Plenty’s FAQs

Everyday we get a bunch of questions about who we are and what we do so we thought it would be a good idea to pick 6 of the most commonly asked questions and turn it into a blog post.

What is Plenty?

This question is a daily occurrence for us.

We liken ourselves to GPS but instead of showing you physical directions we give you financial directions – Financial GPS.

We show you how to reach your financial goals and live a more plentiful life – along the way we can advise you on every aspect of your financial life.

Our goal is to put a financial roadmap in every Australian household.

How Does Plenty Work?

We import data (securely) from your bank accounts and ask a few questions.  We analyse this information and then produce a financial roadmap which shows exactly where you are today and maps out how to get where you want to be. The map covers goal setting, budgeting, choice of super fund, insurance, debt, investing, super contributions, super pensions and retirement. This advice is free and can be updated as your finances evolve.

This video shows you how our process works:

You can see a sample of the advice here.

You can get your very own free financial roadmap now.

Do You Have Any Online Reviews?

Yes – at the moment you can find unbiased reviews on Adviser Ratings; a directory that gives ratings and reviews of financial advisers. Check out our profile here.

We are also in the process of posting more reviews to our website – watch this space.

I Am 35 and Just Started a Family – How Does Plenty Help Me?

As someone who is getting married next year this is a very relevant question to me and something we get asked often.

As the financial lives of you and your partner become more intertwined, it is a great time to start acting as a unit financially. Personally, this has meant combining our incomes and taking a closer look at both the now in terms of spending and the future in terms of goals.

Plenty can help make sure you are staying on top of your spending today while still planning for the future – we also make sure that all of your financial choices and products make sense.  We also can evolve with you which means as your lives progress so will our advice.

To find out who else Plenty helps click here.

Why Is Your Roadmap Free?

The reason we give our roadmap away for free (as opposed to the $2,500 a traditional adviser will charge you) is because technology is at our core – this means we can provide services at prices that other advisers can’t match.

Just like Uber is cheaper than taxis or Amazon is cheaper than stores so we are cheaper than physical advisers.

How Does Plenty Make Money?

Since our roadmaps are free people often wonder how we make money – we do this in a variety of ways:

  • Ongoing support – once you get your financial roadmap we offer the ability to have meetings and ongoing email support with your very own advisor for a small monthly fee – check out our pricing page to find out more.
  • Superannuation and Investments – For a small monthly fee we can manage your investments* and superannuation.
  • Mortgages & Insurance – When we assist with your mortgage or life insurance we get a commission from the provider you end up with. We are completely supplier agnostic and our system is programmed to only ever recommend either of these if they are in your best interest.

There you have it – some of the most commonly asked questions we get here at Plenty.

If you are curious to find out more get started with us today or hit that little chat button in the bottom right hand corner if you have any more questions.

Josh Golombick

Josh is the co-founder of Plenty. Along with being a mortgage broker, he spent 5 years in banking and has an honours in Finance from UNSW. He loves all things tech and finance.

The information contained on this page is of a general nature and may not be appropriate for your personal circumstances. You should obtain personal financial advice before acting on this information.

*At the moment we can’t implement your investments – it is a feature that is coming soon!

October Personal Finance Wrap

Each month we provide a wrap of the biggest issues in personal finance.

This month shares plunged in the face of increasing US interest rates and further fall out from the trade wars between the US & China. Property prices also continue to dominate headlines with no end to the recent slump in site. We also look at some surprising outcomes from a survey into bank trust.

October Sell Off

The ASX shed close to 9% in October entering a “technical correction” for the first time since early 2016.  The slide this month has been driven by two major factors; the first is rising US interest rates. It may seem a bit odd that rising US interest rates are impacting Australian share prices but the fear from investors is that these rate rises will make borrowing more expensive for Australian companies in the future which means less money for shareholders. The rising rates also makes investing in debt (i.e bonds) more attractive vs. shares.

In addition to rising rates, fears of the impacts of the ongoing trade war between China and the US re-surfaced as the Chinese economy showed signs of weakness. This weakness is particularly harmful for Australia with over 30% of all our exports heading that way.

Property Not Doing Much Better

With shares pulling back it is logical to look elsewhere for investments but, unfortunately, property doesn’t seem to be doing all that much better with  AMP downgrading their Sydney and Melbourne property forecasts to a 20% decline from peak to trough. The downgrades come as auction clearance rates continue to decline and credit remains harder to obtain.

