FuturePlan a reminder to check in with clients
Criticism of a closed Fisher Funds scheme has highlighted the issue the sector has with legacy products.
Thursday, January 24th 2019, 6:00AM 
3 Comments
Financial research site MoneyHub has drawn attention to fees being charged by funds in the FuturePlan scheme in which 90% of clients have a financial adviser.
Clients in the scheme have their money split into a foundation account and an investment account.
The foundation accounts charge fees of more than 8% in some cases.
By comparison, Fisher Funds’ KiwiSaver funds charge 0.66% to 1.29%.
Fisher Funds chief executive Bruce McLachlan has committed to changing the product, which was sold between 1987 and 2005 by Tower.
It was picked up by Fisher Funds when it acquired the Tower business.
He acknowledged the foundation fees were too high. But he said the fees needed to be looked at across the two funds an investor would hold, combined. The investment funds charged much lower fees and held 94% of the FuturePlan funds.
“There are lots of legacy funds out there,” McLachlan said. “They were, you have to assume, sold transparently. They are products that were acceptable to the market at the time.”
He said superannuation schemes were sold as a 50-year contract, and changes had to be made carefully. It was not like closing a bank product, he said.
“I think all of us, particularly if we receive commission or income, we have an obligation to do the right thing by clients. It can’t just be looked at with today’s lens.”
McLachlan said a contact could not be waived just because the market had moved on.
“We need to make sure we can do right by the client and honour the contracts made.”
He said part of advisers’ obligation was to continue to review client products to determine whether they were still appropriate for clients. “A lot of advisers associated with this have moved clients on to other products.”
Moneyhub researcher Christopher Walsh said the worst of the scheme’s funds looked to be the Property Foundation Fund, which had a five-year annual return of 1.64% compared to a benchmark of 9.05% - but investors were charged 8.34%.
The Emerging Markets Foundation Fund, with 98% of its money in term deposits, charged 7.25% management and administration fee, plus the $36 annual fee, despite making a five-year average return of 0.37% (after fees and tax) against its 8.51% benchmark.
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Prey, why do I "have to" assume that?
When it comes to all those rotten plans that had 'foundation units' and up front commissions and stupid-high fees and opaque holdings, I have always assumed quite the opposite.
How else could they have been acceptable to the market at the time?