Welcome back to Ireland’s independent & award winning Financial Planning Blog & Podcast. We don’t claim to be perfect but we have been creating and sharing ideas here on the podcast for the past 2 years and are on a mission to help people of Ireland (& beyond!) to make decisions which benefit them in the long-run. All we ask is that if you like what we are doing that you’d tell a friend or loved-one about us and see if it can be of any use to them!

Speaking of long-run we are hugely grateful for your ongoing support, readership and listenership, if the few thousand of you who listen every month didn’t do so we wouldn’t still be producing the show, so thanks for that, we love it! I know I say ‘we’ but it is really only me, but for some reason it seems right to me! Maybe we will be a we in future! Last week we tackled Entrepreneur Relief, and had some interesting emails from some entrepreneurs who have learned a thing or two as a result, which is cool!

This week I have to vent a little, not for my own good but as a bit of a warning or war-cry for us all. It is pretty disappointing that people still need to be warned about what I am talking about today but it is a fact, and an important one at that. What I am talking about is a charging structure that I witnessed on a retail savings product recently, that was being promoted on a state-funded website by an ‘advisor’ with national media coverage. It also ties-in with my announcing that I have recently become Ireland’s first Ambassador for the Transparency Task-Force. This is a voluntary group/movement based in several countries, with a few hundred members, and a dozen or so ambassadors. As the title suggests they exist in order to encourage more transparency and improved provision of information in financial services industry. I hope to interview the founder Andy Agethangelou in January so we’ll have more for you in a few weeks!

The Umbrage:

I never realised it until today when I went to check the spelling of it but Umbrage apparently comes from the Latin ‘Umbra’, which means shade, or shadow. It is the same ‘Umbra’ that we get the word umbrella from. So when we say to ‘take umbrage with’ it essentially means to cast a shadow over the person/event that has caused the offence, how cool is that!

So, I have taken umbrage with someone on all our behalves, however I have never been one to criticise others behind their back, and I don’t intend to start now, so I won’t be naming & shaming. If that’s what you were hoping for I am sorry to disappoint!

Suffice it to say that this particular ‘financial advisor’ has been in the business for many years and has built up a very high profile in the media, and all credit to him for the work that has gone into that. He is in papers, national papers and national radio fairly frequently, talking about all things personal finance.  He is talking about things that people could and should consider, and that’s great however what I do take umbrage at is the way he is capitalising on the faith and hey, the vulnerability of people who see him in these credible media sources regularly.

To give a specific example what I most definitely take umbrage with is the fact that in a recent article which was featured on the home page of a state-funded news website, he encourages people who are saving regularly to contact him so that he can help them set up a savings plan. This particular savings product that he is touting has such extortionate fees and charges that they would erode the vast majority if not all the market returns of the fund each year. In his article he suggests that this would be a great option for people who want to ‘take a bit more risk’, seriously!

The Fees:

I am a realist and encourage others to be too, there is nothing for nothing, and often you get what you pay for, however you don’t always pay for what you get! I was taken aback to see this advisor promote products in a general advice article that I decided to take a look at the plan he was trying to sell.

Now bear in mind that I know my way around these things yet I had trouble locating the nitty-gritty of the product, and finding out what the charges were. One of the products he is touting in this article charges a fee on every payment you make each month, and then has an additional set of fees every year thereafter to manage the fund, some of this would go to him if you bought it from him, and some would go to the product provider and fund manager (a well-known insurance company).

The full break-down of the ANNUAL costs associated with this product were the following. Please note that the entry fee would be in the region of 5-8% of what you pay in but all these fees are annualised to show the impact of them each year over a 7 year period.

Entry Fee (1.5 to 1.9% per year)

Exit Costs (0% to 0.3% per year)

Portfolio Transaction Costs ( Up to 2.36% per year)

Other On-Going Costs (1.7% to 2.87% per year)

So the heel of the hunt here is that if you signed up to this plan you will pay between 3.2% and 7.43% EVERY YEAR in fees on the value of what you have invested. If your fund is at €10,000 you will be paying between €320 and €743 effective fee EVERY YEAR!

If you have €30,000 in the fund you will pay between €960 and €2,290 in fees every year. If you have €100,000 in the fund you will pay between €3,200 and €7,430 in fees every year. I could go on but I think you get the jist of it, it’s totally extortionate and border-line criminal. And to add insult to injury you would very likely get nothing for your fee every year, no planning, no support, no nothing, bar maybe a call every year to see if you wanted to buy something else from him. Madness

On reflection I am also really disappointing that this sort of rubbish is so prevalent in the national media, the papers and the air-waves, yet people are generally totally unawares to it. I am sure that the media channels that he is spouting it through are totally unaware of it too, and perhaps they would say it’s not their role to filter what a contributor is selling, but I am tempted to draw their attention to it, and let them then decide. And in case anyone might think it I certainly don’t want to take this person’s position in any of these media channels, for fear that I’d be associated with this sort of old-school over-charging and mis-leading behaviour, really.

Conclusion:

I’m a little unsure of how to conclude this piece, just as we might when we come to the end of a rant to a close friend, maybe the only fitting thing to do is let a long and heart-felt sigh!

What I ask you, dear readers & listener, is to share this piece with anyone you feel might be about to get nipped or indeed mauled by a wolf in sheep clothing, or maybe encourage a loved-one to have another look at the terms and conditions on that policy they just took out, it could end up saving them many thousands over the life-time of a plan, surely they’d thank you for that! Heck, if you have any experience of this I’d love to hear from you, drop me a mail here directly. Remember when it comes to independent financial planning or financial advice be sure to make sure your dealing with someone who has your best interests’ to the fore, otherwise you could get mauled……

……..Sigh.

Paddy.

When you get a brain-wave or moment of inspiration then please do drop me a mail here with any feedback, ideas or suggestions which could help improve the podcast or website…..we are always looking to improve.