• In my recent interview with Ausbiz, I wanted to give my insights on prevailing economic trends, the Australian economy, and the equity market. Watch here

On yer bike

On yer bike

Lest you read Tim’s comments below and err by drawing the incorrect conclusion that we are against good financial advice and planning…Keep in mind, every industry has their good and bad. Sadly, because the bad get all the press so it is easy to conclude from reading the papers and watching the news that an industry as a whole is rotten. This, in my personal experience, is not true. I have met a great many planners with a passion for their clients and a strong spirit of independence. I have met those who have left their firms when they believed their clients needs were not being best served. The standard of research I have witnessed is extraordinary and the investment being made in systems and processes is in inspiring. I am delighted to be an external advisor on the investment committee of one such group…Roger Montgomery

Back to Tim…

Early this morning I went for a bike ride with a former colleague from the investment banking industry (let’s call him “Bud” for short). We rode at what is known as “conversational pace”, and chatted about a range of things along the way.

One of the topics was the experience a member of Bud’s family had had with a financial planner. Yes – a rant is to follow.

Bud took the time to read the financial plan that had been drawn up, and having quite a good grip on things financial, was able to articulate the key points. In summary, a large part of the plan was in the form of boilerplate legal disclaimers. The remainder was a straightforward calculation that showed how much money the family member would retire with if their salary and expenses grew at the rate of inflation for 20 years, and their savings and investments earned an assumed rate of return.

That’s fine. It’s good for people to have an appreciation of this. However, calculating this requires minimal effort by anyone with some basic spreadsheet skills. In this case, the planner had charged an eye-watering amount of money to prepare the report, and sought an eye-watering amount each year to “maintain” it.

It didn’t take a spreadsheet to realise that the fees charged by the planner posed a greater threat to the client’s long-term financial well-being than the absence of a financial “plan”.

There are many very capable and honest advisers and brokers that give a great deal of comfort and reassurance to their clients, not to mention sound advice and reliable access, so we don’t want to malign them. However, it is a fact that the finance industry, like any other, will always attract a small number of shonks, and from time to time we encounter dreadful examples of people whose savings have been brutalized through greedy or incompetent decisions foisted upon them. In some cases these are matters that really need attention from ASIC.

Without wanting to incite a full-scale gripefest, have you had any particularly good or bad experiences you care to mention? Without naming names, let us know your thoughts and experiences.


Tim joined Montgomery in July 2012 and is a senior member of the investment team. Prior to this, Tim was an Executive Director in the corporate advisory division of Gresham Partners, where he worked for 17 years. Tim focuses on quant investing and market-neutral strategies.

This post was contributed by a representative of Montgomery Investment Management Pty Limited (AFSL No. 354564). The principal purpose of this post is to provide factual information and not provide financial product advice. Additionally, the information provided is not intended to provide any recommendation or opinion about any financial product. Any commentary and statements of opinion however may contain general advice only that is prepared without taking into account your personal objectives, financial circumstances or needs. Because of this, before acting on any of the information provided, you should always consider its appropriateness in light of your personal objectives, financial circumstances and needs and should consider seeking independent advice from a financial advisor if necessary before making any decisions. This post specifically excludes personal advice.

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  1. As a 26 year old Financial Planner who has just started his own Financial Planning firm, I’ve read this thread with great interest.

    It’s apparent that there is a huge opportunity for those of us committed to providing quality Financial Advice, simply by reading the feedback left from readers and their comments above, if we can find a business model that sustains our clients needs and values.

    Instead of continuing to highlight the frustrating parts of our industry however, I would love to hear what people would in fact value from a Financial Planning service, and how their compare that to the cost of the service. I find that at times, putting aside talk on commissions (which is no longer the norm anymore) expectation management around the value vs cost of service is one of the single biggest defining characteristics of good planners vs not so great planners.

