SARAH KING | from Stockspot

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Looking after the financial needs of your parents. With Sarah King from Stockspot. Proudly brought to you by Stockspot

Recently, my mother’s financial adviser retired. His clients were transferred to another advice firm. This meant that and my brother and I were presented with an updated Statement of Advice. Before I started doing this podcast I had no idea about what a document like this covered. For most ordinary people it’s a classic case of Too Long Did Not Read. Most people’s eyes glaze over and they sign the document based on trusting the adviser. But having a little bit of knowledge (which can be a dangerous thing), I devoured the Statement of Advice. I learnt some interesting stuff.

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In this episode I’m joined by Sarah King from Stockspot to discuss this process and how adult children can make sure that their parents are basically getting the best possible deal Sarah works in ADVICE AND CLIENT CARE at Stockspot. She has over 13 years experience in the financial services sector working in financial advisory, operations and administrative roles.

“I chat to so many clients who are now really, really fee and performance savvy and they're coming to us because they want professional investment advice and they know that they can get it for a fraction of the cost. We don't charge for a statement of advice for example, but they're still getting really good investment outcomes from having a simple ETF portfolio. So I'm speaking to more and more of our clients in their thirties, forties, or fifties who are looking at their parents who are advised and really questioning the value that those advisors are giving. They're often in high fee products. We actually offered to do health checks where we'll actually, look at the parent's portfolio and do an analysis around, what are the fees they're paying, what's the performance, how well diversified are they, do they have defensive investments in there?”

It can be difficult having those conversations with parents about their financial advice especially if they've had a long-term relationship with that advisor.

“If your parents have been with that advisor for a while, then they, they might have a relationship. So you don't wanna go gung ho and be accusatory. So I mean, I I would start by, if you wanna help your parents understand if they're being advised well, you know, what is their relationship like, how frequently do they meet with their advisor? What value are they getting? Is their advisor explaining things to them in an easy to understand way? It's not full of jargon, it's not massive reports where they can't articulate the advice. All of those types of things. Just to get a sense of where your parents are at.”

However, it's worth checking the fees as ETFs often have much lower costs than managed funds.

“So each time you're investing in a product, the product issuer is going to charge you a fee. So for example, a managed fund, they might charge you a fee of 1.3% to invest into a, an actively managed share managed fund, whereas a, a share etf, for example, might charge you just not 0.1% to invest into a share etf. So those MERs and ICRs are really important and they can be quite, quite different. And you know, that's what we found looking at ETFs and why we recommend them to our clients because they are much, much lower fee products and those fees really accumulate over the period of your, your investing and often managed funds can be 10 to to 15 times the cost of a a low cost etf.”

EPISODE TRANSCRIPT

Chloe (1s):
Shares for Beginners.

Phil (3s):
This episode of Shares for Beginners is proudly brought to you by Stockspot.

Sarah (7s):
All the elder abuse out there, financial abuse is the most common. So recent statistics are that one in 10 elders experience some form of financial abuse. This could come from a family member, it could come from a, you know, a, a relative, or it could come from a a third party.

Phil (25s):
G'day and welcome back to Shares for Beginners. I'm Phil Muscatello. So recently my mother's financial advisor retired. His clients were moved to another advice firm. This meant that my brother and I were a presented with an updated Statement of Advice. Before I started doing this podcast, I had no idea about what a document like this covered. For most ordinary people. It's a classic case of too long, did not read. Most people's eyes glaze over and they sign the document based on trust for the advisor, but having a little bit more knowledge, which can be a dangerous thing. I devoured the statement of advice and I've learned some interesting stuff and to talk about it Today, I'm joined by Sarah King from Stockspot to discuss this process and how adult children can make sure that their parents are basically getting the best possible deal.

Phil (1m 10s):
Hi Sarah,

Sarah (1m 10s):
How are you Phil?

Phil (1m 12s):
Thanks for coming in.

Sarah (1m 13s):
Thanks for having me. It's great to be here.

Phil (1m 14s):
Don't look so nervous.

Sarah (1m 16s):
Never.

Phil (1m 17s):
We're having a nice conversation actually before we started about ocean swimming. We're both passionate fans of ocean swimming.

Sarah (1m 23s):
Absolutely.