It’s important to remember that both property and equity have their ups and their downs – the key is not to panic in the face of these corrections – as Warren Buffet says, “Be fearful when others are greedy and greedy when others are fearful.” Plenty can help you stay on course with your investments.

Trust & the Royal Commission

In light of all the scandals unearthed in the ongoing royal commission into financial services, it should be no surprise to anyone that a recent Deloitte survey found that only a quarter of respondents believed “banks in general” will keep their promises.

What is surprising however is that close to half trust their own banks to keep promises. This means that we are twice as likely to trust our own bank than their competitors. Recently we wrote a post on how being loyal to your bank is costing you close to $2,500 per year. This basically means that we should trust our own bank less than any others – particularly if we have been with them for a long time.

Josh Golombick

Josh is the co-founder of Plenty. Along with being a mortgage broker, he spent 5 years in banking and has an honours in Finance from UNSW. He loves all things tech and finance.

The information contained on this page is of a general nature and may not be appropriate for your personal circumstances. You should obtain personal financial advice before acting on this information.

Guaranteed Buyer’s Remorse – 3 Common Financial Products To Avoid

We have previously looked at how you are probably getting ripped off by the financial products you currently have.

There are other financial products out there that, no matter who and when you buy them from, are always a bad idea.

In this post we will take a deeper look at 3 such products and demonstrate how they are all likely to lead to buyer’s remorse.

Extended Warranties – “How can I lose!”

Extended warranties essentially work like this – you buy a $2,000 television and the salesman will offer you a 3-year extended warranty, above the manufacturer’s 12-month warranty, that will protect in the event of damages for $200.

Sounds like a reasonable deal for such an expensive product….right?

The salespeople certainly think so – but so do numerous consumers; in a Choice survey of 570 respondents who had been offered an extended warranty, 65% had purchased one.

The first problem with these warranties is that they may have complex terms & conditions that prevent standard repairs. The second problem is that you are very unlikely to claim, and retailers know it.

The Bathtub Curve & Consumer Law

Most consumer appliances (where lots of extended warranties are sold) have what is called a bathtub curve of failure expressed in the following graph:

What the graph shows is that these products are most vulnerable to failure when it comes out of the factory (due to manufacturer defects) or later in their life due to wear out. Retailers are very aware of this and that is why they offer the warranty in the period when the product is least likely to fail.

Furthermore, under Australian consumer law, you are usually automatically covered for a set period after purchase which, for TV’s for example, might be anywhere from one to three years – this makes it more unlikely that you will actually ever need the extended warranty.

Like a lot of things in life, the Simpsons might be the only thing you need to know about extended warranties. In an episode, Homer has a crayon hammered into his nose to lower his IQ. Homer’s ever decreasing IQ is evidenced by him making stupider and stupider statements – the “surgeon” knows the operation is complete when Homer finally exclaims:

“Extended warranty! How can I lose?”

Car Hire Excess Reduction

If any of you have hired a car you will know the first thing the agent will do when you pick it up is offer you to reduce your excess (i.e the amount you have to pay if the car gets damaged) from, say, $4,500 to $500.

Sounds like a pretty good idea…

Wrong

You will also have noticed that this excess reduction is often the same price as the car hire itself – if not more.

Have you ever wondered why these companies are so keen to offer you these policies? The reason is that they are insanely profitable for the car hire companies.

The Alternatives

To calculate how profitable these policies are for the rental company it is best to look at the alternative option for this cover – this is primarily done through standalone policies (i.e done through a 3rd party rather than the rental company). The table below looks at what you will pay with these policies vs going through the car rental company on a 3,5 & 7 day car rental:

 Through Rental AgencyStandalone Policy
3 Day Rental$88$28
5 Day Rental$147$40
7 Day Rental$206$49

The car rental companies charge 250-350% more than what the product should realistically cost. It is also worth noting that the standalone policies in this comparison reduce excess to $300 while the car rental companies are anywhere between $500 – $1,000.

What’s more, a lot of travel insurance policies cover this excess reduction so there is a chance you are already covered either by the policy or your credit card.

All options discussed so far will have terms and conditions that make them differ in slight ways.

Ultimately, being prepared and making sure you arrange excess cover before you get the car could make sure you don’t get ripped off.

Credit Card Insurance

Credit card insurance is a policy designed to pay off a certain amount of your credit card if you lose your job, get injured or die. It is usually offered to you through the card lender when you apply for a new credit card with the fee automatically added to your monthly bill.

