff

[mrmoshe]

G'day geoff,

I have just retired too and did the same thing you are doing.

I nailed down the Fin. Planner guy as low as I could and he finally agreed to

my figure.

Admitidly, mine wasn't too complex..mostly super etc, so wasn't a whole lot

he couild sell me..He tried, but I put my foot down and did a lot of research first.

Research seems to be the key here I think...Do your homework first, then talk to 'em and see if they can improve on

what strategy you have come up with.

Hope this helps...If I can give you more info, just ask.

Retirement is bloody wonderful BTW...I now fish whenever I bloody well want to..which is getting more often than I had planned..LOL

Pete.

Edited November 9, 2006 by MallacootaPete

[Guest Aron]

peekingduck is in the finance/share market industry - he may be able to answer your questions.

Have not seen him around here lately

Tri where are you - that new wife of yours (hi Kim) got you under the thumb already?

[mrsswordfisherman]

I think Tri and Kimmie are still travelling around the world on their honeymoon

Cheers mrsswordfisherman

[Robbielites]

Hi Geoff,

I am not in your shoes and have not been in your position, but I have discussed this with a good friend that is my accountant. Her advice is stay away from financial planners, IF you are in a position to do the research and put in some of your new found free time you will get a better result. As with most things in life slow and steady wins the race.

My 2c

Robbie.

[Clarkie]

I am not in your shoes and have not been in your position, but I have discussed this with a good friend that is my accountant. Her advice is stay away from financial planners, If you are in a position to do the research and put in some of your new found free time you will get a better result. As with most things in life slow and steady wins the race.

As an accountant, I shudder when I here things like that. This is your life savings here, and it's pretty easy to fu** it up.

You have started off on the right path though. Ask lots of questions, and gets lot's of independant advice. People who have gone before you is where I'd be looking. Also, go for reputable advisers. There are plently of people who call themselves advisors, who have no more experience than you or I. Anyone can pick investments from the newspaper. When it comes to fees, usually you get what you pay for. Someone might be cheaper, but they may not necessarily be better.

FP just like any other profession, whether it's builders, mechanics, plumbers, doctors, lawyers. There will always be someone out there cheaper, but do they know what they are doing.

And just like any other profession, fees can sometimes be open to negotiation, so like MallacootaPete suggests, haggle.

Now this is just my opinion. But remember, you don't get a second chance at this stage if it goes wrong.

I have friends who are FP's (I'm not though) so I may be biased towards them. Depending on where you are I can give you a name or two if you want second or third opinions. PM me.

Cheers, Clarkos.

[heckendorfmortgage]

Well said Clarkos.

MH

[Geoff]

Tks guy's for your comments

Pete Your comment on research is correct. Since my origional post I have been back to the planner expressing my concern on the rates & indicating rates obtained from other sources.

A few hours later received a response advising the annual fee would be reduced from 1.6% to 1.51% , not a lot but the big one was the 1% initial establishement fee reduced to .40%.

I have a No. of other inquiries out so still researching

Robbie Your accountant friend has a good point. When the industry kicked off in the early 80's any one could hang out a shingle & reep a nice income from charges. There was a lot of bad taste left behind & whilst the industry has gone through a major clean up in the past 5 years there is still some mud sticking.

Unfortunatly for many people who do not understand or have taken an active interest in their personal financial plan there are not a lot of options known to them & tend to blaze off in blind faith to a F.P.

Understanding how the system works & who get's what for what services is important this includes what charges are on top of the table & what slides under , eg trailing commissions or commissions to the actual fund manages from the declared performance .

There is nothing illegel about this , it is common practice across the whole industry.

Eg Company A declares 15% investement return for the past 12 month period. Check a statement , the actual amount paid is around 13% - 14%

It is one of the major attractions for people to to set up their own Self Managed but that is a whole differ subject

Any way , we will keep plodding along

Geoff

[kenmare]

Hi Geoff,

I'm retired, like you, and have more than 15 years experience working in the Industry (but not as a planner).

There are a couple of other things you might consider:

1. How complex are your financial affairs: do you really need a financial planner? In this regard you should be aware that there is currently legislation before Parliament which, if passed, will from June next year essentially exempt superannuation pensions and lump sums from tax when received from age 60. It might be worth having a chat with a financial planner about this before making a longer-term commitment or signing any service agreement contract.

2. Fees charged should be justified by the services provided to you. What will you receive for the fee? How will you be better off? Remember, the fee quoted is invariably a percentage of the money invested, not a percentage of the returns from the investments. This will be important when investment returns(investment growth and dividends and interest) inevitably at some future time decrease from what they currently are.

