Fund managers

[jx2mad]

When it comes to superannuation, what is the roll of a fund manager? I was under the impression that they watched your fund and monitered the changes happening so that if there is a trend rapidly downwards they can reallocate your portfolio to counter this drop. It seems I am wrong and they just sit there seemingly doing nothing until I ring and ask them to do something. In the meantime they continue to get their commission each month. What are some of your experiences? Good or bad? Jim

[FenianEel]

A fund manager is not normally an individual, and generally "manages funds", as in an investment fund, not individual portfolios.
Individuals or companies can invest in that fund, but generally have no say in the allocation/investment decisions.

A broker/adviser/personal banker etc., is a different story.

Is it an institutional fund/super plan you are talking about?

[jx2mad]

Boy I am way off today. I meant an institution financial adviser.:(:(

[101RRS]

The fund manager must invest funds in accordance with its PDS so have little scope to mave funds into other areas. I think you may be referring to a Financial Advisor and if so I share you pain.

I first started putting money into a private super fund 12 years ago on the advice of a financial adviser - it was a falling market and I questioned why invest in a falling market - lost 5% in the first week and then lost and lost until the market turned in 2003 with the invasion of Iraq. My advisor basically said that you cannot predict the market and cannot pick the rises and falls - I agree on daily ups and downs but when there is a low term falling market that was different.

Along came the GFC and again the losses started - I again questioned my advisor why he had not recommended a move to a safe haven like cash - in another 6 months I ignored my advisor and moved much into cash to help protect my position. When the turnaround came in 2009 my advisor was then advocating staying conservative and staying in cash - I then sacked him and have been manageing the funds myself - I had been as successful as the advisor until last year, when I made 50% - however the downside is this last 15% drop caught me out so have lost a bit.

My simple experience is that a record high of some sort is always followed by a drop so switch to a safe haven and buy back in for a profit - if you get greedy you will get caught out - a fund unit in the hand is worth two in the making.

The big question is - if our economy had been so great during the GFC etc - and so much better than the US - how come the US market has exceeded its high of late 2007 - that is recovered all losses from the GFC but the Aust market has only achieved 2/3 of its late 2007 high and has not performed as well as other markets.

The other thing I have experienced is that economic factors no longer drive the Aussie stock market - we have learned that if there is a bad message somewhere the market will sell even though there is little or no economic impact.

I think that superannuation needs to be de-linked from the stock market and other suitable investment classes used. I am not sure what but the stock market is not working for super.

Garry

[jx2mad]

I share your pain. My super is through the stock market vie a large fund as I need an income stream from it. The only other way is property but who has that much super. I sit here watching my now meager funds loose another 6 thousand last two weeks. I may have to drag myself off the sick bed and find work, but at 67! Like you I feel that super should be protected somehow. Jim

[harlie]

...
The big question is - if our economy had been so great during the GFC etc - and so much better than the US - how come the US market has exceeded its high of late 2007 - that is recovered all losses from the GFC but the Aust market has only achieved 2/3 of its late 2007 high and has not performed as well as other markets.

..


Mainly, because the Aus market was over valued.
The high aus$ has got a lot to do with it, many plp like myself invested in hard hit foreign markets with the view that we can pick up on the currency trade as well as the investment.
The stable Aus property Market has also kept local investment capital tied up, not many racing out to sell investment properties and buy shares ATM, being stable also means that plp aren’t borrowing on their new found equity to buy into managed funds like they were during/after 2006/07 property run, many did and this.
Also many plp were hurt by margin loans post ’08, that level of risk taking will not return for some time.

As for "Financial Advisors" (sorry have to use quotes, it's not really accurate description of what they are). They are nothing more than sales agents, for the Fund Management Company, or insurance. They receive vast sums from you portfolio no mater how it performs and it isn't mentioned in any statement (except the small print when you handed it over). Fund managers them selves are even worse. The amount of cream stripped from the fund before the unit price is calculated is mind-blowing. Some have said the former only exists to keep the angry clients away from the later.

