Plan 2 Prosper

In challenging economic times, the Federal Government last night handed down one of the most eagerly anticipated budgets for many years. In the end, there weren’t many surprises with most of the major initiatives carefully ‘leaked’ in the days leading up to the official release.

Items released which were of particular interest to Financial Advisers and their clients include:

• Halving the cap on concessional super contributions
• Temporarily reducing the super co-contribution
• Halving the minimum drawdiwn rates for account-based super pensions for 2009/10
• Removing tax defferal for shares issued under Employee Share Schemes
• Retention of previously legislated personal income tax cuts and low income tax off set changes
• An increase to the maximum Age Pension payment for couples and singles
• A phased increase in the age pension to age 67
• Introduction of a Government funded paid parental leave scheme
• Introduction of a means test for private health insurance rebate
• Abolition of the Pension Bonus Scheme (excluding registered participants)
• Removal of Tax-Free super/pension payments from the Commonwealth Seniors Health Card income test.

As we have observed in recent times these announcements may have further fine tuning before they receive the majority vote required to progress through the lower and upper house and be passed into legislation.

We know any announcements made by the Rudd Government regarding the 2009 Budget is something you’ll be watching closely to see how it affects you. We have sourced information through our strategic partnership with MLC, which we are happy to be able to pass on to you.

Video:

•  In the Budget 2009 Video, technical expert Gemma Dale analyses and explains the key budget measures and how they are likely to affect investors.

Articles:

• What next for self-funded retirees? Hit hardest by the global financial crisis, the article looks at why in most cases switching to a more conservative strategy is not the answer. Also spotlighted are to discuss which could help ease the pressure for account-based pension holders.
• The upside of a recession. Theres not much to like about a recession, however this article uncovers four benefits which you could be taking advantage of.
• Clever Year end Strategies. This article outlines four strategies which boost superannuation savings and save tax.

It’s important to consider this information in the context of your own personal circumstances and objectives… or in language we all understand better … Like with most things, what is right for you, may not be what is right for your mate in the smoko room or over the back fence.

While it is important to have an adviser (or counsel of advisers) whose technical abilities you respect, it will prove far more important to have an adviser whom you trust – literally with your families financial life. Do not care what they know, until you know they care. Thank you to those who are trusting us at the moment.

Where to from here?

• Contact us
• Get more information about an Educational Forum for you and your friends
• Register and receive regular email updates

Working with a client to develop a financial plan requires a certain amount of looking into the future. There is no certainty about what th efuture will hold, so assumptions will need to be made. These assumptions may be about:

• the client’s situation (eg. health, income, dependants) and goals (retirement date, income needs)
• the economic environment, including tax, superannuation and social security
• investment returns

Together the client and the adviser will need to better understand the client’s attitude to investment risk as well as the unceretainty of future returns. Once a plan is put in place, it is imperative that the client participates in periodic reviews of the implemented financial plan so as to provide the opportunity to assess its progress and make changes where relevant.

Consider these changes that have affected many peoples established financial plans in recent years … who would have thought when compulsory superannuation was introduced in 1992 that now:

• super after age 60 is generally tax free
• reasonable benefit limits (RBLs) have been abolished
• assets test exempt income streams can no longer be commenced
• official interest rates would rise to 7.o% in February 2008 and fall to 3.25% a year later
• the exchange rate of the Australian dollar in terms of the US currency woul dbe 97.86c in July 2008 and then fall to 68.84c as at 20 March 2009

When a financial plan is reviewed and identifies deficiencies in client goal attainment … the plan may be revised to:

• meet the clients new situation or new goals
• take advantage of new opportunities or avoid threats presented through/by legislative change or adverse economic circumstances
• cater for a change in client’s attitude to investment risk.

The end of the long bull run in investment markets is an extreme example of a situation where assumptions made in a financial plan might not come to fruition (at least in the short term). 

While the adviser may recomend a course of action involving various strategies and products, the client must make an informed decision to accept the recomendations and ‘own’ their financial plan. In the early rapport building stages, the adviser will generally know more about the legislation, products and possible strategies … whereas the client will know more about their own situation – their fears, goals and attitudes. Over time, the adviser will start to understand the clietn and will expect the client to have a better understanding of financial issues, strategies and products.

A client may say they understand share markets rise and fall in value. However, it is something different to see the value of their own investments rise and fall. This is real ‘in-your-face’ education. One of the Adviser’s roles is to ensure the client is coached through these ‘lessons’ and has a better understanding of financial returns from a long term perspective.

