Clients need to stay alert on strategies
While following the progress of the banking royal commission may be unsettling, the stream of revelations about malpractice and dishonesty provides a timely reminder of the need to stay alert and monitor the progress of your savings and investment strategies.
Despite the revelations of clients not receiving the services and benefits they have paid for, regulations and controls governing the sale of products have been greatly tightened. There's still only lax control over the spruikers of property investments, but purveyors of insurance, superannuation and investment products are required to disclose fees and ongoing changes as well as provide a detailed product disclosure statement to customers.
This hasn't always been the case. Until the mid-1990s when then-treasurer John Dawkins changed the legislation, life insurance and super funds weren't required to disclose all the fees and charges. Until then, hundreds of thousands of workers were sold super and savings products where two-thirds of the first two years' premiums were paid as commissions to the agents. These front-end loads payable to agents greatly reduced the chances of obtaining tangible returns from superannuation and other long-term savings.
Competition has reduced the losses from entry and exit fees. Paying attention to the fine details of the products being offered and regular monitoring of the investment performance helps ensure a successful outcome.
There can be substantial benefits from seeking professional assistance but this increases the chances of receiving advice inappropriate to the relevant personal situation. Many defined benefit super fund members have lost benefits (such as in evidence provided to the royal commission by one witness) from advice to cash out or move their benefits.
When seeking advice, there's no substitute for coming to a meeting with a broad understanding of the options available and a realistic understanding of your objectives. Compared with the hassles of managing assets, receiving a regular fortnightly indexed pension is an easier and more certain way of funding retirement.
For those without a guaranteed employer provided retirement income, diversification of asset holdings and an appropriate risk profile are essential to generating an adequate income and maintaining sufficient capital.
The clear message is that even when professional advice is sought, investors and savers need to understand and closely monitor the investments and strategies they choose to pursue.