THANKS DANIEL…

… for helping us get our money back on track!

Matt* and Megan* came to see me recently after attending a seminar I held. Matt works full time in mining and Megan works part-time as a teacher. They have three kids, are both in their early forties and were wanting to see if what they had set up was doing the job.

What I love about Matt and Megan reaching out is that they are acting earlier than most. In my almost two decades in financial services, the biggest bug bear has been seeing people leaving their run too late, leaving it until their mid-to-late fifties to start planning for their financial future.

However, this wasn’t the first time they’d sought advice.

Matt’s work mate had recommended they go and have a chat to a financial adviser as the adviser was paying a referral fee of a couple of hundred bucks and he offered to split it with Matt. Easy money… or so it seemed!

Matt and Megan have now realised they were ‘sold’ over-the-top insurance that has been paying a commission to that adviser since it was set up and has been costing them an extra 30% a year as a result. Don’t get me wrong… insurance is REALLY important. The question is whether insurance is being recommended for the interests of the client or the interests of the person ‘selling’ it for a commission?

Matt and Megan had both been in great quality industry super funds, but their previous advice experience had resulted in their super being rolled over to a for-profit fund. We researched the running costs, returns, fees and options, which uncovered that they were now paying more than ten times as much in fees as what they would be paying had they stayed with an industry super fund and used the best options available.

It is incredibly unlikely that a portfolio costing ten times as much in fees is going to be able to perform well enough to make up the difference in fees. As I explained to Matt and Megan, as I do all my clients, it’s about controlling the things we can control, and fees most definitely falls into that category.

They were also paying a 1% advice fee each year. Now, 1% doesn’t sound like much, but when I pointed out how much that fee will grow in dollar terms as their super grows, they quickly understood why I’m against percentage-based fees… they are a commission by another name.

Matt and Megan and I delved into what it was that they were trying to achieve:

-        They wanted to make sure they were setting themselves up the right way for a comfortable financial future

-        They wanted a plan to help them be putting away money on a regular basis

-        They wanted to get their house paid off before retirement

-        They wanted to start investing for the future

-        They wanted to make sure they had a back-up plan in place

-        They wanted confidence!

We modelled some scenarios to show them how they were tracking and discussed the sorts of things we could work on together going forward to get them closer and closer to financial freedom. They were able to see that there is so much they can do and that time plays a huge part in how successful they can be.

In the meantime, we rolled their super back to an ultra-low-cost portfolio within an industry super fund and replaced their expensive insurances with policies that were cheaper and without the expensive bells and whistles (and without the commissions!).

We changed their mortgage repayment strategy and they’ve been put in touch with a great mortgage broker to get a better rate. They also know where their money is going and are building up a cash reserve so that we can then take the next strategic steps necessary when we do our next review.

There were two aspects of the experience they enjoyed:

-        Everything was explained to them in an easy to understand way

-        The fees were totally transparent and easy to understand.

I’m looking forward to continuing to work with Matt and Megan!

Cheers,

Daniel

*Names have been changed for privacy reasons.