Great debacles of our time: The great mezzanine financing collapse (part 3)

This is part 3

Part 1 is here.

Part 2 is here.

It is with great displeasure that I announce that Bridgecorp has gone under.

This, sadly, means that a fourth major mezzanine financier has gone to the wall, and appears to have taken with it about AUD $25 million of investors' money.

I don't really want to add much more to this. It's a sad tale, and I don't know much about Bridgecorp's circumstances. Suffice to say, there can't be much more carnage on this front.

Standard but necessary disclaimer: This is not advice. Only a complete idiot would think that any of this constituted advice. It's not even vaguely reasonable to consider this to be advice. If you are in any doubt as to the content of this, see a good, independent financial adviser immediately. They do exist.

Dikkii's financial tips #5: How the hell do cheques work?

Welcome to Dikkii's financial tips.

This is a series where I attempt to provide some sort of guidance to financial matters without breaching the Corporations Act by actually providing advice.

Anyway, I have to return to banking just one teensy weensy last time, because I did promise regular commenter Plonka a round up of cheques.

Cheques, as I responded at the time, are amazingly complex instruments. The law as it relates to cheques is remarkably finicky, and horrible. There are so many different bits to them, that I could not begin to explain - but I'll have a go. It's worth knowing.

Back in the day, they were explained to me as a three way agreement between the person signing the cheque, the person that they're giving the cheque to and the bank that the cheque is drawn on.

I prefer to think of it as an IOU.

In any event, what normally happens is this. You write out a cheque, you hand it over, and money flows from your account to the other person's.

Let's look at all the bits - and there are many.

The drawer

(Pronounced: draw-rer)

Not someone's undies, this is the name of the account from which the cheque is drawn. It's usually indicated on the cheque somewhere between the amount in words bit and the space for the signature. Usually looks like "JM BLOGGS", "MP AND LF CITIZEN", "MEGA CORPORATION LTD" or even "J AND P DOE TA SMALL BUSINESS ITF THE DOE FAMILY TRUST".

Note the shorthand - I always thought this looked unprofessional, but it appears to be commonly accepted that AND indicates a joint account or partnership, TA indicates a registered business name ("Trading As") and ITF stands for "In Trust For".

The drawee bank

(Pronounced: draw-ree)

This will be normally shown up on the top left hand corner of a cheque. Underneath that will be the drawee branch. This is the bank and branch of the drawer's account.

The payee

This is the person, persons, company or other entity to whom the cheque should be paid. It will normally have the word "pay" at the start of the line and the words "or bearer" or "or order" at the end. Sometimes it will be made out to cash, in which case, the words "please pay cash," or just plain "cash" will be written.

"Or bearer"

This means that the cheque can be accepted by anyone holding it. Under current conversion laws a bank would be pretty stupid to rely on these words, however a bit of lenience is normally given (within reason). Normally a bank will not allow third party bearers to deposit a cheque made out to someone else - it's just too risky for the bank.

I am reliably informed the stolen third party cheque lawsuit involving a certain "Mr Cash" is an urban myth.

"Or order"

The opposite of "or bearer". This means that the cheque must go into an account name that matches that whom the cheque is made out to. Crossing out the words, "or bearer" means the same thing as "or order".

For example - a cheque is made out to "Tom and Sue Jones or order" - this must go into a joint account set up in the name of Tom and Sue Jones. No exceptions.

Usually, an "or order" cheque needs to be endorsed (signed on the back) by the payee, but the bank is normally deemed to be acting in good faith if it follows the rules in the above paragraphs.

Amount in words vs amount in figures

These need to match up. If one is different to the other, the lesser figure only may be accepted. This is always fun with Generation Y who, according to stereotypical "research", are illiterate, innumerate and belligerent.

Signature

The cheque must be signed in accordance with the operation method of the drawer's bank account. If the account requires two signatures, then the cheque must have two signatures.

I used to get a good laugh when young kids would come into the bank with one of their parent's cheques made out to cash, and only one dodgy signature where two were required. Cheeky little rascals!

The crossing

This is normally two parallel lines drawn vertically or diagonally across the cheque. Occasionally you'll see the words "not negotiable" as well. They mean the same thing - the cheque must go into a bank account and cannot be cashed.

Sometimes you might see the words "account payee only" written - this has the same effect, plus it also does the job of the words"or order" - the cheque must go into a bank account in the name of the payee specifically and it cannot be cashed.

Crossings may be pre-printed on a cheque which can cause great confusion - attempting to cash a cheque made out to "cash" with a crossing is nigh on impossible.

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So what happens when a cheque is deposited, and why does it take so long?

Let's follow one along the trail.

1. Day one.

A cheque is deposited into a bank account. Normally, a cheque debit is processed off-site, usually overnight. The only thing that may (but not always) happen immediately is that an amount is credited to your bank account. If this deposit credit is processed off-site with the cheque, it will also be processed overnight.

Any amounts credited to the payee's bank account during the day on day 1 will be subject to clearance - that is, they will actually be in their bank account that day, however, a hold is placed on those funds so that you can't touch them. Normally for three working days.

And even though some bank branches are open on weekends, now, this does not include those days.

2. Day two

Transactions processed off-site go through some batch reconciliation process which means that you won't notice the deposit in your bank account until the next day.

What will also be noticed the next day, is that the drawer's bank account will also have been debited.

But if you check both accounts, you'll see that they're showing transaction dates of day 1.

So why does clearance still apply?

Well, imagine that the drawer has overdrawn his account. Debits have to fund a credit, and the credit (the deposit) must be processed. Therefore, so too does the debit (the cheque).

The overdrawing will show up on a report which the drawee branch manager gets the next day (day 2) first thing. The manager has two options - allow the overdrawing, or dishonour the cheque.

If the manager dishonours the cheque, she will create a credit dishonouring the cheque and crediting the funds back to the drawer's account. The debit that funds this credit must be made to the payee's bank account. Both sides of this transaction will be processed off-site and will go through the same overnight batch reconciliation process I alluded to above.

Needless to say, the dishonour will not show up in the depositor's account until day 3.

3. Day three

Both sides of the dishonour will have the same date as day 2, but they normally will process overnight.

This means that when the payee checks their account that morning (day 3), the funds that were subject to clearance will have gone from their account.

If the cheque is not dishonoured, the funds will still be subject to clearance that day, though, because it won't be until this time that the cheque will have had a chance to physically make it back to the drawee bank for perusal.