Phil (1m 24s):
So Sarah works in advice and client care at Stockspot. She has over 13 years of experience in the financial services sector, working in financial advisory operations and administrative roles. So let's get started with the nitty gritty of it. What's the Statement of Advice and why is it so long?

Sarah (1m 42s):
It's a very good place to start. So anytime you see an advisor and they give you a personal financial recommendation, they should issue you with this document. A statement of advice. A statement of advice is really designed to help consumers or the client make an informed decision about whether the advice the advisor's giving them is, is the right thing for them. The reason it can be so long is that it can cover lots of different areas in your financial planning needs. It might be focused on one area purely just investing, or it could be a full financial plan covering all of your financial needs. And ASIC the regulator actually has very, very clear guidelines around what must be included in a statement of advice.

Sarah (2m 23s):
So what it will look at is, you know, where are you now? What's your current circumstances, what's your risk profile, what are your goals and objectives, and what are the strategies and recommendations that the advisor is putting in place to help you reach those. Now with that comes a whole gamut of other, you know, rationales. You know, what's the reasonable basis for the advice, why is this in the best interest of the client? How will it help them achieve the best possible outcomes? If they're recommending that you switch from one product to another, you've really gotta make sure that you're doing accurate comparisons. But in addition to that, there's a lot of disclosures and things like that that make the statement of advice very, very long. You know, you have to explain all of the remuneration, any conflicts of interest, any associations with other parties, everything about your licensee.

Sarah (3m 11s):
So it becomes quite a lengthy document. And any product recommendation you're making, you've also gotta provide a product disclosure statement. So the poor client could be ending up with this document that's 40 to 50 pages long, if not longer, full of text. And it's, it's been said that it's become more of a document to cover the advisor rather than being client centric and just giving them the, the recommendations that they need in an easy to understand format.

Phil (3m 37s):
So what kind of advice would you give to someone, sorry, not advice in that sense of the word, but someone who's presented with a statement of of advice, what should they be looking out for in it? I mean, what are the key parts of the document?

Sarah (3m 49s):
Absolutely. I mean, the most important parts are what are the recommendations that the advisor's giving you? What are the fees that you're gonna be paying for that advice? And often they can be quite difficult to understand. There can be lots of layers and we'll probably chat about that shortly. Oh,

Phil (4m 4s):
We will. Don't you worry

Sarah (4m 5s):
About that. But you also wanna check that you know, the advice that you're getting is not conflicted. It's independent. And if you are seeing, you know, product recommendations that are either all from the same issuer or there's not a lot of diversity there or yeah, there are gaps, then they could be red flags and you might wanna have a chat to your advisor about those.

Phil (4m 23s):
So what is the difference between a planner and an advisor? Are they very similar or is there a difference between them?

Sarah (4m 29s):
Yeah, they are, but they're very distinct. They're, they're key differences between an advisor versus a financial planner and advisor is anyone who's going to give you advice on a, it could be on anything. It could be investment advice, it's on one area or a few areas, investment advice, tax, it could be around insurance. Whereas a financial planner is someone who's really gonna set you up with a strategy for life, usually a strategy that will see you through to your retirement. And it's gonna cover a full spectrum of, of areas covering cash flow, budgeting, debt management, investing, superannuation. It might even extend to as far as estate planning and insurances as well.

Sarah (5m 10s):
And you may end up building a relationship with a financial planner for a quite a long period so that they can see that strategy through. For you,

Phil (5m 18s):
What sort of age do you think people should start thinking about seeking financial advice or a plan?

Sarah (5m 24s):
I think the earlier the better, but I mean,

Phil (5m 27s):
But it can be expensive. So people look at that initial upfront cost, it can and then say, yeah, is it really worth it?

Sarah (5m 33s):
Well, that's right. I think the majority of Australians don't need that end-to-end financial advice. It might mean that in certain periods of your life you need investment advice, for example. So for example, I'm an investment advisor. I help, you know, thousands of clients from as young as 18 or you know, parents investing for their kids start to build an investment plan and it's, you know, you can do it in a very cost effective way. If your circumstances become more complex and you, you want structuring advice, you know, you have accumulated a bit of wealth and you need guidance on that, that's when seeking out more holistic end-to-end financial advice might be worthwhile. But you'll typically see individuals not doing that until they're in their thirties or forties.

