Good advice becoming increasingly expensive
BEFORE detailing the news of the week, it is important to start with a warning. Any investor who overpays for ongoing financial advice, as a result of commissions and fees, will only have themselves to blame from July 1, 2012. From that date ignorance will not be bliss.
BEFORE detailing the news of the week, it is important to start with a warning. Any investor who overpays for ongoing financial advice, as a result of commissions and fees, will only have themselves to blame from July 1, 2012. From that date ignorance will not be bliss.The good news is that most of the measures announced under the Future of Financial Advice(FOFA) reforms in April 2010 will be implemented. The bad news is that the reforms will only affect new contracts and arrangements entered into after the date of the introduction of the new system.The other piece of bad news for investors is the number of financial advice organisations not owned by banks or other financial institutions will be decreasing. On Tuesday, the board of Count Financial recommended to its shareholders to accept a takeover bid by CBA. Count has up until now been an independently owned financial advice group for accountant-based financial advisers.A major problem for investors in Australia has been the misconception that they received professional advice on retirement and investment matters when they saw a financial planner. Unfortunately, in many cases, because the financial planners either earned their income from commissions or were employed by a financial institution, they ended up being sold products.This has often resulted in them being sold costly investment or superannuation platforms that the advisers received upfront and ongoing trailing commissions from. This meant the investment returns from their superannuation and other investments have been eroded over time by these commissions.One of the main measures included under FOFA will be a duty on advisers to give priority to the client's interests above any other interests. Although this is not a ban on commissions and asset-based fees, it will place a statutory duty on advisers to look after their clients, not their commissions.QI wanted to withdraw up to 10 per cent of my superannuation from my super fund as a transition to retirement pension on July 1. I was advised the transaction may take up to seven days and would be put in a queue for processing.It turned out there was a "transaction freeze" on redemption requests until July 14. On that date my request would again be put in a queue and it would take up to 10 days to process. I can only imagine how much interest they are making by holding onto my money during this period. Can you advise if this is acceptable business practice?AThis type of delay has been one of the main reasons why self-managed super funds have become so popular. It is also another example of funds holding onto money to benefit their bottom line at the expense of their members. It is these practices, and the fact that reforms under FOFA will not apply to existing products at July 1, 2012, that make it important for everyone to review their arrangements then and possibly change their fund and adviser.Questions can be emailed to email@example.com. Max Newnham's book, Funding your Retirement, is available in shops and as an e-book.