YourShare Blog

Wraps & master trusts

'Choice' the Australian Consumers Association Magazine has recently updated its online article on Master Trusts and Wrap accounts. This article is a tremendous free source of information on the pros and cons of these financial products, that have become so popular for managed funds superannuation and pensions.

"Wraps and master trusts priovide a way for you to invest in a range of different investment funds through one administration structure. And these days, if you go to a financial planner and follow their investment advice, you’ll probably find they recommend you invest through one of these arrangements. So dominant are wraps and master trusts as one-stop-shops for accessing a wider range of investments that they now gobble up the majority of consumers' investment funds.

These ‘platforms’ (basically administration structures for your investments) have taken the market by storm following heavy promotion by product providers and advisers in recent years. But are they the best place for your money?"

As with all financial products YourShare can help you to reduce your upfront commissions and entry fees to nil, and collect the trailing fees and commissions being generated towards your Yearly Cash Rebate service.

To read the full report go to http://www.choice.com.au/viewArticleAsOnePage.aspx?id=104561

Who reads the fine print?

When we get a prospectus for a new investment, how many of us really read it from beginning to end? And if you do read it how much do you really understand? I have a friend who will never sign anything without reading every single word, he is a tax accountant, so I did a small case study on him and looked at all his investments then asked him a few questions. One of the questions was how much are you paying to your financial adviser. His answer was ... "on my super I don't have an adviser and with my managed funds I don't pay anything". I looked into his investments and on his super there was a trailing fee of 0.45% of his fund value every year to an adviser he had never heard of (later we tracked it down to his previous employer's adviser) and on his managed funds he was paying 0.6% to an adviser that he had met a few years ago to sort him out. Luckily he was not paying the entry fees... but still very interesting!

Alan Kohler wrote a commentary in the Business Spectator on 19 Feb 2008 and quoted an interesting fact

" ASIC’s deputy chairman Jeremy Cooper came out with the astounding revelation that 46 per cent of the population do not have the education to actually read and take in financial disclosure.

In my speech a bit later I observed that the other 54 per cent can’t be bothered reading the stuff either."

Read the full story as he also gives some other interesting statistics. http://www.businessspectator.com.au/bs.nsf/Article/Sales-disguised-as-advice-BXQSN?OpenDocument

www.rebatehomeloans.com.au

Upfront and trail commissions are being paid on your home loans also.

Below is an extract from the website www.rebatehomeloans.com.au

Your mortgage is highly sought after by lenders...so highly that generous commissions are paid by the banks to mortgage origination (mortgage broking) firms who bring business to them.
Almost all lenders in Australia pay two types of broker commissions on a mortgage. These are commonly known in the industry as ‘up front’ and ‘trail’ commissions.

The ‘up front’ commission is paid to the broker soon after the loan has settled and is based on a percentage of the total amount borrowed. Most lenders pay between 0.6% and 0.7% in up front commission.
e.g. A $250,000 loan amount will usually generate up front commission of at least $1,500.

The ‘trail’ commission is most commonly paid monthly after settlement of the loan and is based on a percentage of the outstanding balance of the loan during the previous month. Most lenders pay between 0.2% and 0.25% in trail commission per annum. 
e.g. A $250,000 loan amount will usually generate trail commission of approx $500 in the first year (approx $41 per month). Trail commission is generally paid for the life of the loan and the amount paid each month will decrease as the client gradually (in normal circumstances) reduces the balance of the loan by repaying the principal.

No Fees? Get It in Writing!

Below is an item published 29/08 on "Consumerism Commentary" a US website.

This comes from “The Mole,” the magazine’s “underciver financial planner.” If your financial advisor or broker tells you there are no fees for a particular investment or no risk for some product, ask to confirm in in writing.

Even though my clients relied on these promises [of no fees and no risks from other advisors] when they chose investments, they had nothing in writing to prove it. In fact, within minutes of making those misleading statements, the adviser probably had the client sign a multi-page disclosure document that contained language (buried deep inside) directly contradicting the oral promise. Advisers know no one is actually going to read all the disclosures before signing.

Here’s an easy solution. When your adviser makes an extreme-sounding claim, send him a nice, friendly e-mail articulating your understanding of what he said.

Ask him to confirm it in writing. If the statement is accurate, he should have no problem. If he backpedals, dismisses your request by saying “That’s in the disclosure document” or just calls you up to repeat his oral promise, get very suspicious. If he won’t write, something’s not right.

The Mole’s reports take a look at what happens behind the scenes in the world of financial planning. The more someone has knowledge of what goes on on the “inside” will be in a better position to make good decisions. This piece from The Mole is advise is quite clever; theoretically, an advisor knows better than to formally document a lie and will avoid that at all costs.

http://www.consumerismcommentary.com/2007/08/29/money-magazine-no-fees-get-it-in-writing/

The original article published on CNNMoney.com can be found at http://money.cnn.com/2007/08/29/pf/the_mole_September.moneymag/index.htm?postversion=2007082910

Big increases in Super

An article in the age estimated that,

INVESTORS poured an estimated $10 billion into super funds over the past three months as they rushed to claim a Federal Government tax break that expired on June 30

This is as a result of the governments tax effectiveness incentive to shift up to $1 million to super before the June 30 2007 deadline. From 01/07/2007 the super contribution cap is set at $150,000 a year, or $450,000 over three years.

http://www.theage.com.au/news/business/10bn-rounds-off-a-super-year/2007/07/04/1183351290753.html