Phil (6m 15s):
But you encourage people to, to look at doing it rather than, I think a lot of people, they just sort of think, oh well I've got my super and that's gonna be fine, you know, they'll look after me and my retirement. But then they've got sort of no plan for, you know, there's things about looking after kids, which schools are gonna go to which university and all of that.

Sarah (6m 33s):
That's right. And that's what a financial planner will help work out with you. Particularly in that initial meeting. You know, there might be things that you haven't even thought of that the advisor will, will bring to light in terms of meeting those short, mid and longer term goals. How are you gonna get there? You know, is it curbing spending habits? Have you accumulated bit of debt? What can we do to get that down? How can you be investing? Like there's a lot of strategies even, you know, effective ways to contribute to your super so that you can then lead that lifestyle that you want down the line.

Phil (7m 4s):
Yeah, that's so difficult sometimes, isn't it?

Sarah (7m 7s):
There's a lot to think

Phil (7m 8s):
About, but there's, I mean, we gotta understand that people are being protected. It's all being put in place by regulations and legislation to protect people. But then it has seems to have that effect of, it's not really helping people who often really need to get this advice.

Sarah (7m 22s):
Well, that's right. I mean, the average cost of providing advice now has, has gone through the roof. I was reading the other day, it's, it's hit about $3,200 and that's up from about 2,500 over the last year. So that's

Phil (7m 35s):
Per year, isn't it? That's

Sarah (7m 36s):
Per year. And then, but, and that's not only the cost, often that's just the cost to get the plan, to get the SOA. Yeah. You know, you've then gotta look at the investment component. Where are my investments being held? Am I gonna have ongoing reviews with my advisor? So it is an ongoing cost that you need to Yeah. To factor in. And you wanna make sure that if you are paying that higher advice fee, that you really getting strategies and recommendations are gonna lead to better financial outcomes.

Phil (8m 4s):
Yeah. And of course at the moment there's a shortage of advisors and there seemed to be a lot leaving. I mean, we've gone from, how many advisors were there? 30,000 or thereabouts?

Sarah (8m 15s):
Yeah. To paint a picture back in 2019, there was about 26,000 or so advisor, I think that's when they were at their peak

Phil (8m 21s):
For the whole of Australia,

Sarah (8m 22s):
For the whole of Australia, the millions of a Australians. And, and now it's tipped to fall below 15,000 here in Australia by the end of this year. And then by the end of 2023 as low as 13,000. So that's 13,000 advisors to service the whole of Australia. So, and that's, that's a, a latest study by Advisor Ratings and there's really an advice gap there for 5.4 million Australians who really need professional advice, but they just can't get it. And it's because it's too expensive or they just can't access an advisor.

Phil (8m 55s):
But what, what has caused that decline?

Sarah (8m 57s):
Yeah, well there's, there's a few things. I mean, the biggest has really been the, the outcome of the Hayne Royal Commission and the introduction of the, the FASEA board. So that

Phil (9m 6s):
Is that that Banking Royal Commission,

Sarah (9m 7s):
The Banking Royal Commission,

Phil (9m 9s):
The Notorious Banking Royal

Sarah (9m 10s):
Commission. Correct. And they introduced this FASEA board, so that set minimum educational requirements for advisors. So every advisor providing personal advice had to pass this exam by the beginning of this year. And it's, it's been something that's designed to raise their education, the ethics, the, the training standards in the industry. But a lot of advisors have either failed twice or they've just chosen not to do it. Advisors also now need to have a, a qualified degree. So you got a lot of older qualified advisors who never got a university degree. They're now being told they have to go get one and it's just in the two hard basket for them. Yeah. And you know, they may have a very unblemished record, but they can't go and still practice as an advisor.

Sarah (9m 53s):
So there's, there's the FASEA, but then there's also the cost of providing advice and regulation. That's another big hurdle. You know, an advisor may spend 12 to 30 hours preparing a financial plan or you know, a plan for a client. So that's pushing the cost up. All of those regulatory requirements that I mentioned earlier means that the advisors have to spend more time. So it's just not in there. They just can't afford to be providing advice to a lot of smaller clients. So it means that they're falling off their book and they're really only servicing a smaller number of probably high net worth clients who can afford to pay for the advice. So you sort of, in this double bind, the advisors are shutting up shop or they're closing down.

Sarah (10m 34s):
We've also then had the big exit out of the industry from, from the banks who are no longer providing advice, which is probably a good thing. But you know, that's also led to this sharp fall in advisors. So I think there's a big review at the moment, the quality of advice review that's trying to address this massive shortage as well as the cost hurdles and, and regulatory hurdles that the, the industry's facing.