Not all cheques get looked at by the drawee bank, but some do. Any irregularities such as funny signatures, third party cheques etc will have one more window for dishonour. This will happen overnight. So will the lifting of the hold on any uncleared funds that haven't been dishonoured.

4. Day four

Normally, this will be when the payee is finally able to access their funds, assuming that the cheque has been honoured.

With Credit Unions and Building Societies, a couple of extra days may be allowed. Their paper trail is somewhat more convoluted than banks.

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So, if you've read this far, you're probably about to ask, "What about pay cheques? My bank let's me draw against them straight away."

Firstly, banks are under no obligation to do this - this may be done as a favour. Nothing more. No magical solution gets around the paper trail that must be followed above.

Secondly, history shows that employers who aren't organised enough to do their payroll properly are most likely to be ones who dishonour cheques. Resign immediately and get a job with a more organised employer.

Thirdly, fraudsters are all over badgering bank staff to let them draw against uncleared cheques by calling them "pay cheques".

And finally, if your liquidity situation is such that you need to access those funds immediately, then you have a different set of problems.

But what about bank cheques? Aren't they as good as cash?

In a nutshell, no. Bank cheques can be forged or stolen. Thus they're subject to the same rules as every other cheque.

Try to get anyone paying you money to credit your account directly. It's far less messy than cheques. Cheques are, as I mentioned before, a form of IOU, and as with all IOUs, it's the payee who bears the risk.

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Dikkii's financial tips index

Standard but necessary disclaimer: This is not advice. Only a complete idiot would think that any of this constituted advice. It's not even vaguely reasonable to consider this to be advice. If you are in any doubt as to the content of this, see a good, independent financial adviser immediately. They do exist.

Great debacles of our time: The great mezzanine financing collapse (part 2)

This is part 2.

Part 1 is here.

We were starting to really get stuck into the the sheer carnage caused by the collapse of Westpoint, Fincorp and ACR.

In part 1, we looked at a couple of burning issues created by these debacles:

1. The role that adviser commissions played in the collapse of these businesses and the loss of investor savings;
2. Mezzanine finance and portfolio theory - how is it that advisers can spot a wildebeest when it walks and quacks like a duck? and;
3. Financial literacy and retirees. Is it wrong to target a vulnerable sector of the community when pushing risky products?

The media has been completely enjoying this horrific financial pile-up. And why wouldn't they? There are thousands of angles to explore this from - advisers, investors, the companies involved, the executives, the trustees, the liquidators administrators, the federal government, regulators etc.

And why not? They all had a role to play in this. Whether good or bad, savoury or otherwise.

I'll do my best to cover some of the angles, but I'll re-iterate the important lesson to be learnt from this:

"If it looks too good to be true, that's normally because it is."

Let's look at some interesting stats from this. According to an article in the Fin of Saturday 2 June, 2007 by Robert Harley, the following numbers come up. There were:

• 20,000 investors burnt; and
• AUD $800 million lost.

No matter which way you crunch the numbers, this adds up to serious money and serious lost dreams.

The financial regulator, ASIC, is looking very battered and bruised after some fire from both sides of Parliament. But was ASIC being made a scapegoat?

This blogger thinks that they were. And these are the reasons why:

4. Mezzanine finance is a risky proposition.

Even though the issue of debentures and unsecured notes are done through a trustee, there is very little recourse available through a trust deed for investors. The trust deed itself is normally written by a the company who is issuing the paper.

Trustees are usually appointed through a tendering process whereby the one that offers their services most cheaply will win out. Not only that, but during the tendering process, preference will be given to trustees who promise no questions asked.

Trust Company, the trustee appointed to look after ACR's investors maintains that ACR did all that was required from Trust, and met all their obligations under the trust deed right up until the bitter end.

Is this a conflict for trustees?

I don't really think so - provided that there is proper disclosure given up front. If this is done, then the job of the trustee is mostly done. The trustee just needs to look after the rest, but they still have a duty to act on behalf of the investors.

How about ASIC?

ASIC polices the issue of these investments, but really only up to the point where disclosure is concerned. If the issuer of this paper is meeting their disclosure requirements, then ASIC's job is done.

How the company that has issued the debt then operates in servicing their debt obligations is between the trustee, the company and their investors.

This is a bit different to a bank or a superannuation fund.

Banks and super funds have their day to day activities policed by a number of bodies, all of whom ensure that their prudential and regulatory duties are being upheld.

For banks, the regulatory side of things is monitored closely by the Reserve Bank, and APRA monitors their prudential undertakings to ensure that all is good.

Super funds also have APRA keeping tabs on their prudential requirements, except for DIY super funds which are looked after by the ATO. The ATO also looks after super funds' regulatory arrangements.

In the case of debentures, unsecured notes and other debt instruments, there is no body that looks after the prudential goings on of the company that issues them - it really is caveat emptor.

This adds a whole new level of risks that banks and super funds don't have.

Where disclosure is inadequate, this is pretty much the only area where ASIC can step in and so something about it. And in fact, ASIC did so - the article in the Fin reports that ASIC stopped ACR from issuing capital raisings three times until they fixed stuff up. Which ACR did.

ASIC also issued 11 warnings about Fincorp's goings on both before and after their CEO, Eric Krecichwost resigned as CEO (and as a director) in 2005.

This would appear to point the finger of blame in an entirely new direction, and in a direction that investors will not like, at least for investors who didn't use financial advisers:

5. Investors really only have themselves to blame

This really only applies to investors who just saw the advertisements and went berzerk. It doesn't really apply to investors who sought financial advice.

ASIC appeared to be doing everything short of double-checking the disclosure given by these companies for mistakes and errors.

But the whole deal looked too good to be true for retail investors.

What happens in the institutional world?

Harley's article mentions that where professional lenders, like the ubiquitous Macquarie Bank are concerned, rates of 20% or higher are the norm.

(By the way, just once I'd like to do a post where I don't mention Mac Bank. How in the name of Crikey do these guys end up in everything that I write?)

Anyway, you can bet that where professional lenders are involved, all sorts of caveats are written into the contract to ensure that the lender has some recourse.

Retail offers simply don't have this kind of bargaining power. These investors were pretty much sitting ducks for the walloping that they got, and I hate to say it, but they really only have themselves to blame.

6. How do we protect investors from this sort of thing happening again?

Well this is an age old question.

Investing, much like supply, demand, democracy, revolution and innovation only works because of two base human emotions - fear and greed.

