VISIS recently onboarded new clients that had been advised to set up a self-managed super fund (SMSF) and invest with financial products created by their former advisory firm. Our biggest concern with these types of products is the potential for conflicts of interest to arise – particularly when considering the financial incentives advisers receive for recommending the product. The client’s experience had been bad, to say the least, with performance of their SMSF poor compared to market performance over 10 years.
The main issue impacting their SMSF was that in-house products recommended were opaque and its under-performance resulted in the client being uncomfortable acting on further financial or investment advice. This led them to manage their SMSF unadvised for the 18 months prior to engaging VISIS, resulting in further detriment to their investment performance.
Of immediate concern was the impact these investments had on their retirement plans and the high costs of ongoing care they provide for their disabled son. Thankfully, we were able to work with the new clients to add appropriate transparent assets, provide clear advice on exiting existing arrangements, all within reasonable time frames and affordability.
I’ve always been clear on the important distinction between adviser and product. We established our firm to care for our client on a first, last and always basis. So, we stick to what we are the best at, and that is providing strategic advice. We leave the creation of investment products to those who are experts in their field. There are some very big firms throughout the world that have one role, and that is to create and administer investment products and platforms that people like our clients can invest in. There is also an entire universe of investments you can access directly on a stock exchange that can reduce fees you pay to an advisory firm that is white labelling external investment managers products for their own use.
If you are fortunate to walk through the doors of an adviser among the best in their field, it is a bit much to ask that they are coincidentally also among the best manager of investments across the world. I suggest you find an adviser that is an expert in the profession and is someone you can truly trust. This is far easier when the adviser has no potential conflicts of interest arising from things like in-house investment products or floating companies in an IPO for a fee.