Inevitably it’s the question every financial adviser will hear from friends or family.
You brace yourself, expecting to hear of a speculative mining company, tropical island land deal, emu farm, or some get rich quick scheme.
Yet often it’s something that appears significantly less dubious – they’ve walked into their financial institution and been offered some financial advice.
An interstate colleague relayed the story of a friend who’d been asked by the nice lady at the bank if he’d thought about investing, given his bank account was starting to look juicy.
Out of interest he met with their adviser and was given a work quote that amounted to 2.6% of the value of his investment.
This was for a relatively standard piece of work to be done.
Then depending on the financial institution (not looking to identify anyone) the ongoing per annum cost on the funds being managed could be as high as 2.65% per annum.
Now factor in inflation of 2.5% and suddenly there’s a 7.75% return needed in the first year to break even and stay ahead of inflation.
The guy was sharp enough to realise it was more about wealth building for the institution than wealth building for him.
He decided forgo the opportunity of institutional advice, becoming a client of my colleague.
Unfortunately, many people are confronted with similar situations and either take the overpriced advice or run a mile from getting advice at all.
That often sends them back to their own DIY form of investing which yo-yos between low return bank deposits and wild rides on speculative mining shares.
No one teaches investing or money management in school, something that leaves many of us easy prey to salesmen or our own over-confidence.
So when getting financial advice always do your homework on costs and the value you’ll derive from them.
Peter Mancell is a director of Mancell Financial Group and FYG Planners AFSL/ACL 224543, www.mfg.com.au This information is general in nature and readers should seek professional advice specific to their circumstances. Need help with your financial your financial future, we think we’re the best financial advisor in Australia.