I would also add laziness to this, but I'll detail why on another day.

Investors who got burnt were basically shovelling everything that they had into these investments. In a nutshell, they got greedy.

Of course, where advisers were involved, this complicates things a little, and the blame shouldn't be sheeted home to investors entirely.

Portfolio theory says that putting large slabs of your cash into the one asset is a very silly thing to do, and history has borne this out. Diversification, while it won't protect people from market nosedives, will protect people from problems with particular parts of a portfolio.

But if you throw everything into one asset that goes belly up, you are in deep trouble.

Tony D'Aloisio, the new chairman of ASIC, says that all products like these coming on to the market should all be professionally rated.

This is possibly a constructive solution, but D'Aloisio knows only too well that investors will bear the cost of such risk ratings.

D'Aloisio's other solution is better, though:

7. Can we educate investors about risk?

I think that risk is so important that I honestly believe it should be taught at school as the fourth 'R'.

I'll do a Financial Tip on risk a little down the track, hell possibly even three, but risk is so important, and it's through misunderstanding of risk that people go on to get burnt in the way that they have.

I believe that we can educate investors about risk, but this should start in secondary school.

Trying to educate mature Australians about risk is shutting the gate after the horse has bolted type stuff. It really is.

Australians' financial literacy is shocking. But risk would be an excellent place to start fixing this discrepancy up. And I for one will support any initiatives that ASIC puts in place to improve this particular piece of general financial knowledge.

It's the most important piece there is.

Edit 13/06/2007: I lay the blame for quite a lot of this squarely at the feet of investors, which oversimplifies things a little bit. In the case of Westpoint investors (and some others), however, quite a lot of them sought financial advice, and the advisers in question recommended the debt in question. I've done a couple of edits to rectify this, but I may explore Westpoint's situation in a future post - it warrants some additional comment space.

Disclosure: This blogger owns shares in Macquarie Bank Limited.

Standard but necessary disclaimer: This is not advice. Only a complete idiot would think that any of this constituted advice. It's not even vaguely reasonable to consider this to be advice. If you are in any doubt as to the content of this, see a good, independent financial adviser immediately. They do exist.

Great debacles of our time: The great mezzanine financing collapse (part 1)

I haven't really blogged much about this, but the dominoes are really starting to roll within mezzanine finance in Australia. After Westpoint went down, we've now seen Fincorp and Australian Capital Reserve (ACR) hit the deck as well.

The fact that this is even major news speaks volumes about 2 things:

1. Where financial advisers stand to gain significant commissions from the sale of such products, can there be any more evidence that commission-based advice is completely wrong?

2. Where such risky products are offered, should this ring alarm bells on the general level of investor financial literacy if investors go into these with all guns blazing?

First of all, what do we mean by mezzanine financing?

Basically, in all these instances, the company that was the end user was building property developments. Sound OK, so far?

In order to undertake this level of development, money needs to be borrowed, usually from banks, to fund purchase and/or construction.

However, this will only go part way. You know how banks will generally lend up to 80% of a property's value? And possibly a bit more if the bank (which the borrower pays for, natch) buys Lender's Mortgage Insurance?

Well, more money will quite often be required for property development.

This is where mezzanine financing comes in.

Mezzanine finance is usually sourced from the issuance of certain financial instruments, usually debentures and unsecured notes. This promises the investor a fixed rate of interest for a fixed term, and at the end, the borrower pays back the principle, together with any interest that is owed.

Debentures are usually secured through a trust deed over the company. Unsecured notes are, as the name would suggest, not secured.

But the security provided for debentures is not normally worth the paper it's written on, unless the security provided are specific assets. If it is only security over the company itself, then debenture-holders will rank behind secured creditors if the borrower is wound up.

In the case of Westpoint, Fincorp and ACR, the "secured creditors" are the banks who have lent to these companies and have first mortgage claims over specific assets. So all is good for them, provided that employees are paid, the taxman gets his cut and the administrators/liquidators get paid, though not necessarily in that order.

Unsecured notes will then normally rank behind debentures. Shareholders will be last, in the unlikely event that there is anything left over after the banks have mopped up.

The main problems, though, with these were in the points raised above. Let's look at them one by one:

1. Financial adviser commissions

I've heard, but I can't pin it down, that in the case of Westpoint, commissions paid to advisers were as high as 10%. This means that for a $10,000 investment, a financial adviser would be collecting a commission of up to $1,000 up front, not allowing for cuts that his dealer group may keep. Not only that, but the commission was paid for by Westpoint themselves, it wasn't recouped from the investor through an "entry fee" arrangement.

Now in all my years of providing advice, it was rare that any product would provide anything up front of more than 4%. And even then, this would normally be recouped via an entry fee, so that the investor essentially paid the fee.

Ostensibly, this means that Westpoint were paying a 10% commission to advisers on top of the interest rate applicable to the notes that they had written. That's some seriously expensive borrowings.

The interest rates were quite high, too. But I'll come to this later.

I can't find any evidence to suggest that Fincorp and ACR were being invested in via financial advisers, so I'll have to assume that his problem was specific to Westpoint.

2. Mezzanine finance and portfolio theory

From what I can tell, advisers appeared to be completely ignorant about the nature of these investments.

Debentures and unsecured notes are medium to long-term instruments that promise a rate of interest paid in regular instalments, together with a return of capital at the end.

This means that they are fixed interest investments, just like bonds and term deposits.

Because the funds were used for what was ostensibly property investments, advisers were not only recommending these to people as part of their fixed interest portfolio, but also as part of their property portfolios.

This is erroneous in the extreme.

Not only that, but it appears that advisers were, in some instances, recommending that investors stick all this part of their portfolio into the one instrument.

Portfolio theory tells us that this is a silly thing to do. For most investors - my guess 90-95% - portfolio theory tells us that diversification achieves a greater return for a given level of risk.

Usually, the risk that is managed through diversification is market risk, however there are other risks out there, two of them being credit risk and interest rate risk. Diversification provides an effective way of managing both of these risks, by "not putting all one's eggs in the one basket".

But if you're going to stick an entire segment of your portfolio in the one asset - your diversification is reduced. And because of this, your exposure to something going wrong is greatly increased.

It's fair to suggest, and studies back up this suggestion, that advisers were really only thinking about their commissions when recommending this sort of product.

Again, I can find no evidence to suggest that Fincorp and ACR's ones were being sold through financial advisers, so this problem appears to be Westpoint-specific.