No one can really predict the future … current media headlines are almost universally negative, so it’s not surprising that absorbing these will probably add to downhearted feelings. Previous posts have commented on surrounding yourself with positive news and positive people … even when listening to the destruction caused by Victorian fires and North Queensland flooding there were still many positively inspirational messages provided by those people facing some relatively tough challenges. In uncertain times, most people look for signs that the future may be more predictable and certain … while no one knows the future, retaining a positive outlook and encouraging people to manage what they can control (look at things like Debt Management, cash flow, access to liquid assets and personal spending patterns) is an important message. Economies and markets are cyclical and we can expect them to self-correct over time with the help of government intervention and renewed consumer confidence … so c’mon Get Happy.

When the markets turn as volatile and confusing as they have been over the last year, even the most patient of people will begin to question the wisdom of the financial plan they have been following … we can certainly empathize with people who find the current environment troubling and disturbing … we’d like to help, if we can and to that end here’s what we offer:

A cup of coffee and a 2nd opinion

By appointment, you’re welcome to come in and sit with us for a while. We’ll ask you to outline your financial goals and your understanding of what your existing financial plan is intended to do for you. Then we’ll review your financial plan for and with you.

If we do not believe we can add value to your situation, we’ll gladly tell you so and send you on your way.

If, on the other hand, we think we are able to add value, we’ll explain how in plain English and, if you like, recommend alternative financial strategies to assist you to achieve your goals.

Either way the coffee is on us.

Where to from here?

• Contact us
• Get more information about an Educational Forum for you and your friends
• Register and receive regular email updates

If you’re approaching retirement, you may often be reflective on how life is going to treat you on the health and financial fronts. This reflection is confronting and challenging enough by itself.

Probably the last thing you’d expect to cope with upon retiring from the permanent workforce would be taking on a parental role again, but for around 22,500* Australians this is something they’re already experiencing.

If something happened to your son or daughter, like many Australians you’d likely want to make sure your grandchildren were looked after financially, whether you became the legal guardian or played a supportive role.

A growing concern

While financial worries wouldn’t be top of mind during such family trauma, if your child hasn’t planned ahead there could be financial pressure on your own retirement funds. (more…)

Our conviction and belief (and one of those things which helps me sleep at night during the current market volatility) is that regardless of what’s happening in the market, investment fundamentals don’t change.

Perhaps, if you have also subscribed to MLC’s Market Watch you would have read the post on Investment Fundamentals. If you haven’t visited the Market Watch website and viewed that post, I’d encourage you to do so. 

I had also been speaking with some past colleagues about their own experiences over the past 25-35 years … the challenges faced, the lessons learnt, ‘tactical’ positions taken (which made them feel better at the time but were proven to over time not make much of a difference at all) … I shared with them a print out of the Investment Fundamentals article and as they read it, their body language spoke volumes. Smiles and nodding of heads …

My past colleagues agreed with the observations from Mr Scurrah, “to take a long term view of your money, set a strategy for the long term and stick to it … however difficult it becomes ignore short term noise created by market volatility”.

Many previous posts made capture the essence of what I would like to again convey … rather than rewriting I’ll beg your indulgence and redirect you to posts that spring to mind: Headlines, Fear and Reassurance ; Dollar Cost Averaging ; Market Volatility – the fundamental things still apply.

Where to from here?

• Contact us
• Get more information about an Educational Forum for you and your friends
• Register and receive regular email updates

Believe it or not, sudden wealth can create a huge headache. So before you collect the pot of gold from the end of the rainbow or win the lottery, read this …

(more…)

The media continues with stories of doom and gloom. You’d have to be on Mars not to know that we’re experiencing some of the most volatile markets in history. Let’s not kid ourselves…this is not fun!

The essence of chess is time … a point Bobby Fischer always used to be fond of emphasizing. Give an inferior position an extra tempo and it may suddenly become tenable. Now what seems like the worst time to get into any market with long term capacity for growth can, in reality, be the best time. Successful wealth makers today realise that they can use time to their advantage.

In fact, a weak market is a wealth creator’s paradise, because a weak market is a buyer’s market, and one of the first steps to any wealth creation project is securing the right level of diversification on the best possible terms. History shows markets go up, they go down and then they go up again. When one market is weak, another is performing stronger.

When liquidity starts to free up, money will begin to flow through to markets shunned by investors in our current period of heightened fear.

As recently as 3 months ago, investors could achieve close to 8% return on cash. This meant decisions to hold cash or term deposits rather than long term growth assets seemed easy. With interest rate movements downward, income returns from cash are now nearly 40% less and still falling.

The ‘flight to safety’ has distorted asset prices and made government guaranteed assets very expensive, while other income and growth assets are now relatively cheap. A very low ‘risk free’ rate also makes valuations for shares and other growth assets appear much more attractive. The current dividend yield for the Australian share market of nearly 7 % is now higher than the yield investors can achieve from Term Deposits, even before allowing for the benefits of franking credits.