What’s Wrong with That?

Much like mortgage protection insurance, the policy itself doesn’t sound all that bad, however in practice the policies are actually very expensive.

Additionally, the chances of you claiming are very low as there are so many exclusions and hidden terms and conditions that are often not made clear when the policy is purchased. In fact, between 2011 and 2016 claims on policies like credit card insurance (known as consumer credit insurance) were rejected more than any other insurance product. During this period, claims were declined five times more often than general insurance claims, and 33 times more often than car insurance claims.

So Bad It Might Be Illegal

Just over a year ago CBA paid out $10 million in refunds to more than 65,000 customers who were sold credit card insurance who would never have been able to claim.

Additionally, there is a law firm that is currently filing a law suit against NAB & MLC for customers who “have been sold seemingly worthless or junk credit card insurance.”

Conclusions

You would have noticed a common trend with all the products discussed so far – on their surface they sound like prudent financial purchases and therein lies the danger, sellers of these products know this and will make you feel like you are doing the right thing by buying these expensive, ineffective products.

Plenty can help you make smarter financial decisions by giving you a free financial roadmap – we also offer low cost subscription services, so you can have your very own personalised adviser to ask about all of your financial products – the good, bad and ugly.

Josh Golombick

Josh is the co-founder of Plenty. Along with being a mortgage broker, he spent 5 years in banking and has an honours in Finance from UNSW. He loves all things tech and finance.

The information contained on this page is of a general nature and may not be appropriate for your personal circumstances. You should obtain personal financial advice before acting on this information.

Four Places Your Loyalty Is Exploited

Growing up one of my guiding principles has always been loyalty.

I have also always valued loyalty and thought it is a quality that should be rewarded…

Wrong. So Very Very Wrong.

I personally found out the expense of loyalty with my energy & gas.

I have been using the same provider for over 6 years (Energy Australia) and called to check up on my bill. On a whim I told them that I was thinking of changing service providers – they instantly offered to increase my discount from 17 to 34%, cutting my bill by $300 year.

I then performed a similar exercise with my health insurance and reduced my premiums by $348 per year (although I had to change providers to achieve this).

I was quickly learning that having the loyalty of the Australian Liberal Party can pay some hefty dividends.

King of The Rip Offs – Financial Services

Big financial institutions understand the real value of a loyal customer – ripping them off, so they offer better deals to new customers.

In the recent Productivity Commission’s (PC) brief 686-page report into “Competition in the Australian Financial System” they concluded that:

The huge product variety combined with price obfuscation provides latitude for exploitative price discrimination… Typically, it is existing customers that get a poor offer, as institutions jostle to attract new customers…relying on their lassitude for switching to generate high margins off them in the years to come.

Effectively, financial institutions understand that existing customers don’t switch either because they think they are getting a good deal, or they are lazy, and therefore gouge them to fund the acquisition of new customers.

Loyalty Costs you $2,500 Per Year

While $300 a year on energy isn’t a huge amount, the stakes are raised exponentially when it comes to financial services. Based on data within the PC’s report, findings in the ongoing royal commission, along with our own analysis, we estimate the average consumer is slugged with a “loyalty premium” of $2,500 per year – broken down as follows:

ServiceLoyalty Premium
Mortgages$1,400
Life Insurance$250
Superannuation$600
Savings Accounts$275
Total$2,525

It’s worth understanding how the financial institutions exploit your loyalty:

Mortgages

The PC’s report estimated that existing customers of banks pay 0.3-0.4% relative to new customers. This means on the average loan of $400,000, existing customers pay an extra $1,400 per year.

The banks do this by offering bigger discounts and honeymoon rates to new customers – these eventually expire, and the clients revert back to higher rates.

Some lenders also keep introducing benchmark rates for new clients making it difficult for existing clients to understand what their actual interest rate is; particularly when compared to new customers.

Plenty understands the tricks the banks play and gives live notifications if your mortgage rate changes – find out more about what we do here.

Life Insurance

Every year Australians are living longer (~2% longer) – this means that life insurance companies can lower their premiums by ~2% per year and still keep the same profit margins.

However, these price decreases are only passed onto new customers – existing customers are left in more expensive policies. While 2% a year doesn’t sound like much – after just 5 years of having a policy in place you are already paying over 10% more than a new customer who is getting the exact same product.

Superannuation

Superannuation companies are known for exploiting laziness rather than loyalty.

