A cautionary tale of superannuation, mortgages and sharks.
A year or so after I’d taken on a mortgage, I got a call from a financial adviser— let’s call him Ken—who said he was affiliated with my bank. He offered me a free consultation to look at ways I could make my money work better for me. How timely! I collected my paperwork and arrived at the bank at 5pm the following day.
Ken admitted me into the now-closed bank and took me into an office.
I told him my focus was on reducing my mortgage. He then spent two hours combing through every possible detail of my financial life down to the full names, ages and earning capacities of my children. He looked through my papers and told me he thought he could potentially free up a few thousand dollars from my superannuation to put into my mortgage. By now I was beginning to think that being put through the financial wringer for two hours was going to be worthwhile.
Then he shoved a piece of paper and a pen towards me and asked for my signature.
The ‘potential’ saving of a ‘few thousand dollars’ was going to cost me $1200 of my precious, meagre superannuation. A heated conversation ensued during which I expressed my surprise at being asked to pay for a service I thought was free.
‘Who do you think pays me?’ he asked. ‘Not my problem,’ I replied, adding ‘I’m a pleaser, Ken. I know you want me to sign that form and I want to please you.’ I stood up. ‘But I’m not gonna. Now open that door!’
By now it was dark outside and we were alone in a bank in lockdown. I was at his mercy and I didn’t like it. Not one bit. Reluctantly he pressed a button and the door opened.
The following day I made an appointment for a free half hour phone consultation with my superannuation fund.
The consultant took five minutes to work out that, given my age and mix of funds, I could access a substantial amount of superannuation immediately without paying tax. Included in my super were some non-concessional funds, meaning that tax had already been paid on them. Because I was born before the cut off, I could move them into my mortgage. This would reduce my monthly payments significantly. Since Ken would have seen this within minutes of looking at my paperwork, it would have been the easiest $1200 he’d ever made.
Armed with that information, I paid a good chunk off my mortgage and didn’t pay a cent for the privilege. Thanks to the Future of Financial Advice reforms introduced on July 1 2013, my experience with Ken cannot be repeated: the changes are aimed at improving transparency and fairness in the financial advice industry.
The lesson here is to trust no one on face value when it comes to your hard-earned savings. Make them understand you expect your adviser to earn your trust. You are a single independent woman now. Look out world.