The Human Face of Underinsurance

Super boost: How to get the most out of salary sacrificing

Super boost: How to get the most out of salary sacrificing

Arranging to salary sacrifice super contributions might sound like taking a voluntary pay cut, but don’t let the name fool you. Salary sacrificing can be a tax-effective way to make your income go further, and it can also be a great option for boosting your super.

How does salary sacrificing work?

Salary sacrificing (or salary packaging) is an arrangement you make with your employer to withhold a portion of your pre-tax salary. In exchange, you get another type of benefit — for example, a car or a computer — which is paid for out of your pre-tax salary.

With a salary sacrificed super contribution, your employer agrees to pay part of your salary straight into your super account. This is on top of the compulsory Superannuation Guarantee (SG) contributions your employer makes, which are currently 9.25% of your pre-tax salary.
Even if your retirement is still a long way off, paying a little extra into your super now can make a big difference in retirement
Why salary sacrifice?
Of course, everyone likes to get more for their money while paying less tax, and salary sacrificing can help you do that.
Salary sacrificing super contributions can allow you to take advantage of tax benefits while helping to boost your super balance because they come out of your pre-tax earnings and are not counted as assessable income for taxation purposes, which means you could pay less income tax each year.
What’s more, if you make super contributions through a salary sacrificing arrangement, they’re taxed in the super fund at a maximum rate of 15%. Generally, this tax rate is less than what you would pay if you did not enter into a salary sacrifice arrangement.1
This means salary sacrificing can be an especially useful strategy if you’re in a higher tax bracket. Just say your income is taxed at 46.5% (including the 1.5% Medicare Levy). You could save 31.5% in tax on the amount you put into your super via salary sacrifice, rather than by topping up your super from your after-tax earnings.

How much super will I need?

You may think that it’s enough that your employer contributes to your super — but in reality, these payments are unlikely to provide a comfortable lifestyle in retirement.

According to the Association of Superannuation Funds of Australia (ASFA) Retirement Standard, a single person will need about $430,000 in today’s dollars for a comfortable retirement, while a couple will need $510,000.2 Even with compulsory SG contributions set to rise to 12% by 2019, the unfortunate reality is that many Australians will come up short.
If you end up in this situation, you may have to keep working longer than you’d planned or adjust to a more frugal lifestyle.

Paying a little bit extra into your super now by salary sacrificing super contributions means that your salary sacrificed contributions increase your super balance, helping to fund your retirement. And chances are, it will probably only make a small difference to your take-home pay.

Case study

Julia is 40 years old and single. She is currently working full time and earns $60,000 a year. Over the years, she has had a couple of career breaks and now her super balance is $50,000.
If Julia relies on compulsory employer SG contributions alone, by the time she turns 65 she’ll have around $401,000 in her super account. But with a weekly pre-tax salary sacrifice of $50, she could end up with an extra $100,000 by the time she turns 65.3

How do I get started?

Ask your employer whether they offer the option to sacrifice part of your salary into super. If they do, it’s usually just a matter of filling in a form. It can also be a good idea to speak to a professional financial adviser to find out whether salary sacrificing is best for your situation and retirement goals.

1 The concessional tax treatment is limited to a set amount of contributions made each income year.
2 AFSA (2013) Retirement Standard, p4. http://www.superannuation.asn.au/resources/retirement-standard
3 See calculation assumptions at http://findyourfuturecalculator.com.au/cfs/calculator.

This may contain general advice. General advice is prepared without taking into account your objectives, financial situation or needs, and because of this, you should, before acting on the general advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs and if the advice relates to the acquisition of a particular financial product for which a Product Disclosure Statement (PDS) is available, you should obtain the PDS relating to the particular product and consider it before making any decision whether to acquire the product.

Duty of disclosure

Do you have all the protection you need ?

Do you have all the protection you need?

As a qualified or skilled workers, you need to be physically fit and healthy to make a living. That way you can maintain the lifestyle you and your family have worked so hard for.
So when you’re looking at insurance, you need to make sure you have cover that takes into consideration the work you do and the unique risks you face. It’s important to feel confident knowing that whatever happens, your family will be looked after.

Workers compensation may not be enough

Workers compensation helps part of the way, but you could be waiting a long time and it only covers some of your medical bills.
What if something happens outside work or you suffer heart disease or cancer? When your income stops, the last things you need to worry about are your loan repayments, bills, and everyday expenses including your children’s schooling.

Here are the facts:

• According to Safework Australia, labourers and related workers had the highest incidence rates of work-related injury – nearly three times the rate of all occupations.1
• 48% of claims from tradespeople relate to having an accident.2

Let’s make sure you have the cover you need

I encourage you to make an appointment with my office. If you can’t afford comprehensive cover, you can cover yourself for accidental injury only. Considering the majority of claims are due to accidents, it’s a pretty sensible option.

1 “Key Work Health and Safety Statistics Australia, 2010”
Safework Australia
2 Source: Asteron Life, based on 2011 income protection claim statistics.

This may contain general advice.  General advice is prepared without taking into account your objectives, financial situation or needs, and because of this, you should, before acting on the general advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs and if the advice relates to the acquisition of a particular financial product for which a Product Disclosure Statement (PDS) is available, you should obtain the PDS relating to the particular product and consider it before making any decision whether to acquire the product.

Hindsight bias

Introduction

After an event has occurred, people often look back and convince themselves that the outcome was obvious and likely, and that they could have predicted it. This is known as ‘hindsight bias’, or the ‘knew-it-all-along’ effect. In actual fact – particularly in the investment world – outcomes can rarely be reasonably predicted ahead of time.
Hindsight bias is common and can be attributed to our natural need to find order in the world. We create explanations that allow us to make sense of our surroundings, and that help us to believe that events are predictable.

The human ability to find patterns and to link cause and effect can be useful – for example, to a scientist carrying out experiments. However, finding false links between an event and its outcome can sometimes result in unreliable over-simplification.
Studies have also shown that hindsight bias occurs because it’s easier for people to understand and remember the actual outcome than it is to consider the many other possible outcomes that, in the end, didn’t come to pass.

Given how important investment decisions are in our everyday lives, hindsight bias is frequently observed among investors.

