It just stinks !

Another story heard on the road today…..

an accountant tells me that his client was quite impressed with the 21% return his managed fund portfolio achieved, that he gave his financial planner a further $1 million to allocate to the same strategy.

There are a few cognitive bias here to identify.

By the way, this return is not stellar because ‘everyone did’ 19%-29% in the last financial year.

Incidentally, the ASX 200 posted a 24% capital return and 26% if you include dividends.

The financial planner declared he will charge $11,000 for the service of selling (sic: recommending) the appropriate products.

I’m not sure this is value for money? I mean directing money to funds appearing on a product list, meeting the client once a year and ‘rebalancing’ a portfolio in the first week of each July is hardly skillful.

Notwithstanding, the funds themselves have their own costs. Let’s say an average of 0.5%, which the investor doesn’t normally see, as the funds reports its performance as ‘net of fees’.

More amazingly, is that the financial planner deployed 100% of the money in the same week which the investing client remitted the funds.

Isn’t it just superbly fortuitous that on the day that a $1 million became available, that the ‘stars and universe’ signalled an appropriate, prudent and cheap moment to pile in last week.

No sour grapes here. This is how a large part of the financial services industry operates.

My suggestion to the investing retail public is a combination ‘eyes wide open’, ask questions and challenge the advisors thinking.

August 25, 2021

by Rob Zdravevski

rob@karriasset.com.au