Phil (11m 2s):
Because a lot of the problems with the banks were that they were recommending products, well they were recommending their own products and so there was a conflict of interest in there

Sarah (11m 9s):
As well. Well, that, that's right. And that's what you call vertical integration. They're providing the advice. I mean, AMP was a classic example that I think we all know, you know, you have an AMP advisor, they're looking at their product list, they're all AMP products, high fee products, terrible performance, or

Phil (11m 26s):
We're gonna get onto fees. I'm looking forward to talking about fees,

Sarah (11m 30s):
Recommending them to their clients so that they, they get the, the bigger commission or you know, the licensee ends up making more money, which is you. Yeah. Really, really conflicted.

Phil (11m 38s):
Yeah. Well let's get to some jargon busting, cause that's a big part of it. So I wanted to start with the difference between the accumulation phase and pension phase of a person's investing life.

Sarah (11m 52s):
Is that the Yeah, yeah. So accumulation as, as it sort of sounds, it's when you're accumulating wealth so that you can lead the life that you want in in retirement, you're putting as much as you can into super, you might even be investing outside of super. It's all of the strategies you're putting in place to, you know, once you hit 65 or whenever you wanna start drawing down an income, you're trying to maximize that as much as

Phil (12m 14s):
Possible. And then the pension phase,

Sarah (12m 16s):
Pension phase, or otherwise known as retirement phase is when you actually start drawing down on your superannuation. So that's usually when you retire. So that could be 65 or a lot older these days and Aussies are working a lot odd or you meet some other kind of condition of release. So you draw down from your super, there's stipulated minimums that you have to draw down each year that are based on your age, but it could also mean that you're getting some pension from the government as well. And you could also be living off some other savings. So that's really that pension retirement phase. And that should hopefully last you through to through your retirement, your retirement years. We all know we're living longer, so it needs to last a lot, lot

Phil (12m 56s):
Longer. A hundred's the new 80, that's

Sarah (12m 58s):
Really,

Phil (12m 58s):
That's right. But that's where it gets confusing in terms of the pension phase because that's where you really do need some sort of advice because you might be getting money from investments or from annuities or from your super and possibly some from Centrelink, depending on your means. There's a lot of moving parts, aren't there?

Sarah (13m 17s):
There are. And that's often when Australians do need advice, they're, they're in that vulnerable stage where they're transitioning to their retirement and they wanna make sure that they're getting the most effective outcomes. So it can really help to get advice at that, at that stage, how much should you be taking down from your super? You wanna feel comfortable that you can cover your cost of living needs? What are your, your entitlements from a government pension? You know, you've got assets tests, income tests, you regularly have to report that information to Centrelink. So it can be helpful to have someone who can handhold and, and guide you through that process and set you up with a plan and, and, and manage that for you for as long as you need

Phil (13m 57s):
And transition to retirement. That's another phase, isn't it really in between, you know, which has got its own special rules.

Sarah (14m 4s):
It does indeed. So that can be quite complex. That's when you, you not quite ready to retire, but you cut down your hours, you can then start accessing your superannuation and drawing a pension, but you're also using the income from your employment to compliment that. But because you're still working, you can then still have an active superannuation account that's separate to your pension account and contribute back into that. And it's known as a transition to retirement strategy. But that's something you definitely need to get proper advice around to make sure that you are getting the right benefits and using it to its full benefit.

Phil (14m 38s):
Okay, so what's a Wrap platform?

Sarah (14m 40s):
Yeah, I mean you could otherwise call it an investment platform. So when I was a financial planner, we actually used Wraps and it's, it's a really easy way for an advisor to set their clients up with a mix of different investments. So it could be term deposits, shares, unlisted managed funds, and they're all wrapped up together on this platform. So it makes it very easy for you to select different products from different product providers and, and then manage that for your client. And you get the benefit of consolidated reporting, all of the tax summaries and the tax reporting is managed for you. But you the client actually pay for that convenience, not the advisor.

