Or should you just DIY?
Trust is a quality that can take years to establish.
And about a minute to lose.
We see this in action at the moment with the recent arrest in the Bahamas of the Cryptocurrency billionaire, Sam Bankman-Fried. And the related dive in the value of most other Cryptocurrencies.
A not dissimilar sentiment can be seen in the views of many retirees toward financial advisers.
Some of us have long memories and so the excruciating detail of financial misbehaviour that was revealed in the 2019 Royal Commission can be very hard to ‘unsee’.
So when we posed the question in the November Retirement Pulse survey, ‘What is the major reason why you would not seek financial advice’ we expected to learn that a lack of trust was a strong factor.
But we were missing something.
Interestingly, there was another factor that ranked far higher, and that barrier was one of cost.
It seems that the main reason some of our members do not wish to seek advice is that they believe it is far too expensive and probably not going to deliver value for money.
Ben, the winner of the free advice consultation put it very succinctly:
‘Major reason? Cost. (I also have a) lack of trust that they are working for me and not receiving kickbacks from product suppliers. Also, there is a risk of them wanting to churn investments for brokerage.’
There’s quite a bit to unpack here, but we trust that Ben will find his free consultation with a Retirement Essentials’ adviser to be a very positive experience. The good news is that we do not promote or sell financial investments so there is no danger of kickbacks or of churning anything to earn more fees.
And clearly a complimentary appointment tackles the cost issue very neatly!
But let’s unpack the concern about cost a little more.
A common response to why someone won’t seek advice is because they believe that they ‘really don’t have enough to worry about’. And in some instances this can be the case. But there is no ‘one-size-fits-all’ costing for financial advice.
Some advice is personal, some is general The Moneysmart website explains the difference very usefully. For a detailed financial plan, the going rate seems to be about $3500. There is a reason for this. Financial advisers are now required to observe much more extensive compliance requirements and it does take a lot of time to meet with clients, understand their overall financial situation, goals and other related matters and then to create a long term plan that will tick the required client and compliance boxes. This is not written as an ‘excuse’, rather an explanation of what financial advisers are required by law to do. So it is little wonder the number of advisers in Australia has shrunk from a peak of about 30,000 in 2016 to about 16,000 today.
Retirement Essentials does not offer this extensive personal advice solution. Instead, we offer one-off $330 consultations which allow our members to discuss specific issues and to more fully understand the rules that will apply to their financial decisions. You may have read the ways our advice and customer service team have helped members this past year – saving many of them thousands of dollars for a modest fee of $330.
As one member said in response to the same Retirement Pulse survey question:
‘This question does not apply to me as I am a full member of Retirement Essentials and receive financial advice and support when required.’
When super was introduced in 1992 i’m sure those who created it had no idea it would turn into the animal it has become.
It has become so complicated that members have no way of navigating through the layers of information and red tape
Billions of dollars are extracted from ordinary, compulsory investors by money grabbing companies for running the various schemes and offering advice, money that would benefit members more if it stayed in their super accounts, no wonder there is not a lot of trust with financial advisers
You state that the number of advisors has dropped over the last few years but I’ll bet that the costs have not gone down and companies are still making the same, or more.
Interesting read – I thought the word ‘Trust’ is hard to achieve, as the investment markets (Funds in super) have been having too many swings up and down in the past 14 years. Low bank interest rates have forced retirees to risk more in conservative or balance funds to have an actual return on super investment.
I have had financial advisors but found what they promised does not really occur. Pay a monthly fee and only get nothing in advice – just a statement from the Trust Fund telling me the rates achieved … overall. Not sure how direct costs are calculated or if fair and equitable. Even when you ask how your funds are invested they are in various established funds ( no details) from funds.
I was in GESB and changed to Colonial First State Wholesale index Balance fund – retirement fund.
So my question is what does the $330 fee cover?
Thanks
Hi Ray, thank you for your comment! Regarding what our service/fee covers, our adviser will spend time with you using our retirement forecasting tools to help you understand your options to enjoy a better retirement.
It is hard to know how much you can safely spend and how much you need to put aside when you don’t know for sure how long your money needs to last. You might live longer or shorter than average, investment markets will go up and down and unexpected events can send our well laid plans off track.
Our retirement forecasting tools can help you to understand the options and rules to better enjoy your retirement including providing answers to the big questions that worry most retirees. You will have the option to compare your current situation to provide you with confidence in your decisions. We will provide you with a strategy paper after the appointment.
Hmm… years ago, pre-GFC, I did my own financial plan, pre-retirement. A spreadsheet, it fitted on an A4 page. When I complained at a Superannuation forum that their cash returns were poor compared to those I could achieve for that portion of my nest egg, a consultant berated me and told me condescendingly that I would understand if I had a financial plan done. Said plan cost $4000 and was mostly a template that the ‘paraplanner’ used to enter data supplied by me. What a waste of my time and money.
That was my second bad experience with an advisor. The first was when I was advised to switch from a government superannuation scheme to the current model. Had I stayed with the defined-benefit government pension scheme my funds would not be subject to market instability now, and would be indexed for inflation. Although as a woman I had missed 10 years of super accumulation, I could have ‘topped up’ by buying extra units from that point on. And I still could have built other investments.
Some ‘advice’ I thankfully didn’t take a couple of years ago was to switch from blue-chip shares to new growth investments … tech start-ups, crypto-currencies and the like. Whew!
I know my funds ‘could’ earn more if my superannuation was in more risky ‘growth investments. I retired in 2007 at nearly 57 years old.
I am now 72 years old, and my priority is not “growth” investments, but to live a minimalist-possessions, maximum-experiences lifestyle. Apart from the Covid years, that is happening!
Your model of advice seems much more focussed on the client’s needs and values than many advisor groups out there. Thank you.