Managed Funds Is it a good deal

A close friend is a financial adviser working for one of the big 4 banks for +10 years. I contacted him and asked for assistance re. investing in managed funds. This is what he said he could do for me:
- help me to pick a portfolio of managed funds that satisfies my requirements
- will monitor the portfolio for me without any charge (said usually bank/fin. adviser would chage about 1% or more trailing fees for managing the portfolio)
- so all up it would cost me about 1.5 % per year which is: roughly 0.8% managing fee charged by the fund managers + .5% bank admin charge (said so I can get into, and switch between those whole sales funds etc).

I would still be a legitimate client of him and the bank. He said he had this flexibility not to charge managing fees for selected clients.

Is this really a good deal ? or I am "just another client" of his ?
Thanks in advance for any comments.

 

I don't like the idea of mixing friends with business.

What happens if you get really poor returns or paperwork gets lost etc? The natural reaction is to have an issue with the other party...

 

Glebe,
Thanks for the comment and I understand the concern. If putting that aside, is it a good deal purely as far as the fees is concerned ?
I would still a legal client of him & the bank and would be treated as such. No risk of losing records etc more than anyother clients under the bank recommended admin system (ASGARD or Master Trust or the likes)

 

If you have the time, you can chart the unit prices of funds yourself (perhaps using excel) and if a fund doesnt perform, give it the boot. Find a Fund is one tool you could use to find fund that fit your criteria. If you manage these yourself you wont have fees to worry about (except for buy/sell spreads).

 

regarding the fees, he is not been upfront, the only fees a adviser can waive is the entry fee, which you can avoid yourself by doing to a discount broker like comsec or investsmart.

The ongoing fees your friend is refering to are fixed fees within the managed fund known as the MER, which he can't change. The fund pays the adviser out of these internal fees collected, which isn't a fee the adviser charges you ontop.

Some advisers are greedy, and charge you a ongoing fee ontop of what the fund pays them internally.

Just use a discount service provider like Investsmart, and they even give you back 50% of your funds internal trailing commission.

If you arn't confident in choosing your funds yourself, like select one of the pre-mixed balanced funds from someone like colonial first state.

hope that helps.. really its not that hard, have faith in your own research!

 

Pretty sure an advisor can waive or reduce the trail as well.

Investsmart actually give you back 50% for year one then 100% after that for everything above $396 (I think that is the figure - close to that anyway). Works out that you need $100K worth to get anything back - but even if just starting out you should plan to be having $Ms there one day

 

how would he do this? he would need to personally send a refund to the client, and for the small amount I hardly think his business unit would accept the paper work and effort required to do so.

As i said, managed funds pay this direct to the advisor, its not something which can be reduced from your units held.

 

Last prospectus I sent in had a series of boxes the advisor ticked that determined what trail he received - went right down to 0%. Imagine a fee for service broker might use that one.

 

Guess my fear of failure comes from the lack of knowledge but I don't have time (and don't enjoy) learning about funds & shares. Hence the question is "accept paying fees" and get something going, or keep procrastinating out of fear and do nothing still.
Thank you everyone for their comments.