The Nosebleed Section

Hi Barefoot

I have an SMSF with $2 million in cash and shares. I visited a financial planner and was recommended a plan that would cost $1,100 to draw up. It involved purchasing a number of Australian shares, a number of managed funds (both Aussie and international equities), and cash. The goal is to provide $100k income per year. The initial cost is $33k, which involves moving all my shares to a management platform and purchasing shares and managed funds. After that, there is an annual cost of $12k. Is this reasonable?

Terry

Hi Terry,

They’ve charged you a special rate that is only for high net worth individuals.

It’s called the ‘rich bastard rate’.

That upfront whack of 1.5 per cent of your assets is a real ‘bend over and touch your toes’ type of fee.

And, if you’re trying to earn $100,000 a year, these turkeys are putting you 12 grand behind the eight ball from the get-go.

The longer I do this job, the more I’m convinced that most people would be far better off investing their money in an ultra-low-cost superannuation fund, which will provide you with professional trustees and a range of index investments, at a fraction of the cost of what you’d pay these turkeys.How cheap? Well, you could bring your upfront down from $33,000 to ... zero. That’s because most of the big industry funds charge no entry fees on their investments. You could reduce your ongoing management fees from $12,000 a year to around $1,500 a year by substituting their actively managed funds with low-cost indexed options. And if you really feel the need you could spend $1,100 each year to sit down with an independent professional planner and have them review your strategy.

Terry, if you’ve earned $2 million bucks you’re no dill. Stop acting like one.

Scott