The Sunday Times - - BUSINESS -

James says: So I get this mes­sage from my wife at 2am while she is in Morocco (find­ing her­self ) — “I think I’m go­ing to move to Morocco, I’m so sorry.”

This re­ally was not ex­pected, nor in my plan for the fu­ture. Now I am hav­ing to deal with all the fi­nan­cial re­spon­si­bil­i­ties on my own, with­out a sec­ond in­come. I have a half-ren­o­vated house, our com­bined debts, and now le­gal fees to deal with the sepa­ra­tion. I am 34 and earn­ing good money ($140,000), but it feels like I have caught an STI from an over­seas holiday I didn’t take. Bare­foot re­sponds: It sounds like your ex-wife took the ‘Eat, Pray, Dump’ tour!

Se­ri­ously, I can’t imag­ine what it was like to get that text — you must be go­ing through hell. And while it prob­a­bly feels like you’re the one here in Aus­tralia clean­ing up the fi­nan­cial mess, you are both re­spon­si­ble for see­ing this out. So, a cou­ple of prac­ti­cal things. If you haven’t al­ready shut down any joint bank ac­counts, credit cards or re­draw fa­cil­i­ties, do so im­me­di­ately. Also, keep good notes on your fi­nances, and en­gage a fam­ily so­lic­i­tor.

You don’t men­tion kids and, given your age, it sounds like it may have been a short mar­riage. This will be taken into ac­count, and should make things much sim­pler in com­ing to a fi­nal prop­erty set­tle­ment. Ob­vi­ously you are fac­ing a fi­nan­cial set­back, but at your age and with your in­come it’s some­thing you will over­come. So, think hard about whether you want to keep the house or sell and make a clean break . . . your ex-wife cer­tainly has.

Su­per stress­ful

Lisa asks: I am 27 and earn $95,000 a year, so my su­per is adding up. But I re­ceived my an­nual su­per­an­nu­a­tion state­ment and found I am be­ing charged three sep­a­rate fees — ad­min­is­tra­tion fees (0.37 per cent), in­vest­ment fees (0.25 per cent) and some­thing called in­di­rect costs (0.64 per cent). In your book you rec­om­mend pay­ing no more than 0.85 per cent in fees on su­per. Does that re­fer to any type of fee charged, or only ad­min­is­tra­tion and in­vest­ment fees? And do you have any idea what in­di­rect costs are?

Bare­foot re­sponds: Good on you for be­ing one of the few peo­ple who both­ers to look at this stuff.

ASIC de­fines in­di­rect costs as costs “paid by your su­per fund to ex­ter­nal providers that af­fects the value of your in­vest­ment. Typ­i­cally th­ese are costs paid to in­vest­ment man­agers.” Bot­tom line? It’s an­other fee. All up, you are be­ing slugged 1.26 per cent of your bal­ance each year.

If you’ve got $40,000 in su­per, that’s about $500 a year. That doesn’t sound like much. yet as a back-ofthe-en­ve­lope cal­cu­la­tion (6 per cent real re­turn, not fac­tor­ing in tax), your su­per will grow to about $720,000 over the next four decades.

How­ever, the neg­a­tive ef­fect of the com­pound­ing fees will be roughly $220,000.

You’ve done the hard work by wad­ing through the com­pli­cated, bor­ing guff.

Now comes the most prof­itable call you’ll ever make.

Talk to your fund and ask if it has a high-growth, low-cost in­dex su­per of­fer­ing — prefer­ably one that charges less than 0.85 per cent in fees, to­tal.

Is AMP head­ing south?

Cliff asks: On ad­vice from our fi­nan­cial ad­viser, my wife and I moved our su­per from Aus­tralian Su­per to AMP MyNorth Su­per a year ago.

We have gen­er­ally been happy with the ad­vice we have re­ceived and, like all funds, in the past year MyNorth has had its ups and down. How­ever, with the find­ings of the bank­ing royal com­mis­sion and re­cent stock mar­ket volatil­i­ties af­fect­ing AMP, we think we should maybe go back to the in­dus­try fund.

Is it likely AMP could go un­der in fu­ture, mean­ing we could lose all our su­per? Bare­foot re­sponds: I’ve had a num­ber of peo­ple ask me the same ques­tion — whether their money is safe with AMP. Let me be clear: your money is safe. That’s be­cause the money you have in su­per is held via a le­gal trust for you. Su­per is strictly reg­u­lated and the trustees have a le­gal duty to man­age the fund for the ben­e­fit of mem­bers.

But the same can’t be said for the suf­fer­ing AMP share­hold­ers. The fact so many of its cus­tomers are ques­tion­ing whether this 170-year-old blue-blooded com­pany will sur­vive is an in­di­ca­tion of just how much the brand has been bat­tered.

As Dr Phil says, it’s hard to win back trust. Speak­ing of which, I’d ask your ad­viser to do a fi­nan­cial com­par­i­son be­tween your old in­dus­try fund and your MyNorth fund since you switched.

The Bare­foot In­vestor for Fam­i­lies: The Only Kids’ Money Guide You’ll Ever Need HarperCollins RRP $29.95

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