Phil (15m 22s):
Like I said, we're gonna be talking about the fees of all this,

Sarah (15m 24s):
You pay for that. So there's always gonna be a Wrap administration fee for the administration that goes on within that platform. But you'll also then, if your advisor is ever buying and selling for you, there's also transaction costs that will be incurred as part of being on the Wrap. So just consider it as a bucket. You're wrapping everything up together, but you get the benefit of that consolidation and that and that reporting ease. But yeah, as I said, you pay a price for that.

Phil (15m 49s):
And what's an approved product list?

Sarah (15m 51s):
Good question. So if we use a Wrap as an example, you know, a Wrap platform could have, let's say 3000 products available on it. Now if I'm an advisor, my licensee is only going to allow me to recommend a certain subset of those that they've approved and that's their approved product list, their products that they've vetted often through an investment committee and they agree that are appropriate products for their client base. Now this can also lead to conflicts as well because what you'll often see is a lot of licensees will have their own products on their product list or it could mean that it's outdated and you know, your client isn't necessarily getting the best investments out there.

Sarah (16m 33s):
There are a lot of ETFs out there now, but a lot of advisors continue to recommend, you know, actively managed funds, unlisted funds that are much more expensive and may not, you know, achieve the best returns for their clients as well.

Phil (16m 45s):
Okay. So then, well let's talk about fees. The exciting moment of fees and how much this is gonna cost you. And I just wanna preface this by saying something that I have learned and why I devoured this statement of advice is that costs compound. In this statement of advice. There were three fees outlined. There was the advisor fee, the platform fee, and the ICR run us through them, Sarah,

Sarah (17m 8s):
So many layers of fees and this is where it can become quite not transparent. So the advisor fees we mentioned, that's the fee you will pay your advisor for the strategy, what are the recommendations? They'll charge you a fee for that and that might be a fee that you pay each year if you're getting, having ongoing reviews. So you need to factor that cost in. It can be thousands if not multiple thousands of dollars. You've then got the platform fees,

Phil (17m 32s):
Sorry, just before we get onto the platform for the advisor fee. So some advisors will not only be getting the money that you are paying them, but they will be getting a certain income stream coming from some of the products that they provide as well.

Sarah (17m 42s):
That's, that's correct. Yeah, yeah, yeah. So a lot of advisors will recommend certain products because they might get a, a revenue stream coming. That's a very easy way for them to make money and that's when it can become conflicted again because the advisor can be recommending products that are gonna benefit themselves rather than you the client. And yeah, those fees that you mentioned, even if it's just a tiny bit coming out of your, you know, your returns each year at compounds like credit card debt and it can end up being thousands of dollars over the course of your, your

Phil (18m 15s):
Lifetime. But they do have to disclose that to

Sarah (18m 16s):
You, don't they? Absolutely. That should all, and that's one thing to look out in the statement of, of advice. Any relationships, commissions, trailing commissions, revenue that they're getting from products or product providers must be disclosed in your SOA. So if you see that and you, you don't feel that it's right, that that's also a bit of a red flag.

Phil (18m 37s):
So that's the advisor fee. Now what's the platform fee?

Sarah (18m 40s):
Exactly what we just talked about with the Wrap platform. So if you wanna hold investments on a platform that will often charge you an administration fee. Some platforms charge a flat fee, others might charge you a percentage based on the value of your assets held on that platform. Typically, the more you invest it can be a, a sliding scale model, but for example, it could be not 0.5% of your total account balance held on, on the platform. So yeah, that's an important fee to add to that total fee calculation when you're, you're chatting to your advisor

Phil (19m 13s):
And then what's the ICR, what is that fee?

Sarah (19m 16s):
Yeah, so that stands for an indirect cost ratio or otherwise known as a management expense ratio.

Phil (19m 22s):
Yeah, that's the other thing cuz you often hear MER

Sarah (19m 24s):
Is, well, and that's the same thing, ICR. Yeah. So each time you're investing in a product, the product issuer is going to charge you a fee. So for example, a managed fund, they might charge you a fee of 1.3% to invest into a, an actively managed share managed fund, whereas a, a share etf, for example, might charge you just not 0.1% to invest into a share etf. So those, those me and ICRs are really important and they can be quite, quite different. And you know, that's what we found looking at ETFs and why we recommend them to our clients because they are much, much lower fee products and those fees really accumulate over the period of your, your investing and often managed funds can be 10 to to 15 times the cost of a a low cost etf.

Sarah (20m 15s):
So a really important one to look out for as well.