Impact on investment decisions

One of the most significant effects of hindsight bias is the way in which it can influence investment decisions.

It does this by encouraging investors to over-estimate the accuracy of their past forecasts. This leads to a false sense of security, causing investors to assume that their future forecasts and decisions will be equally accurate.

As a result, investors often make decisions based on future investment outcomes which may seem obvious and highly likely to them, but actually involve much more uncertainty and risk than they realise.

Philip E. Tetlock, a professor of management at the Wharton School of the University of Pennsylvania, has studied people’s tendency to exhibit hindsight bias. “Even after it has been explained to you 100 times, you can still fall prey to the bias” he has said. “Indeed, even after you’ve written about it 100 times.”

The ability of investors to identify a bubble after it has burst is a classic case of hindsight bias. In both 1999 and 2007, for example, very few investors correctly forecasted that stock markets were about to fall. However, when we now look back at those times, it’s often felt that the signs of what would happen next were clear and there for all to see.

Case study

Hindsight bias can be illustrated by the following case study and above chart. In this example, our investor William invests in two managed funds during 2013.
In January, after much research, William decides to invest in Managed fund A. The Managed fund unit price soon increases substantially in value. William is delighted – his research has paid off! He congratulates himself on his perception and investment insight.
In December, William decides to invest again. His success with Managed fund A gives him confidence that he will be able to pick another winning stock. This time, William invests in Managed fund B.

Of course nobody can be certain how Managed fund B’s unit price will perform, including William. But he is more confident in his expected (positive) outcome for Managed fund B – and less focused on the wide range of other possible investment outcomes for its unit price – than he might have been before his success with Managed fund A.
In short, hindsight bias has led William to become over-confident in his Managed fund-picking skills.
Eliminating hindsight bias
The first rule of avoiding the common investment pitfalls associated with hindsight bias is to be aware that it exists.

Even experienced investors can never be certain how particular investments will perform in the future. Investors must always balance risk and return, placing equal emphasis on all factors that have impacted previous investment decisions, both successful and unsuccessful.
Doing so will provide investors with a clearer and more balanced perspective to their decision-making process. Maintaining this focus can enable investors to avoid the unfounded over-confidence in their predictive abilities that hindsight bias can trigger.
An alternative approach would be to invest in a managed fund, run by a professional investment manager. Investment managers tend to follow consistent, repeatable investment processes which can help eliminate hindsight bias from investment decisions.

Speak to your financial adviser if you have any questions about hindsight bias.
This may contain general advice.  General advice is prepared without taking into account your objectives, financial situation or needs, and because of this, you should, before acting on the general advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs and if the advice relates to the acquisition of a particular financial product for which a Product Disclosure Statement (PDS) is available, you should obtain the PDS relating to the particular product and consider it before making any decision whether to acquire the product.

Females to take the lead on insurance

Females to take the lead on insurance

The gap between men and women is closing in most facets of life. But it seems there’s one area females still have some catching up to do – protecting themselves with insurance.
That’s my view I believe the problem lies in the historical notion of the male being the primary breadwinner.

There was a time when you only took out insurance on the husband. But not only does this ignore the value of what women do – both at work and at home – it doesn’t reflect the changing nature of the Australian family.

Women now earn 92% of male salaries . And despite making up 45% of the workforce, females represent only 15-20% of all insured incomes .
The lack of insurance for women doesn’t make sense – particularly when you consider how much more vulnerable women often are financially.
This vulnerability stems from less time in the workforce, with women often assuming the role of primary carer of children and/or elderly relatives.
As a result women typically have less savings, and less superannuation than men. And considering women will statistically live longer, they can ill-afford extra setbacks.
Add illness or injury to the mix, and women can find it incredibly hard to recover financially if something happens to them,That’s where insurance can be so valuable.
All women, particularly those with a family and/or a mortgage, to review their insurance needs regularly with their financial adviser.

Your cover has to keep up with your changing circumstances. There’s no point putting it off until it’s too late.

‘Australian Social Trends, 2005 – ABS
‘Australians at risk’ – IFSA, 2006

This may contain general advice.  General advice is prepared without taking into account your objectives, financial situation or needs, and because of this, you should, before acting on the general advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs and if the advice relates to the acquisition of a particular financial product for which a Product Disclosure Statement (PDS) is available, you should obtain the PDS relating to the particular product and consider it before making any decision whether to acquire the product

Supporting Elderly Relatives

Supporting Elderly Relatives

It’s common for borrowing or transferring of assets to occur within a family. It could be parents helping their children to buy their first home or children providing financial support to their elderly parents. When this occurs, it may be worthwhile for the party providing the funds to formalise the transaction as a loan arrangement. This could avoid potential disputes down the track i.e. when the children go through a divorce or when there are disputes about inheritance.

The most important starting point for people with elderly relatives is putting an Enduring Power of Attorney agreement in place while the elderly person is still of sound mind. An Enduring Power of Attorney enables a person to appoint someone they trust to make financial and property decisions on their behalf.

If you wait until the person has lost legal capacity i.e. dementia, you will not have access to the person’s financial assets to pay for medical treatments and other expenses. You may have to ask a court or Guardianship Tribunal to appoint you as a guardian before you can access funds – a process that can be frustrating and time consuming. It’s possible to take an early inheritance in order to help pay for their care but such a transfer may have capital gains tax (CGT) implications for the elderly person. While the usual after-death transfer of assets still causes a CGT event, the inheritor of those assets usually doesn’t have to pay CGT (if any) until they eventually dispose of the asset.
If the elderly person is receiving the Age Pension, gifting an asset worth more than $10,000 to a family member means the amount in excess of $10,000 will continue to be assessed by Centrelink as their asset, and also deemed as income. This may adversely affect the elderly person’s Age Pension entitlement.

There are exceptions, though. If an elderly person decides to move in with their children, as long as it is to establish a right to accommodation for life, they can transfer their principal residence in which they previously lived into their children’s name. This is known as a ‘Granny Flat Right’ and it does not affect the elderly person’s pension entitlement. Because it’s the transfer of a principal residence, it generally does not create any CGT liability for the elderly person.
Sometimes the physical and mental condition of an elderly person can deteriorate to the point that they need to enter an aged care facility. The rules around this are complicated and could have significant financial implications, and could happen at a highly emotional time. It’s therefore vital to consult your financial planner if anything more than small cash transfers are being made.