However, my point about diversification applies to all investors who used this sort of product still stands, and I'll discuss this some more in due course.

3. Financial literacy and retirees

In the case of ACR, I remember seeing advertisements on TV last year where interest rates of up to 9.15% were being offered. I remember at the time breathing a snort of disbelief and thinking to myself, "Surely that can't be sustainable."

And obviously, it wasn't.

However, as I've mentioned before at various spots throughout my blog, the general level of financial literacy throughout the Australian public is not particularly good.

The first thing that anyone should learn before they invest a cent is this old maxim:

"If it looks too good to be true, that's normally because it is."

Anyway, the advertising that ACR was doing was calculated to ensnare retirees. I'm told that Fincorp and Westpoint were doing this too, at various times, but retirees are an interesting demographic.

Why?

A. They're usually cashed up. They've retired from the workforce, and they often have a significant chunk of money to play around with, either in the form of superannuation, or equity in their homes.

B. It would appear that retirees are not particularly financially savvy compared to later generations. This blogger would contend that later generations aren't all that better, but I'll leave that post for another day.

C. Retirees generally like investments that pay regular income.

So it would appear to be a no-brainer - when presented by advertisements showing excellent rates, why wouldn't retirees go in for this hell for leather?

In my book, aiming one's advertising at retirees is only slightly better than how the music industry, alcohol and tobacco companies target their advertising at kiddies.

This doesn't make it any less vile.

I'm going to call a halt here - there's plenty more that I'd like to write, but it needs a second part. Stay tuned.

Standard but necessary disclaimer: This is not advice. Only a complete idiot would think that any of this constituted advice. It's not even vaguely reasonable to consider this to be advice. If you are in any doubt as to the content of this, see a good, independent financial adviser immediately. They do exist.

Dikkii's financial tips #4: A case study in banking

Welcome to Dikkii's financial tips.

This is a series where I attempt to provide some sort of guidance to financial matters without breaching the Corporations Act by actually providing advice.

Today, we're going to conclude our discussion on bank fees by giving you some idea of the kind of banking undertaken by one who is hell-bent on reducing their fees.

Namely, me.

I will point out at this juncture that I may not be a good role model for your personal banking needs - I will admit from the outset that I have more accounts than I need. But the idea that I'm trying to convey is this: by looking at the fine print, you can save a heap of money on your personal banking, and make life easier for you.

To put that another way, it is up to you to work out what your personal banking needs require - mine may totally not reflect yours. I am not saying that this is a good strategy - even though it works for me.

I will also limit my discussion to deposit accounts. Where necessary, I may discuss lending accounts, but this will, by and large, be limited to their relevancy.

Also, I will use terminology which I introduced in Dikkii's financial tips #2: Why are there so many different accounts? and Dikkii's financial tips #3: How do I reduce my bank fees? so click here for explanation of account and fee types, respectively.

Lastly, thank goodness that bank fees are all over. There's heaps more interesting stuff in this big, wide, financial world.

So on to the case study.

1. Transaction accounts

I have two of these. One of them, I don't need, but I'll discuss that later.

The main one is with a big four bank.

I choose to have my main transaction account with a big four bank, because I value convenience. This particular big four bank has one of Australia's largest network of ATMs, which I find particularly useful.

Normally, this account is subject to an account keeping fee of $5 per month, and allows unlimited EFTPOS, ATM, phone, internet and over the counter withdrawals. If you use another bank's ATMs, there is a fee of $1.50 per use.

I pay no account keeping fee for the use of this account, because I own enough shares in the bank to give me an exemption.

This account is a joint account which I share with my wife. While she is good about using just the ATMs that the bank provides, I'm not so disciplined. We usually pay about $3 per month in other bank ATM fees, and this is totally avoidable. Mea culpa, I'm afraid.

Our account has never been overdrawn, ever. This is because, we always leave a small amount, about $20 in our account at the end of each week.

Our transaction account will usually only have enough cash in it for our weekly cash requirements. Plus the aforementioned margin of $20 which is purely there for any fees at the end of the month.

My other transaction account has a balance of about $2 in it, and hasn't been used in over two years. It is with a credit union, and only exists because I have an unsecured (and reuseable) line of credit with the credit union that I also haven't used in two years.

I keep the unsecured line of credit for emergencies, but the last time I used it was to transfer $1 into the credit union transaction account, which I promptly transferred back into the line of credit again. Just to keep it available.

No account keeping fee is charged on my credit union accounts, and no transaction fees are charged, unless I have cash access. I only have phone and internet access, so I'm charged nothing.

Total fees on transaction accounts = $3 per month, if that.

2. Cash management accounts

I do have one of these. And it's with another big four bank entirely.

Now I don't actually use this account much at all. I got this account initially because my online stockbroker, which is owned by the big four bank from the previous paragraph will give me a fantastic discount on trades for having one of these, and settling my trades through it.

To make it difficult, the account in question needs to be opened with a minimum of $5,000 and only pays interest on balances above this figure, but I only trade about once every couple of months, if that.

So the day after the account was opened, I transferred the money I opened the account up with straight out and back into the online account it had come from. The account would be lucky to have any more than $2 in it at any one time, and I only use it to settle trades and pay my margin loan repayments (direct debit).

It is account keeping fee exempt, and comes with a maximum of 15 electronic transactions, including direct debits for trades and margin loan repayments. Naturally, I'm unlikely to be breaching this at all, so no fees here.

Total fees on cash management accounts = $0

3. Online accounts

I have two of these - one is a joint account which I share with my wife and is with the same institution that our joint transaction account is with. This is where we keep our (admittedly small) "slush fund". The joint transaction account is the nominated account.

The other is in my name and is with yet another institution again. This account is kept to store the funds required to service my margin loan. The nominated account for this is my cash management account.

Most of my salary is directly credited into our joint online account, with a small portion credited to my personal online account. My personal online account also receives the odd credit from dividends and managed fund distributions.

Money from the joint online account is "drip fed" in weekly instalments into our joint transaction account for weekly cash requirements. This is excellent for budgeting.

On top of that, a small portion is transferred from our online account to our transaction account in monthly instalments for bills such as rent and credit card payments.

Money from my personal online account is mainly fed monthly to my cash management account to service my margin loan repayments.

Like most online accounts, these charge no account keeping fees or transaction fees. They also pay a high rate of interest - while they may not be the greatest interest rates on the market, I have absolutely no intention of chopping and changing online accounts just to chase rates - I don't have enough cash to make this a worthwhile exercise.

