Plan 2 Prosper

Keep your insurance going in tough times

Dan Smith — Thu, 19 Jan 2012 07:11:39 +0000

During tough economic times, you may look for ways to cut your expenses. However, when reviewing your budget, insurance should be one of the last items examined.

If the unthinkable were to happen and you didn’t have adequate insurance, the financial impact on you and your family could be quite dramatic. Regardless of whether you’re feeling the squeeze right now or looking for ways to reduce your expenses, there are a number of ways many of us can make personal insurance cover more affordable.

Buy your insurance in super

If you buy your insurance through a superannuation fund, you may be able to take advantage of a range of upfront tax concessions generally not available when insuring outside of the superannuation environment.

Additionally, you could arrange to have your premiums deducted from your existing superannuation account balance without making additional contributions to cover the cost. This can make your insurance more affordable if you don’t have sufficient cash flow to fund the premiums during periods you find yourself on Struggle Street. The trade-off with this option is that you will use up some of the money you could otherwise have used to fund your living expenses in retirement.

While this could impact your lifestyle when you are no longer working, think of what could happen to your family’s lifestyle in the interim if the worst were to happen. Without insurance, your family could run down your savings very quickly and face financial difficulty well before your intended retirement date.

Pay level premiums

If you elect to pay level rather than stepped premiums, you could reduce the long term cost of your insurance considerably. This is because, over time, level premiums can end up cheaper, often at a stage in life when you need the cover the most.

Pay your premiums annually

In some cases, you may be eligible for a discount if you pay your premiums annually, rather than monthly.

Consolidate your insurances

Holding all your personal insurances under the one policy could help you save on fees. Fee savings could also be made by consolidating the insurances held by yourself, your spouse and other family members (in some cases) into the one policy.

Choose a longer waiting period and shorter benefit payment period for Income Protection

Most income protection insurance policies enable you to choose how long you will need to wait before the insurance benefit will start to be paid and how long it will be paid for. Choosing a longer waiting period and a shorter benefit payment period can reduce your premiums, in some cases significantly.

Reduce the sum insured

As a last resort, you could consider insuring yourself for a lower amount. If something were to happen to you, this would clearly be a better option than cancelling your insurance completely. But you also need to keep in mind that reducing the sum insured could leave you (or your family) without sufficient money to meet your financial goals should the unthinkable happen.

To better understand the concept of life insurance follow the link below to our website and then left click on “Understanding Insurance” – http://www.plan2prosper.com.au/benefits/understanding-series

With so many different types of life insurance and options available it’s important to discuss your needs with someone who has more than a basic understanding of the topic. Determining an appropriate insurance solution or an acceptable compromise can be very complex. A client commented to me it was a bit like an onion … at face value it’s just an onion, but the simple onion has many layers which can be peeled back, sliced, diced, cubed, filed, and cried over depending on preferences.

Where to from here?

If you would like to discuss the topics raised or if you would like more information, speak to your financial adviser or contactDan Smithof Plan 2 Prosper on 07 49265 570.

Dan Smith is self employed and is for many families their trusted Financial Planner based in Rockhampton. He has clients in various locations throughout Australiabut predominately in Central Queenslandand specifically the geographic area encompassed by the Rockhampton Regional Council.

This information is intended to only provide you with general information and, while the sources for the material are considered reliable, no responsibility is accepted for any inaccuracies, errors or omissions. Before making a decision based on this information, you must consider its appropriateness having regard to your objectives, financial situation and needs. We recommend you obtain professional financial advice specific to your circumstances.

Dan Smith and Dancin Pty Ltd ABN 71 531 338 371 trading as Plan 2 Prosper are Authorised Representatives of GWM Adviser Services Limited ABN 96 002 071 749 trading as MLC Financial Planning, an Australian Financial Services Licensee, with its Registered Office at 105 – 153 Miller St, North Sydney NSW 2060

Insurance inside your industry super fund – quality or just discount cover?

Dan Smith — Tue, 13 Dec 2011 04:00:26 +0000

Many of us through our working life have had insurance through the super fund that our employer has organised as their default fund. Often these default funds are funds organised for employers in that particular industry or employees in that industry. Thus the term industry fund has become prevalent. Generally speaking industry funds offer two main benefits for their members, being reduced administration fees on their investments and access to discounted premiums on the insurance cover inside the fund.

