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Cooling-off vs Fully withdrawal

Discussion in 'Managed Funds & Index Funds' started by evisional, 20th Oct, 2007.

  1. evisional

    evisional Well-Known Member

    Joined:
    23rd Aug, 2007
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    Location:
    Melbourne
    unfortunatelly, I have lodged an application for a wrong managed fund and now I want to fully withdraw it.

    I can send withdrawal form and close the account. However, reading the PDS, I also can exercise cooling-off right.

    According to PDS, "To exercise the cooling-off right we must receive your written instructions in our office before the expiry of the 14-day cooling-off period. The repayment of your investment under the cooling-off right is subject to an adjustment for market movements (both positive and negative) during the period the investment has been held. We may also deduct a reasonable charge for our administration costs. "

    So, what are differences between full withdrawal and cool-off exercise? Which one I should use if i have a right to choose one of them?
     
  2. Simon Hampel

    Simon Hampel Co-founder Staff Member

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    If they are just going to give you market value for your units, then I don't really see the point of a "cooling off" clause. Unless they refund fees perhaps ?

    Did you pay an upfront fee to invest ?

    I think it's worth ringing them and checking on the difference ... I'd be interested to know!
     
  3. evisional

    evisional Well-Known Member

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    Location:
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    I have emailed them and will post their reply here as soon as possible.

    Also just let you know it is Challenger W/S China Share Fund.
     
  4. evisional

    evisional Well-Known Member

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    I got the reply email from Challenger:
    ---
    Thank you for your email.


    To exercise Cooling Off you must contact us within 14 days of opening your policy to in effect close that account/ pull your money out. Effectively when you exercise your right to Cooling Off does not guarantee you to your original investment amount. This amount is subject to market movements, so you may receive a higher or lower dollar amount subject to market performance.

    You can withdraw your Investment Funds if you wish, but it may be subject to capital gains implications. You need to discuss this with an accountant or financial planner.

    I trust that this email has addressed your query but if you have any other questions, please don't hesitate to all us on 13 35 66. If you would prefer to contact us by email, please send your queries to info@challenger.com.au


    Kind regards,


    Sai Srinivasan

    Client Services Team
     
  5. Simon Hampel

    Simon Hampel Co-founder Staff Member

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    I still don't see the difference ? Surely if you receive an effective capital gain or loss as a result of cooling off, you'd still claim/declare that ?

    Can any of the financial advisors or accountants comment here ?

    Am I correct in my suggestion that the only difference may be that they refund up-front fees (if applicable) if you cool-off rather than withdraw ? (which is of course irrelevant for most wholesale funds).
     
  6. Rob G.

    Rob G. Well-Known Member

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    Location:
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    I can only guess that you are dealing with an overlap of laws.

    There are statutory rights giving the opportunity to withdraw from the financial contract within the cooling off period.

    These rights may allow only minor processing costs to be retained by the service providor (application costs) as liquidated damages. Prepaid fees to the extent they have not been earned must be refunded, and no claims allowed for lost profits of the fund managers by the breach.

    However, the trust deed will likely have a restriction only allowing redemtpion of units at market value. This is to enable unit holders to claim interest expense tax deductions on borrowings to acquire their units.

    So its not like the contract was made void, it just limits your potential losses.

    There will be a capital gain or loss on disposal of the asset, without the 12 month CGT discount available.

    Just my guess ....

    Cheers,

    Rob
     
  7. evisional

    evisional Well-Known Member

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    Another reply from Challenger:
    ------------
    Whether you incur a capital gain/loss will be a matter for your accountant and I won’t be able to comment in regards to that.

    You would be correct in assuming that in terms of exercising Cooling Off your fees would be rebated, and not so if you were to redeem your account. As you also mentioned this, for a Wholesale account is irrelevant.

    I trust that this email has addressed your query but if you have any other questions, please don't hesitate to all us on 13 35 66. If you would prefer to contact us by email, please send your queries to info@challenger.com.au


    Kind regards,