It would just be a few basis points of interest anyway.

But I still pool money in them - with the exception of one bank's ludicrously humiliating offer, online accounts usually pay a high rate of interest from $1 balances upwards.

Total fees on online accounts = $0

4. Interest

All this time, I have discussed fees, and haven't really broached the subject of interest.

Given the way bank accounts work at the moment, I choose to have as much of my (and my wife's) money in our online accounts at any one time. This ensures that maximum interest is paid and that we only have funds that we need for cash purposes in our transaction account.

We get paid into our online accounts. There the money stays until we need it. Using this strategy with credit cards means further fee saving and interest maximising opportunities, but I'll leave that until I discuss credit cards more.

You can even have more fun rorting the banks with your home loan, but I'll leave that until another day as well.

All in all, I think I do pretty well - I count a total of about $3 per month in fees, all of which can be avoided if I was a bit more disciplined.

You can probably do it with a little more finesse than what I've done it. You just need to know your account types and know your fees. Knowing your interest rates should be the last step.

Lastly, be creative - banks rely on people doing things the same way. If you do it differently, you can consider yourself in front of the game. It's that easy.

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Dikkii's financial tips index

Standard but necessary disclaimer: This is not advice. Only a complete idiot would think that any of this constituted advice. It's not even vaguely reasonable to consider this to be advice. If you are in any doubt as to the content of this, see a good, independent financial adviser immediately. They do exist.

Dikkii's financial tips #3: How do I reduce my bank fees?

Welcome to Dikkii's financial tips.

This is a new series where I attempt to provide some sort of guidance to financial matters without breaching the Corporations Act by actually providing advice.

Today, we'll be looking some more at bank fees. Specifically, how to reduce them, if not avoid paying them outright.

I'm going to look specifically at deposit accounts, today. I'll do a feature on lending a little down the track, but for most of us, deposit accounts are what we start out with. In today's banking climate, it is quite appropriate that we look at deposit accounts separate to lending, because more and more people are getting their loans through mortgage brokers, and you may even end up with a loan from some organisation that doesn't even have deposit operations. Or isn't even a bank, credit union or building society, for that matter.

There are many different types of fees that you might come across in using deposit accounts. We're going to stick to the main ones. In the process, I might use terms for bank accounts that I introduced in Dikkiis financial tips #2: Why are there so many different bank accounts? and so if you get lost, please click back here for help.

So let's get started.

1. Transaction fees

For personal accounts, these are normally fees for any withdrawals that you might make.

It's interesting to note that banks reserve the right to start charging for deposits and anything else, but to do so on anything other than business accounts will be PR suicide for the first bank that tries to do this.

Transaction fees will normally be quite low for non-cash withdrawals, such as through internet and phone banking channels, a little bit higher for cash withdrawals made through ATMs or EFTPOS, a little higher again if they're through a cheque facility and then completely outrageously high if done over the counter of a bank.

The good thing about these, is that most transaction and cash management accounts appear to have a reasonable amount of "electronic" withdrawals built into them fee free - like about 15 or 20, and at some banks, you might get an unlimited supply of these. By electronic, I mean ATM, EFTPOS, internet and phone banking.

Do not accept anything less than 15 electronic withdrawals fee free on your transaction account. Go for unlimited if you can. After a few transfers and bill payments, you'll be wondering where your free transactions have ended up.

One thing important to note is that where you have any kind of direct debit arrangement in place out of your bank account, these will normally be factored into your electronic transactions total. Always check to see how direct debits are itemised in the fee scheme of things.

Be prepared to pay top dollar for cash withdrawals over the counter of a bank branch - I don't think that there's an account left that gives much in the way of exemptions for these. You can expect to pay up to $4.00 per over the counter withdrawal if you like getting your cash from a person.

Interestingly enough, online accounts don't charge transaction fees at all, as a rule. However, you can only generally withdraw out of them over the net or telephone, so this kinda makes sense. I would counsel against opening any kind of online account that charged transaction fees.

Anyway, the moral of the tale is that if you make withdrawals through your bank's network of ATMs or use the bank's phone or internet banking facilities, you will save on transaction fees. Avoid doing withdrawals over the counter or via cheque facilities.

2. Account keeping fees

This is a bitch of a fee introduced primarily to recognise the fact that accounts don't maintain themselves. Usually, these will only apply to things like transaction accounts or cash management accounts - ones where you'd expect to be quite a lot of activity.

Online accounts don't usually charge these fees - but you still need to use them with a transaction account which will.

People who will happily complain about this one strangely don't appear to mind that they'll be charged up to $50 per month for monthly land line fees, or other utilities, even though bank account keeping fees can start from as little as $2.50 per month and only go as high as $6.00 per month, usually.

These fees normally come with catches.

For example - a small account keeping fee on a transaction account may have written into the fine print that only "electronic" withdrawals are allowed, that is, only through ATMs, EFTPOS, internet and telephone banking. You would normally expect to pay hefty transaction fees if you do a withdrawal over the counter in a bank branch, or operate a cheque facility.

If these are even allowed. This blogger is aware of quite a few transaction accounts where over the counter withdrawals are expressly forbidden, except in the event that you close your account.

For larger account keeping fees, you can expect maybe up to a certain number of over the counter withdrawals being made available to you fee free - like, you know, maybe two - before being hit with transaction fees for these.

Be aware that some banks like to offer a deal whereby they will waive account keeping fees if you keep more than a minimum amount in the account. This is a con. You will not maintain the balance, and will therefore be charged.

Also the minimums are usually quite high, often in the region of $1,000 or more. Given that these accounts are normally transaction accounts which pay extremely small rates of interest - if any at all - you would be better off keeping any money that you are not using in an account that earns more interest. Avoid these kinds of deals - banks need to know that his sort of thing will not be tolerated.

Try to keep your account keeping fees to a minimum - why pay extra for the privilege of using over the counter facilities if you don't need them?

Lastly, if you are paying account keeping fees, try to reduce the number of accounts that you use. Having a separate account with a cheque facility that you rarely use is a luxury if you are paying two sets of account keeping fees. Given that most state governments in Australia have stopped charging debits tax, if you require a cheque facility so badly, have one added to your everyday transaction account. You'll have more of a clue about balances in there before you write cheques than a separate account, anyway.

3. Other bank access fees

I get asked about these fees all the time, usually from people who really should know better.

