Real-life client examples of how an independent financial adviser can help save you money.
Saving $7000 a year on insurance premiums.
In March 2017 we had a new client approach us. He is a 62 yr old executive who’d acquired a considerable amount of life insurance, purchased at different times from various institutions here in Australia. The total premium paid was approximately $16,000 per annum (p.a.). When we applied for replacement cover through another company (with commission taken out and for the same amount of cover offered) we were quoted close to $9,000 p.a. Yes, – a $7,000 a year saving! You see, as truly independent advisers we are by law, not permitted to accept commissions of any kind. Any commission we do receive must be rebated to the client.
An independent review of your insurance policies can identify inefficiencies and areas where you may be paying unnecessary commission fees.
Switching to a better super fund product with lower fees.
We assessed a client’s super fund that is being charged at 2.5% p.a. This particular super fund is owned by one of Australia’ biggest banks, has been active for over 20 years and charges clients a total fee of around 2.5% p.a. which is quite common practise in older super funds held within larger institutions. This includes 0.60% p.a. fee to an anonymous adviser who the client doesn’t know and who doesn’t do anything for their money.
A review of the investment performance after these high fees indicates that basically the returns were average, while the banks paid themselves handsomely through high fees. Interestingly, this particular bank appears to have another, better priced product but would be reluctant to recommend such a product as this would mean reducing their established fees.
The lesson here is don’t expect a big bank’s adviser to tell you about their best products as the conflict of interest is too high. The big banks do have some excellent value products with lower fees and an independent adviser can help you determine which product will suit your circumstances, rather than protecting a commission structure.
Paying for life insurance you just don’t need.
In 2016 we were approached by a doctor and his wife for financial advice. The combined balance within their super fund was around $2 million with a 2.5% p.a. fee. Let’s firstly consider this client’s circumstances:
- He is in his early 60s
- Lives comfortably on $60-$80k per year
- Has a large home (debt free)
- Investment assets worth over $4million
Despite this clearly healthy financial position the adviser continued to recommend the client maintain a $million life insurance policy, at a cost of $20,000 p.a. Again, high fees and unnecessary insurance driven by the commission the adviser continues to receive. We have since moved the client into a much lower fee paying and more suitable product.