Hidden fees not such a great investment

THE cost of investing can be surprisingly, and unnecessarily, high. Take the case of a couple I met recently who I’ll call Mary and John.

They’re both professionals in their mid-50s and their home mortgage is almost paid off.

Several years ago they saw a financial adviser who recommended they set up a self-managed super fund and invest in a range of products including managed funds and direct shares.

The adviser suggested these investments be held in a “wrap” account or platform.

The benefit of such platforms is that all investments are held in one place and investor reporting can easily be consolidated. Money can be more easily moved from one investment to another.

In many cases these advantages help the adviser more than they help investors because it makes running an advice business simpler.

Financial advisers enjoy this improvement to the efficiency of their back office administration but don’t pay anything because all the access costs for wrap accounts are paid by the investors.

Our couple had clear visibility of the monthly fees they were paying their adviser as well as the wrap platform. Based on what we could work out the cost of running the SMSF was built into the adviser’s fees.

All up these investors were paying $12,000 a year for the wrap account, advice and SMSF administration. Of this total fee the adviser was being paid about $7000.

Full article: http://www.theaustralian.com.au/business/opinion/hidden-fees-not-such-a-great-investment/story-fnciik1u-1226704581952

Australian assets under management growth leads world

Australia has recorded the fastest growing level of assets under management (AUM) among the world’s top 10 developed countries, growing faster than the Netherlands, Germany and the United States.

Data collected by The Boston Consulting Group and released yesterday show that total AUM (including superannuation and managed funds held by retail and institutional investors) grew by 14 per cent from US$1.4 trillion in 2011 to US$1.6 trillion in 2012.

China was the fastest growing country in 2012 with total AUM increasing by 23 per cent, resulting in a total AUM of US$1.6 trillion, on par with Australia among the world’s top 10 by AUM.

Australia’s AUM growth exceeded the Netherlands, which was up 12 per cent of US$1.9 trillion; Germany, which was up 11 percent to US$2.3 trillion, and the United States, up 10 percent to US$28.3 trillion.

Read more: http://www.moneymanagement.com.au/news/investment/funds-management/australian-assets-under-management-growth-leads-wo

Foreign investments can help as the Aussie falls

If you’ve taken an overseas holidays in the past few years you’ll have appreciated the historically high Australian dollar. Until recently, investors in foreign assets haven’t been quite so appreciative. Their investments have suffered as the Aussie dollar has gone from strength to strength.

But in the past couple of months our dollar is down about 10 per cent against the US dollar, trading at just under 95 cents at the time of writing (compared with more than $US1.05 in early April). This has delivered a windfall gain to investors in foreign bonds, shares, funds and property.

Anyone thinking of joining them (for instance, buying an international share fund) could be excused for thinking they’ve missed the opportunity. But perhaps not.

Currencies are notoriously difficult to predict, and the Aussie dollar might still bounce back to parity, but it’s worth keeping in mind that our dollar is simply back around where it was in June 2012 and October 2011.

Read more: http://www.smh.com.au/money/investing/foreign-investments-can-help-as-the-aussie-falls-20130620-2ol1q.html#ixzz2ZHsLUcEu

 

Aussie dollar falls to fast money folly

When the Australian dollar fell almost 5 per cent in a few days it was a salutary reminder of how fast the currency markets can move. Fast change has been a feature of globalised capital markets for at least two decades, especially in the smaller currencies. They can quickly rise because of trader sentiment and just as quickly fall.

The after-the-fact explanations seem perfectly reasonable, but the rapidity with which the re-pricing occurs is not. There has been a decoupling of what money does and what money is supposed to represent. Suddenly, Australian manufacturing exporters become more competitive, and importers of foreign goods for local sale less competitive. People involved in the real economy have to respond to the financial markets as well as their customer markets.

A currency’s value is supposed to represent the state of the country’s underlying economy. Yet very little changed about the Australian economy during a week in which the value of the dollar was substantially altered. It is a small instance of how rapidly change occurs in currency markets, sometimes to devastating effect. During the Asian financial crisis, entire economies were brought to their knees in a matter of weeks.

Full article: http://www.eurekastreet.com.au/article.aspx?aeid=36755#.UdQiU_kiZrI