My Financial Planner Hates You

Scott,

We’ve just come back from seeing our financial planner, and I am a little rattled! Our super fund is competitive in terms of earnings but its fees are 2% pa. When I questioned the fees (our pension balance is $1.1 million, so around $22,000 each year), he said that what matters is returns, not fees. And when I mentioned that I had read your book, he got quite angry and dismissive. He said that it is not so hard to beat the averages (because index funds hold lots of dud stocks). He waved away my concerns and said there were numerous errors in your book. He got a little worked up, so we did not want to push things with him. Just wanted to let you know! 

Jeff

Hi Jeff,

I totally understand his reaction.See, I wrote the second best-selling book ever in Australia (the first was Fifty Shades of Grey). And my book also delved into bondage, dominance, and sadism — of the financial fees variety. I showed the masses how the game is played (and how they’re played).

Here’s the rough sum: a balanced portfolio will provide an income of around 4% per annum. That means, in your case (paying 2% in fees), you’re losing around half your potential investment income each year.

And remember, you’re taking all the risk.Also remember that actively managed funds (like the ones your advisor is hawking) fail to match simple low-cost index funds over the long term after fees, according to every study that’s ever been done on the subject.S

o it’s not surprising he’s being defensive: remember, the fees you pay are his income.

Look, I’m not anti-advisor. In fact, I say repeatedly in the book to seek out a financial advisor who’ll give you personal advice tailored to your situation.

My motivation for writing the book was to empower my readers to ask the right questions (which you did). And the truth is, the best advisors want their clients to be educated and informed.Maybe it’s time you found one.

Scott