Case in point: My good buddy, whom we call "Bob" has his bank accounts with a small regional bank. As a result, he can never find an ATM of his bank's when he needs one. So he has to use other bank ATM's.

Bob could be being charged up to $3.00 per go at using a bank ATM network that his bank is not maintaining and, therefore, getting charged for using.

Bob: This sucks. Why should I get charged for this?
Me: Well, ATM networks don't just maintain themselves, you know. Why should you get free access to other bank ATMs, just because your bank isn't wealthy enough to build their own network properly?
Bob: I love my bank. They support the community.
Me: Well they're clearly not supporting your community, because in all the time that I've known you, you've never been able to find one of their ATMs.

What Bob doesn't get, is that if he wants convenience, he's going to have to trade in the "community" feel of his current provider for it. Knowing Bob, of course, he'll blame the big banks for this, and come up with some conspiracy theory that has it as a plot by the big players to wipe out the small ones. But I digress.

One thing to look out for with other bank ATM usage fees is that usually balance enquiries at other bank ATMs are often charged the same rate as a withdrawal. A great trick here is to try a withdrawal - if you have no money in your account, the withdrawal won't go through, you will get a printout showing your balance, and you (in most instances, but not all) won't get charged the non-bank ATM fee. Of course, you may end up doing a withdrawal that you didn't need to do.

My suggestion here is to take advantage of your phone banking if you just want a balance.

Another thing to look out for is that some banks will charge an electronic withdrawal fee, or have an other bank withdrawal count towards your fee free total for your electronic withdrawals, on top of getting stung for the other bank ATM fee. Ouch!

The moral of the tale is, steer clear of other bank ATMs, unless your bank has some kind of deal in place where you do not get charged for using certain other bank ATMs.

Also, cash out at EFTPOS terminals is a great way to get around using another banks ATMs. Planned well, EFTPOS is an excellent way of doing this.

4. International transactions

These can be quite pricey. I've used ATMs overseas and regretted it afterwards. Usually, you could be up for as much as $5.00 per withdrawal, so you need to make every one count. Avoiding small withdrawals is a really good suggestion.

5. Overdrawing fees and interest

Never overdraw your bank account. Borrow from family and friends if you have to and ensure that you've got enough in your account at the end of the month to cover fees.

Keep mental tabs on the transaction and other bank ATM fees you're clocking up, or keep a small notebook if you have to. You only have yourself to blame if you overdraw your account.

Most banks will let you get away with a few dollars before they start charging fees - but they won't let you get away with a debit balance for a moment before they start charging interest, sometimes up to 25% pa or more.

And never, ever enter into a direct debit arrangement if you don't know when it's going to come out of your account. This is just being irresponsible.

Overdraft facilities by prior arrangement will save you on fees - but it is rare that they'll save you on interest. My suggestion is to avoid these unless you have a good reason for needing one.

6. Fee exemptions and hints

Transaction fees can be avoided - go for an unlimited electronic transaction deal or better.

Account keeping fees can also be avoided. Most banks offer fee exemptions to customers who have their lending under the same roof. Also, relationship balances can assist here as well - one bank offers a deal whereby if you have $50,000 or more in a relationship total, you'll get your account keeping fees waived. Relationship balances is usually the absolute value of all banking balances - deposit and lending - that you have with a bank.

Another deal that some banks offer is to be a shareholder. One bank has a deal whereby if you own more than 500 shares in them, you'll get charged no account keeping or transaction fees. Nice.

Students usually enjoy fee free banking. Be warned, though. If you are a tertiary student, you will usually need to visit the bank just after the start of each calendar year to get your exemption extended for another year.

Pensioners often get to enjoy fee free banking.

Other bank ATM fees and international access fees can't usually be waived for anyone. One bank that I do know, however, doesn't have very large operations in the state where I live, so they're offering to waive all other bank ATM fees provided that you link one of their Visa debit cards to your account. That's pretty good.

One last thing - if you've been charged a fee that you think you shouldn't have been, get a bank staffer to explain it to you. If you're still not happy with their explanation, mention the words "Banking Ombudsman" and just see how fast they move in getting your fees reversed.

But anyway, that's the minefield that is bank fees, or at least a start to them.

Other fees do exist - banks these days exist to get fee income - but hopefully we've covered the basic ones.

You have to know what you're paying before you can go shopping around, but you stand to save a fortune once you do. Hopefully this post has helped you out.

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Dikkii's financial tips index

Standard but necessary disclaimer: This is not advice. Only a complete idiot would think that any of this constituted advice. It's not even vaguely reasonable to consider this to be advice. If you are in any doubt as to the content of this, see a good, independent financial adviser immediately. They do exist.

Dikkii's financial tips #2: Why are there so many different bank accounts?

Welcome to Dikkii's financial tips.

This is a series where I attempt to provide some sort of guidance to financial matters without breaching the Corporations Act by actually providing advice.

Today, we were going to look at bank fees, but they're going to make more sense if, before we do, we look briefly at bank accounts first. It is vitally important, that in this day and age, if you want to cut your bank fees, you must know what bank accounts you need, and what fee structure they're on. Only then should you be addressing the issue of what level of interest you'd like to generate.

Part of most people's misconceptions about bank fees come from the fact that they have entirely the wrong set-up for their accounts in the first place. This blogger has a weird and wonderful bank account set-up - if truth be told, I have a couple more bank accounts than I need, but then again, I don't pay any account keeping or transaction fees, so there's no loss there.

This post aims to have a look at why different bank accounts evolved, and what their purposes are.

We're going to look at deposit accounts, first. These are a bit more straightforward than lending accounts, and are what most people start their lives off with first. And we'll try to cover off on the main types:

• Transaction and cheque accounts
• Term deposits
• High interest savings accounts
• Cash management accounts
• Cash management trusts
• 24 hour accounts & 11AM accounts
• Online accounts

There are other types of bank accounts out there, but these are the main ones for personal investors.

1. Transaction and cheque accounts

These evolved from the old savings accounts and the old cheque accounts, which don't really exist anymore except in archaic, inconvenient and costly formats, such as passbook accounts.

Transaction accounts exist to provide day-to-day access to money - a sort of entry and exit point into and out of the banking system. Without one of these, you have very few ways to access your cash as and when you need it.

These days, you're sunk if you don't have ATM and EFTPOS access - which is what these accounts aim to provide. Most of them also provide a cheque facility on the side, should you need one and this is one reason why cheque accounts in their old form have largely disappeared. The cheque accounts of today are merely transaction accounts with a cheque facility.

