The End of Australia?
Greetings Scott,
I am 65 and in the process of beginning a transition-to-retirement strategy. I am very worried about the monetary future of the world (have just read a booked called The End of Australia). My financial advisor is recommending the AMP North Protected Growth Guarantee Fund for my $832k in super. What is your opinion of this scheme? The costs will be a 1.35 per cent protection fee, 0.89 per cent for the MyNorth Personal Pension Protected Growth plan, plus a yearly fee of 0.66 per cent for my advisor. Help!
Bruce
Hi Bruce,
Sack your financial planner immediately. Seriously.
I’m so mad I’m going to invoke the spirit of Donald Trump: “Your financial planner is a total lightweight. What a loser. He’s really a dummy.”
Here’s the thing: you went to see your financial advisor, admitting that you were freaked out after reading a book that was, well, designed to freak you out (having ‘The End of ...’ in the title is always a great way to sell books).
Faced with this, your advisor should have sat you down and said something like this:
“You’re right, Bruce. We’ll face many crises in the future. Of course no one can predict precisely when the next one will happen, though generally they seem to happen every ten years or so.
“However, if you look back at the past two hundred years of panics, wars, depressions, booms and busts, investors have been well compensated for taking on this risk: the long-term annual return from shares is around 6 per cent after accounting for inflation.
“Still, it’s no use having money if you can’t sleep at night. That’s why I’m recommending that you have at least five years of living expenses in a cash account. And to counter inflation, I’m recommending you invest the rest of your super in tax-effective, dividend paying shares.”
“And Bruce, you’ll be in good company with this strategy. The greatest investor in the world, Warren Buffett, analysed the risks going forward and publicly stated that he would invest 90 per cent of his estate into a basic index fund for his wife. So the real question is, what does the author know that Warren Buffett doesn’t?”
Well, that’s what your advisor should have told you -- but the truth is he squibbed. Instead, he took the easy option and flogged you an expensive bunch of products that will ultimately eat up almost half your annual income ... and deliver him waves of commissions. Bruce, your biggest risk isn’t the ‘End of Australia’, it’s the ‘end of your savings’. Plan accordingly.
Scott