Phil (20m 19s):
This episode of shares for beginners is proudly brought to you by Stockspot. Now I don't wanna get into the specifics of my mother's situation, but you provided a complimentary appraisal of the investment part of her investment plan and what became clear to me and my brother is that the ICR fees are high because of investments in managed funds, whereas ETF fees are much lower. Has the advice industry been slow in passing on the benefits of lower fees in ETFs to clients?

Sarah (20m 49s):
Yeah, I believe that they have. I mean, ETFs have been around for 20 years now and as we mentioned earlier, you know, a lot of these advice providers have their approved product lists and continue to recommend actively managed funds to their clients which have much higher fees. So as I mentioned earlier, the average actively managed share fund has a fee of around 1.32% per annum versus an equivalent share ETF charging, not 0.1%. I mean that's a 13, you know, the, the managed fund is charging 13 times the cost and clearly on an after fee perspective, most actively manage funds underperform a general index, fewer than 20% outperform over the long run.

Sarah (21m 34s):
So it's astounding that these, you know, financial licensees aren't refreshing their product lists and and adding ETFs as a really viable product for their clients. But the main reason will be is those fees that they're getting out of those products. Often with ETFs they wouldn't be getting any ongoing fees from the product.

Phil (21m 54s):
So anecdotally, have you noticed a trend where the children of older parents are waking up to the fees that are being paid?

Sarah (21m 60s):
Absolutely. Really

Phil (22m 1s):
It wasn't just because I would make a podcast and suddenly I know I know what I'm doing.

Sarah (22m 6s):
Yeah, I mean I'm on the advice team at Stockspot. We have thousands of clients. I chat to so many clients who are now really, really fee savvy and performance savvy and they're coming to us because they want professional investment advice and they know that they can get it for a fraction of the cost. We don't charge for a statement of advice for example, but they're still getting really good investment outcomes from, you know, having a simple ETF portfolio. So I'm speaking to more and more of our clients in their thirties, forties, or fifties who are looking at their parents who are advised and really questioning the value that those advisors are giving. They're often in high fee products. We actually offered to do health checks, where we'll actually, you know, look at the parent's portfolio and do an analysis around, you know, what are the fees they're paying, what's the performance, how well diversified are they, do they have defensive investments in there?

Sarah (22m 60s):
All of those types of things so that, you know, our clients can either go back to their, their parents and and have a conversation but also, you know, feel confident that their parents are getting value for money and, and and the right outcomes as well. So

Phil (23m 14s):
Yeah. How difficult is, is it to have that conversation with your parents? Do you ever hear any stories about that?

Sarah (23m 20s):
I think, I think older generations can be quite sensitive to talk

Phil (23m 24s):
About. Yeah, they very private

Sarah (23m 26s):
Aren't they? It's that era where money was, you know, it was taboo, you don't talk about it, but, and also if your parents are being advised, there can also be a trusted relationship there with an advisor. So I think you need to tread quite sensitively and, and carefully in broaching the conversation because

Phil (23m 43s):
They, they invest so much into the, the trust that they have have for that person, don't they?

Sarah (23m 46s):
Well, that's right. Yeah. And if they've been with that advisor for a while, then they, they might have a relationship. So you don't wanna go gung ho and be accusatory. So I mean, I I would start by, if you wanna help your parents understand if they're being advised well, you know, what is their relationship like, how frequently do they meet with their advisor? What value are they getting? Is their advisor explaining things to them in an easy to understand way? It's not full of jargon, it's not massive reports where they can't articulate the advice. All of those types of things. Just to get a sense of where your parents are at. You could also, if you're investing yourself and using an alternative option, plan a c talk about the fees you are paying, what's changed in the industry, what options are out there, just so they have a point of comparison.

Sarah (24m 32s):
But if you're really concerned, you could also offer to attend the next meeting with your parents just as a, as a sounding board so that you can both feel confident that they're being looked after in the right way and, and yeah, not being taken advantage of.

Phil (24m 46s):
And what kind of questions should you ask at that meeting?

Sarah (24m 49s):
You should definitely ask about the fees, single one of those total fees. I mean that is number one and that's often where things are really opaque and not transparent. But also what is the asset allocation? How is the money invested? What strategies are in place if there are, you know, strategies around social security or whether it's investing, you know, you just wanna get an understanding of what's, what's in place there. I mean they're, they're the most important things. And then of course just the performance, you know, and, and I guess wanting to know that their capital will see them through to retirement. And I, I would stop there. You could then venture into estate planning eventually, but as the, as the initial sounding questions, I would focus on fees, diversification and performance.