[DeeJay]

I just finished reading this from Saturdays Age. Certainly gives you confidence in the Banks financial advisors - not.:(

Targets, bonuses, trips - inside the CBA boiler room (http://www.theage.com.au/business/banking-and-finance/targets-bonuses-trips--inside-the-cba-boiler-room-20130621-2oo9w.html)

[jx2mad]

What prompted this thread was that around 6 months ago I received documentation listing my share holdings and how they had performed over the last few years. Imagine my surprise to see one company had NEVER returned a positive result since my super had been set up. I immediately checked all the rest and found that some others showed a negligible return. Also my super was split over 18 different areas. I rang my adviser and organized a meeting. I told him I wanted my portfolio restructured getting rid of these bad choices and dropping the spread to eight companies and to set about 20% in cash. I thought all this was his job and I am paying him to take my instructions. All this was probably my fault for not taking a more proactive approach and leaving this up to him. :mad::mad::mad:Jim

[FenianEel]

Diversification people, the old eggs in one basket story - it's important.

So is keeping an eye on your super, whether it's fund managed or self managed.
You can always change the investment choices, or the super provider.
There are a lot of sub-standard fund performances out there, that haven't made the recovery they should have, over the last 12-18 months.

Don't put it all in shares/share funds unless you're young and/or can accept some losses along the way.
Mortgage & property funds are a little more stable now, and will provide a regular dividend/income, if with the right manager.
Cash/bonds/CMA's are generally always a safe option, (but not a high performing one)

You want a mix of asset classes and investment types, otherwise you're too exposed.

Risk v Reward - The greater the risk, the greater potential for returns, but also the greater potential for loss.

There's no accountability of advisers & fund managers for poor performance, they still get their commissions & management fees.

It's YOUR money, not theirs - keep an eye on it, and make it work for you, not vice versa.

[DiscoWeb]

Boy I am way off today. I meant an institution financial adviser.:(:(

jx2mad,

Most financial planners should be helping you establish medium term financial goals and investment strategies to help you achieve those goals. Many also focus primarily on selling you life and other insurance style products.

Planners are generally not like a stock broker who will call you every few days to suggest selling ABC share and buying XYZ because they have a tip that XYZ company will do really well.

I work in the property funds management industry, dealing mostly with private clients who are "self directed" i.e. make their own decisions without the input of a financial adviser. And for what it is worth, of the hundreds of financial planners I have met there are less than a handful I would actually consider taking advise from.

Most are still focused solely on how to keep you and your money moving so they can make commissions and other revenues from you and have little more than a cursory interest in the actual investment they will put you into and potential outcomes for you and your money.

This is why so many people are setting up their own self managed super fund and making the investment decisions themselves.

The key thing for you to consideration is your investment time frame.

If, like most you are investing for the medium to long term then try not to look at the week to week or even month to month changes in capital values. Consider the medium term trends and invest into those, as provided the trend is right and the company or fund is structured correctly the long term capital growth will come.

If investing for the short term, invest in yield based investments with low capital volatility, but in doing this you will not get the capital gains of the more high risk/higher return medium term investments.

Finally you also need to regularly set a realistic return expectation. If the risk free return (say a term deposit) is providing you only 3.5% - 4%p.a then why do investors expect their low risk super fund returns to be much higher than that over say a 3 yr period.

As a rule of thumb if you can beat that "risk free" rate by say 2% pa year on year your are doing pretty well. And remember that is a combination of both income (distribution) return and capital growth and should be measure of a 3 -5 yr period.

And as always, be wary of anything that sounds to good. If it is truly low risk then it will be low return, and remember no one will care as much about your money as you do.

