Glenn Mabbott of Sydney emailed 6 questions to throw open to the Adviser Ratings community. We asked Platinum Advisers Julian Battistella of Battistella Financial Services and Corin Jacka of Corin Jacka Financial Solutions, who were both more than happy to tackle them head on.
Q1. How does an adviser add value in these 3 areas: defining needs ; formulating strategies ; choosing investments?
Q2. Do you recommend managed funds or are you a stock picker?
Q3. How would you charge for investing a portfolio either in super or out?
Q4. Research shows fees are the one area over time that reduces returns that can be controlled. Do most clients realise this?
Q5. Do you list fees before making recommendations, eg platform/ fund manager margin/ brokerage
Q6. What do you tell investors when comparing active management with low fee index ETFs?
Top answer provided by:
Corin Jacka
Q1. How does an adviser add value in these 3 areas: defining needs ; formulating strategies ; choosing investments?
A good adviser can typically add value through two key areas, strategic advice and asset management. Strategic advice includes defining needs and formulating strategies. The value provided here by a good adviser is being able to help the client understand “What is important about money…to them”. Answering this question in detail will expose the clients deeply held values about what they are doing and the direction they going. A strategy can then be developed, giving the client the greatest probability of achieving their goals. The value includes a clear sense of direction and peace of mind knowing that the client is taking control of their and their family’s future.
In relation to choosing investments, if it’s for the long term the key area that impacts the returns to a client will be asset class selection. So the questions shouldn’t be whether a client buys CBA or BHP shares? But should they be investing in Australian Shares or other asset classes such as overseas shares, cash, fixed interest or property.
The value of good advice will help formulate an allocation that will provide the returns required to achieve the client’s objectives at the same time as having the client comfortable with the risks involved.
Q2. Do you recommend managed funds or are you a stock picker?
We are not a stock picker nor do we just recommend management funds. Depending on the clients circumstances our recommendations may include direct options, such as shares or property or indirect options, such as managed funds.
Q3. How would you charge for investing a portfolio either in super or out?
Simple. We have a strong view that a good independent adviser should only charge flat dollar fees for the services provided. Only this way can the adviser then work for client and no one else. In this circumstance the adviser can then work with the client to do what is the best option for the client, either inside or outside super.
Q4. Research shows fees are the one area over time that reduces returns that can be controlled. Do most clients realise this?
As the only income a true independent adviser receives, is the flat dollar fees paid to them directly by the client they can then focus on finding the best solution for the client. Much of this is investments fees; however, you shouldn’t forget other issues such as good administration and investments options.
It is certainly important to understand the full costs of any investment so an informed decision can be made.
Q5. Do you list fees before making recommendations, eg platform/ fund manager margin/ brokerage
All fees need to be understood to make an informed decision. The client needs to understand what the platform gets, what the investment manager gets, what gets paid back to the adviser from any other party other than the client.
Q6. What do you tell investors when comparing active management with low fee index ETFs?
The majority of the returns a client well get over the long term will be driven by the asset allocation. So in most cases a low cost index approach is perfectly suitable. However, in some circumstances, some fund managers do have the potential to invest in an area that is diversified well away from the index, has low correlation and can add value.
Remember, nearly three-quarters of all actively managed investment funds focusing on the top 200 stocks underperformed cheaper 'passive investment' index funds over the past five years, according to S&P Dow Jones, so you need to select carefully.
While the Adviser Ratings Website facilitates the question and answer functionality, all such communications are between users and authorised financial advisers, of which Adviser Ratings has no affiliation. Adviser Ratings is not the advice provider and does not provide financial product advice and only provides information that is general in nature.
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Comments1
"Thank you Julian and Corin. You both display a genuine concern for a client's well-being. In an industry where close to 80% of advisers are owned by or aligned with the Big4 banks or AMP, your transparency on fees and commissions is a rare and valuable quality."
Glenn Mabbott 12:33 on 12 Nov 14