Phil (25m 35s):
But that, that's very difficult because if you, if you don't understand the mechanics of investment allocations and different sectors, it can be very difficult to understand it and you really want the, the advisor to articulate it in a way that makes it easy to understand, even if you're a normal person without any financial experience.

Sarah (25m 56s):
Yeah, without a doubt. Yeah, it's really, really important. And any advisor who can't articulate that clearly there's a, there's a problem there and you should question that, but most advisors should be very, very well experienced on asset allocation and knowing what's appropriate for the client. So, you know, that's the important of doing regular annual reviews. You know, your risk profile can change over time, particularly as you move through different life stages. You, you tend to become more conservative looking after the money you've got becomes more and more important. So you wouldn't wanna see someone in their seventies or eighties in a, you know, a high, high growth portfolio where they're heavily exposed to Australian and international shares.

Sarah (26m 38s):
They should be having far, far more defense in their portfolios. A lot of more stable things like bonds, fixed interest, but still with that little bit of allocation to growth assets that will still help their money to grow. Cuz that's important if you're drawing down on it. So, yeah. Mm.

Phil (26m 54s):
So how much of a problem is elder abuse?

Sarah (26m 57s):
It's a good question. I did some research into this and of all the elder abuse out there, financial abuse is the most common. So recent statistics are that one in 10 elders experience some form of financial abuse. This could come from a family member, it could come from a, you know, a relative or it could come from a a third party, it could be an advisor, it could be, you know, like what used to happen. Thank God the anti-hawking provisions are now in place financial service providers making unsolicited calls and selling products. And we know that elderly people are a lot more vulnerable and you know, they fall prey to a lot of scams and they could end up handing over their, their life savings.

Sarah (27m 39s):
Similarly, it could be an advisor who may be a bit unethical and who may be recommending high fee products or you know, something that's gonna eat into that person's capital much more than it should be. But yeah, I was quite shocked to understand the number and you know, with the aging population over 60 fives growing and growing, it's only set to increase as well.

Phil (28m 2s):
No, it's really sad when you see family members at odds with each other, especially about this because some family members are quite cool about the inheritance and then other family members, that's all they can see.

Sarah (28m 14s):
Yeah. And and this is a common form of financial abuse. It's this inheritance entitlement. Yeah. And it's shocking to think that that's what it gets to and

Phil (28m 23s):
It's so common.

Sarah (28m 24s):
So common. Yeah. Yeah. I think that's where there can be a lot of family breakdowns and family feuds over that and can actually sort of break families apart. Yeah. Yeah.

Phil (28m 35s):
So what is the Stockspot solution to all that we've discussed?

Sarah (28m 40s):
So many

Phil (28m 41s):
Things. There are so many, there are so many things. I guess there's several layers of this. The first one is, if you haven't retired

Sarah (28m 46s):
Yet, if you haven't retired yet, know that you can access advice. There are so many options out there like us, you know, we offer advice for such a low cost. If you've got $10,000, a hundred thousand dollars, know that you can come and chat to a professional. If you come to us, you'll speak to myself or Hannah who's one of our advisors on the team. We can do a portfolio health check for you. We can have a conversation. We're actually here to help you work out what you need with your investing journey. We can give you general guidance on other aspects as well. But just know that there are low cost options that, I mean that's a great thing about the FinTech industry. There's a lot of alternative options out there now compared to going to a traditional advisor where the fees can be a lot higher.

Sarah (29m 30s):
So do your research, but, but reach out and we can certainly help guide you.

Phil (29m 34s):
And if someone's retired really with Stockspot, they've gotta be in an SMSF. Is that the case?

Sarah (29m 39s):
Yeah, if it's within the super environment, absolutely. But if you are still investing outside of super, you have the option to open up a trust account with us or an account in your individual name, joint name. So we have retirees doing both. They may have their self-managed super fund, but you can also continue investing outside of Super Trust accounts have become quite popular as well with the, the balance caps now within the super environment. So we've definitely got clients doing both. Again, you know, if you're worried about your parents not getting good advice, just be there for them, inquiry into it. Know that there are lower cost options available. You know, I'm helping, you know, clients at the moment transitioning off complex Wrap platforms out of unlisted managed funds to come to a simple ETF portfolio.

