RaboDirect Worried Clients – Some Advice
With some 5,400 customers affected by the recent announcement (24th Nov 2016) by RaboDirect to close their investment accounts, MyAdviser has some independent advice to help the transition and get over the loss of a quality provider.
There are many options open to you and you should compare them to Cantor Fitzgerald (the default option post 24th April 2017). This default option includes your current charges (most between 1.5% p.a. and 1.7% p.a.) for 12 months, after that they can change the terms. There will be no regular contribution plans transferring, and no advice included at these rates. So what should you do?
INDEPENDENT ADVICE
This is an ideal time to review what you are doing with your finances, and here is how you should do it. RaboDirect never provided advice and 2014 Vanguard (the pioneers of passive low cost investing) research shows that good advice can add 3% p.a. over time*.
Just to show you that there are quality solutions out there that are better value than the default solution RaboDirect has arranged, here are two examples. There are many others and deals can be done where you get real independent advice and lower costs.
Option 1 – €30,000 or More Invested
100% invested in the new solution, with annual charges typically between 1% and 1.15%. Endless choice of investment options including low cost index tracking funds and ETF’s from Vanguard and Blackrock. On top of this you can access Dimensional Funds - Science of Investing rather than chasing active managers. Most of RaboDirect Funds (36/55) cost 1.5% to 1.7% p.a. and there is no advice. The above offer includes ongoing advice services, there are no exit penalties and no 1% government levy.
Option 2 – Between €5,000 and €29,999 to Invest
100% invested in the new solution (101% less 1% Government Levy), with annual charges typically between 1.25% and 1.50%. Wide choice of investment options including index tracking funds, active managed funds from Zurich, M&G and Blackrock. On top of this you can access Dimensional Funds - Science of Investing rather than chasing active managers. Most of RaboDirect Funds (36/55) cost 1.5% to 1.7% p.a. and there is no advice. The above offer includes some ongoing advice services and there are exit penalties (1st 5 years 5%, 4%, 3%, 2% & 1%).
Regular Investors For those who want to save regularly there are similar solutions but they are likely to cost more than the terms above (unless you contribute 1,000 or more). RaboDirect did offer low cost entry points for regular investors, but unfortunately it was not a sustainable model and will not be continuing with Cantor Fitzgerald.
CONCLUSION
Stop and make a bit of effort. No point feeling bad that RaboDirect are leaving and instead see it as an opportunity to do better. Seek and find an independent financial planner/adviser who is fee based (most are not) and as you can see above there are better solutions waiting for you. Finally, as a rule of thumb, don’t use your bank for these services as they are usually pushing their own solutions and are not independent.
Ends
* 1Kinniry, Francis M., Jr., Colleen M. Jaconetti, Michael A. DiJoseph, and Yan Zilbering, 2014. Putting a Value on Your Value: Quantifying Vanguard Advisor’s Alpha. Valley Forge, Pa.: The Vanguard Group.
Author: Michael Kiernan is the CEO at MyAdviser.ie, holds QFA, MSc. (Mgmt.), MA. MyAdviser has been providing independent financial advice for 15 years and has 27 years’ financial services experience.
There are many options open to you and you should compare them to Cantor Fitzgerald (the default option post 24th April 2017). This default option includes your current charges (most between 1.5% p.a. and 1.7% p.a.) for 12 months, after that they can change the terms. There will be no regular contribution plans transferring, and no advice included at these rates. So what should you do?
INDEPENDENT ADVICE
This is an ideal time to review what you are doing with your finances, and here is how you should do it. RaboDirect never provided advice and 2014 Vanguard (the pioneers of passive low cost investing) research shows that good advice can add 3% p.a. over time*.
- Only use a Fee Based Adviser – if an adviser is willing to meet you and do a report for free then be very careful – they are not really working for free and to recoup their time they will need to sell you something. Also, consider who pays for the time they spend with prospects who do not buy from them? If someone else does not buy form them then they must add the cost of their time to you. A fee based adviser will give you independent advice and, as you pay them directly, they are not biased by a need to sell you something.
- The review must start with you and your needs. If they get straight or quickly into products and the latest investment solutions, then you should question are they selling or advising? Usually it is the former in such instances. What are your objectives for this capital? How long can you leave this capital invested? What is your investment profile and tolerance for risk? They need to know who you are and have a good understanding of your needs and situation.
- The better financial planners will incorporate cash flow and net worth projections, which help get answers to questions like – will we always have enough money? They will review short, medium and long term needs, and only when they have explained how best to meet your needs will the best solution be put in place. If your adviser (however recommended) is not doing these things, then walk away. There are better ones that you should be talking to.
- Make sure you shop around and use the web to do some homework. Sites like www.askaboutmoney.com and www.finfacts.ie are worth reviewing.
Just to show you that there are quality solutions out there that are better value than the default solution RaboDirect has arranged, here are two examples. There are many others and deals can be done where you get real independent advice and lower costs.
Option 1 – €30,000 or More Invested
100% invested in the new solution, with annual charges typically between 1% and 1.15%. Endless choice of investment options including low cost index tracking funds and ETF’s from Vanguard and Blackrock. On top of this you can access Dimensional Funds - Science of Investing rather than chasing active managers. Most of RaboDirect Funds (36/55) cost 1.5% to 1.7% p.a. and there is no advice. The above offer includes ongoing advice services, there are no exit penalties and no 1% government levy.
Option 2 – Between €5,000 and €29,999 to Invest
100% invested in the new solution (101% less 1% Government Levy), with annual charges typically between 1.25% and 1.50%. Wide choice of investment options including index tracking funds, active managed funds from Zurich, M&G and Blackrock. On top of this you can access Dimensional Funds - Science of Investing rather than chasing active managers. Most of RaboDirect Funds (36/55) cost 1.5% to 1.7% p.a. and there is no advice. The above offer includes some ongoing advice services and there are exit penalties (1st 5 years 5%, 4%, 3%, 2% & 1%).
Regular Investors For those who want to save regularly there are similar solutions but they are likely to cost more than the terms above (unless you contribute 1,000 or more). RaboDirect did offer low cost entry points for regular investors, but unfortunately it was not a sustainable model and will not be continuing with Cantor Fitzgerald.
CONCLUSION
Stop and make a bit of effort. No point feeling bad that RaboDirect are leaving and instead see it as an opportunity to do better. Seek and find an independent financial planner/adviser who is fee based (most are not) and as you can see above there are better solutions waiting for you. Finally, as a rule of thumb, don’t use your bank for these services as they are usually pushing their own solutions and are not independent.
Ends
* 1Kinniry, Francis M., Jr., Colleen M. Jaconetti, Michael A. DiJoseph, and Yan Zilbering, 2014. Putting a Value on Your Value: Quantifying Vanguard Advisor’s Alpha. Valley Forge, Pa.: The Vanguard Group.
Author: Michael Kiernan is the CEO at MyAdviser.ie, holds QFA, MSc. (Mgmt.), MA. MyAdviser has been providing independent financial advice for 15 years and has 27 years’ financial services experience.