It is important to review the paperwork received from the the Employer Super Fund/Industry Fund to ensure you are aware of the terms of cover being offered. Be mindful of:

Pastime exclusions
Pre-existing conditions
offset clauses for sick leave
policies terminating upon cessation of employment
policies which cease if no contributions have been payable into the account for a specified period
decreasing cover
the right of the fund to cancel insurance at any time
salary continuance cover which ceases after the insured has made a claim for TPD

This article will focus on the insurance components in the industry funds and the ‘tips and traps’ of these investment plans including:

What are industry funds and how do they differ from group insurances schemes
What are the advantages of insurance inside industry funds?
What are the limitations of insurance inside industry funds?
How do they compare to an insurance policy offered by an adviser?

An extract from a publication prepared by ThreeSixty, a division of GWMAS, appears below.

What are industry Funds and how do they differ from group insurance schemes?

Industry funds are large scale funds generally offered to employer groups and other members. The funds are invested in a strategy depending on the age of the insured. This strategy can usually be altered at the request of the member. These plans are large scale with minimal client contact, generally solf without financial advice and offer discounted investment administration and insurance premiums. Group insurance schemes are offered as a benefit of employment with the premiums funded by the employer. As the policy is ultimately owned by the company and not the insured, the employer can cancel and amend cover at their discretion without consulting the members.

Advantages of Insurance inside industry funds

As previously stated, industry funds are large scale funds offered to employer groups. The main advantages of insurance inside industry funds are:

Cost: given the large member base, premiums are offered as ‘wholesale’ or discounted rates. The covers usually expire earlier than regular policies and have a reduced number of benefits available to their members.
No underwriting: Rather than spend time collecting medical information from their members and assessing their individual health risks, the industry funds rely on the employers to hire what they assume are healthy people and cover is offered without the financial burden of medical assessments. The maximum level of cover available without medical underwriting is known as the Automatic Acceptance Limit and set by the super fund depending on the number of employees and the industry in which they are employed.
Simplicity: Usually arranged by the employer using a specific default level, the insured is provided with a level of cover without completing any health forms or engaging with a financial adviser. This cover can be increased upon application through the super fund. This cover can also be cancelled at any time.

As a general rule, the higher the number of employees insured, the higher the level of cover available through the automatic acceptance limit (AAL). All cover above the AAL is subject to medical underwriting, which may involve blood and other tests. Any loadings or exclusions can generally only be applied to the cover in excess of the AAL.

Limitations of insurance inside industry funds

The main disadvantages of insurance inside industry funds are:

Basic cover: Usually no ‘bells and whistles’ and cover is often quite limited due to the discoounted underwriting and SIS regulations preventing the client from receiving more than 75% of their pre disability income under a Non Commutable Income stream. The definitions and terms of the product are usually not as favorable when compared to retail insurance policies sold with financial advice.
Offsets: Depending on the product selected, the policy may include a number of offset clauses including sick leave, any pother policy and workers compensation entitlements. The policy may also cease if the insured is totally disabled. Many older clients may find their cover reducing in later years.
Underinsurance: As no financial advice has been sought, the cover may be insufficient to meet the needs of the client in the event of death. The insurable income reported by the employer may not include bonuses, commissions, regular overtime or superannuation contributions.
Termination: The benefit will often cease when the insured changes employment. Not all funds offer a continuation option to transfer the cover to a self owned policy and cover may cease despite the client’s intentions of staying in the workforce.
Exclusions: Some policies may apply exclusions including depression, drug and alcohol related claims, criminal activity or pre-existing conditions. Some industry funds may cancel cover at any time.

How does the insurance within an industry fund compare with cover offered by an adviser?

To ensure that premiums are affordable for all members without eroding their retirement savings, the products offered by the industry funds are generally basic relative to other providers on the market, however they do provide their members with valuable (although quite basic) cover. It is important to consider that retail products offered by Financial Advisers are more comprehensive, have more favorable definitions and offer more guaranteed cover, compared to industry funds and if your employment conditions change the policy remains in force as agreed at the time of application, The definitions and features with a policy offered by an adviser are of higher quality with less offset clauses providing greater security and opportunity to claim. Furthermore, the level of cover recommended by an adviser will more likely meet your long term needs.

The information contained in this publication is current as at 11 October 2011 and is prepared by ThreeSixty, a division of GWM Adviser Services Limited ABN 96 002 071749, registered office 105-153 Miller Street North Sydney NSW 2060. This company is a member of the National group of companies. Any advice in this publication has been prepared without taking account of your objectives, financial situation or needs. Because of this you should, before acting on any advice, consider whether it is appropriate to your objectives, financial situation and needs. Past performance is not a reliable indicator of future performance. Before acquiring a financial product, you should obtain a Product Disclosure Statement (PDS) relating to that product and consider the contents of the PDS before making a decision about whether to acquire the product.