This may contain general advice.  General advice is prepared without taking into account your objectives, financial situation or needs, and because of this, you should, before acting on the general advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs and if the advice relates to the acquisition of a particular financial product for which a Product Disclosure Statement (PDS) is available, you should obtain the PDS relating to the particular product and consider it before making any decision whether to acquire the product.

A trades person’s best back-up tool

A trades person’s best back-up tool is insurance – are you adequately covered?

Statistics show that tradespeople are three times more likely to suffer work-related injuries 1 than any other occupation. Heart disease is also the number one cause of death in Australia, followed by stroke and cancer 2.
With figures like these it’s important, that as a trades person, you have cover that takes into consideration the work you do, the unique risks you face, plus other medical factors that affect all Australians.
You need a plan that covers you, your income and your debts.
Workers compensation may not be enough
If something happens to you at work, workers compensation helps part of the way, but you could be waiting a long time and it only covers some of your expenses.
What if something happens outside work or you suffer heart disease or cancer? When your income stops, you don’t want to worry about your loan repayments, bills and everyday expenses.
That’s why you need life insurance
Life insurance goes to work where workers compensation leaves off. It includes life cover, income protection cover, total and permanent disability (TPD) cover, and trauma cover. It can also cover you if you have minor fractures and still keep working.
Benefits of insurance
• You’ll receive the rehabilitation you need to be able to return to work.
• If you’re self-employed and need to keep an eye on your business, or work for someone else and wish to return to work, some policies allow you to work 10 hours a week while still receiving benefits.
• If you can’t afford comprehensive cover, you can cover yourself for accidental injury only. Considering the majority of claims are due to accidents, it’s a pretty sensible option.
• Trauma cover not only provides benefits for things like coma, intensive care, loss of limb or sight, major head trauma, paralysis and severe burns. It also covers you for the early signs of a heart attack, melanoma or cancers.
• Generally income protection and business expense insurance premiums are tax deductible. Plus you may be able to cover your premiums through your super.

Peter’s story

Peter, a high-achieving tradesman, suffered an injury that left him unable to work on the tools effectively. He was confident he could win enough work to expand his business using other tradespeople to do the hands-on work.

Through his income protection’s rehabilitation benefit, he had access to a business coaching program which focused on helping Peter build a team of high-caliber tradesmen. Over seven months his coach helped him create and work a business plan until he was convinced the strategy was working.
It’s essential to get the advice you need

With so many different types of life insurance available, it’s important to discuss your own insurance needs with a financial adviser. To find out more, contact me on 0413892531.

1 “Key Work Health and Safety Statistics Australia, 2010”
Safework Australia
2 “Causes of Death, Australia, 2010” Australian Bureau of Statistics

This may contain general advice.  General advice is prepared without taking into account your objectives, financial situation or needs, and because of this, you should, before acting on the general advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs and if the advice relates to the acquisition of a particular financial product for which a Product Disclosure Statement (PDS) is available, you should obtain the PDS relating to the particular product and consider it before making any decision whether to acquire the product.

Its what you know

IT’S WHAT YOU KNOW…

A LIFETIME OF SENSIBLE INVESTMENT EXPERIENCE COULD MEAN YOU HAVE THE OPPORTUNITY TO CHANGE A YOUNGER PERSON’S LIFE FOR THE BETTER.

According to Ph.D. research by clinical psychologist Dr Meg Jay, the person you develop into during your 20s is the one you will be the rest of your life. Jay’s 2012 book ‘The Defining Decade’ says that in terms of good and bad financial traits, the habits you set in your 20s will build an everlasting foundation.

Helping to positively influence a younger person financially could be the gift that keeps on giving, as long as the advice you are offering is welcome and correct. We can’t help with making sure the advice is welcome, but we can suggest a few useful topics.

1. What not to do
Investment advice and strategies are always best left to the professionals. The performance of asset classes and industries changes as time goes on. New regulations, tax laws and other legislation can drastically alter the performance of a financial instrument.

2. Be penny-wise from day one
Teaching younger people to be wise with their pay packets is a good start. Time is on their side in terms of compound interest. If they can truly understand this then they will benefit throughout their lives.

3. Don’t leak dollars
In ages past the big expenses were the ones to be wary of, but these days marketers and retailers are far more savvy at removing money from our accounts in a much less noticeable fashion. Teach younger generations to budget, and to look out for their funds
being eaten away by subscription providers such as digital music services, pay TV providers, mobile phone deals and pay-as-you-go software services etc.

4. Use technology
Younger people live in a world saturated by technology and this can be a good thing. A seemingly endless list of apps is available to help save, invest, seek loans, figure out retirement savings plans, and calculate superannuation payments – all of which may assist in making sound financial decisions.

5. Gender specifics
It is always worth having a conversation with young women around the gender-specific challenges they could face when it comes to superannuation, and discussing how they might prepare financially, well in advance, for periods out of the workforce raising the family.

6. Do something
Empower young people to make choices and start something for their financial futures. Doing something is infinitely better than doing nothing. Even if they make mistakes, the lessons they learn early on will offer powerful insight and knowledge later in their lives.


This may contain general advice.  General advice is prepared without taking into account your objectives, financial situation or needs, and because of this, you should, before acting on the general advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs and if the advice relates to the acquisition of a particular financial product for which a Product Disclosure Statement (PDS) is available, you should obtain the PDS relating to the particular product and consider it before making any decision whether to acquire the product.

