An industry secret that must be shared!
The illustration is the average person’s reaction when they hear this little known financial advising industry fact:
You can pay for financial advice through your super fund. It works exactly like the administration fees that you are already paying. The fees can be a fixed amount or a percentage of the underlying assets and can be once off or ongoing.
For some reason there is very little awareness out there that you can pay financial advice fees using your super monies. Most super funds offer this service however in the industry fund space it’s generally limited to retirement advice AND the funds have a vested interest in keeping their members, so they really can’t give the optimal advice solution to their clients. I believe this explains the lack of awareness for individuals nowhere near retirement age. Enter an independent financial adviser!
We have no alliances/allegiances to any industry fund, investment manager, insurance company, lender….nada! We can look at your entire situation, not just your super and not just retirement. Anywhere from investing for education, building a portfolio to fund free holidays for life, disciplined savings assistance (for those that dip into their house deposit account from time to time), lending strategies, super, loan options and providers……..you name it, an independent financial adviser can help you with it.
I know what you’re thinking “Won’t I be reducing my retirement savings by paying someone to give me financial advice from super?” In a literal sense, of course, however I would argue that the exact opposite is actually true from a net wealth perspective over the long term.
When we compare the idea of paying for financial advice from super to the alternatives – paying for financial advice from your daily cash flow OR not getting financial advice at all, it becomes a different picture entirely. A few of the reasons I think it’s a good option to pay advice fees from super as opposed to cash flow (or not access advice at all!) are as follows:
Inside super vs outside super – EFFECTIVE USE OF CASH FLOW – by paying advice fees from super your daily cash flow remains completely free and can be used for alternative purposes such as servicing debt (non-deductible debt or investment debt). By using and servicing this leverage you are able to gain exposure to assets on a larger scale than you could otherwise afford and hence you are multiplying any wealth effects that result from this. Should your cash flow be reduced by advice fees your ability to service debt is decreased which over the long term (20+ years) can have a significant impact.
Inside super vs outside super – A LITTLE HELP FROM THE TAX MAN – The advice fees payable through super can be tax deductible to your super fund (super funds lodge their own tax return each year). You pay tax on contributions you make to your super fund at 15% (most commonly your compulsory employer contributions) and you also pay tax on any investment income (15%) and capital gains (15% but 10% for assets held for longer than 12 months) that are generated by the assets inside your super fund. The advice fee can help offset some of this tax.
Advice vs no advice – INVESTMENT IN A MORE CERTAIN FINANCIAL FUTURE – Imagine for every big financial decision in your future for the next 20 to 30 years you could be certain that you have weighed up all of the benefits and risks and have made the optimal decision for your circumstances. You have consistently updated your path and been responsible and accountable to your plan. No matter what happens you are covered and can spend time doing the things you want instead of stressing over which investment to use or even worse, the monthly budget!
What you need to be careful of?
The biggest consideration weather you are paying for financial advice either inside or outside of super is getting value for money. You must be certain that you are getting sufficient value from your adviser to justify the fees they are charging. This will be evident in the process they use to understand your position and the directions that you wish to take in the future.
Some people have excellent self-discipline and enjoy spending their time researching financial topics and making financial decisions. Financial advice may be less suited to these types of people or perhaps a once every few year check up is all they require. It’s the people that have low self-discipline, no extensive financial knowledge or no spare time for the important things like spending time with family and friends (let alone financial matters!) that should look to partner with an adviser to help them improve their financial situation. Just like with diet and exercise, pretty much everyone has the same options and opportunities but how many of us have the time, discipline and self-control to be at our best all the time??? Might that change with a personal trainer at our side? Someone to keep us accountable when we get tempted, someone to keep our reasons for action in front of us consistently?
The fund I prefer for my clients is a retail super fund that gets a platinum rating from super ratings (see http://www.superratings.com.au/ to check how your fund stacks up). My preferred fund also happens to appear in the top 10 cheapest funds list, beating most industry funds! The majority of my clients pay me an ongoing fee through their super fund to ensure that their financial future is on target with their goals and that any curve balls thrown their way are dealt with using the proper due diligence and thorough process they require.