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Guest fredhargreaves

Financial advice - Superannuation

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    Guest fredhargreaves

    Just a word of warning to those who have not been here long. There is a government enquiry currently going on on this subject. Basically the Financial Advice industry was for many years dominated by the "retail" super funds - some organisations specialising in exactly that - others mainly owned by the big banks etc. They operated by giving free financial advice but making their money by deducting big fees from your balance in the (just sign here then) investment product - including huge exit fees for when you wake up to the scam.


    In spite of their inflated fees many retail funds are amongst the worst performers.


    Just google superannuation in the internet versions of grown-up papers like The Age or SMH and you'll find plenty about this.


    In recent years "industry" funds have been opened up to members of the public and their fees are much lower, typically with zero entry and exit fees.


    A few tips:


    1: If you want financial advice expect to pay for it by the hour. Free (sic) financial advice is just a foot in the door for a rip-off later (and a big one $20,000-$50,000 on average).


    2: Even if you pay for financial advice don't buy products through that advisor - certainly not at the same session. Don't sign anything whatever you do. Take your advice away - think about it - check it - maybe even get a second opinion. Then go shopping later.


    3: Even honest financial advisors live in a culture of financial products - shares etc. You will rarely be advised to hold e.g. an investment property, even though for some people that may be a smart move.


    4: Generally the industry funds have the lowest fees and zero exit fees enabling to flex into something else later without loss. If you have a lot of money a self-managed fund is by far the best but you need to do some homework on that first.


    5: If you have a good tax accountant their advice is worth considering as well. If you have a tax acountant who is forever suggesting you talk to their associated financial adviser then beware there also.


    6: Don't put all your eggs in one basket - all the funds (even the industry ones) will continually offer you the possibility of saving paperwork etc by rolling all your super into their fund. Typically the admin fee is only about $50 per fund. For the sake of that small amount you can spread your risk (small though it may be) around.


    7: You will be asked to nominate benificiaries who will receive your balance should you die prematurely. Make sure you make a "binding" declaration - it has to be renewed every 3 years - otherwise the fund may pay the balance to your ex-wife etc - only a current "binding" nomination is actually binding.


    8: Most industry funds offer income protection insurance automatically. If you need it this is probably the most economical way to buy it - but read the terms first - they vary widely and it could be exactly that which determines your choice of fund. If you don't need it you can generally avoid taking it, even though they don't shout that from the rooftops.

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