Gold-news-letter-first-for-2015

Pathways to a prosperous future

Pathways to a prosperous future

We all look forward to creating a financially secure future. But how do you build security for tomorrow without sacrificing your lifestyle today – especially if you have a family to raise or a mortgage to manage?
There are many pathways to a prosperous future for you and your family. Your long-term strategy is likely to include everything from cash, managed funds and shares to the family home and your super. So it makes sense to follow the lead of the investment professionals and look at all your assets as a diversified portfolio.
By thinking about your assets as a portfolio, rather than a collection of separate investments, you can hone your strategy and make sure you’re getting the right overall balance between risk and return.
Getting the right balance
Most investors understand that there’s a trade-off between risk and return, with higher growth assets generally involving more risk. But what you might not realise is that the right mix of investments can give you better returns without driving up your overall risk. That’s because different asset types tend to rise and fall at different times, so the right combination can help you profit from the rises while cushioning the impact of the falls.
Your adviser can help you with how you should combine your assets to help achieve your objectives.
So it’s important to take a close look at all of your investments and think carefully about the role they play in helping you build your portfolio.
Investing in bricks and mortar
For many of us, the family home is a large part of our personal wealth – and we invest a large proportion of our income, and our lives, in paying it off.
The current record-low mortgage rates are a great opportunity for property investors, whether you’re looking to get a foothold in the market, grow your property portfolio or simply pay off your home faster.
But while property can be a great long-term investment, it is only one part of your portfolio. While it’s great to have a roof over your head, the value locked up in your home is hard to access, unless you plan to downsize down the track. Especially if you need funds in the meantime for things like the kids’ education. That’s where the other assets in your portfolio come into play.
Investing in shares
History shows that shares are an outstanding long‑term investment, despite the short‑term ups and downs. Over the long‑term, Australian shares have outperformed most other investment options. With the benchmark S&P/ASX 200 returning 9.58%1 a year for the five years to August 2013, it’s an enduring – if sometimes volatile – way to grow your money.
And it’s also worth considering investing in global shares. With the Australian sharemarket accounting for only 2.3% of the global sharemarket in August 20132, investing in global shares can provide additional diversification and investment opportunities.
You can invest in shares directly or through managed funds. For more information on the best way to access the sharemarket, speak with your financial adviser.
Get instant diversification with managed funds
Managed funds are a great way to take advantage of the benefits of a diversified portfolio without the effort of constructing it yourself. Because your money is pooled with contributions from other investors, you can draw on a wider range of opportunities. This may include bonds and other assets that can be hard for individual investors to access, such as large infrastructure projects like airports or energy production plants. And with a huge range of funds to choose from, it’s easy to find a fund with an appropriate balance of risk and return for your strategy – whether you’re looking to grow your money over the long term, earn an income today, or something in between.
Invest tax-effectively with super
When we think about our investments, we too often forget about super. Yet your super is likely to be your biggest asset after the family home.
Like a managed fund, super isn’t a separate asset type, but a vehicle for investing across a range of different assets. One of the main differences is that super can be extremely tax-effective.
Generally, you’ll pay less tax when you put money into super – less tax on your investment returns and less tax when you take it out. So compared with a non-super investment, super can give you more value from every dollar you invest.
For example, making salary sacrifice contributions lets you add to your super from your pre-tax salary. Instead of being charged your normal tax rate, these payments are taxed at just 15%. So if your normal tax rate is more than 15%, you’ll effectively get more for your money than if you had invested from your after‑tax income.
Similarly, earnings in super are taxed at a maximum of 15%. And if you are over 60 years of age when you access your super, any lump sum or income payments you receive will usually be tax-free.
However, while super may be one of the most tax-effective investments, it must be preserved until you reach your ‘preservation age’ – this means for most of us you can’t access it until you reach at least 55 years of age (and up to age 60 for others).
So it makes sense to treat super like any other investment and give it the attention it deserves. That means thinking carefully about your super investment options and ensuring you’re managing them actively to achieve the outcome you need.

1 Source: http://au.spindices.com/indices/equity/sp-asx-200.
2 Source: World Federation of Exchanges http://www.world-exchanges.org/statistics/monthly-reports.


This may contain general advice.  General advice is prepared without taking into account your objectives, financial situation or needs, and because of this, you should, before acting on the general advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs and if the advice relates to the acquisition of a particular financial product for which a Product Disclosure Statement (PDS) is available, you should obtain the PDS relating to the particular product and consider it before making any decision whether to acquire the product.

Being prepared for surprises

 



Being prepared for surprises – good and bad – is a smart financial strategy

While none of us can predict the future, we can do a lot to lessen the shock that can arise from unexpected events and emergencies at any time of life. For retirees relying on investments for day-to-day living, having a contingency plan means you’ll be prepared for any surprises that could derail your financial security and lifestyle goals.
Your financial plan has you on the right foot, but it can be a good idea to make sure you have a sufficient safety net to protect your retirement income, and other long-term investments, from one-off or cascading personal life events that can crop up at any time, which especially affect people at or after retirement. Examples include sudden illness, an accident or disability, the death of a spouse, or those same events affecting close family members such as children, siblings or aging parents. It’s also not unusual for changes to superannuation benefits or pensions to affect retiree expenses.
Other surprise expenditures that can interrupt your income stream might be emergency repairs to your home and investment properties due to everyday wear and tear or a severe weather event; maintaining the family car; or if a beloved pet racks up a large bill from the veterinarian. Having a savings safety net can also come in handy should you need to help out a relative, such as a son or daughter losing a job, or suffering unexpected health or life costs.
Your financial plan may already include a savings safety net – if so, that’s great news. However if you set your plan in place some time ago, you may want to consider talking to your financial planner to ensure that you have enough flexibility in case of a rainy day. Insurance provides another form of safety net, helping you to deal with unexpected losses. From general insurance covering fire, flood and theft of property and vehicles to life insurance that provides important financial support to a family, many of us take a set and forget approach to our policies. But take the time to review your protection, checking that values are still up to date, perhaps organising for new quotes on policies, and making sure that you are covered for the events of concern to you.
Mind the gap
Preparing for events that may never happen can be overwhelming, but it’s really a matter of managing the gap between enough funds to cover your retirement goals, and a safety net of savings to protect those funds. That’s the ideal scenario, but many retirees and those approaching retirement are carrying more debt than ever before. Average mortgages and other property loans held by people approaching age 65 have more than doubled since 2002, and credit card debt is up 70 per cent, according to a report by Kellyresearch.1 The report also shows that “increases in wealth through rising asset values, easy credit, and higher earnings” have led to a higher standard of living for working households.2 But a higher standard of living based on debt is unsustainable. That’s why retirees need to be careful about debt liability and having a focus on building up superannuation to the detriment of other forms of saving, because both approaches lock up funds that may need to be accessed quickly. That’s where contingency planning comes in. I can review your current situation, take an objective look at your assets, savings and the level of risk you’re comfortable with, and then collaborate on a tailored strategy to help you.
1. Household savings and retirement: Where has all my super gone? A report on
superannuation and retirement for CPA Australia by KELLYresearch, October 2012.
2. Ibid.
This may contain general advice.  General advice is prepared without taking into account your objectives, financial situation or needs, and because of this, you should, before acting on the general advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs and if the advice relates to the acquisition of a particular financial product for which a Product Disclosure Statement (PDS) is available, you should obtain the PDS relating to the particular product and consider it before making any decision whether to acquire the product.