    Personally, I recently went through the process of getting a quote for a website for our new business. I was ecstatic to find a fantastic web designer who was the best of an average bunch- he used his experience and fantastic questioning skills to identify the solution we needed within half an hour. He promised he could create this solution in 3 weeks. He quoted $10,000, which was about $7,000 more than I was expecting. Asking my colleagues and other trusted sources, I’ve had feedback saying that this guy is trying to rip me off and that I could get a solution for $1,000 or less. I’ve had others comment that this is a bargain based on the traffic and lead generation this website could attract for our business. I am at a loss- I’m a Financial Planner not a web designer, how do I value this website? What is it’s intrinsic value? Do I measure it’s return through it’s cost vs my expectation, or by the amount of business it could lead to? I am still not sure, which has made me me sympathetic to how prospective clients must feel after having less than fantastic experiences with Financial Planners.

    Moving forward however, I’d love to hear the collective thoughts of what clients most value when dealing with a Financial Planner, so that we can sway our focus towards helping up and coming FP’s such as myself build more valuable, more relevant and more meaningful business models and client experiences. Your feedback would be invaluable!

  2. susan.nolan.908

    I have had a bad experience that has left me scared to invest. A few months ago we asked our advisor to sell two stocks, horror shares not authorised were sold….. 6 months previously similar thing occurred and we put it down to a mistake. This time after an apology that no fees would be charged on shares sold by mistake and advisor could re buy,we felt violated and have now sold all portfolio. No body takes responsibility, once maybe ? Twice within a year period I think not. How did this happen. We still don’t k ow

  3. I am a Financial Adviser. One of the biggest issues with our industry is the lack of understanding by consumers of what Financial Advisers do and equally a lack of insight by Advisers themselves as to their capabilities. We are not Investment Managers, nor are we Stock Brokers or Accountants/Lawyers. Rather, we should be the Project Managers who collaborate with all the relevant stakeholders to help our Clients achieve their goals.


    Following a reasonably decent loss during the GFC, and taken aback by advice from my late gran to watch my super, I’ve been very concerned about whether I’m doing the right thing by my super investments. I recently moved my super from a well known super funds manager to an independent adviser with offices up and down the eastern seaboard. No idea whether I made the right choice moving across to these guys or not but I’m beginning to realise that I was just a mere number in a system with the other. There service is very personable. Fingers crossed Ive done the right thing.

  5. craig.n.vicki

    Seems there is a terminolgy or role definition issue here. A Financial planner essentially works with objectives and structures, whereas the investment adviser deals with how to achieve the objectives within the chosen structures eg SMSF.

    There are some very complex issues in finance/tax/legal/family etc and a planner can be invaluable in sorting through the issues.

    If one needs help executing the plan the investment adviser may be enlisted, or you could abrogate responsibility to a good fund manager.

    I always believed that if the investment adviser was any good he/she wouldn’t be working for others, but building his/ her own wealth – or running a fund!?

  6. alan ferguson

    I don’t know where else to raise this and ask this… So I’ll just jump in.

    What little I know and understand about ‘big’ finance… I hear enough concern from savvy pundits about the squillions that have been thrown into the global financial melting pot in order to try and fix the GFC mess. All too occasionally you will hear… How can this NOT result in runaway inflation?

    Having lived through the seventies in London, back when they invented the CPI, I found myself with a salary that was, neccesarily, linked to the CPI because we were living in an inflationary firestorm, and it helped stop an exodus of the masses setting off on a quest for the better paying job… Inflation was running at around 17%. And my consequential pay rises were truly, seriously appreciated.

    So I am left to think now, how can this scenario not be the next imminant event horizon? As Buffett explains, inflation is a way of govt. getting out of all the debt it created for itself by making the money worth less, so in affect, paying it all back quicker and more cheaply. (one is left to ponder… How else are we going to sort all this mess out?)

    So my question, in regards to the Montgomery Fund here, is do you have any plans to look at inflation-indexed bonds as a means of ensuring and maintaining ‘real’ value as a way of complimenting and supporting your value investing approach, should such a firestorm blow our way?