The PC recently estimated Australians are paying $2.6 billion extra a year because of unintended multiple Superannuation accounts. That’s $1.9 billion in excess insurance premiums and $690 million in excess administration fees – meaning that, on average, each working person is paying $200 per year in unnecessary fees.

On top of these excess administration fees, Australians often pay way too much in investment fees to manage their money. The average investment fee in Australia is 1.1% – this compares to lower cost funds which are often ~0.7% (or below). By not switching (i.e being lazy), the average Australian is paying $400 more than they should each year.

The loyalty premium in super is even more dangerous as the affects are compounded over multiple decades.

At Plenty we understand this – that is why we analyse a person’s existing super arrangements in the Financial Roadmap’s (see sample here) we generate.

Savings Accounts

It is common for banks to offer favourable promotional rates that only last for a few months when an account is opened.

For example, the figure below from the PC’s report depicts the applicable interest rate for savings accounts available as at 30 November 2017:

deposit-rates

 

 

 

 

 

 

 

The advertised rate vs. the “actual” rate can often have a difference of up to 2%. This can really add up especially given how consumers aren’t that fond of switching bank accounts – a survey by Galaxy Research for the Australian Bankers’ Association found that only 17% of respondents had switched banks in a three-year period, while 83% had not.

Get Back the Loyalty Premium

The best way to get back your loyalty premium is to get on top of your financial situation, understand what exactly you are currently paying and what better offers are out there.

This can be easier said than done – financial institutions purposefully obfuscate pricing and make switching seem harder than it really is.

At Plenty we understand the games these institutions play – that is why we compare over 1,700 super funds, 12 life insurers and work with over 20 lenders when you get your financial roadmap.

Check us out and get started today.

Josh Golombick

Josh is the co-founder of Plenty. Along with being a mortgage broker, he spent 5 years in banking and has an honours in Finance from UNSW. He loves all things tech and finance.

The information contained on this page is of a general nature and may not be appropriate for your personal circumstances. You should obtain personal financial advice before acting on this information.

 

August Personal Finance Wrap

Each month we provide a wrap of the biggest issues in personal finance.

August saw the royal commission turn its attention on the superannuation industry. Westpac became the first major bank to hike its home loan rates this year. Australia’s financial literacy was put to the test and the results are less than spectacular and an interesting report was released on the impact of fees in retirement.

Royal Commission Turns Spotlight on Super

Round 5 of the royal commission concluded in August with superannuation being put through the wringer. There were multiple objectives with witnesses from NAB/MLC, AustralianSuper, IOOF, Hostplus, Colonial First State, ANZ and APRA all giving evidence.

Some of the more shocking findings were of NAB/MLC charging dead customers (perhaps more shocking was that this was the second major bank caught doing this). Elsewhere, IOOF and CFS were shown to be taking action that wasn’t in the best interest of their members.

There was also a report released last month showing that members paid a total of $32 billion in super fees in the 12 months to 30 June 2018, rising 10% on the prior corresponding period (this excluded insurance premiums and additional advice fees).

It can be hard to know if you are in a competitive fund – Plenty can help you analyse your current super – get started now.

Westpac Hike Rates – Others to Follow?

Westpac became the first major bank this year to hike their home loan rates blaming an increase in its wholesale funding costs. The variable rates will increase by 14 basis points, effective from September 19. The move follows interest rate hikes by more than a dozen smaller lenders in recent times. The big question is whether the other 3 majors will follow – history suggests yes and it will be interesting to see the impact on an already cooling property market.

With so much movement it’s important to stay on top of your interest rates – Plenty’s free roadmap will you do just that – get started now.

How is Your Financial Literacy?

A high number of Australians couldn’t answer a simple set of five questions laid out by researchers as part of the latest Household, Income and Labour Dynamics in Australia (HILDA). The questions tested knowledge around interest, inflation, returns and risk with less than 50% of participants getting all 5 answers correct. These are very important topics that can have a very real impact on your future.

Want to see how you go – check out the quiz at the bottom of this article.

Report on Fees

A report released by Vanguard highlights the substantial impact investment costs can have on retirement income. According to the report, investors require an extra 10 per cent more in assets to live a comfortable retirement where they pay an extra 50 basis points in fees. Given that the average fees paid by Australians in super is around 1.1% vs. lower cost funds at 0.5-0.7% this should be a wake-up call to anyone in a high cost fund.