Why it's never too late for financial advice

Why it's never too late for financial advice

It’s difficult to stay up to date with the economy and global financial markets, not to mention laws and regulations, all of which can affect your financial situation and life keeps changing too and with that, our financial needs and goals. Planning for the long term is a good way to manage these changes and ensure we can keep our finances on track. A financial adviser can help you do just this.
An adviser can get your finances organized, keep you up to date and help you grow your wealth. A financial adviser can analyze your financial circumstances and recommend strategies, which will make best use of your entitlements, such as Centrelink pensions and government contributions to low income earners. Tax can be a complicated issue and tax implications vary substantially, depending on where you are in life. For example, have you thought of the benefits of salary sacrificing? A financial adviser can help you navigate through these issues.
Circumstances change and an adviser can help you restructure investments, to best provide for your family. A plan that allows you to leave a legacy according to your wishes and one that accounts for your beneficiary’s personal circumstances. An adviser will review any existing personal insurance arrangements you or your family may have and recommend the policies best suited to your short and longer term needs.
If you have old super accounts still open, you may have insurance cover you’re not even aware of and for which you are still paying premiums and general cash management and budgeting, reviewing the management of your day-to-day finances and recommending strategies to help you save more effectively, or better manage your borrowings.


This may contain general advice.  General advice is prepared without taking into account your objectives, financial situation or needs, and because of this, you should, before acting on the general advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs and if the advice relates to the acquisition of a particular financial product for which a Product Disclosure Statement (PDS) is available, you should obtain the PDS relating to the particular product and consider it before making any decision whether to acquire the product.

Aussie super among the world’s best

 

New research shows Aussie super among the world’s best
Australia’s super system has once again been rated among the very best in the world — but there’s still room for improvement.
Australia’s superannuation system is one of the world’s best, according to the Melbourne Mercer Global Pension Index1.
Mercer gave Australia a rating of 79.9% overall — up from 77.8% in 2013 and second only to Denmark on 82.4%. Australia was rated better than 23 other countries, including the Netherlands, Finland, Switzerland, Sweden and Canada.
Australia scored 79.9% overall — up from 77.8% in 2013 and second only Denmark on 82.4%.
Dividing the best from the rest
The report starts by identifying the three critical factors that divide the world’s best super systems from the others. They are:
1. Adequacy — is it enough? This measure focuses on the retirement income each country provides to its citizens, including super payments, pensions, tax support and other government benefits.
2. Sustainability — is it designed to last? This measure considers whether the system is likely to remain affordable in the future, analysing factors like the total assets in the system, the country’s demographics and the level of government debt.
3. Integrity — does it keep our money safe? This measure assesses whether members can be confident that their money is safe, analysing government regulations, investor protections and governance rules, along with the overall cost of the system to investors.
Once Mercer has given every country in the survey a rating out of 100 for each measure, it calculates the overall score, with a weighting of 40% for Adequacy, 35% for Sustainability and 25% for Integrity.
How Australia fared
Australia’s super system received a B+ rating — just below Denmark’s A rating but ahead of the other 23 countries covered. The Netherlands was the only other country to make it into the B+ category.
Our system scored first in the world for super Adequacy (81.2%) and third for Integrity (87.7%), although our Sustainability score was slightly lower at 73%, in fourth place. Overall, the report found that our system has a sound structure and a range of positive features, but also that there is still some room for improvement.
Room to grow
They included:
• Raising the retirement age.
• Lifting the age at which we can access the pension, in line with our increasing life expectancy.
• Actively encouraging older workers to stay in the workforce longer.
• But while those recommendations are remarkably similar to recent government announcements, other recent moves may be less positive.
The report specifically states that Australia’s score increased this year “primarily due to the increase in the legislated minimum contribution rate from 9% to 12% and the higher minimum pension”. With the government moving to delay further increases in the super guarantee rate and to limit pension increases by changing the indexation method, it will be interesting to see whether we can maintain or improve our ranking in the future.
Keep your super on track
A financial adviser can help you take advantage of the best features of Australia’s super system while overcoming the challenges of a rising retirement and pension age. The sooner you seek advice, the sooner you can create a practical plan for the future.
1 Melbourne Mercer Global Pension Index, 2014
Why salary sacrifice just became even better
If you use salary sacrifice to save for the future, then it’s time to check you’re making the most of the government’s new, higher contribution caps.
What’s changed?
On 1 July 2014, the government lifted the concessional contributions caps that limit the amount you can contribute to your super from your pre-tax salary. The new caps for the 2014–15 financial year are:
• $35,000 a year for people aged 50 or more from 1 July 2014
• $30,000 a year for everyone else.
These caps apply to both your employer’s compulsory super guarantee contributions and to any voluntary salary sacrifice contributions you ask them to make. So, if your cap is $30,000 and your employer makes $9,000 in super guarantee contributions a year, you can now boost your super with extra salary sacrifice contributions of up to $21,000.
If you're aged between 50 and 59, you can now put an extra $10,000 into super from your pre-tax salary.
What does it mean for you?
If you use salary sacrifice, you already know how easy and tax-effective it can be. By asking your employer to pay some of your pre-tax salary directly into your super account, you can build your super faster while paying just 15% tax on your extra contributions.
The new concessional contribution caps make it possible to put even more into super each year while taking advantage of that low 15% tax rate. For example, if you’re aged between 50 and 59, you can now put an extra $10,000 into super from your pre-tax salary — and if you pay the top marginal tax rate, that could save you $3,200 in tax compared to an after-tax investment.1
How much difference could that make? According to ASIC’s MoneySmart Retirement Planner, a 50 year old man who earns $100,000 a year and has $120,000 in super could boost their income in retirement by almost $8,000 a year if they salary sacrifice up to the current cap.2 Even if you’re close to retirement, extra super contributions now could make all the difference in the years to come.
Get the right advice
A financial adviser can help you make the most of your super options, with a personalised plan to put you on track to a retirement worth looking forward to. The sooner you start planning, the sooner you can get your money moving.
1.Based on a 45% marginal tax rate and 2% Medicare Levy.
2.Source: MoneySmart Retirement Planner at www.moneysmart.gov.au
Super guarantee increases frozen: what it means for you
As part of a deal to repeal the mining tax, the Government has frozen super guarantee increases until 2021, costing Australians around $128bn in lost super savings.1
What’s changing?
The super guarantee contributions that most Australian workers receive from their employers were set to increase by half a percent a year from 2014, up to 12% of each worker’s annual salary by 2019.
But on 2 September 2014, the Federal Government announced that, as a result of its deal to scrap the Minerals Resource Rent Tax, those increases will be delayed for seven years2. Instead, super guarantee contributions will be frozen at the current rate of 9.5% of salary until 1 July 2021. After that, they will gradually increase to reach the target of 12% per annum in 2025.
By taking action to boost your super now, you can offset the effects of the changes and make a positive difference to your financial wellbeing in retirement.
What does it mean for you?
Put simply, the changes mean less super for millions of Australians — around $128 billion less by 2025, according the Financial Services Council1. As a result, many will struggle to save enough for a comfortable lifestyle in retirement.
According to the Association of Super Funds of Australia, even with a super guarantee rate of 12% per annum, a typical worker earning $50,000 a year might expect to save around $244,000 over 30 years — just a little over half the $430,000 lump sum required for a comfortable retirement lifestyle, assuming a part pension 3. Now Australians can expect to save even less.
Here are some examples of the potential impact of the changes:
How the super guarantee changes could affect you
Source: Colonial First State.
This projection compares previously legislated super guarantee rates with those that passed parliament on 2 September 2014.
Assumptions: Investment earnings: 7% • Salary indexation: 4% pa • CPI inflation: 3%. •All income and contributions taxed at 15% • All balances in today’s dollars
What can you do about it?
By taking action to boost your super now, you can offset the effects of the changes and make a positive difference to your financial wellbeing in retirement. For example, according to ASIC’s MoneySmart Superannuation Calculator, the 45 year old in the table above can increase their super balance on retirement by more than $56,000, simply by using salary sacrifice to boost their annual contributions by another 3% of salary each year, or around $212 a month.4
A financial planner can help you work out the best way to increase your super savings. Remember — the sooner you act, the better off you're likely to be.
1.Financial Services Council media release, ‘Super guarantee delay will mean $128 billion less in savings for working Australians’, 2 September 2014.
2.Media Release, Senator Mathias Cormann and JB Hockey, 2 September 2014.
3.Association of Super Funds of Australia, ASFA Retirement Standard, June 2014.
4.Source: MoneySmart Super Calculator at www.moneysmart.gov.au
This may contain general advice.  General advice is prepared without taking into account your objectives, financial situation or needs, and because of this, you should, before acting on the general advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs and if the advice relates to the acquisition of a particular financial product for which a Product Disclosure Statement (PDS) is available, you should obtain the PDS relating to the particular product and consider it before making any decision whether to acquire the product.