    All the finance news reports seem to reference that it’s amazing that all of recent history has not resulted in any noticeble inflationary concerns… All I ask is, how long can it be ‘amazing’ for?

    I am not looking to be alarmist, I just want to know that we have some position of intelligent insurance here.


  7. Dennis Lambert

    The fees my wife and I were quoted to manager her defined super on retirement seemed excessive when we approached a number of advisors. So we went DIY. I had been a share investor for many years and with the help of Skaffold, the Montgomery fund, and Rogers book it has helped making it a lot easier at a fraction of the cost.
    Lloyds comments are really important for young ones just getting started. Our daughter is just out of uni in her first job. I have encouraged her to use the wonderful calculators on the ASIC Money Smart sight for budgeting, compound interest and super calculators to help her financial management and goal setting. They are all free and simple to use. While at the same time introducing her to Skaffold and Rogers blogs.

  8. If I were to become education minister (I am not a politician, I am a simple engineer), I would make raising the financial literacy of all Australian people my top priority. Further to this I would also add teaching how to eat healthy and balanced diet. The founder of a modern republic, is famous for his saying: “Healthy body healthy brains”. I think financial planning should start at school by including related courses in the curriculum, perhaps as early as school year 7-8, if not earlier. It should not be seen something for which we must constantly take advice from some people who think they know better than the rest. By all means go to FPs (good ones) and discuss your situation to get advice or a second or third opinion. The more you know the more level playing the field will be. Then you are likley to ask the critical real questions and get the most help.

    • There’s a great theme running in this thread about self education. I completely agree with you, financial planning in school years needs to become common place, and good, balanced accumulation of investments thoroughly ingrained before you enter the real money earning world.
      I seriously regret not learning everything I know now until my 30’s, and I had started on the investment path with the greater amount of disposable income I had in my 20’s

  9. Andrew Legget

    Not really on topic i guess, but is on the subject of questionably unethical practices. I am looking on doing some reading up on financial scandals on listed companies and how to spot them. I obviously know about the big ones like worldcom and enron but does anyone have any other examples of ones where most people missed it before they went under or were caught?

    This (short side/activist investing) is something i have become quite interested in even though the resources i would need to do such a thing is quite a way off. I think it would at least complement my regular value investing skills.

  10. alan ferguson

    Well, despite your pre-emptive strike, blanket apology for the industry, that seems to have become part of the cliche schtik that has to be delivered when referring to FP’s, most of your respondent’s fall into the category of once bitten twice shy when it comes to dealing With the industry.

    The bad guys get all the press where there names are writ large, but professional appropriateness somehow forbids ever even uttering a reference or mention of a good one… Go figure.

    Even the anchorman on the cable network you visit on occasion, who I do have a deal of respect for and have read a couple of his books, will smile politely and give a sorta a verbal pat on the head and a really well done nod, when the caller say I am Joe Averge and my retirement savings are just over $120K… The fat cat chuckle that bounces round the table, turns to SMSF’s ponders how much do you need for this, 300K is suggested, 600K more likely, then we hear that the average SMSF’S sits at 900K plus.

    Now the talk turn’s to buying property within the SMSF, and securing loans, none of which they advise or support mind you, but then allow this to dominate the rest of the show. meanwhile, Joe Average has to listen to all this without being told the name of a trustworthy, affordable FP that can help him get on.

    Call me naive, but I am dim enough to think that if I had $900K plus in super, I would think I was doing ok, and perhaps not really need the ‘help’ of an FP. As time goes by, you start to realize that every little bit helps, every dollar, every percentile in returns… yet when FP comes into the discussion, we hear $2,000 for the initial plan (if you are lucky) and possible ongoing fees of 2% a year, and there is mention of a further $2K a year in a management fees…

    So one is left to weigh up, is it all worth it? Can I afford to spend 4 or 5 grand, to maybe save 4 or 5 grand? The industry subtlety and repeatedly let’s the Joe Average know that he is NOT the target demographic, then throws it’s hands up in dismay when it hears that people think this way.


