Shout out to Chanticleer this morning in the AFR (channeling the reasoning behind the MB fund) and talking about the problems with financial advice:
… it provided a stark reminder of why the integrated advice model of the major banks cannot survive.
Argo and WAM Leaders stand for the sorts of things banks struggle to offer through their integrated advice models – transparency, accountability, low costs and hands-on control of investments.
Under the integrated financial advice model there are layers of different fees including adviser fees, platform fees and investment management fees adding up to 2.5 per cent to 3.5 per cent.
The fees are usually as follows: an adviser charge of 0.8 per cent to 1.1 per cent, a platform fee of between 0.4 per cent and 0.8 per cent, and managed fund fees of between 0.7 per cent and 2.1 per cent.
These fees are not only opaque, they are sufficiently high to handicap the ability of the client to quickly earn real rates of return.
A client seeking advice from a bank-controlled financial planner is likely to find themselves with a bunch of proprietary managed funds sitting on a bank-owned investment platform.
Now, fees aren’t everything. But 3.5% in fees in a low-return world is a performance killer.
Chanticleer goes on to channel more MB philosophy:
It is noteworthy the truly independent financial advisory firms in Australia offering separately managed accounts have done everything in their power to avoid using managed funds.
They have made exceptions for international share investments, but that is changing as platform providers are increasingly offering direct international share investment.
Tomorrow we are going to welcome Tim Fuller, our structuring and advice expert to the MB blog. Tim is going to write more about the importance of getting the investment structure right and tomorrow is at the differences between the various superannuation options.
What is the MB Fund?
- Outsourced managed account platform – full transparency into what is in the portfolio
- Direct Australian shares, direct bonds so removes a layer of fees
- Direct international shares for larger accounts (Alphabet trades at over AUD1,000 – you can’t own half a share)
- Low fees
- Advice is optional – don’t pay for it if you don’t need it
Damien Klassen is Chief Investment Officer at the MB Fund launching in April 2017. Register your interest now (if you haven’t already):