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Financial Confidence

Take Charge of Your Finances

financialliteracy getgoodwithmoney learnaboutmoney Jun 13, 2022

Many years ago I went to see a Financial Advisor to get my “money sorted”.  I have to admit to being pretty naïve, and I bought the sales pitch hook, line and sinker.  I have since been on a research and clean up exercise and what a journey!

I found that I was paying more than 3% in fees on my superannuation!

I was also paying the advisor a monthly fee (aka “trailing commission”) and for that he did almost nothing.  We hadn’t corresponded in years, and all I received was adhoc forwarded industry reports written by fund managers, and a monthly generic performance report from the managed fund platform I was in (from which I had to extract the performance of my specific funds).

Instead of getting progressively angrier (which did happen for a little while), I decided to take responsibility for the decision of allowing myself to get into this situation, and to do something about it.

In case you haven’t already realised, I’m fascinated by many things financial, so I thoroughly enjoyed my research journey – finding a new superannuation fund, and then trying to decide what to do with the investment money I currently had tied up.

Step 1: Finding a Superannuation Fund

Finding a superannuation fund is not as straight forward as one might think (which is why I went to a Financial Planner originally).  You can choose an organisation, but each one will have different types of investment funds, which will have varying degrees of risk, returns and fees.

Understanding your risk profile is very important.  How comfortable are you with market volatility, and how much volatility can you handle before you go into a head spin?  Then you’ll want to link this to your current age, and how many working years you have left – that is, at what age do you want to retire.

Add to this, what level of comfort do you want in retirement (and how much money you’ll need to achieve this)?  Do a calculation to see what superannuation balance you’ll need -

Having figured all this out, I then went onto find out which funds had performed the best over the last 10 years, and what their fees were.

I ended up finding a fund that was returning an annual average of 6.5%, and their fees were 0.75% - quite a big difference to the more than 3% I was paying (and the returns were less than 6.5% too!).

Needless to say I’ve switched over, and hopefully now my retirement savings will grow much faster!

Step 2: Finding Investment Options

You saw how involved it was finding a superannuation fund, so I’ll go into more detail on investment options in my next post.  Briefly though, before you can even think about specifically what investments you want to be in, you need to look at your current investment portfolio’s Asset Allocation, and compare this to where it should be (based on your age and risk profile).

My Asset Allocation wasn’t too far off, but I decided to do some serious tweaking – particularly as I wanted to stop paying for a Financial Advisor who did nothing, and also paying for a “wrap platform” that I didn’t need.

Two layers of fees were going to be eliminated – just like that!