Also, like most of the accounts in this list, transaction accounts should have phone and internet access.

Most transaction accounts pay minimal interest, if any. They are designed for transacting, nothing more. Keeping large wads of cash in these is usually a transitory thing.

2. Term deposits

These are pretty much the only type of deposit account that still exists intact from the "good old days". Essentially, a term deposit pays a fixed rate of interest for a fixed time frame.

There is pretty much no access to a term deposit until it matures - if you do, expect to pay an interest adjustment, which is normally unfavourable, and an administration fee which could be as high as $50. One should really only consider term deposits if they need to lock away a sum of cash for a short to medium term time frame with no requirement to access any of the funds. What if you need these funds in a hurry?

Another thing to be aware of when using term deposits. You are having a bet that interest rates will not increase over the time frame that your funds are invested. If interest rates increase, you have no one else to blame other than yourself if you start moaning about better rates that might be available in the future. This is a risk that you are taking when locking into one of these products.

3. High interest savings accounts (HISAs)

These appeared in the early nineties as a way of getting depositors to save. Most of these pay a bonus rate of interest should you satisfy some criteria.

It's interesting to note that they evolved from a specialised account which was known by some providers as the "Christmas Club Account". These were highly restrictive, yet effective HISAs.

The most common criteria appears to be a requirement that there be at least one deposit per month and no withdrawals in order to satisfy the eligibility requirements for bonus interest, but some also have account minimums as well. Because there is significant variance on this, be sure to read the fine print.

HISAs appear to have lost a significant degree of popularity in recent years - mainly due to the advent of the online account. For small amounts, the interest earned doesn't appear to reward the onerous bonus interest requirements by comparison with online acounts.

4. Cash management accounts (CMAs)

Cash management accounts evolved as an all-in-one solution designed to take care of large amounts of cash with higher interest but a full range of access, i.e. ATM, EFTPOS, internet, phone and cheque.

Normally, CMAs can have higher fees applying to them if their balances fall below a certain amount. Also, they usually only pay interest above certain balances. But this (interest) is usually quite high compared to transaction accounts.

CMAs have also been losing popularity in recent years as people realise that using a combination of a transaction account and an online account yields similar levels of convenience with minimal extra disruption.

Banks appear to be realising this, and some have started issuing more sophisticated CMAs that are targetting this market - these CMAs are probably more accurately termed online accounts with better access functionality. However, it remains to be seen whether these enhanced CMAs are successful.

5. Cash management trusts (CMTs)

A bit of a red herring - these are not bank accounts at all, but a special kind of managed fund that only invests in cash assets.

But given that most of them these days appear to have enhanced access facilities such as ATM, EFTPOS, internet, phone and cheque, and pay market rates of interest in arrears, quite a lot of CMT users use them in place of CMAs.

Be aware that fees are usually implied rather than explicitly charged, and that significant minimum balances are normally required. Also, like all managed funds, none of them come with a bank guarantee.

6. 24 hour accounts & 11AM accounts

These are extremely sophisticated bank accounts for people who need to have extremely large amounts of cash on hand at short notice.

They normally don't have any access methods, save for credit to and debit from a nominated account, however, they do pay top rates of interest and they generally have multiple storage facilities within the account - for example, you can generally designate a portion of the funds invested to be locked away in several term deposits within the account as well as having cash on call - as well as sweep facilities and consolidated reporting.

Seriously high minimums apply with these, and most retail investors will never require use of these.

7. Online accounts

These were the banking innovation of the 1990s. Basically, these pay a high rate of interest on all funds invested, and normally charge no account keeping or transaction fees.

This blogger regularly used to breathe sighs of sheer amazement as these accounts brazenly fought it out for market share with interest rates that were regularly over and above the official cash rate set by the Reserve Bank.

The catch is that you need to have a nominated account (normally a transaction account) set up for credits into and debits out of the online account, but with the advent of enhanced CMAs, this could be coming to an end.

It's also notable that some online accounts are getting more sophisticated themselves. This blogger saw one offered by a credit union that offered multiple storage facilities, much like in a 24 hour account. Unfortunately, some of the attraction of these accounts is in their simplicity - so it remains to be seen if this kind of innovation is successful.


Banks offer plenty of other types of deposit accounts as well, these are just the main ones. Others that you might come across are childrens' accounts, pensioner (deeming) accounts, Retirement Savings Accounts (RSAs) and others.

Also, we've really only looked at accounts for personal use - there are plenty for business use as well.

In my next post, I plan to tackle fees, although I might switch order yet again and put my case study in. Or do cheques.

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Dikkii's financial tips index

Standard but necessary disclaimer: This is not advice. Only a complete idiot would think that any of this constituted advice. It's not even vaguely reasonable to consider this to be advice. If you are in any doubt as to the content of this, see a good, independent financial adviser immediately. They do exist.

Dikkii's financial tips #1: A brief history of bank fees

Welcome to Dikkii's financial tips.

This is a new series where I attempt to provide some sort of guidance to financial matters without breaching the Corporations Act by actually providing advice.

Today, we'll be looking at bank fees.

Now this blogger worked for 6 years at a major Australian bank. This is not meant to be an argument from authority, however, one of the things that I used to have to deal with from time to time was people whingeing about bank fees.

I still cop it from time to time, although not working for a bank anymore appears to work in my favour, as people no longer feel that they have to unload on me over the fees that banks charge. However, as soon as I open my mouth and mention that I've worked for a bank in the past, the gripes will, sooner or later, make themselves known.

And before I start, I'll let it be known that I am absolutely the last person that you should be complaining to about bank fees. I do not have any sympathy for you at all. More often than not, if you are complaining to me about bank fees, it's because you have not even bothered to put in the hard yards shopping around for a better deal.

So how do we get that elusive "better deal"?

Well, for that, let's take a brief look at bank fees. It's important to know your enemy, and bank fees fall into this broad category. How do they come about? How are they charged? How can they be avoided?

It is important at this point that I mention that it is impossible for me to cover off on all the different types of bank fees out there, but in the meantime, this is a brief history of bank fees.

A brief history of bank fees

The first thing that is obvious is that, unlike a lot of other things, when people talk about "the good old days" when Telstra's customer service was good, crime was non-existent, sex happened only on one's wedding night and drugs were what you got at the pharmacist after a visit to the doctor, this one is actually true:

There actually was a time where bank accounts didn't get charged account keeping fees and transaction fees.

Oh yes. Such a time existed.