    • Hi Alan,

      I really valued your honest appraisal of the situation. It really strikes me that there is a serious lack of understanding of what investors actually need and no amount of regulation is going to help in delivering that. I am happy to report that I do indeed know some very good planners to whom I refer my friends and close associates.

  11. Chris Embery

    Try being a Gen-X or Gen-Y and talking to a financial planner.

    From my experience, most won’t even bother talking to a 20 or 30 year old because they “don’t have enough assets” (>$100k) for them to consider even worthy of “walking in their office and wasting their time”. That is the stuck-up mentality that I have encountered, like, they are doing ME a favour even considering talking to me.

    When I finally found someone who was able to see me, I was palmed off to the “young apprentices”, instead of who I really wanted to pay for – the experience of the more senior planners.

    The joke is, I seemed to know more about finance than the planner himself (who was my age). I was actually after someone to try and help me, because I am smart enough to realise I don’t know it all, hence, you need a good team around you to build wealth.

    I would happily enlist the services of a fee for service planner (who could advise on things like tax, health insurance etc. instead of ‘buy this stock’), but most planners I’ve met (not ones who work in the big four banks) just want to sell you something or not listen to how you think you should be building wealth…and I have done quite alright for myself so far in seven years of investing with my approach !

    Roger, I have given up chasing FPs, because I just cannot be bothered talking to someone who is going to look down their nose at me, like I am some ‘upstart’ Gen-Y or Gen-X.

  12. I work in the finance industry and you come across all types both good and bad.

    Some get out of bed in the morning and see their clients as dollar signs. This leads to poor judgements around advice and the best outcome for their clients.

    On the other hand, the vast majority of participants within the industry genuinely care about their clients. They provide sound financial advice and respect their client’s capital as if it was their own.

    The bad, however typically get more press that the good, which is a shame.

    I stumble across this article the other day. Disgraceful.


  13. Tony Wrightson

    Yes Tim, there are plenty of shonky advisers but fee wise I would argue that far more revenue is generated and received by so called ‘active’ Australian Share fund managers that essentially ‘hug’ the index. Given the relative small size of our market, most of the large cap fund managers charge a 1% plus fee for what can nowadays be managed by a ‘free’ software program. It’s a joke.

  14. roland.marshall.50

    Hi Roger, lover your site and posts, keep up the great work!
    Unfortunately I’ve met several Financials Planners who all offer the same lame advice “backed up” by spreadsheets. My pet hate is seeing the trailing commissions the insurance, superannuation and other financial products give back to them. Yes, I understand that’s how they make their money but charging a service to complete a FP and then collecting commissions really gives drives me crazy. The problem is that people like myself are financially illiterate so don’t know when we’re being conned (and to what extent). Time to get back to more study I guess – any pointers would be appreciated!

  15. Michael Leslie

    A few weeks ago a friend of mine died at the age of 78 years and kindly left a Will which named me as the executor (thanks, mate). Amongst the boxes of papers which I “inherited” I found that the power of attorney, his 20 year old daughter (he started breeding late in life), had sought financial planning advice for her Dad about six months prior to her his death from the sort of organisation that you discussed on your bike.
    What appalled me was that my mate was too ill to attend the interview with the advisor (he had dementia and Parkinson’s disease) but was assessed after “discussions about risk and investment volatility” to have a “moderately aggressive (85% growth)” risk profile. “Projected net worth (proposed)” ran out for 20 years! Yes, so much of the wording amounted to no liability statements. His 20 year old daughter was thrilled to think her inheritance would double in about 20 years! Wow!
    Anyway I phoned the advisor asking for the return of the fee of $3,850 considering he made no effort to establish the serious nature of his clients diseases and gave advice which was, on the whole, worthless. So far I have not been offered any refund. Discussions are continuing and, if I have the energy, I shall present the case to ASIC.
    Tim, your article is timely as I am still upset with this guy who was only too pleased to offer worthless advice to a man who died six months after receiving advice through his 20 year old daughter, the co-inheritor of his estate.