How to make good investment choices

 


How to make good investment choices
We all like making good investment choices when it comes to our money, but is there an easy way of going about it?
The helpful blog, that newspaper article, or an expert tip from an investment magazine, are all useful research when it comes to successful investing, but there’s one more source that you should milk as an invaluable research tool – an investment journal.
According to experts, your personal history of making decisions is likely to hold more data, more information, more opinions, more successes and more failures to learn from than you will gather from reading any blog, book or annual report.
So, where do you start when you’re looking for inspiration?
Consistently updating your journal when you review your transactions will help you keep your investment strategy on track…
1. Keeping an investment diary
Get a notebook, folder or spread sheet and treat it like a diary that you can refer to quickly and easily. This will be your central hub to record any investment decisions you’ve made, why you made them, what you based your decision on and what the outcome was.
2. Rules for investment
In time, you’ll be able to create a list of dos and don’ts based on what has worked for you in the past. By identifying investments that were profitable, and looking at what they had in common, you may find key indicators of a company’s performance over time that are both consistent and above the industry average. Alternatively, you could find that decisions you made because you received a ‘hot tip’ at a party resulted in disappointing results, so you’ll come to understand how to make good decisions in the future.
3. Watch the potential
Keeping an investment journal will also help you monitor a list of potential investments. This watch-list will help you build your investment rules, as well as your confidence. However, you should not base your decisions on ‘virtual’ stock trading games or paper trading, as these are likely to cloud your judgement in actual investing.
4. Build your investment strategy
Consistently updating your journal when you review your transactions will help you keep your investment strategy on track because it will help you remember why you bought or sold an investment, and provide research and valuable information when you want to sell or buy more.
5. Notes to self
Ultimately the most useful information in your journal will include notes like:
• Why you bought or sold an investment
• Your entry and exit strategy
• Charts of share prices you are watching
• Dividend yields when purchasing shares
• Rental yields when looking at investment property purchases And, of course, there is no substitute for getting professional advice, so back up your method with sound advice from a professional adviser. If you’re looking for help with your investment portfolio, why not find a financial adviser?
This may contain general advice.  General advice is prepared without taking into account your objectives, financial situation or needs, and because of this, you should, before acting on the general advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs and if the advice relates to the acquisition of a particular financial product for which a Product Disclosure Statement (PDS) is available, you should obtain the PDS relating to the particular product and consider it before making any decision whether to acquire the product.

Why get advice ?

