CBA Financial Planning - Open Advice if only if that was true!

Hi there

I was reviewing my mom's pension requirements and to my surprise I found one of their advisors had sold her an annuity for 50k.

The annuity provides her $280/mth for 22 years. If I had invested 50k in a managed fund and assuming a 5-7% average return she would have $150-220k. As she was withdrawing monthly....I can accept that initially the payment was $280 but what getx my goat is that it was indexed. This was a slight of hand by CBA...I understand that quite of CBA advisors driven by aggressive bank targets sold these sort of products to get the maximum commission. I can see why now. After 22 years they will have paid out $77k...it would have been better for my mother to have earned bank interest or get dividends as she would have got far more. Interesting...enough the Financial Planner has left and guess what no follow-up...I am told by CBA they don't do this...and she will need to pay more money after giving poor advice?? Are they serious?

So I call this Open Advice Review Program. set up CBA due to ASIC and the govt putting pressure on them to sort out their dodgy practices...it is anything but that. As soon as I ask the hard questions...they go defensive and shutdown. I have now asked for the holistic review they did prior to selling this product...again nothing. I suspect the Exec team at the CBA is purposely slowing things down...base on the recent senate review...Ian Narev admitted they have only settled 3 claims and 200 are waiting...the other issue is questions have been asked how such process can be possibly independent when CBA is paying the so call Independent expert?? This shows the bloody mindedness of the CBA. Someone should get charged and put in prison! What a debacle...looks like I might have to go legal with this and sue them for both mis-selling of a financial product as well as costs for litigation. I am in the process of gathering the facts now.

Here are some of the threads to back-up what I am saying......:

http://www.afr.com/news/politics/national/cbato-review-a-decade-of-advice-20140703-jgq49

http://www.smh.com.au/business/cba-...ancial-planning-division-20140818-105buz.html

http://www.abc.net.au/lateline/content/2015/s4221070.htm

I welcome any comments and experiences with CBA OARP...
 
I guess you'll need to sort out a few things first.

1. When did your mum sign the authority to proceed for the purchase of annuity?
2. Can you dig up that SOA sold to your mother, and have a look at the risk assessment score? We all know that investing in manged funds can deliver a greater return but if the customer has a low risk tolerance score the adviser will usually suggest a safer investment option such as annuity because it is less volatile.
3. For the annuity, is't a lifetime annuity or a fixed annuity?
4. Ask CBA for the file notes of the communications and the notes for strategies, and usually in the SOA the adviser need to explain why they suggest this option and why did they NOT suggest another option.

Because as far as I know, for an adviser to earn more commission from the sales, they will be selling high risk managed fund not a low risk Term Deposit/Annuity option. And that is exactly what causes all those financial adviser flaws in MQ Bank and CBA during GFC....
 
Without knowing the full story it is very hard to say.

It could well be legitimate and suitable to her needs at the time. To say its a bad investment because the rate of return is no good and a managed fund would return better is not a valid reason.

In fact, comparing it to a managed fund where there is investment risk would be worse, especially if your mother was risk adverse. This is where most the complaints are actually from! People who were lead to believe to they would get higher returns in riskier investments when they were actually much more risk adverse!

Based on what you said, it appears it may have been a Fixed Term Annuity with the term based on the ABS life expectancy tables with 0% Residual Capital Value (RCV).

This may have been setup to help her acquire the age pension, because if setup before 20 Sept 2004, it would 100% asset test exempt, between 20 Sep 2004 and 20 Sep 2007, it would be 50% asset test exempt, after 20 Sep 2007 it was 0% exempt.

Now at the time, this may have qualified your parents to receive the age pension (even if it was a $1 - so they could get the other benefits related to getting an age pension).
 
I guess you'll need to sort out a few things first.

1. When did your mum sign the authority to proceed for the purchase of annuity?
2. Can you dig up that SOA sold to your mother, and have a look at the risk assessment score? We all know that investing in manged funds can deliver a greater return but if the customer has a low risk tolerance score the adviser will usually suggest a safer investment option such as annuity because it is less volatile.
3. For the annuity, is't a lifetime annuity or a fixed annuity?
4. Ask CBA for the file notes of the communications and the notes for strategies, and usually in the SOA the adviser need to explain why they suggest this option and why did they NOT suggest another option.

Because as far as I know, for an adviser to earn more commission from the sales, they will be selling high risk managed fund not a low risk Term Deposit/Annuity option. And that is exactly what causes all those financial adviser flaws in MQ Bank and CBA during GFC....

Good advice/
 
Another reason why I would trust a fund manager with a cent of my cash.
They just keep their hand in your cookie jar the entire time and when the market or the investment turns to the proverbial it's all part of the risk..

My only exposure to the markets is via an index fund.
Happily make a smaller return each year, shield myself a bit more from the downside and pay 1% in fees rather than 4%+ to that of the fund managers.
It is the difference of the 3% in fees compounding that makes a huge difference at retirement.

Horses for courses I suppose.
 
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