Over the past few days, we’ve had a number of clients ask us “We have money with X Bank, does the Royal Commission matter? Am I at more risk?”
First of all, these are great questions. You (and we) should always be considering what do changing circumstances in markets, products or product providers mean for our investments.
We thank you also for taking the time to share your concerns with us. One of the most horrifying and saddest comments out of the Royal Commission was the evidence of Melbourne-based registered nurse, Jacqueline McDowall. Fighting back tears, she was shattered to reveal that ‘I felt humiliated, stupid’.
You should never ever hold back from asking us questions about your money. It’s your money. If you have any fears or concerns, as your advisers you have every right to ask us anything. If something doesn’t make you feel comfortable, keeps you up at night or maybe it’s just something you don’t understand; then please ask us. When it comes to YOUR money, the only stupid question is the one that was never asked.
We’d only ask that if a thought pops up in the middle of the night, then perhaps send us an email. We’ll get back to you, we promise.
One thing we have learnt in our near 25 years in business is that if a few clients tell us they are wondering something, then it’s likely that far more of you are wondering the exact same thing but just haven’t got around to asking us yet.
So, back to our question, What does the Royal Commission mean for you?
The main companies that were highlighted at the Royal Commission were the Commonwealth Bank, AMP, ANZ, Westpc/BT, NAB, Henderson Maxwell and Dover Financial.
We have nothing whatsoever to do with the latter two (Sam Henderson appeared from Henderson Maxwell and Terry McMaster from Dover Financial). However, as long time active industry participants ourselves, we were sadly not surprised these were the names raised.
That leaves the big four banks (CBA, ANZ, NAB and ANZ) and AMP. We have no allegiance to any of them but we may choose to use products from these providers where we believe it is in your best interests.
For term deposits and bank accounts, we have no allegiance to any and simply choose whichever provider offers the highest rate on that date for the desired term (eg 3 month, 6 month, 12 month, etc). We also strive to keep individual term deposits below the government guarantee amount of $250,000. If we seek to invest more, then we spread the risk across the banks in order to keep it below the $250,000 level. This should alleviate some of your concerns.
If other, smaller banks or building societies offer higher rates, then we will use them. However, if a smaller (lower rated – higher risk) bank offers the same rate as a larger (higher rated – less risk) then we will take the higher rated, lower risk bank. It is common sense to take the lower risk on offer if the return is exactly the same.
We don’t receive any kickbacks, lower fees for ourselves, marketing allowances, etc. If the system works efficiently, is reasonable on costs and offers exposure to the investments we think are best for you, then we will use it. None are of these products are perfect and we wish all of them were cheaper.
We could try to shift clients to another product from another provider but this can sometimes be a case of jumping out of the frying pan into the fire.
We are incredibly proud of the fact that we have never advised into a product that has collapsed or been frozen. We have no products of our own and we never will. We advise our clients into best of breed, blue chip investments that we believe are in their best interests. Our due diligence process on products and product providers has stood the test of time.
Do we feel comfortable what has gone on in these institutions? No.
Do we wish there were as good alternatives, cost effective we could use so we could avoid them altogether? Yes.
We have long and loud argued for reform of the finance industry – reform for financial planners, for institutions and for financial products. We will continue to speak up on your behalf with all the product providers, without fear or favour.
If you have any questions about any of these, please drop us a line or give us a call.