 



Why get advice?
The right kind of financial advice can really make a big difference. It can help you:
Set your financial goals and achieve them
make the most of your money
get any government assistance you’re entitled to
Feel more in control of your finances and your life and avoid expensive mistakes,
protect your assets.
Financial advice can give you confidence that your future plans are achievable.
If you’re not on track to achieving your goals, financial advice can help you put the right strategies in place, or come up with more realistic goals.
Where to start
You may have avoided getting financial advice because you’re not sure how a financial adviser can help you. You may also think you’ll have to pay for a comprehensive and expensive financial plan. Depending on the kind of advice you need, you may not.
Instead of financial advice, you may simply:
want factual information about different financial products and strategies
need to understand more about financial services generally.
Online
There is a lot of information online that can help you with questions about your finances:;
ASIC’s MoneySmart website – moneysmart.gov.au
Australian Securities Exchange’s online courses and education website – asx.com.au
your super fund
Association of Financial Advisers  financial columns and blogs.
Banks, credit unions or building societies
Bank, credit union and building society staff can be a good source of free factual information about ways to save such as savings accounts, term deposits and first home saver accounts. This might be all the information you need if your main financial goal is saving for a home or building a savings buffer.
Remember to shop around and compare products.
Your super fund
Your super fund can provide factual information, including:
investment options within your current fund
saving for retirement
how to make extra contributions to your current fund
consolidating multiple super funds
insurance options within your current fund.
Seminars
The Department of Human Services’ Financial Information Service offers free money seminars all over Australia. Topics include:
managing your money
reducing your mortgage
investing understanding superannuation.
Financial
Information Service officers can also give you information over the phone or at a face-to-face interview.
Visit humanservices.gov.au or call 132 300 for more information.
General advice
You can get general advice about financial products or investing from someone who works under an Australian Financial Services Licence (AFSL). General advice does not take into account your particular circumstances, such as your objectives, financial situation and needs. For example, you may receive general advice when you attend a seminar about investing.
Financial services from an accountant
Accountants can give you information on specific tax situations and setting up a Self Managed Super Fund (SMSF). However, only licensed advisers can advise on investment strategies.
Personal advice
If you want a recommendation that takes your personal situation into account, you need personal financial advice.
For this kind of advice, it’s important that you only talk to someone working under an Australian Financial Services License (AFSL).
Types of personal advice
Personal advice can range from simple advice on one topic to a comprehensive financial plan. Some examples of personal advice are:
Simple, once-off advice on one issue – This addresses a particular aspect of your finances (for example, the best way to contribute to your super).
Broader financial advice – This involves a comprehensive financial plan to help you set goals and covers investments, superannuation, insurance and retirement planning.
Ongoing advice – This involves regular reviews with a financial planner that reassesses your goals, financial position, strategy and investments.
Different ways to get information or advice
Factual information or advice on simple topics can be given by phone, online advice services or email, while complex advice is usually better suited to a face-to-face meeting or video conferencing.
Internet options such as Skype also allow people in rural and remote areas to access advice.
Costs
The cost of the advice will depend upon the scope and kind of advice you receive.
Choosing an adviser
Before you contact an adviser think about the kind of advice you want, and what you’d like to achieve from the advice. This will make your initial discussions more useful and help you find an adviser who suits your needs.
Step 1: List a few ‘possibles’
Professional associations usually have ‘find an adviser’ services that will help you find a member in your area. They also have a code of conduct for members to follow and a list of suspended or terminated members.
Visit moneysmart.gov.au for a list of professional associations you can contact.
You could also ask your friends or family to recommend a professional adviser they’ve used.
Step 2: Get their financial services guide
Once you have a few possible advisers, get a copy of their financial services guide (FSG) by visiting their website or by phoning and asking them to send it to you. The FSG will say what services they offer, how they charge and whether they receive any additional payments or benefits.
The FSG will also tell you who owns the company the adviser works for and if they have links to product providers. Many advisers are linked to banks, fund managers and life insurance companies. This can affect the services and products offered.
Step 3: Check they are licensed
Only consider advisers who hold an Australian Financial Services Licence (AFSL) and/or are employed by or authorised to represent a business that holds an AFSL. You can double check the adviser or licensee’s name on ASIC Connect’s Professional Registers connectonline.asic.gov.au. Advisers who are ‘employee representatives’ will not appear on the register as their employer holds the AFSL.
Step 4: Check for qualifications and experience
Make sure an adviser’s licence covers the services you are looking for.
You should also call and check if the adviser has the right experience and qualifications for your needs. During the conversation, make sure the adviser focuses on the services and strategies they can offer you, rather than the products they can sell you.
If the adviser says they can’t give you any information about their services unless you have a meeting or provide all your personal details, don’t feel pressured to do so.
Step 5: Check they can advise on your current products
You should check that the adviser can provide advice on your current financial products. This is critical when it comes to super, as the adviser may not be able to give advice about your current fund, if it is not on their ‘approved product list’.
Be careful of advisers who only sell one investment product or solution.
Step 6: Check the fees
Ask the adviser for an estimate of the cost of the advice. Even a rough estimate will give you an idea of what you’ll be paying.
Before the first meeting
Before you meet the adviser for the first time, do some preparation. Good advice depends on a clear picture of your financial situation.
For example, for retirement advice, you could start by listing:
what you own – your home, savings, super, car, shares and other investments
what you owe – debts, including mortgages, loans and outstanding credit card balances
income and expenses
what insurance you have and for how much.
At the first meeting
Your adviser will need to collect detailed information about you. This is so they can work out your needs and objectives.
Give your adviser accurate information. If you are not honest with your adviser or leave things out, you could get advice that’s wrong for your situation.
The adviser will need to know your financial needs and objectives. For example do you want:
a strategy to pay off your mortgage sooner?
a plan that covers all aspects of your finances?
to build wealth and save for retirement?
ongoing advice about investments?
advice on consolidating super accounts?
You need to be clear about which issues will be covered, and which ones won’t be.
Once you have established the scope of the advice, the adviser will be able to give you an idea of the cost.
Know your risk tolerance
A good adviser will work with you to help identify the most suitable strategy to achieve your financial goals.
Part of this strategy should be to protect your capital and get reasonable returns, without exposing you to too much risk. Higher potential returns usually come with higher risks. Never agree to an investment product or strategy that you’re not comfortable with or don’t understand.
Your attitude to risk can change with time and circumstances. If you’ve agreed to ongoing advice, you need to tell your adviser if your ability or willingness to take on more or less investment risk changes.
