I have to admit that I have.
It was back when I was at Uni. I had one of the craziest jobs that you could imagine. I was working at a Rave – my official role was to hook people up to something called a ‘Dream Machine’. It consisted of strobe light glasses, headphones and a walk-man like controller. It was said to induce deep states of relaxation and even produce altered states of consciousness. Kirk Cobain, who had recently died of a suspected suicide, had several of the machines in his home. Needless to say, the machines were hugely popular and there was a massive waiting list which I had to manage.
This is where the abuse of power comes in. Among the waiting list were a few big deals from my high school and every time they came to ask me if they could have a chance, I would say that they still had a seriously long wait (of course pushing everyone else in front of them).
In my defence, I was young, I was trying things out and the consequences of my actions were pretty negligible. I have since grown up and tend to treat people much more fairly.
However recently I came up against a much more serious abuse of power – by an industry super fund against a pensioner.
A lovely lady came into my office last Tuesday. She was an ex teacher, had recently turned 60 and was interested in drawing a pension off her super fund. She had approached her super fund, whom she had been with for the last 40 years, to ask for some advice. They were very obliging, noting that she had amassed a reasonable balance, however added that she would have to pay a fee of $3,000 - $5,000 to receive this advice. Not only would she be charged this initial fee, but she would be charged a further fee of $3,000-$5,000 if she would like phone access to an adviser on an annual basis.
Insane! What kind of shop would charge you a fee for advice on purchasing their own products?
This is a clear abuse of power. This fund holds itself to be managed in the interests of its members. The teacher contributed her whole life towards it and when she is most vulnerable the managers blatantly abuse her position of trust.
So you may ask – how is this different to a financial adviser?
Well a financial adviser with a bank would be pretty similar. If you were to walk into a bank seeking financial advice you can be rest assured that they would charge you a fee but any recommendation on their part would be full of all the wonderful products offered by the bank.
Financial advisers that do not work for an industry super fund or bank of are different. Commissions or kickbacks from fund managers were abolished many years ago. Most financial advisers, who are not aligned with a product manufacturer such as a super fund or bank, will charge you a fee for their service. They are dependent on you for their income and therefore have your interests at heart. When it comes to choosing the most appropriate product for you they will I look at the whole market of providers and compare them based on quality, performance and price to ensure that you get value for your money. They also typically charge an annual fee, whereby they review your portfolio on a regular basis to ensure that it is still appropriate for your circumstances.
The bottom line is that when it comes to industry super funds and banks there appears to be allot of balding men in ill-fitting grey suits that are letting their cronies jump the queue. They are charging for advice but recommending their own products. You are far better off seeking advice from someone who acts independently, whose income is not tied to a product provider.
Marisa Hoffenberg, BCom, CFA, DFP