Regards,

George

[jx2mad]

Thanks all for the good advice. It is a little troubling to see your super value declining all the time, especially after retirement. Jim

[101RRS]

Thanks all for the good advice. It is a little troubling to see your super value declining all the time, especially after retirement. Jim

Yes - $65K in 4 weeks :(

[sashadidi]

There was a old guy in our share club who told me a story:
When those stock brokers offer you a deal ask them to some round to your house with their last ten years personal stock market buy and sell notices in their personal names and their bank statements to match, if they have made a profit let them in the door to at least talk to you , if not do not let them in the door.
Lots of studies of stock broker's and fund managers results over many years have shown that they are not better at picking the market than anyone or even getting returns above inflation if at all, just that some of them are more lucky than the others for a couple of years and then you get their advertising saying how great they are, its a lot of rubbish as history is not a guarantee of the future which no one can predict anyway. Apparently quite often those "lucky" fund managers get poached by other firms in a lot of cases after a couple of years so there is no basis to the advertising as well.
DO it yourself and you will watch it more carefully than any of these guys who get their fees whether the market rises or falls so what do they care...

[ian4002000]

The first thing to do with super is take an interest in what is happening with it, and you all semm to have got that right.
Next is to have a structure that allows you to do what you would like to do and have that structure at a reasonable price.
Dont overlook industry funds as their is one that allows you many ways to invest in many ways, whilst having very low fees.

[weeds]

i use a financial advisor........all i can say is i am in a much better position than i would have ever been. i was just cruising along in my own little world just relying on super and paying my house off to set me up for retirement.

i doubt i could do it myself so i am happy with the management fee that i pay for my portfolio......some say i am paying too much but for the service but i reckon its worth every cent.

the more i watch what my advisor is doing the more i learn.......i still doubt that i would manage my own portfolio

the company i used were very up front about fees and who they are in bed with, as they get most of there business from referral they encouraged us to get a second/third option or proposal from other institutions......

i haven't had to deal with a bank for 5/6 years.........i needed a replacement credit card the other week, all i do is a quick email to my advisor and the card turns up in the mail....we just changed our loans and all we did was turn up for coffee on a weekend and all the paperwork was sorted, a few signatures done and dusted in 30 minutes

sure they take a bit of cream.....but i reckon i will be better set up for retirement

[101RRS]

With super funds and the stock market it is easy to get greedy when losses have been made over many a year.

As it is the end of the financial year I have looked at the performance of my super for the past 12 months.

I have my super spread over three areas, a volatile managed fund, an industrial fund and direct shares in an insurance company. I manage all my own stuff and I have nominated a trailing commission company as my finance advisor so I get about 75% of trailing commissions back.

The Aussie Stock market went up about 16% in the last 12 months, the US stock market about 19%. Both were a bit higher but lost over the past month.

Overall my super fund made 45% last year but if there had not been the downturn in the last 6 weeks it would have been 64%.

The risky fund made 56% but would have been closer to 100% if there was no drop off. The industrial fund which is a good stabilising fund made 28% and the shares in the insurance company made 64%.

So overall a great year and it could have been better - however this barely makes up for losses at the start and during the GFC.

I started this super in 2001 and in the 12 odd years it has been going it has only made 5% over inflation - that is not an average of 5% per year but 5% in 11 years so overall about .4% per year over inflation - so really in the long term super is not such a good investment.

Garry

[ramblingboy42]

All of the funds ultimately have to use the banks. Banks do not like losing money at all. So why not forget these financial advisors and fund managers and deal directly with your bank. My investment portfolio has returned 22% during all the latest doom and gloom and with all the May/June performance may drop to 20% before eofy results come out. Which bank....no not that one....Westpac and their BT Financial Services Program....which is a rippa . I don't want to hear negatives about this, if you are concerned, go to Westpac and ask them what they can do for you. mention you heard about BT and how it works.....it isn't free, you will be asked to pay. If all good advice was free, none of you would be having investment problems, now would you?

[101RRS]

So why not forget these financial advisors and fund managers and deal directly with your bank.