3. Investment performance over the last four years has been very good -- well in excess of increases in the cost of living -- due largely to stunning share-market performance. This is unlikely to continue indefinitely. There have been lengthy periods in the past when investment returns have stagnated or even declined. A fee (based on funds invested) may look reasonable when returns are high and rising, but will it seem so reasonable when investment returns (your income) are stagnating or falling?

Regards,

Bob

[Geoff]

Bob

1. How complex are your financial affairs:

They are reasonably straight forward. I'm not actually using the planner to sort out what I have , more so to advise on the various investement options & if / when I am happy actually place the funds with the selected fund manages.

In this regard you should be aware that there is currently legislation before Parliament which, if passed, will from June next year essentially exempt superannuation pensions and lump sums from tax when received from age 60.

Yes , I am aware of this change , turned 60 last June so only 6 months before the new rules kick in

It might be worth having a chat with a financial planner about this before making a longer-term commitment or signing any service agreement contract.

We have discussed this

2. Fees charged should be justified by the services provided to you. What will you receive for the fee? How will you be better off? Remember, the fee quoted is invariably a percentage of the money invested, not a percentage of the returns from the investments. This will be important when investment returns(investment growth and dividends and interest) inevitably at some future time decrease from what they currently are.

Yep , in the fore front of my thoughts

. Investment performance over the last four years has been very good -- well in excess of increases in the cost of living -- due largely to stunning share-market performance. This is unlikely to continue indefinitely.

I think the rule of thumb is out of 7 years 2 negetive years & 5 positive years . But overall a positive result

I lived through the 1987 crash , lost heaps in the short term but over all has recovered to healthy No's over the years

For what it is worth the people I am talking with are very large in the industry , not sure if that is good or bad

Geoff

[kenmare]

Bob

1. How complex are your financial affairs:

They are reasonably straight forward. I'm not actually using the planner to sort out what I have , more so to advise on the various investement options & if / when I am happy actually place the funds with the selected fund manages.

In this regard you should be aware that there is currently legislation before Parliament which, if passed, will from June next year essentially exempt superannuation pensions and lump sums from tax when received from age 60.

Yes , I am aware of this change , turned 60 last June so only 6 months before the new rules kick in

It might be worth having a chat with a financial planner about this before making a longer-term commitment or signing any service agreement contract.

We have discussed this

2. Fees charged should be justified by the services provided to you. What will you receive for the fee? How will you be better off? Remember, the fee quoted is invariably a percentage of the money invested, not a percentage of the returns from the investments. This will be important when investment returns(investment growth and dividends and interest) inevitably at some future time decrease from what they currently are.

Yep , in the fore front of my thoughts

. Investment performance over the last four years has been very good -- well in excess of increases in the cost of living -- due largely to stunning share-market performance. This is unlikely to continue indefinitely.

I think the rule of thumb is out of 7 years 2 negetive years & 5 positive years . But overall a positive result

I lived through the 1987 crash , lost heaps in the short term but over all has recovered to healthy No's over the years

For what it is worth the people I am talking with are very large in the industry , not sure if that is good or bad

Geoff

Hi Geoff,

You seem to have already given this matter some thought.

Large or small in the Industry, good or bad? You'd normally have to buy me a few beers to get me started on that.

But as far as choosing advisers is concerned, you may already be aware:

1. The Industry, due largely to Government pressure, has attempted to clean-up its act in recent years. Despite this, advice received is not always impartial: it can be tainted by the remuneration arrangements of the adviser.

2. There are Industry bodies to which many advisers belong, such as the Financial Planning Association, which attempt to self regulate the Industry. If you follow the financial media, which I'm sure you have been doing, you will see that this attempt is not always successful.

3. Even when you receive advice, the investment risks (the inevitable financial market ups and downs) remain with you, so you don't have any come back against the adviser unless you can prove the advice was inappropriate.

4. In a worst case scenario -- an adviser illegally takes your money -- a larger organization is possibly in a better position to make full restitution to protect the reputation of the rest of its financial planning network. The media just loves reporting on these cases in excruciating detail.

Of course, what I have written here in no way constitutes financial advice and you should consult your adviser about your particular circumstances etc... But then I'm sure you know the drill.

Regards,

Bob

[Captain Pugwash]

I have only one comment,

If it sounds TOO good to be true it usually is!

gO WITH ANY OF THE "ESTASBLISHED" houses but dont take the "get rich quick schemes"

Cheers

Peter

[Geoff]

1. The Industry, due largely to Government pressure, has attempted to clean-up its act in recent years. Despite this, advice received is not always impartial: it can be tainted by the remuneration arrangements of the adviser.

Bob I think this remains one of the main sticking points for the industry & comes under the heading of "Conflict of Interest".