Sarah (30m 27s):
It is possible. And the fee savings are, you know, they could be thousands if not tens of thousand dollars for your parents each year. Or you know, I'm also talking to clients who have, their parents have just met a financial advisor, but there's a few red flags there. So they're coming for us, coming to us as a sounding board. So reach out, there's people like us available to help and, and chat through options for you.

Phil (30m 49s):
So if people wanna find out more, how can they find out more about Stockspot?

Sarah (30m 53s):
You can find out more on stockspot.com.au. You know, we have so many channels you can connect with us. We're on live chat. You can book in a call, you can email us, you can call us directly. If you are interested in signing up, you'd hit get started on our website. You actually go through and we'll give you a personalized portfolio recommendation. Anyone tuning into the podcast, we've got a special promo code you can put in the promo code, FUTURE F U T U R E and you'll receive $5,000 of your portfolio managed for free for 12 months, which is a really great way to get started. It's super easy. But as I said, if you've got questions, pick up the phone and yeah, we're here to

Phil (31m 31s):
Help. I've got one more question. How much can you save in fees?

Sarah (31m 35s):
Oh, a ton. It depends. I mean, because

Phil (31m 38s):
We've talked about the three levels of fees with a traditional financial planner advisor,

Sarah (31m 43s):
Yeah, thousands of dollars depending on how much you have to invest. But if we look at, say someone with a hundred thousand dollars investing with us, that would cost you about $660 a year all inclusive. If you were going to an advisor and then being set up on a wrap platform, you'd be paying an advice fee for a couple of grand, I'd say, or thereabouts. And then you're paying those wrap administration fees. So that's gonna cost you multiple th you know, several thousand dollars. So it's, it's quite a saving. We don't charge our clients for the statement of advice. It's actually automated in our signup process, which is quite amazing. You still get that document with your personalized portfolio recommendation, but our fees are focused on the money we are managing for you.

Sarah (32m 26s):
There's no brokerage fees anytime we're buying or selling. No platform fees, no entry or exit fees. It's just that all inclusive monthly fee. So really worthwhile and definitely an option worth looking

Phil (32m 36s):
Into. Yeah, that that's, this is what's really been stark for me is the amount of fees that are charged. It's like I said previously in the interview you're talking about, okay, oh, it's 2% or it's 2.3% per annum and you think, well that doesn't sound like a lot. But then when you think about it, I think in your example it's 0.6 of a percent, it would come to

Sarah (32m 58s):
Correct 0.66 for balances up to 200 k. And that's exactly right. Percentage terms are quite hard for consumers to get their head around

Phil (33m 6s):
Particularly. Yeah, just don't understand it

Sarah (33m 7s):
Really, particularly when they're split out into little percent here and a little percent there. I mean, even my mom, you know, she was in a a terrible MLC superannuation products and I couldn't believe her fee statement when I looked at it and how complex it was and all of these fees that were in tiny, tiny fine print, but that the average person wouldn't even look at. But they were actually the bulk of her fees each year, like multiple, like two to $3,000 coming out of her super account. So yeah, there's definitely a lot of work that needs to be done around fee transparency and making it more digestible for the consumer and anyone receiving advice.

Phil (33m 44s):
Sarah King, thank you very much for joining me today.

Sarah (33m 47s):
Thanks so much for having me. It's been a pleasure.

Phil (33m 49s):
This episode of Shares for Beginners is proudly brought to you by Stockspot. If you found this podcast helpful, please tell a friend, especially for someone who needs to start thinking about investing for their future, you'll be helping them and helping me to keep this show on the road

Chloe (34m 4s):
Shares for beginners is for information and educational purposes only. It isn't financial advice and you shouldn't buy or sell any investments based on what you've heard here. Any opinion or commentary is the view of the speaker only not shares for beginners. This podcast doesn't replace professional advice regarding your personal financial needs, circumstances, or current situation.

Phil (34m 24s):
And thank you for listening to my podcast.
 

Shares for Beginners is for information and educational purposes only. It isn’t financial advice, and you shouldn’t buy or sell any investments based on what you’ve heard here. Any opinion or commentary is the view of the speaker only not Shares for Beginners. This podcast doesn’t replace professional advice regarding your personal financial needs, circumstances or current situation

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