Our Analysis
A prospective client was seeking a better solution to the management of his own personal superannuation fund. Our analysis of his existing arrangements revealed:
a financial planner providing investment advice. The planner had constructed a portfolio of many different investment products – including cash, fixed income, shares and managed funds – which were traded heavily. Overall, the shares and managed funds had performed poorly on both an absolute and relative basis. As a result, the fund had lost value over the previous five years, despite receiving sizable contributions on an annual basis. The planner was invoicing his client a monthly fee for service, as well as receiving payments from stockbrokers for share sales and upfront and ongoing payments from investment institutions with whom he had placed funds.
an accountant providing administration services. The accountant was invoicing the client a significant annual amount for the required ongoing administration, as well as charging substantial additional fees for one-off items. We discovered that a previous administrative error would result in the client being subject to a penalty assessment from the Australian Taxation Office.
a life insurance company providing reporting services. The accountant had engaged an insurance company’s reporting service to provide quarterly Valuation, Income & Expense, Transaction and Capital Gains Statements. The client had difficulty understanding these statements and was usually kept waiting several months after balance date before receiving them.
a separate personal superannuation account held with a financial institution. A personal superannuation account was established with an institution in addition to the client’s existing personal superannuation fund. This resulted in additional administrative costs without providing any apparent benefits.
Our Solution
We recommended and implemented the following strategy:
close the client’s institutional superannuation account and consolidate all his benefits into his existing personal superannuation fund. This resulted in a simpler superannuation structure that provided the client with greater investment choice – and thereby improved performance prospects – as well as lower costs through the avoidance of duplicate administration fees.
rationalise the portfolio into cash, an Australian Equity Fund and an International Equity Fund. Our objective is to maximise long-term investment performance within the client’s appropriate risk level. We recommend funds solely on the basis of our own proprietary research, and actively monitor the performance of recommended funds against our established benchmarks. We believe that a small number of the best performing funds held over the long-term will provide the best results at a given risk level. We avoid short-term trading within the portfolio as we believe that our selected fund managers are closer to the market on a day-to-day basis and are consequently better placed to make these decisions. Transaction costs and capital gains taxes are two other significant factors that influence our bias against short-term trading.
appoint a specialist firm of personal superannuation fund administrators that provide a high quality service at a significantly lower cost.
establish the client’s personal account within our own Portfolio Administration Service (PAS). The PAS provides the client with internet-based access to a comprehensive set of informative and easily-understood financial reports. This service is provided by myFinancialAdvisor at no additional cost to the client. To view a simulation of the PAS’s functionality, please click the link below:
