I remember when I got my first (and only) SOA from QSuper many years ago when I made the decision to learn about financial literacy. I wanted to be armed with a bit of knowledge about what I wanted from my finances and did a lot of reading before going through the SOA process.

I waited months in anticipation for the SOA and eventually received my colorful glossy SOA (with many pages). It was all clearly set out and logical, but it was mostly just regurgitation of what I already said I wanted/needed from my finances. I was rather disappointed and have never requested a SOA ever since. I have also simplified my finances and investing so I don’t need one.

POINT: By the sounds of it, you already know what you want/need to do. The SOA confirms this. The more complex your financial situation may justify the need for further guidance from your Financial Advisor. Maybe rather than a full-on commitment to your FA you could negotiate him/her to spot you once a year (or longer) to make sure you are on track with your finances?

Sounds like you are considering both getting a financial advisor, as well as setting up a SMSF?

I looked at getting a something similar a few years ago. The fees and admin burden were quite high and offputting. To be fair, I am pretty biased against financial advisors and have a preference for doing things myself (I trust myself and enjoy the process)

I looked into other options and found that some super funds (eg Australian Super) let you invest directly in the sharemarket. This option has MUCH lower fees and they do all the admin for you. Ended up being much better for me. Limitations are that I can only invest in ASX300 companies and I can only put 80% directly into shares (the other 20% has to be in one of their funds, eg "balanced", "growth", "diversified fixed-interest" etc).

I basically do most of my sharemarket investing through super, with the expection of non-ASX300 companies, which I buy in my own (or my wife's) name

The conclusion for my personal situation ended up being that if I just want to invest in the sharemarket, it is not really worth the expense/admin of getting a SMSF. If I wanted to borrow money and/or invest in property, that is when I would consider an SMSF

The compliance requirements is what has caused the most issues - I believe advisors need to charge about $4-5kpa just to break even. I believe there's hope that some of this will be cut in the next few years but that's how the SoAs end up at 100+ pages - with a lot of it useless.

I would ensure you always go to a competent, well-resourced independent advisor and not a major bank or industry super fund advisor. Few and far between though with the large drop in advisor numbers.

Think keeping it low cost and easy is the right way for most. Though not sure I trust the industry super funds at all.

The compliance requirements is what has caused the most issues - I believe advisors need to charge about $4-5kpa just to break even. I believe there's hope that some of this will be cut in the next few years but that's how the SoAs end up at 100+ pages - with a lot of it useless.

I would ensure you always go to a competent, well-resourced independent advisor and not a major bank or industry super fund advisor. Few and far between though with the large drop in advisor numbers.

Think keeping it low cost and easy is the right way for most. Though not sure I trust the industry super funds at all.

Hey @Seymourbutts

As a former adviser, I can understand you being underwhelmed by the SOA (advice document).

Following the Hayne Royal Commission, the SOA became "boiler plated". It's full of turgid, unnecessary information and lots and lots of fee disclosures. And due to the time required to table the SOA with all of the requisite compliance information, the advice costs you more than it should.

ASIC speak with forked tongue. They state the advice should be clear & concise - a laudable goal, but that's not how they behave and thus, you end up with a document which while not necessarily instructive on how you can achieve your goals, it does serve as an excellent door stopper on windy days.

The issue as i see it is that most advisers "selling point" is their technical knowledge which is not much of a moat when, these days, you can plug many of your questions such as "how much can I contribute to super" into Google, Chat GPT, for the answers. It may be why you were expecting more from the advice...because you already knew a lot of what they retold you?

My view, which is not widely shared by fellow financial advisers is that the role of the adviser and hence, why you would even consider hiring them (and paying them), is about accountability ie you're holding them accountable for their advice and they are going to hold you accountable to achieve the big goals in life, such as I want $XX per annum when I finish work, I want work to be optional when I turn 60, we want to take the grandkids to Disneyland, etc, etc.

The follow up question is, "If we don't do our part to achieving our goals, what will you do"....the answer from the adviser should be "I'll fire you"., but too may advisers (and Industry Funds for that matter), are more interested in keeping the funds under advice than firing you.

When I was advising, I'd fire you if you weren't prepared to do your bit to achieve your goals, but my experience tells me that most advisers won't do that for fear of losing your fees.I

In any event, I would urge anyone who is planning on seeing a financial adviser to say something along the lines of " here are our 3 big goals that we want to achieve. We think we're going to need $X to fund each of the goals and we want to achieve these goals by the following dates"......"how are you going to hold us accountable to achieve them".

If they can't answer that question, it's time to look for another adviser who can.

DM me and we can have a chat offline.

Hi @Seymourbutts for what it's worth here's my 2cents for what it's worth, obviously opinion, not advice. I have set up a SMSF and am very happy with how it's tracking. For reference I also have a Company and a discretionary trust.

First, costs (ballpark and based on my experience):

Approximate set up costs:

·        Non-corporate trustee - $600 plus fees for creating Tax File Number, ABN and ESA (maybe $1000 all up)

·        Corporate trustee - $1000 company creation, $500 SMSF, plus fees for creating Tax File Number, ABN and ESA. You also need a director’s number, which it think is a small fee too.

·        New Fund Regulatory Body Fee $259.

Ongoing Costs:

·        Regulatory body fee - $259 p/a (you pay both this and the New Fund fee in the first year $518)

·        Accounting Costs – about $2000 p/a

·        Audit costs - $500

If you allow $3000 you’d be fine.

If you go Corporate trustee: there are also annual ASIC company statement fees, approximately $310 per annum, and required minutes filings through the accountant cost me about $180 per year. 

The company would also need to do a tax return for maybe another $1000.

Things to be aware of:

·        Most accountants will push for a Corporate Trustee, we didn’t do it, I don’t think it’s worth it and it’s more expensive to set up and for ongoing compliance.

·        You don’t need to go to a Financial Adviser but a lot of accountants will try to get you to as an ass covering exercise, or because they get a kick back. It’s not required and if they carry on either get a different accountant or offer a letter stating that you acknowledge they recommend financial advice but that you don’t need it. You've already experienced the boilerplate garbage that most of them churn out.

Financial Advisors:

If you do want to use a financial adviser I’d ask the following before retaining them:

o  What was your total taxable income last year?

o  What proportion of your income is passively derived? (not including trailing commissions)

o  What is the total value of your asset base (property, shares, cash, other investments)

o  Are you receiving trailing commissions, and if so for what products?

o  Do you have a company structure?

o  Do you have a family or limited Trust Structure?

o  Do you have a SMSF? If so how are your investments allocated?

If they don’t want to provide that information, forget them. If they earn less than you and or have less assets than you, forget them. If they have big income and assets but no company, trusts, SMSF etc. forget them. If they have all that but don’t want to show you their structures and/or asset allocation strategy forget them.

·        You need an Investment Strategy, it doesn’t need to be complicated, and the looser the better.

·        You will need to provide a letter from the ATO that your SMSF is compliant before your employer will pay into it.

·        You have to choose and set up the bank account and share trading accounts for your SMSF once you have the ABN, TFN etc. (this was harder and slower than it should have been)

·        Big super funds will often stall for ages when closing down your Super Fund and transferring your balance, you have to get onto them. They won’t action the request through MyGov like they should and will insist on some bullshit paperwork (at least that was my experience). You’ll find it easier if you cancel all the insurances etc. before transferring the account. That reduces the incentive for them to stall. You can also make it faster by contacting them and telling them you want all your fund allocated to cash prior to doing the transfer.

·        You don’t have to have insurance, if you have a high asset base both inside and out of super you don’t need it. It’s a big saving over the life of the investment. Of course risk manage depending on your circumstances. You will pay more through a SMSF rather than in a big as you won't get the bulk discount.

·        Your super fund has to pay the 15% tax on your contributions and 15% on the earnings. You don’t have to pay the 15% until you do your tax at the end of the year (apart from the occasional interim PAYG demand from the ATO when they think you're making too much money), so you can use that extra money to make more. Try to ensure that your proportion of earnings from fully franked shares is at least as much as your contributions, that way your tax will already be paid. It that is not the case make sure you have sufficient cash to pay the tax bill come tax time.

·        If you can have a higher proportion of earnings from fully franked shares than contributions and other earnings, then the SMSF will get the franking credits refunded, so an extra 15c for every addition franked dollar earning, and you’ll pay no tax.

·        You can’t buy any of your own assets (houses etc.) or assets from a related party (family, companies/ trusts you are a beneficiary of). The exception to this rule is transferring shares but with the accompanying CGT and contribution limit liabilities. Again, I wouldn’t do it.

·        My preference is Fully Franked Dividend paying shares in my SMSF for the tax benefits, but I also have a proportion in cash and some in US dividend paying shares. I focus on earnings for reinvestment and maximising franking credit benefits. Money in is money available for reinvestment, I maximise the earnings on the money by reinvesting dividends in the next share paying its dividend, e.g. I'd take the dividends from FMG paid in March and buy WBC that pay in June, take the WBC div and buy WDS that pay in September and so on.

I'd steer away from ETF's in my SMSF as there are likely to be additional CGT events that can impact your tax calculations and make compliance more expensive. I went with NAB Trade for my SMSF because it payed the highest interest on money in the account waiting to be traded at the time I set it up. I use CMC for my other portfolios and it has much better functionality and tax reporting, has easier access to foreign markets, and is cheaper to trade. If I had my time again I'd forgo the extra interest and stick with the more comprehensive tax reporting (my accountant is very disappointed that he doesn't get the neat reporting for my SMSF that he gets for the other stuff).

Anyway, best of luck with it, hope this was of some value.

Cheers, Tom

I’d shop around for financial advisers, look for appropriate qualifications such as CFP and find someone you can relate too. I feel it’s the same for lawyers, accountants, doctors etc as it’s a long term relationship.

I do think many financial advisors are better are structuring than picking specific investments hence the guardrails that get put on them licencees'. It’s just not what you learn in a financial planning course though i’m sure there are some that do this very very well, just have to find them.

They need to know your risk tolerance both what you’re capable of taking and willing to take, your return expectations, your liquidity needs, tax situation all those things could feasibly impact on what investments you should hold plus others.

@shadow my understanding is that things have changed a lot post, the Royal Commission and more advanced learning requirements for the industry.

the upshot is that template advice will be the norm except for the exceptionally rich. that is you get customisation at much higher levels of FUM that incentivise the time required.

i don't use an IFA but if i did i would expect expert tax and social security knowledge and how i best work into those frameworks, trust planning etc, some ideas for asset allocation with a suite of mainly passive options, and i would not expect or particularly want stock tips. since it is a template based working around an existing portfolio becomes more time-consuming and i suspect less attractive to the IFA. to be clear, the new world means reducing your expectations, being the ironic conclusion of the industry changes.

G'day @shadow

My experience with my former industry colleagues is that they're generally nice people, well intentioned but the number one consideration when providing advice is first and foremost, producing a turgid, bland document (called a statement of advice) that is ASIC "bullet proof". Yes, the advice has to be pertinent to your circumstances, hence the undertaking of the risk assessment, insurance analysis, etc but I would argue that the advice is not outcome focused. It's an arse covering exercise.

And because the advice document is written to make the internal lawyers and ASIC happy, it's very, very lengthy. And that means it takes quite a bit of time to produce and you know who's going to pay for that, don't you?

There are some excellent advisors' who will customise the advice for you with clear strategies to achieve your goals, but you're likely going to have to pay well for the advice. I've got some tips below on how I would approach an advisor if ever I wanted advice.

It's also why I at least, steered clear of specific share advice when I was an advisor.. It was too difficult to get compliance signoff and I always felt that a stockbroker was better placed than me for specific stock recommendations.....and it was one less mouth in the fee clipping food chain as I used to tell my clients'.

As for the managed funds question. The evidence for active funds outperforming say, a Vanguard index fund over 10 years, is not good. And because we're talking about the future, not the past, it's a guess I'm afraid as to which active funds will beat the index over the next 10 or 20 years. And this is why the index fund argument is so compelling for most people.

My suggestion, whoever you choose to hire, is to take a slightly different approach to what most people do when they see an advisor. In my experience, most people still seek financial advice due to an event eg impending retirement, redundancy, inheritance, etc.

Their questions often can be answered by a Google search such as how much can we put into super, can I get the Age pension, how long will my money but I suspect it's a bit like the reason why people hire accountants....the advisor might know something I don't and I might miss out on [ fill in the blank]. I don't blame them for asking such routine questions as the advice industry has fostered this kind of behaviour for years and years and we (financial advisors) don't like being asked more difficult questions.

I would suggest that going to see a financial advisor is a really good thing to do, as long as you're prepared to be held accountable which if you're a member of Strawman, already demonstrates your preparedness to be held accountable!

My suggestions are:

Firstly, are you single or a couple? If you're a couple, you MUST involve your partner in the discussion. It's not an investing conversation. It's a collaboration about planning your future.

1. Make a list of your big financial goals that need money and planning to achieve. People usually have a few such as "we want $XX's for our lifestyle needs when we stop working", "we want work to be optional by age 62", "we want to drive along Route 66 on my 50th birthday". Personally, I would exclude paying off the mortgage in this list of big goals as it's a given that almost everybody wants to achieve and it should be factored into any Statement of advice in any event.
2. Assign specific dates for when you want to achieve the goals. It's more compelling if you have a date as opposed to "...in 5 years time".
3. Make an estimate of how much each of the goals will cost (in today's dollars).

Take your specific goal list, with specific dates you want to achieve them by and the amounts of money required to fund the goals to a financial advisor and give them the list, telling them you want them to hold you accountable to achieve your goals by the due dates. And you will hold them accountable for their advice.

It's a much better relationship because it's all about you and the outcomes you're looking for instead of "hey, let's switch out of fund X into fund Y because their performance has been better over the past year".

I would also suggest you negotiate a flat annual fee. Advisor service fees as a percentage, especially if you have a large sum to invest are a joke.

If you want to discuss with me further, send me a message and we can arrange a phone conversation

I'd point out there has been some change with SoAs I believe with the regulators coming round to the fact that the document is ridiculous and annoys most clients rather than being additive. I believe they are even moving to video SoAs as a possibility - where there is a summary of the document, and they then talk through the risks and advice.

I find this all interesting as may cut paraplanning costs re SEQ etc.