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

On our shared journey through life we all experience common trials, challenges and other things life insurance companies may define as Personal Events. Generally these Personal Events include:

• you or your spouse adopt or give birth;
• you get married or divorced;
• you complete an undergraduate degree at a government recognised institution;
• you take out or increase a mortgage to buy or improve your home.

Increases without medical evidence are available inside most Life insurance companies through their plus range of contracts. Through Personal Events, you may be able to increase your sum insured, without any underwriting by up to 25% (of your original insured benefit) or a maximum of $200,000.

Why is this “Personal Events” Benefit important? 

The ability to increase a policy without needing to again be medically underwritten (more…)

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…)

Many of the conversations in my working day include posing questions and presenting situations to deliberately challenge and reposition peoples thoughts. A client who has recently made a claim for payment for cover afforded to him by his insurance policy, was definitely happy I had done so in one of our earlier reviews …

The review was a result of him receiving his annual policy statement. The client was just seeking some reassurance that he understood the policy statement and the implications of the “Good News” booklet he had received with it from the product provider. He was a bit concerned about the purpose of the policy. To help with discussing his concern, I provided him a letter which caused him to raise an eyebrow and then share a laugh. (Download - the ”Letter from a Forgotten Friend” by clicking on the link).

Not even 6 months later while we were processing the paperwork to lodge his insurance claim, he told me of a lovely quote he’d once read … it was along the lines of “I don’t take out insurance because the insurance is worth it, I take out insurance because I’m worth it”.

I think thats a pretty good attitude to have. What do you think?

Where to from here?

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

Consider for a moment the following statement attributed to the United States Court of Appeals:

“… what corporate purpose could be considered more essential than key man insurance? The business that insures its buildings, machinery and automobiles from every possible hazard can hardly be expected to excercise less care in protecting itself against the loss of two of its most vital assets - managerial skills and experience …”

It is clear that key persons may be found in all types of business, large and small, incorporated and unincorporated, capital oriented and personal service oriented, new and old. However, the need for key person insurance is not the same for all businesses that have key persons. (more…)

Once you have it, you often don’t give your insurance another thought until you need to make a claim. But as your lifestyle changes, it is easy to outgrow the insurance you have in place.

If you have made some big changes recently - like having a child, buying a house, retiring from the workforce - you may need to reassess your insurance. As your circumstances change, so does your insurance needs. Just as your circumstances change, the features and benefits available within insurances products are often updated with new offers which help furtehr protect the things you value.

Not reviewing and updating your insurance, can leave you vulnerable when you need it most. (more…)

When the budget doesn’t seem to be going as far as it used to it is human nature to try and stretch it further by reducing those expenses which aren’t providing value for money.

Insurance products when percieved purely as an expense are often the first budget item cancelled.

However, the risk of disability is great. (more…)