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Help - Problem with my super fund

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Published on: Thursday, February 11, 2010

I have a problem with my super fund. I’d like to invest my super in a plan that reinvests the dividends back into the investment, however I don’t understand if my fund can do it. I contacted my super company and there seems to be a lack of knowledge as to how it works. So I contacted a financial adviser to see how much it would cost to have this explained to me. Their fees would be an ongoing percentage each year just to get an answer. I’m happy with a one-time payment, but yearly grabs at my money for this advice is not on! How do units reinvest themselves? Where do I find supers that have a reinvestment plan? And is there a way to understand what is going on without paying those unfair fees?

I have to say due to technical difficulties, some of your question was lost, but I understand the core of your question and the answer I will give is important for lots of people who want to know about some complex financial planning issues.

When I ran your question by my responsible officer in my business he thought you might be a little confused about what you want. Generally super funds reinvest your gains each year to create the snowball effect, which is the beauty of super. If you had a self-managed super fund and you bought shares that permitted the dividends to be reinvested, then you’d achieve what I think you’re after. I know some super funds allow you to buy shares direct but if you’re doing so and the shares permit it, you could tick the box to reinvest the dividends.

The bottom line is that you were right to look for a financial adviser to answer your questions — you need one given your head scratching issues. However, there are money-hungry advisers who see every potential client as a cash cow and that’s why the adviser you talked to wanted to sign you up and get an ongoing one per cent from you.

In some cases the one per cent is an OK charge. For example, if you had $500,000 to invest and you wanted a self-managed super fund where you bought and sold shares and wanted regular advice on loans, credit cards, buying homes, etc then $5,000 could be a fair charge.

Some financial advisers will give you answers to questions by the hour, but you could be charged between $200 to $500 an hour.

By law, if you need advice the adviser has to get to know your circumstances and put in at least 10 hours work but it’s more like 15 hours and so you can see where the charge comes from.

I don’t generally spruik for business in this column but if you try to find an adviser who’ll help you on an hourly basis and you fail, then contact us. I’ll have to charge you but it’s at the reasonable end of charges.

The bottom line is that many Aussies, like you, have questions and they have important impacts on your wealth and this means you should pay to get good advice but you shouldn’t be ripped off.

Important information: This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. For this reason, any individual should, before acting, consider the appropriateness of the information, having regard to the individual’s objectives, financial situation and needs and, if necessary, seek appropriate professional advice.


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