Q&A from CEO invests $1m series

Q1: Could your insights be biased?

As CEO of InvestSMART, of course! It would be impossible for me to claim impartiality. But my wife and I invested $1m and we would not do so without first doing our homework and agreeing on the best product. Our decision, after comparing the alternatives, was based on merit. I understand members’ circumspection, but I would answer this question with another – where else could we invest $1m with investments options, flexibility, and admin benefits for just $451 a year?

Q2: Why didn’t you mention the plethora of other ETFs available with similarly low fees?

Maybe I should have done so, although it’s not really comparing apples with apples. Yes, we could have invested directly into a portfolio of ETFs ourselves and saved $451 but we are time poor and didn’t like the paperwork and hassle of doing so. Aside from capped fees, the InvestSMART platform enables us to invest into a ready-made portfolio of low-cost portfolios of ETFs that are curated, managed, and rebalanced by a team of experts, plus full tax reporting. Why do it myself when the experts can do it for me for a fixed fee?

There are about 220 ETFs listed on the ASX. InvestSMART examines all of them and finds the best ones to put into the ready-made portfolios. New ETFs come on to the market all the time and we don’t have the time to research them all. Nor do we have the time for rebalancing and reporting they demand, so we’re happy to outsource it for $451 a year. But I understand some people, prefer to do it themselves and that’s fine. It’s horses for courses.

Q3: As your balanced fund is made up of a variety of other ETF providers with their own fees built in, how are the fees capped at $451?

Most of the investment options available on the InvestSMART platform are made up of Exchange Traded Funds (ETFs). All these ETFs are managed by external managers that collect a small fee inside their fund. InvestSMART does not receive any money or kickbacks from these fund managers. The InvestSMART fund management team picks the best of these ETFs based on low fees, tracking error, liquidity and appropriateness for each portfolio available on the platform. The platform fee capped at $451 pa is on top of the internal ETF fees which are usually below 0.20%.

If you think of our service as like an adviser that charges a maximum of $451 a year to manage and report on your investment portfolio. And like an adviser the fees charged within your managed funds are on top of the adviser fees.

Q4: Not everyone has a million dollars. What if you’re just starting out?

You can start a Professionally Managed Account with as little as $10,000 in any portfolio. Regular contributions and other simple stuff can be set-up in Investment Preferences (see screen shot below). The important thing is to get started and keep going. The regular addition of funds helps you get to your investment goal much quicker.

Q5: Nice to see someone being honest and upfront but a balanced portfolio with 80% growth is not balanced at all in my view. I’m an adviser and this is one of the most confusing things for a client when I use balanced options.

The 80% I now have in growth assets such as Australian equities, international equities and Property & Infrastructure is in total, including both my direct equity investments plus my new investment in the Balanced Portfolio. The InvestSMART Balanced Portfolio on its own is currently about 55:45 in Growth and Income assets. I hope that clears up the confusion.

Q6: If you had just sold your nest egg and were about to retire, would you have made the same choice?

It’s hard to say for sure as I would soon have more time on my hands whereas now I’m extremely busy. That said, I think I would still use the same capped fee investment platform but would probably put my money into a conservative portfolio with less exposure to growth assets like Australian shares, international shares and Property & Infrastructure. This portfolio still has circa 30% in growth assets to beat inflation but the remainder is in more capital-stable investments like cash, Australian bonds and international bonds. That would certainly be more appropriate for that stage in our lives.

Here are the links to the rest of the series:

https://www.investsmart.com.au/investment-news/a-personal-anecdote-part-1-why-our-ceo-invested-1m-at-market-highs/149961

https://www.investsmart.com.au/investment-news/a-personal-anecdote-part-2-how-did-i-invest-keeping-it-simple/149966

https://www.investsmart.com.au/investment-news/a-personal-anecdote-part-3-where-my-wife-and-i-invest-1m-and-why/149973

https://www.investsmart.com.au/investment-news/why-our-ceo-is-investing-1m-at-the-top-of-the-market/149967