Henk asks: I bought a living annuity in August 2009 after retiring. An on-going consultation fee of 0.5% of the investment value was negotiated and is paid to my financial adviser.
I felt it was reasonable at the time as I was under the impression she would be looking regularly at my investment and making recommendations for changes according to market tendencies.
The first recommendation to make changes came after I had my opportunity to reconsider my monthly drawdown one year down the line.
Where can I find out the job description for a financial adviser to see if I am getting value for money? I need more information before re-negotiating her fee or finding another adviser.
Maya replies: It is important to discuss upfront with your adviser exactly what services you can expect. These should have been put in writing to make sure you both understand what you are paying for and what you can expect.
At the very least, your financial adviser is required to fully review your financial situation once a year.
This would include discussing your portfolio and your current financial situation, including your income needs and updating her on any changes.
However it may be that you would like to speak to her once a quarter to get a sense of how your portfolio is performing and her view of the markets.
What your adviser should not be doing is regularly reviewing or making changes to your portfolio in view of the markets.
Your portfolio should be set up according to your risk profile, not based on short-term market expectations.
In fact, frequent changes to a portfolio is the number one reason people underperform– no one is very good at second-guessing the market.
That said, a call every quarter from your adviser just to chat about what performance is expected from the portfolio given the current market conditions could be seen as part of her on-going service.
Legislation allows you to cancel your on-going fee if you do not feel that you are receiving value.
However, I suggest you first sit down and discuss your expectations and give her an opportunity to respond.
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