Commonwealth Bank Financial planning scandal
I couldn’t help but write about the recent scandal enveloping the Commonwealth Bank and it’s Financial Planning division. What a debacle that has been developing for a long, long time!! Now, more than ever before I can’t emphasise enough that to take control of your own money and investing it wisely is the most prudent action anyone can take. The only thing stopping you is to improve your own education which is why websites like this exist. One of my first articles Do you need a Financial Planner or Guru? was my attempt at a starting point for everyone to begin the journey to learning about taking control of their own finances. Please read this article later although unfortunately the share I used as an example was the Commonwealth Bank. Although it’s been a great share since it listed in the 1990’s, they are receiving unwanted press at the moment.
Life’s savings gone!
Some of the stories from the press this week have been horrendous about people that are often elderly and vulnerable, losing substantial amounts of money, sometimes their life savings. One of them – Jan Braund, talks about investing one million dollars with the Commonwealth Bank and losing the bulk of it. She went through negotiations with the bank while at the same time losing her husband who was suffering from dementia. The bank made it as hard as possible for her to retrieve her money and only after many years did they agree to pay her back $880,000 of her original one million dollars. There was no compensation for all her hardship, stress and the fact that she could not enjoy the last years with her husband the way she would have preferred. Meanwhile some egotistical, narcissistic bank worker is going around spending all her money and probably a large wad of other clients cash too.
Correct financial advice.
All these dodgy financial planners had to do was advise their clients the most basic of financial advice. You don’t have to be a Rhodes Scholar to work it out and that’s why planners can get away with charging people so much money. They make their advice sound complicated and mysterious!! If Jan Braund had been told about iShares she could have invested some of her money and even kept a proportion in cash as a buffer amount. The iShares MSCI Australia 200 EFT (IOZ stock exchange listing) would have produced a return of 33.32% since inception on 6 December 2010 which is around the time she tried to unwind herself from Commbanks dodgy advice.
Let’s do the figures –
Say you invest $700,000 x 33.32%, for 5 years = $2,948,319 !!
Try it out on the calculator below. Fill in the boxes thus – Initial amount $700,000, Annual contribution = 0, Annual Interest Rate = 33.32%, Number of Years = 5
You could put half that amount, say $350,000 in a share fund and $350,000 in a property fund to spread the risk or select a number of managed funds to spread the risk depending on your risk profile.
It’s unfortunate that so many people like Jan Braund have been let down by one of our major banks and that Financial Planning has taken a big confidence hit by all the bad press. I’m not saying they don’t deserve it but it is a great boon for people like me who are trying to get readers to be confident to DO IT THEMSELVES.