My funds are through "which bank". Their process makes it easy to review different funds and it takes 60 secs to change funds so I can move in and out of cash (no entry/exit fees) when when the nerve begins to fail. Can all be done from home and there no financial advisors etc. If set up at the bank then trailing commissions go back to the person in the bank who initially setup the account (I assume WESTPAC is similar). My nominated financial advisor does not provide financial advise but collects the trailing commission and passes it back to me less their fee of course.

What I do not like about Financial Advisors is they seem to only provide advice at the annual review of the portfolio with little management advice in the intervening period no matter what is happening and they get paid no matter if their advice works or not. I ditched my financial advisor 4 years ago and have been able to match or exceed his performance since then.

Garry

[jx2mad]

My followup question is...do you have to have an advisor? My cousin has a self managed fund and has to have one

[scarry]

so really in the long term super is not such a good investment.

Garry

I have stuck with commercial property over the years.

But you have to hunt around and do a lot of the work yourself, with a good freestanding commercial property,you often can't go wrong.

Our super is with an industry fund and is reasonably small.

The properties we have,over the last 10yrs,have put our superfund to shame,there is actually no comparison.

Just my 2cents worth.....

[101RRS]

My followup question is...do you have to have an advisor? My cousin has a self managed fund and has to have one

Mine is not a "Self Managed" Fund in the legal sense where you can invest is areas that would normally attract a tax liability - eg direct shares, property etc.

No I do not have or have a requirement to have an advisor.

My funds are in "bank" designated super funds. These are different to a "self managed super fund".

Garry

[101RRS]

I have stuck with commercial property over the years.



Yes but that is not super. Maybe if you had an approved "self managed super fund" you could invest in that area and attract the tax benefits but I am not sure.

It is wise to not put all your eggs in one basket and I have mine in three areas - a small taxed pension from a defined benefit super scheme, my private super as listed above and like you investment property (residential not commercial) which provides a small taxed income.

You said you have done better than super but is that before or after Tax which is often the big equaliser. Depending on your age, super is tax free if you do not withdraw before 60 and fully tax free after 60 where even if negative geared you will pay tax at your PAYG rate on your commercial properties. It is certainly a big issue for me on my residential stuff.

Cheers

Garry

[scarry]

You said you have done better than super but is that before or after Tax which is often the big equaliser. Depending on your age, super is tax free if you do not withdraw before 60 and fully tax free after 60 where even if negative geared you will pay tax at your PAYG rate on your commercial properties. It is certainly a big issue for me on my residential stuff.

Cheers

Garry

Correct, the tax benifits are way better with super,and it is a good idea not to put all eggs in one basket.

What we should have done is bought them in a SMSF,but the rules were different in those days,and finding good advice was also difficult,as it often is today.
We could transfer them over but the costs,stamp duty,capital gains tax, etc makes it a very expensive exercise.They are owned by a family trust which helps.

Even with the extra tax that we pay,they are still ahead of our super.

[101RRS]

Well another roller coaster ride this week for super - down $10K one day - up ten the next down 10 the next - as a commentator said in the paper today fund managers are now in a herd mentality and basing decisions on what others are doing and not on the economics - "if the market is selling so am I, if the market is buying so am I". Those management fees do not seem to be getting good performance from managers - anyone can follow the pack. When "blue stocks" are swinging 3 - 4% on a daily basis there is something wrong with the processes within the market.

On another performance note, the average super fund returned its highest figures in 6 years in 12/13 with the most popular growth fund rising 15.5% but todays paper claims the market went up 17% so the most popular super fund under performed - just investing in the ASX or All Ords Management Fund would have been better.

This indicates to me that Fund Managers and Financial Advisors are really not doing their stuff and not earning their high commissions. Maybe these should become performance based.

Garry

[DiscoWeb]

My followup question is...do you have to have an advisor? My cousin has a self managed fund and has to have one

jx2mad,

Short answer is no. You need a super fund administrator who audits the fund and does all the compliance stuff but not an advisor.

There are number of "online" administrators who provide inexpensive services or you can go to your accountant and set one up.

George