  16. My ex accountant kept pushing financial advisors in our direction. In each instance we would have been spending so much on the financial advice, accounting fees and fees associated with the recommended financial products that we would have ended up going backward. I recommend DIY. Treat it like it’s your business. After spending a fair bit of money on bad analyst advice I have found a third party newsletter, The Montgomery Report and Skaffold to be a great combo. But you need to do plenty of your own research as well as having a clear strategy to your investing. We are now way ahead of any of the returns that we could have hoped for from the various investment strategies recommended by the ex bank tellers (financial advisors).

  17. The financial planner should be reported to the professional association that he is a member of and maybe ASIC. I hope the people who engaged him didn’t pay.

  18. Andrew Legget

    I have long been a believer that there needs to be more time spent teaching financial maths etc in school so people can have a greater understanding and ability to calculate various simple financial things. You do not need to be an expert in modern portfolio theory and economic modelling in order to do some simple calculations like you said.

    I currently have a situation where a family member after selling her house is trying to re-arrange her finances. The report cost her $2000, no idea if this is normal or quite high. not sure what the report will contain but i expect it will have the usual thing that you mention above.

    The financial world is good at making itself more complicated than it actually is so they can get away with charging these amounts for what is really a pre-set template which is calculated by a program, it could almost be automated. That is my probably cynical view anyway. I am sure there are some out there that are quite good and do tailor things to the individual.

  19. “these are matters that really need attention from ASIC”

    “Caveat emptor” is best protection, no alphabet soup can protect you from bad people.

    The Australian Investment and Securities Commission, ASIC, now admits it has failed to do enough to protect investors, which begs the question, is there worse to come?

    TREVOR SYKES: We have heaps of company law in Australia. It’s enforcement that’s the problem. The wild west was not lawless, it’s just that the sheriffs were not good enough.

  20. I was warned off financial advisers by my accountant, on the basis that anyone who had half a brain and some time to do their own research and maths could come up with the same conclusions for free.
    I took this advice, and Roger your book was part of that research, and I did indeed come to the conclusion that I could do a pretty good job on my own, particularly in your example of working out how to slowly accumulate compounding growth out of well priced shares.
    So far I appear to be doing ok, and my accountant is enjoying doing my now more complex tax returns.
    I have a work colleague here who has recently employed the services of a financial adviser, and I am looking very forward to seeing the results of his work.
    I have instigated a plethora of financially based conversations in our office of late, I’m really enjoying making people that would never normally think about their money realise they could be doing so much more.

  21. I have come across some very average performers and spoke at length about this to a mate who works in the industry and used to run a large part of the MLC/nab wealth management business. Although he is a good person he is still part of the machine and fails the self interest test on the grounds that he was whooping when Swann up’d the compulsory super as it was going to boost his income… However he did give an insight which was that the worst planners are those working in a bank branch as they either lack the skills or drive to go out and make a real business of it, the best run a private business. As it happens my own parents who are the type to put their head in the financial sand use a planner from their bank and the results are average despite my pushing them to take a more active view and just go as far as talking to other options.
    For myself I asked around and eventually found a company in Melbourne named (name withheld) who have been around for a few decades and had a good reputation. They charge only the standard remuneration offered by the super funds and give a comprehensive service of active management. They use the commercial products but do the homework that no one does for themselves and work within the profile of the clients, most of who are older, I may well be their youngest client. The returns are good and they also pass the test of being active in their approach which is that they try to take action when trouble is brewing on the market rather than after the fact. I have asked them to consider the Montgomery Fund as one of their investment options, you should get in touch with them as they oversee a significant pool of invested funds for a medium to longer term outlook as retirement funds tend to be.

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