I had an interesting phone call to my "non advisory" financial planner today. The company doesn't actually do any planning for me, I just use them to lodge mutual fund applications as they rebate 100% of the upfront fee (which is generally paid by the mutual fund to their distributors to get them to push product). They profit by getting the trailing fees on the investments (usually around 0.5%)
I'd bought a $50,000 hedge fund investment (Macquarie Equinox Select Opportunities Fund) back in June (using a 100% gearing loan) and prepaid the coming 12 months interest on the loan (so that it was deductible that tax year). As I'd only come across this investment a couple of weeks before the end of the Australian tax year (June 30), I decided to apply directly to the fund manager online, rather than print out the prospectus and mail it in via the "non advisory" financial planner. I thought I'd still be OK to get the entry fee (4%) rebated as the online form asked for your planner's details and what % fee they were to be paid.
However, I hadn't received any rebate yet, so when I sent in the application for my new son's "child super" account to the planner last week (to get the entry fee rebate, and, hopefully a rebate of the trailing commisions) I enquired about the missing rebate from June.
A couple of interesting things turned up - firstly, the fund manager claimed that they had no record of the planner's details from my online application, but that they were happy to send the planner the fee if I emailed them to that effect (I'd then be able to get 80% of the fee rebated back to me, so this was very good).
The second thing, and this is the funny bit, is that after confirming that I could get an 80% rebate of the 4% entry fee on my $50,000 investment made last June (which meant the "non advisory" planner was pocketing $400 for a couple of minutes paperwork, PLUS would get ongoing trailing fees of about $250 pa for doing nothing) he also confirmed that my son's super account application had been forwarded with the entry fee rebate approved (ie 4% of $1000) BUT they hadn't approved the rebate of the trailing commision (around 0.6% per year). I said that a few year's earlier they HAD approved a rebate of the trailing fees on my first son's super account, and as the amount was going to be trivial (around $6 per year!) I didn't think it was a big issue. The "planner" then commented that the trailing fee would just about pay for the express postage they'd paid for my son's paper work to be forwarded to the superannuation fund. At this point I just gave up - why argue about a $6 annual fee when they're going to be pocketing hundreds of dollars each year in trailing fees for my other investments placed via them?
On the bright side, there's another discount broker service that will rebate 50% of the next year's trailing fees if I fill in a form notifying the investment fund that I'm changing to them as my "advisor" - this would mean my current "non-advisory" planner would lose out on any further trailing commisions from my existing investments placed via them (probably worth about $400 a year to them) - all for the sake of not OKing a rebate worth $6 a year. So there!