The advice
At the end of the meeting your adviser will go away, do some further research and put together some recommendations. You will receive the recommendations in writing, usually at a face-to-face meeting, where the adviser will explain the recommendations and discuss the reasons for choosing one path or product over another.
You should receive:
a statement of advice (SOA) – this sets out what the adviser recommends and why they think it’s suitable. It’s important to review this and consider how well it meets your needs and objectives
a product disclosure statement (PDS) for each product they recommend – these describe the features of the products.
Do not sign or agree to anything until you have read and are happy with these documents.
What to look for in a good statement of advice
Paying for advice
The first meeting
The first meeting with an adviser is usually free. During this meeting, you and the adviser can discuss your advice needs and the adviser can give you an idea of what they can do to help you.
The adviser will also be able to tell you how much the advice will cost so you can decide whether to proceed any further. Make sure the cost is given to you in dollars, not just a percentage of the amount you have to invest.
Statement of advice fee
The adviser will prepare a statement of advice (SOA) that will formally document the advice, the strategies and any financial products they recommend. The cost for preparing the SOA will be billed to you or may be deducted, with your permission, from the balance of your investment.
The cost of the advice will depend on its scope. As a guide, expect to pay between $200 and $700 for simple advice and between $2000 and $4000 for more comprehensive advice. If you’ve agreed to ongoing advice, some of the cost may be paid over time.
If you receive advice about insurance, you may not have to pay for the SOA. This is because the adviser will be paid commissions from the insurance company.
Even if you decide not to proceed with the recommendations in the SOA, you will generally be expected to pay for the preparation of the SOA.
Fee for implementing the advice
If you decide to accept the adviser’s recommendations there may be a fee for implementing the advice. This pays for administration work.
You may be able to negotiate the rate with your adviser.
There are usually different options for how you pay. You can agree to pay upfront or the cost can be deducted from the investment.
Ongoing advice fee
If you’ve agreed to pay a fee for ongoing advice, it’s important to understand what your fee will cover. Services may include:
regular newsletters
regular reports on your investment portfolio
an annual review with your financial adviser
invitations to seminars.
Many advice businesses have ‘bronze’, ‘silver’, ‘gold’ or ‘platinum’ services you can choose from, with fees scaled according to the services you receive or the amount of contact you can have with your adviser.
Advisers can charge another implementation fee in addition to your ongoing advice fee if you want to change your finances following a review.
If you’ve agreed to ongoing advice, you will receive an annual fee disclosure statement that will outline the fees you paid, the services you received, and the services you were entitled to receive for the previous 12 months.
Carefully consider the information in your fee disclosure statement:
Have you benefited from the services you paid for?
Were they worth the cost?
Are you happy to pay the ongoing advice fee for another 12 months?
You can end your ongoing advice relationship with your adviser at any time.
Commissions
Commissions and volume-based payments for recommending financial products can influence the advice given by financial advisers.
Commissions are banned on new investment and super products from 1 July 2013. Some other commissions, for example for selling life insurance, will remain.
However, if you bought a financial product before 1 July 2013 the adviser may continue to receive a commission each year for advising on that product. The commissions will continue to be deducted from the money you have invested until you leave that product or end your relationship with that adviser.
Information about commissions may not be included in your fee disclosure statement.
Find out about the fees you’re paying
If you’re unsure about the fees you’re paying, talk to your adviser. Ask them to explain the products you have investments in and whether they pay commissions.
If commissions are being deducted from your investment and you’re not happy with this arrangement, speak to your adviser about your options. You may be able to switch to a product that doesn’t pay commissions, or arrange for the commissions to be rebated to you.
How to complain
If you’re unhappy with any aspect of the advice or service you receive, try to talk it over with the adviser. If you are still not satisfied (or your adviser won’t meet with you) you should make a complaint through the adviser’s internal dispute resolution system. The adviser’s financial services guide will tell you how to do this. You can also complain to the adviser’s professional association.
You should receive an acknowledgement letter from the adviser’s internal dispute resolution system within 14 days. They have 45 days to give you a final response. If you’re unhappy with the response, you can contact an external dispute resolution scheme. The business must tell you which scheme it belongs to or you can call ASIC’s Infoline on 1300 300 630.
Ending your relationship with an adviser
If you decide to end your relationship with an adviser, there are some things you should consider first.
Some financial products can only be accessed through a financial adviser, so if you decide to end your relationship with them you may also have to leave the products they recommended, or get a new adviser.
The implications of this may include:
selling and buying costs
changes to any government assistance you’re receiving
being out of the market (which could be an advantage or disadvantage depending on timing)
income and capital gains tax.
If you decide to switch advisers or leave an investment product, you need to be satisfied that it is worth the cost.
Glossary
Australian Financial Services Licence (AFSL)
A licence given by ASIC that allows people or companies to legally carry on a financial services business, including selling, advising or dealing in financial products. You should only deal with licensed businesses as you are better protected if things go wrong and you will have access to free dispute resolution services. A licence does not mean that ASIC endorses the company, financial product or advice or that you cannot incur a loss from the investment. ASIC grants a licence if a business shows it can meet basic standards such as training, compliance, insurance and dispute resolution. The business is responsible for maintaining these standards.
Commission
A fee paid to an adviser or salesperson as a result of selling a particular product. An upfront commission is based on the sale amount of the product. An ongoing commission is based on the balance of the account.
Financial services guide (FSG)
A guide that contains information about your financial adviser and the AFSL holder. It should explain the financial service offered, the fees charged and how the person or company providing the service will deal with complaints.
Product disclosure statement (PDS)
A document that contains information about a financial product’s key features, fees, benefits and risks. A financial adviser must give you the PDS when they recommend that product to you.
Self managed super fund (SMSF)
A private super fund you can manage yourself. SMSFs are regulated by the Australian Taxation Office and can have one to four members. All members must be trustees to ensure they are fully involved in the decision-making of the fund.
Statement of advice (SOA)
A document that sets out the advice given to a consumer by their licensed financial planner or adviser. It must include the basis on which the advice is given, and information on any payments or benefits the adviser or licensee will receive.
Reference : http://www.moneysmart.gov.au
This may contain general advice.  General advice is prepared without taking into account your objectives, financial situation or needs, and because of this, you should, before acting on the general advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs and if the advice relates to the acquisition of a particular financial product for which a Product Disclosure Statement (PDS) is available, you should obtain the PDS relating to the particular product and consider it before making any decision whether to acquire the product.
Income Protection
Life Insurance