It is interesting to challenge F.P. on their choice of recomended investments. There are many to select from & the trick is to access what they are not saying , rather than the explenation given

Geoff

[caine]

THERE IS NO SUCH THING AS FINANCIAL PLANERS

ONLY MANAGED FUND SALESMAN

[kenmare]

It is interesting to challenge F.P. on their choice of recomended investments. There are many to select from & the trick is to access what they are not saying , rather than the explenation given

Geoff

Hi Geoff,

This takes us back to my first question: Do you need a financial planner?

If you're not going to follow the advice you pay for, then why seek out and pay for advice in the first place?

Regards,

Bob

[pekingduck]

G'day Geoff.

I am back.

I'm an equity and options advisor, not a financial planner so I can’t help you directly, but the firm I work in has a heap of planners. Some good and some not so good. If you like I could get one of the ones I trust to give you a call.

There has been some good…and some not so good advice and comments given in this thread and I am not going to go into details here.

The advice I can give you is to focus on the overall returns and not just on the fees and costs. These are important of course, but not the first question I would be asking them.

[kenmare]

G'day Geoff.

I am back.

I'm an equity and options advisor, not a financial planner so I can’t help you directly, but the firm I work in has a heap of planners. Some good and some not so good. If you like I could get one of the ones I trust to give you a call.

There has been some good…and some not so good advice and comments given in this thread and I am not going to go into details here.

The advice I can give you is to focus on the overall returns and not just on the fees and costs. These are important of course, but not the first question I would be asking them.

Hi Peking duck,

Geoff's original query was what fees he should be paying. I asked about services he would receive and whether he needed a financial planner at all. To approach financial planning any other way is "putting the cart before the horse."

Focus on the overall returns, not just on the fees and costs?

Upon closer examination two things become obvious:

1. Promised returns may never eventuate if the investments are inappropriate to the investors circumstances or just plain bad.

2. Fees most certainly will be incurred; usually layers and layers of them, when the investments are made and often at every possible point along the way.

The vast majority of retirees have a superannuation lump sum to invest. And the financial planning/managed funds industries have largely been built on the backs of retirees with lump sums and little or no investment experience.

The vast majority of retirees also have modest retirement savings, simple financial affairs, and do the sensible things: invest in managed funds which spread their retirement money across shares, property and cash investments, then go fishing, play bowls, tow a caravan around Australian and so on. Others, not necessarily the most wealthy, believe they're smarter than the market professionals and do their own investing, usually with the assistance of other "helpful" market professionals.

I agree overall financial returns (income and growth from investments less all fees and charges) should be the focus. But the most important questions really are:

1. How do I best earn an adequate investment return, but still sleep at night? The investment reality is "the higher the return, the higher the risk."

2. How can I keep the costs as low as possible when earning that investment return?

Regards,

Bob

[pekingduck]

Hi Bob,

I agree with what you say and was not having a go at your comments.. I am not a planner myself, I don’t even know what fees and charges they apply.

In what I do my main job is not just to make money for my clients, but to make sure the risk they take is in line with the returns they make. Each client I have has different risk profiles and my job is to know my client and choose strategies which are appropriate to them. When I get a new client and their main focus is on what I charge, rather than what services I can provide them, then I usually do not bother as my selling point is not on price.

[Geoff]

Hi Geoff,

This takes us back to my first question: Do you need a financial planner?

If you're not going to follow the advice you pay for, then why seek out and pay for advice in the first place?

Regards,

Bob

My origional post related to the cost for their service not weather or not I should follow the advice they were offering.

I needed to find out if the cost being quoted were competitive , ie how did this compare with others in the industry.

From research over the past week or so their costs were higher & subsequent discussions have seen them reduced in line with what I would consider industry standard.

My comment relating to challenging their choice ( selection) of investements was perhaps "off topic"

At this time I plan to move forward with their recomendations

Regards

Geoff

Edited November 14, 2006 by Geoff

[Geoff]

Pekingduck

If you like I could get one of the ones I trust to give you a call

Tks for your offer , I will keep it in mind

Bob. Your last post , Nov 14 touched on a No of aspects relating to investement , returns & security of funds.

These are all very important especially if placing every last cent one has into an Allocated Pension & for some reason the wheels fall off , Eg the market crashes & suddenly you loose tens of thousands of $$$$ over night. I remember Oct 1987

Now every one is different & branching off here on how & where to invest is another subject & will vary from person to person.

For myself & without going into personal details I will not be placing every $$$$ into the A.P. There is money in other investements should I need a temporary fall back position.

Also , if I mentioned the name of the fund manager (very well known with a good track record ) & how the money will be distributed by percentage & category I think most would agree that whilst it is a slightly agressive / balanced mix it is reasonably responsible & if one catagory , eg Oz shares drop then other section like cash or property will deminish ( I Hope) some of the decline

Tks again to your continued interest & comments

Geoff