Over the past year, share markets around the world have fallen around 40% on average, and experienced extraordinary levels of volatility along the way. While this has tested the resolve of even the most experienced investors, those who shun the markets at these levels, risk missing the opportunity to buy growth assets cheaply and the rebound as the markets recover.

Our belief is that this is a golden time to act – perhaps a once in a generation opportunity.

Maybe it is not the time to sell existing growth assets held, but it is certainly a great opportunity to secure new ones. Now this acquisition strategy is not for everyone – you must have the necessary resources, funds and wherewithal to buy and also the appetite to hold firm during any further volatility that may occur.

The best approach for anyone contemplating further wealth creation through investment in growth assets will depend on his or her own personal and financial circumstances, but the key message here is that you must do something! There are many strategies that wealth creators can access if they don’t have vast sums of money or other resources available to them.

Successful wealth creators know that times of opportunity like this only come along once in a while, and they’re taking action so they don’t miss the boat. Regardless of your immediate financial situation, this is the perfect time to reconsider your own capacity to leverage your habits and resources into current or future income.

If you have any doubts about your ability to do this, or you would like advice and assistance to guide you through the many options, act now to get the knowledge and mentoring that you need.

There is no time to waste – and there’s no time like now !

Where to from here?

• Contact us
• Get more information about an Educational Forum for you and your friends
• Register and receive regular email updates

You are invited to an MLC Market Update Webcast

With the current market turbulence, you are probably worrying about its effect on your super or pension and are keen to know what you can do to protect your retirement nest egg.

In times like these, staying informed is the best way of staying in control. With this in mind, we would like to invite you to view a live, online panel discussion with MLC.

The panellists will provide a market update and talk through some of the options and choices that may be available to you given the current market circumstances.

This will be a great opportunity for you to raise your concerns, hear what other people are saying, and ask MLC’s market experts any questions.

You can watch the webcast live on Wednesday 4 December 2008 at [11 am EDST] at

http://mlc.permission.com.au/cgi-bin16/DM/y/nBkiX0UI6Rj0BA7z0RT510Er

or at a later time that’s more convenient for you.

Go to the Market Watch site for more information and contact us should you have any further questions or concerns.

Where to from here?

• Contact us
• Get more information about an Educational Forum for you and your friends
• Register and receive regular email updates

Media headlines continue to be dominated by reports regarding uncertainty and volatility within our investment markets. As is usual, there are unhelpful voices saying that they got out of the markets before point X or point Y and are therefore smarter than the rest of us because of this proprietary  system or that registered business model … I trust when you come across them you recognise the sales pitch for what it is and insert bucket loads lots of disbelief.

Joe Public and for that matter Arthur Adviser are being scared out of their wits by media headlines highlighting doom and gloom, depression period analalogies and even more uncertainty. It is natural that consumer press will want to take a golden opportunity to grab reader and viewer attention. All this does is provide a result similar to every one in Rockhampton throwing their tins of mower fuel from the lookouts on Mt Archer toward the fires, fanning and feeding the flames that have been harassing the ranges and blanketing the region in a smoky haze.

More than anything, we as humans tend to fundamentally be herd animals. We like to move together and to think the same way … even if those thoughts and actions are in conflict with what we know fundamentally to be true. What we know for sure is that emotional human responses are rarely rewarded, and nobody has a clear crystal ball to forecast when and how the markets will respond. Bear markets do end and this time its not any different.

If you continue to watch the news and continue to get depressed by the “news” being provided, the best advice that can be provided is to simply stop watching the news. Take a moment for yourself. Go outside for a walk. Do those things you enjoy. Me, I enjoy pretending to fish and just watching the world go by … 

To further assist you, the major messages we would like to convey to you at this time are:

• Share markets are volatile, but Bear markets don’t last forever
• Focus on the Medium to Long Term

In doing this it is important to:

• Rebalance using a disciplined approach 
• Access the best management firms in the world, who can add value through active fundamental stock research 
• Be well diversified

Please gain reassurance that adopting the methodology above has aided many people like you to weather and thrive through many crises since 1985, and also that the important points outlined above are the very foundations of the vast majority of the plans we have implemented with our clients.

Where to from here?

• Contact us
• Get more information about an Educational Forum for you and your friends
• Register and receive regular email updates

Latest 6 weekly update and insights from MLC Investment Strategist, Brian Parker.

Click on the link to open a new window – “Brian Parkers Update”

From speaking with colleagues in the banking industry it is apparant that their own capacity to access capital is somewhat restricted at the moment. This in turn naturally has a flow on affect to us as customers and consumers of their services.

Brian Parker Investment Strategist from MLC has published an article, “No Guts- No Glory” in which he discusses the Reserve Bank of Australia’s decision to cut interest rates by a full percentage point.

I think it provides some useful insights for us all. Click on the link to be taken to a new window to read the article – “No Guts – No Glory”.