Where to from here?

To ensure you are adequately protected with a quality product, it is important to review your existing insurance arrangements and determine whether these levels are sufficient to meet your long term needs, with the most appropriate features and benefits based on your personal circumstances.

If you would like to discuss the topics raised or if you would like more information, speak to your financial adviser or contact Dan Smith of Plan 2 Prosper on 07 49265 570.

Dan Smith is self employed and is for many families their trusted Financial Planner based in Rockhampton. He has clients in various locations throughout Australia but predominately in Central Queensland And specifically the geographic area encompassed by the Rockhampton Regional Council.

Christmas Thoughts for 2011

Dan Smith — Tue, 22 Nov 2011 08:17:13 +0000

Please allow us a moment to wish you all the best for the coming Christmas and New Year period.

Recently a ”Test” post was sent out by Jason. It was reassuring to get more than a few enquiries asking if Plan2Prosper had a new staff member … it made us understand that some of the posts made are actually read by the intended audience. No new staff have joined Plan2Prosper, it was just Jason from Almost Anything upgrading some of the tools used to make the posts and a “Test” message slipped through the testing controls. Everything works great again now.

Later this week we will be sending out a message via post to our clients. Our greetings for the season and thanks, an update on our availability over the coming school holiday period and some general comment … for a sneak peak check out – Christmas thoughts 2011

Where to from here?

If you would like to discuss the topics raised or if you would like more information, speak to your financial adviser or contact Dan Smith of Plan 2 Prosper on 07 49265 570.

Workers Compensation and Wealth Protection

Jason — Fri, 18 Nov 2011 00:43:12 +0000

Many people have been asking about workers compensation when reviewing their wealth protection plans. Seeing a need to educate, we sourced content for this article from our research partner, ThreeSixty. This article will focus on the employer provided workers compensation benefits and the “tips and traps” of these plans including:

What is workers compensation insurance and what is covered under the policy?
What are the entitlements under workers compensation?
What are the limitations of workers compensation cover?
How does workers compensation differ from Income Protection Insurance?

An extract from a publication prepared by ThreeSixty, a division of GWMAS, appears below.

What is workers compensation insurance and what is covered under the policy?

Workers compensation insurance is compulsory insurance provided by the employer for all employees. Benefits are only payable for accidents which occur whilst completing the daily work related activities, including travelling to and from work. This does not extend to include sickness, unless it is directly work related and approved by the workers compensation provider.

Workers Compensation benefits are payable for death, incapacity to work, permanent loss or impairment to the body, and the need for rehabilitation or hospitalisation as a result of an injury which occurred during the activities of their work. The level of benefit payable is dependent on the state of residence, with some states providing more generous payments.

Proceeds from Workers Compensation benefits are assessable as income for tax purposes.

What are the entitlements under workers compensation?

(The below entitlements are correct as at September 2011)

The Workers Compensation Act (1997) and the Workplace Injury Management Act (1998) establishes provision for the compensation of workplace injuries. Entitlements vary between states, as outlined below.

New South Wales Source: www.workcover.nsw.gov.au

This benefit is limited to the award wage and no more than $1805.00 per week for the first 26 weeks of invalidity. After 26 weeks, this benefit is limited to no more than $424.50 for clients under an award or $616.10 where no award exists.

After 26 weeks, the claimant would need to reconsider their circumstances if it is a long term claim.

Additional benefits are payable where there are financial dependants.

Benefits will be reduced for partial disability claims.

Victoria Source: www.workcover.vic.gov.au

Totally disabled: This benefit is limited to 95% of the pre-disability earnings and no more than $1930.00 per week for the first 13 weeks. For 14-130 weeks, this benefit is limited to 80% of the pre-disability earnings and limited to no more than $1930.00 per week.

After 130 weeks, the benefit is limited to 80% of pre-disability earnings and no more than $1930.00 per week.

Partially disabled: The benefit is limited to 95% of the pre-disability earnings, and no more than $1930.00 per week for the first 13 weeks. Between 14 weeks to 130 weeks, if the claimant has returned to work, this benefit is 80% of pre-disability income less 80% of what they are currently earning to a maximum of $1930.00 per week. If they have not returned to work, benefits remain at 75% of pre-disability income.

After 130 weeks and if the client is capable of working in any capacity but elects not to work, benefits will cease. A client can apply to have partial benefits extended beyond 130 weeks if they are working at least 15 hours per week and it is evident that they are working towards their rehabilitation.

