"A super adviser has offered for me to change my super from Host Plus to Hub 24 for a one-time fee of $3000 and a trailing 1.9% fee for what he says is 8% return after fees... Does this sound legitimate? Should I go down this path?
- Michael in Perth, WA
Top answer provided by:
Thanks for the great question the easy answer is it sounds legitimate but it totally depends…
On the fee front, the upfront advice fee seems reasonable to me getting advice in 2021 post the Royal Commission. Unfortunately, the compliance costs which have increased in the Financial Service Industry mean that consumers have to pay more to get advice. My advisers are charging between $3,300 - $5,500 as an average fee. Under the rules and legislation, the Adviser should be getting your informed consent prior to providing the advice and you should have had a good vibe and understand their approach and how they work with the client prior to signing this. Ongoing fees usually come once the advice document has been provided but most advisers will provide you with an understanding of what those fees are likely to be prior to getting your commitment to work together. Without knowing your super balance, I can’t comment on if this is higher than average or not but generally, we try to keep our ongoing fees below 1% - 1.5% for clients.
On the advice front, there are a few elements to consider here which your adviser should engage with you on. What is your game plan? What are you trying to achieve and what sort of interaction do you want with your superannuation investment approach? Do you want to consider Ethical and Sustainable investments in your approach? What is your risk tolerance?
You might just want to make money, but the money stuff is all about context. What I mean by this is that it isn’t about the money it is about the outcomes you are trying to achieve. That outcome isn’t an 8% return I wouldn’t imagine. I mean what is that anyway. Your money doubling every 9-10 years? It may be something more like “I want to be able to enjoy my retirement lifestyle on $2,500 per fortnight in my pocket”. “I want to be enjoying time with those special to me, travelling overseas (yes COVID will subside) enjoying dinners out or ticking the items off my bucket list!”
If you haven’t already guessed I don’t like talking to my clients about a promised return. We are all born into this market economy that we live in and no matter how super an adviser is, no one can guarantee return against another fund. We have clients who use both Hostplus and Hub24 as their super solution. They both serve a purpose in the market and depend on my questions above around how much interaction and transparency do you want with your super solution, if we are framing up ethical investment options or if you are following a certain contribution or pension payments strategy. Hostplus is more of a set and forget style (check it every few years) and has a good but more limited investment menu. While Hub24 if you are using the Super Adviser you have found will require more engagement from you and has a very wide and transparent investment menu. It will need more tending depending on the investment approach and based on the fee being quoted I would imagine this would be a fairly active management overlay from the adviser.
So, check the past performance history of Hostplus against the promised 8% as a guide but the advice journey is more than that. It is all about guidance and helping you to get to the future outcomes you want. This will be about achieving a dollar value amount in your super fund at the time you want to retire. If you are going to jump into a long term relationship with this Super Adviser you have found make sure they really are super and that you are happy to have deeply engaged conversations with them about your money and an ongoing relationship. If you don’t want to be seeing this person a few times a year until you retire or you are not feeling their vibe then I would be seeking out an alternative and more suitable Super Adviser!
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Scott Malcolm is podcast host of the Money Mechanics podcast Unpacking Money and been awarded the internationally recognised Certified Financial Planner designation from the Financial Planning Association of Australia and is Director of Money Mechanics.
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