Barefoot Investor: Time for some financial spring cleaning
The best way to boost your investment returns is by lowering your costs and if your financial adviser is working in your best interests, he’ll agree with you, writes the Barefoot Investor.
Barefoot Investor
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She leaned in and whispered, “If you want the good stuff … you really need to go to … Brazil.”
I was speaking to the ‘Queen’ of global financial education: Elaine Kempson, from Bristol University.
She was telling me about a groundbreaking school money program in Brazil that she urged me to see for myself.
“Not only is it the largest study of its kind in the world … but it’s absolutely world’s best practice” she said.
So, later that evening over dinner, I leaned in and whispered to Liz: “I need to go to Brazil”.
At the time, my four-year-old was necking the tomato sauce bottle and my two-year-old was flinging mashed potato.
I thought Liz was going to lean in and give me a Brazilian.
“So what makes Brazil so special?” she deadpanned.
I explained the painful truth: a lot of the money spent on financial education is wasted.
Yet what was different about Brazil is that their program focused on teaching the kids and their parents.
Guess what happened?
The school money program showed a ‘trickle up’ effect on the parents’ financial knowledge and behaviours.
I’ve always said that your money behaviours and values are learned around the dinner table from your parents.
Yet it turns out that the skills of good money management can also come from the kids.
And that’s why my Barefoot Money Movement schools program is based on the following principle: ‘Teach the kids. Help the parents. Change the Nation.’
So I’m off to Brazil to see what I can glean and bring back here for our kids.
If what they did in Brazil really is world’s best practice, our kids deserve nothing less.
I’ll be back in a couple of weeks.
Tread Your Own Path!
Q&As
TIME TO GET OUT THE PLANNER PLUNGER
CHRIS ASKS: Your latest column about Hairy Maclary and expensive super funds really put the cat among the pigeons in our house.
Our financial adviser (who we like) has us with AMP (among a slew of other retirement-related accounts), and we are finding it hard to see through all the smoke and mirrors to get to the fees so we can feel secure.
Can you suggest a few questions that are polite but will still get us to the information we need?
BAREFOOT REPLIES: Would you let your plumber charge you an extra $1000 to fit a tap simply because he asked after your grandkids?
Of course you wouldn’t!
Yet the fact that you’re having to “see through all the smoke and mirrors to get to the fees” tells me that you need to get out the planner plunger … your thinking is blocked!
If I were in your situation, I’d write him the following email:
Dear (adviser’s name)
I was reading the newspaper the other day and I was shocked to read that the majority of funds underperform the averages each year.
That made me think that I should contact you and ask how all my funds are going. So can you please do the following three things for me: 1) Print us a statement that clearly shows my annual percentage return since we began, net of fees.
2) Benchmark our return against the relevant accumulation index for the same period.
3) Provide me with an itemised list of fees (expressed in both dollars and percentages). Include any and all ongoing fees, commissions and administrative costs that I’m charged.
After we have this information, it would be great to sit down and discuss it all.
Chris
I’m sure you’ll find his reply surprising, especially to question two.
My view is that the best way to boost your investment returns is by lowering your costs.
If your adviser is working in your best interests, he’ll agree with you.
The only reason the conversation will be awkward is if he’s not!
ONCE A FAT CAT, ALWAYS A FAT CAT
WENDY ASKS: In last Sunday’s column there was a paragraph that read “Scarface Claw is in this instance OnePath/ANZ … who have some of the worst performing Super Funds”.
I have to say this scared the hell out of me as I have just done a transition to retirement with this specific fund you mentioned.
I am 65 now and am topping up my super with some of my pay other than the work contribution.
Should I be concerned, or ride it out?
BAREFOOT REPLIES:
Your email reminds me of a friend of mine who married an ocker knockabout Aussie bloke who spends his free time sitting on the couch, drinking beer, and watching sport. She’s still holding out that one day she’ll arrive home from work and he’ll be watching The Bachelor, and drinking a bottle of Kombucha. It ain’t going to happen.
Similarly, ANZ/OnePath have consistently topped the Fat Cat Fund list of having the worst performing funds. Every year, for the last seven years! According to StockSpot, who compile the data on funds, they control almost a third of the worst 40 performing funds.
Faced with this dubious award, year after year, you’d think that ANZ would have woken up to themselves, and stopped picking the pockets of their customers with high fees.
They didn’t. Instead, in 2017 they agreed to sell their funds businesses to IOOF for just shy of $1 billion. The price IOOF agreed to pay was no doubt based on their expectation that the high fees you are paying will continue.
WELL DONE TO THE GENEROUS GENERATION
JODIE WRITES: I just wanted to share with you a lovely story.
I run a charity called Mums Supporting Families in Need. We provide material aid to vulnerable families in Victoria.
We recently had a young girl (grade 6) to come in and volunteer hours with her school.
She handed me an envelope with a note that said: “At home I have three jars: splurge, smile and give. Here is $25 from my giving jar for you to put towards something you are needing.”
I love that your concept teaches even our young generation of giving.
BAREFOOT REPLIES: Last week I hung out with a grade three primary school class in Hervey Bay.
As part of my primary school program, ‘The Jam Jar Project’, the kids sold some of their unwanted toys and books in a school ‘Toy Frenzy’, and ended up raising $31 in their class ‘give’ jam jar.
Then the kids debated the best place to give the money: the local animal shelter?
The children’s hospital?
They ended up making a group decision to give it to a local homeless shelter.
On their final graduation celebration class, a representative from the shelter came in and was officially presented with the ‘give jar’ money from the kids.
She brought with her a bowl, cereal, and fresh fruit, and explained to the kids that because of their hard work and generosity, they would be able to feed 25 people in their local community breakfast the next morning.
I sat at the back of the class and saw the absolute pride in the kids eyes.
It was one of my proudest moments too.
Originally published as Barefoot Investor: Time for some financial spring cleaning