‘My account-based pension balance tumbled late last year and I’m worried’

Q. I am currently in retirement and would like some advice on how best to invest my retirement money. I have an account-based pension account invested in a balanced fund with an industry super fund. Between October and December 2018, my account balance tumbled from $601,000 to $576,000. I am worried that if this trend continues my funds will dwindle. Balanced funds have returns good returns in the past but that is not a guarantee, as at least 60 percent of the fund is invested in stock markets. With this amount of money. I may not be entitled to any Aged Pension either. What investment strategy would you recommend? Can you tell me how to find a good financial planner who can help me make a decision on this?

A. Once you are in retirement, it’s understandable that you are more focused on your investments as this is what will sustain you now you are out of the workforce. As you’re in a balanced fund, you will have some exposure to share markets both in Australia and overseas. Without knowing the exact balanced fund you are in, it’s difficult to know how much of the fund is in these markets. It’s this exposure that caused the decline in the value of your fund in the last quarter of last year. But there has been a substantial improvement in these markets since the New Year and most markets are now back near their peaks of last year. This is the very nature of these markets – there can sometimes be large movements, both positive or negative in the short term.

Accordingly, it is important not to focus on short-term movements in financial markets but on longer-term returns. If you go to the website for your fund you’ll most likely find that the medium- to long-term returns from your balanced fund have been quite good over time and certainly better than keeping all of your funds in cash or other secure investments.

Having said all this, without knowing a lot more about your personal circumstances, I cannot give you any guidance in relation to what investment strategy would be best for you. In your circumstances. there’s no substitute for getting independent advice from a suitably qualified adviser on what is best for you and your circumstances. This includes helping you maximise your entitlement (if any) to the Age Pension and reducing your exposure to tax.

But, as you ask, how do I find a good financial planner?

This has always been a great question to ask, even before the revelations from the banking royal commission. In my opinion, advisers who are not aligned with banks or other large financial institutions are more likely to give unbiased advice. There are still great advisers with these institutions but the culture and remuneration practices mean advice is not always in the best interests of clients. The ideal adviser is unbiased, impartial, experienced, qualified and well-regarded. There are a number of things to look for:

• How do you pay for the advice? If the payment is connected to particular products or institutions they recommend, then beware. The best method is fully transparent “fee for service” based on the complexity of your affairs.
• What experience and qualifications do they have? Are they a member of a professional association? Check the register of financial advisers with the Australian Securities and Investments Commission website.
• Who are they connected with? They could have their own licence or be licensed through what is known as a ‘dealer group’. Ask if the dealer group is owned by a bank or other large institution.
• What is their investment philosophy? Do they recommend products or services connected to their dealer group or is it independent?
• Are they prepared to give a reference for you to check? Asking an existing client about their experience is invaluable.
• Are they easy to understand? Be wary of economic jargon designed to get you to say, “OK, that’s over my head, but I trust you.” Good investment advice is something you can understand. If you can’t understand it but want to, a good adviser will work with you until you do.

Usually the best way to find an adviser is to ask a friend or relative who’s working with an advisor whether they are prepared to recommend them to you. Your relationship with your financial adviser is vital. I was a financial adviser for more than 30 years until I retired but I still use an adviser. It is important to trust the management of your wealth to a financial advisor who is reliable, honest and has your best interests at heart.

If you have a question for Starts at 60’s money experts, email it to [email protected].