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Financial Happenings Blog
Tuesday, September 30 2008

Today I have read an article in the Australian newspaper looking at the topic of whether financial planners should also be the investment managers for clients - Financial advisers can be fund managers.  The article refers to a US industry expert who suggests financial advisors should stick to technical strategic decisions and keep away from the tactical investment management.


The article provides a retort to this argument suggesting the new breed of Australian advisors are better-educated, some now holding undergraduate university degrees, and are just as capable as analysts employed by fund managers to help clients make investment decisions.  Another interesting discussion mentioned by the author is the 2.4% average client management expense ratios for using the services of financial planners associated with the major banks and the pressure being placed on these fees thanks to not only industry super funds but also boutique financial advisors who want to cut costs for clients.  (This 2.4% includes adviser, fund manager and administration service or wrap fees.)


So where do we sit on these points?


Firstly we believe that advisors with the proper academic qualifications are quite capable of providing the best strategic and investment advice.  I hold a Masters degree in Financial Planning along with a Bachelor of Commerce while my business partner Scott Francis holds a Masters in Financial Planning, a Masters in Business Administration (MBA) and is now studying towards a doctorate (Phd) in the area of investment markets.  We believe a committment to the education process is essential putting ourselves in a good position to deal with both strategic and investment decisions for clients.


On the issue of fees, we are definitely in the camp of trying to force fees down.  Paying 2.4% is way too much.  Our fee on a $50,000 balanced investment portfolio is 1.6% (GST inclusive).  This quickly falls away to 1.28% on a $100,000 portfolio and 0.9% on a million dollar balanced portfolio.


We think these fees are pretty competitive but we also acknowledge that we would like to get them lower and are currently in the process of reviewing our cost base to see how we can reduce costs and pass this reduction on to clients in the form of lower fees.  More on this point in the near future.


In conclusion, we think that a well educated financial advisor can provide both excellent strategic planning advice along with excellent investment advice.  So when looking for a planner carefully check out their qualifications and also check out their fee structure.  Their educational background does not afford them the right to charge exorbitant fees.



Scott Keefer

Posted by: Scott Keefer AT 10:49 pm   |  Permalink   |  Email
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