In Australia, this was prior to the banking reforms that came about in the 1980s.

The theory, as it was at the time was this: you lent your money to the bank in the form of a savings account, and the bank lent it out afterwards to borrowers in the form of loans.

The bank charged a rate of interest on the loans, and from that it paid a smaller rate of interest on the savings account money. After administration costs, anything left over was profit in the hands of the bank.

This was what I'm calling the "cross-subsidisation model", and it was a very simplistic way of looking at the banking system. Essentially, the admin costs of depositors was subsidised by borrowers.

Now it should be patently obvious to even the biggest bank-hater out there that this was a grossly over-simplistic way of looking at banking. Not all depositors are savers.

Quite a few of them were "Transactors". A Transactor is one who puts money in, just to withdraw it soon after.

A great example, which this blogger saw lots of, were pension recipients. Often a lot of them would come in the day after their pension was credited to their accounts and withdraw all but a few cents.

And it's not just pension recipients, either. Some people just keep bank accounts open to receive their pay, or other moneys and will withdraw the lot soon after.

So this model fell down in that some depositors were essentially getting something for nothing, and borrowers were paying for this.

This blogger had a great conversation with a regular customer whom we'll call Mrs Jones which went like this:

Mrs Jones: "I've been waiting in that queue for twenty minutes."
Me: "Sorry, ma'am."
Narrator: Mrs Jones came in promptly every second Thursday to withdraw her pension payments. The pension payments would always be credited the day before.
Mrs Jones: "Not good enough. You're always busy when I come in. Why can't you get some more staff?"
Me: "The day after pension day is the busiest day of our fortnight. You don't think that it would be silly for the bank to get on a couple of part-timers once a fortnight?"
Mrs Jones: "No I don't. After all, we pay your wages."
Narrator: Words cannot describe the anger I felt at that point in time. She did not pay our wages, nor did any other Transactors receiving their pension payments in this way. I noted that she had an exemption for fees, too.
Me: "Here's your money, Mrs Jones. Have a nice day."
Mrs Jones: "You have no idea, do you?"

This all may seem a little trivial, but when you're working on the cash as I was for the first couple of years at the bank, this kind of ridiculousness grates after several thousand similar comments. And although this was many years after the fee-free banking utopia that many bank customers used to enjoy, the sentiment is still the same.

So de-regulation came into effect in the mid 1980s, and soon after that, the Commonwealth Bank, formerly owned by the federal government, was privatised. About this time, banks that were owned by state governments were also privatised.

Competition was allowed to take its course and bank fees started popping up on bank accounts, now that the banks didn't have to compete with state owned enterprises. Transaction accounts appeared that pay no interest whatsoever.

A shift had taken place. No longer were depositors considered to have lent money to banks - depositors were now considered to be using banks for secure money storage facilities. Banks now provided networks of ATMs for people to get money whenever they liked rather than toting wallets bulging with cash. Banks provided phone and internet facilities for customers to move cash around easily. And banks still (although the importance of this was decreasing) provided staffed cash handling facilities all around the country for customers to drop off and pick up cash and other requests.

This was reflected in the types of deposit products banks now offered. Banks' core offerings now included transaction accounts for easy access to cash. Higher interest accounts for serious savers. Cash management accounts for people who needed to move larger amounts of money around. And more.

Lending products were rewarded with lower rates of interest as banks competed with one another for the lending dollar. Offsetting this was a new raft of admin and, sometimes, transaction fees on lending products.

Complicating this was the fact that banks were now not just competing with other banks for borrowers. There was renewed competition from building societies, credit unions, mortgage funds and other non-bank lenders.

Banks responded by slashing interest rates some more, adding more features to their loans such as redraw facilities and offset accounts and bumping up admin costs generally.

Of course, they had to respond by then going in and raising fees higher still to compensate.

The general public were not pleased with this direction. To this day, the top rating current affairs shows are guaranteed to use a "bad bank fees" story for ratings mileage at least once every six months.

And while banks are still suffering from over 15 years of bad press over fees, and trying to repair the damage, most of the bad press comes from misconceptions about why fees are charged.

To their detriment, banks aren't a good case study in how to manage expectations. Banks have never made a good case with the general public as to why fees have gone up, or been introduced to begin with.

The following are 7 points that banks have failed to make clear to consumers:

• Money doesn't manage itself. Unless you are sinking a large amount of money into an account for the small to medium term, you are not lending the bank a cent, except for accounting purposes. You are storing your money somewhere so you can access it later on. Which pre-empts points two and three.


• ATMs and other access mechanisms don't magically materialise on their own. Banks have to pay for implementation and maintenance of these. If you are purely using a bank as a cash storage medium for immediate use, or in the short term, it is totally not unreasonable to expect to pay a fee for this.


• Don't expect a decent rate of interest to be paid on accounts that, more often than not, have no money in there. Bank accounts with balances close to zero are a major administration drag on resources - they still require all the usual services such as statements, monitoring, the occasional bit of tax compliance etc.


• Fees can be avoided. Yes, this is true. Banks do a pretty poor job of conveying this message, but the vast majority of fees that bank customers pay are completely avoidable. Most of them are charged on a user pays basis, with little extra bits if you request something unusual.


• Expecting borrowers to cross-subsidise depositors' (and others') admin fees is completely unreasonable. I don't think that this point really warrants further discussion.


• Bank shareholders aren't twee altruistic schmucks. They expect banks to be profitable, the evil bastards. Except the "evil bastards" are not just a small cartel of Monty Burns types closeted up in castles in the wilds of Transylvania. Thanks to compulsory superannuation, bank shareholders are effectively you and me and pretty much most of the Australian population. And, because we all expect our super funds to perform, we all, by logical extension, expect our bank shareholdings to do likewise.


• Borrowers have it easy. Oh yes. I remember when I was young, the best interest rate that you could get on your savings was about 8 percentage points lower than the best interest rate borrowers could get a loan for. Now that gap is as small as 1 percentage point. In an environment like this, how could you not expect banks to seek alternative methods of remuneration?

And that is my brief history of bank fees.

In the next exciting installment, I'll tackle some of the fees that exist out there and look at ways that these can be reduced, if not avoided outright.

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Dikkii's financial tips index

Standard but necessary disclaimer: This is not advice. Only a complete idiot would think that any of this constituted advice. It's not even vaguely reasonable to consider this to be advice. If you are in any doubt as to the content of this, see a good, independent financial adviser immediately. They do exist.