Western Australia Source: www.workcover.wa.gov.au

If under an award wage: For the first 13 weeks, the benefit received is the regular award wage plus any benefits payable on a regular basis including overtime, bonuses and allowances. The maximum weekly amount is $2156.60.

From week 14, only the regular award wage is payable up to a maximum of $2156.60 (no additional benefits).

Not under an award wage: For the first 13 weeks, the benefit received is the regular award wage plus any benefits payable on a regular basis including overtime, bonuses and allowances. The maximum weekly amount is $2156.60.

From week 14, the regular award wage is a maximum of 85% of their pre disability income, not including overtime, bonuses and allowances to a maximum of $2156.60.

Queensland Source: www.workcover.qld.gov.au

This benefit is limited to no more than 85% of the insured earnings before disability for a period of 26 weeks. Beyond this period and for up to 104 weeks, claimants will be entitled to benefits of 75% of salary (or 70% of the QLD ordinary full time earnings). For benefits beyond 104 weeks, compensation is dependent on the degree of impairment.

South Australia Source: www.workcover.sa.gov.au

A totally incapacitated injured worker is entitled, for the first 13 weeks of their incapacity, weekly payments at the rate of 100% of their average weekly earnings. Between 14-26 weeks, the worker is entitled to 90% of their pre disability income. After 26 weeks incapacity, an injured worker is entitled to weekly payments at the rate of 80% of their average weekly earnings.

Benefits may continue to retirement age where the insured is significantly disabled.

Tasmania Source: www.workcover.tas.gov.au

For the first 26 weeks, 100% of income is paid. Between 26 weeks and 78 weeks, benefits are limited to 90% of average earnings or 95% where no suitable alternative duties are available. After 78 weeks, benefits are limited to 80% of the average earnings. The duration of the benefits are associated with the level of impairment.

What are the limitations of workers compensation cover?

Workers Compensation benefits are limited to work related injuries. Between October 2010 and September 2011, MLC reported that 60% of all claims were for sickness, compared to 40% for accidents.

Of the 40% accident claims, you would need to consider how many of these are work related and entitled to workers compensation benefits.

This means that those who rely on workers compensation cover alone, leave themselves unprotected against sickness and accident claims which occur on weekends, around the home or outside of the workplace.

Furthermore, the benefits are limited to a percentage of the pre disability income which may not include other benefits of employment, including salary packaging, commissions and overtime.

How does Workers Compensation differ from Income Protection Insurance?

Income protection provides cover for up to 75% of the monthly income for any medical reason which prevents the individual from not working, with the benefits commencing to accrue following the cessation of the waiting period. Additional benefits can be received where the insured has elected to purchase optional cover, such as nursing care allowance, advance benefits for trauma events to name a few. Cover is global and claims are payable for both partial and total disability with benefits generally available to age 65. Generally white collar occupations will not have their benefits offset against workers compensation claims, allowing the insured to claim from both sources. Premiums are tax deductible and benefits are assessable as income.

Workers compensation on the other hand is limited to work related claims with the amount of benefit varying between the state of employment and the duration of the disability. The maximum benefit period is dependent on the individual’s location with benefits ceasing as early as 26 weeks. Premiums are paid by the employer and benefits are assessable as income. There does not appear to be a waiting period with benefits accumulating from the first day of the accident occurring.

There is often a greater level of support from both WorkCover and the unions, for “return to work programs” for claims lodged through Workers Compensation, compared to an income protection policy given that the accident occurred in the course of their employment.

Any advice in this publication has been prepared without taking account of your objectives, financial situation or needs. Because of this you should, before acting on any advice, consider whether it is appropriate to your objectives, financial situation and needs.

ast performance is not a reliable indicator of future performance.

Before acquiring a financial product, you should obtain a Product Disclosure Statement (PDS) relating to that product and consider the contents of the PDS before making a decision about whether to acquire the product.

To better understand the general concept of life insurance follow the link below to our website and then left click on “Understanding Insurance” – http://www.plan2prosper.com.au/benefits/understanding-series

With so many different types of life insurance available it’s important to discuss your needs with someone who has more than a basic understanding of the topic. Determining an appropriate insurance solution or an acceptable compromise can be very complex. A client commented to me it was a bit like an onion … at face value it’s just an onion, but the simple onion has many layers which can be peeled back, sliced, diced, cubed, filed, and cried.

To ensure you are adequately protected with a quality product, it is important to regularly review your existing arrangements and determine whether any cover provided by workers compensation and other existing insurance policies are sufficient to meet your needs.

As an adviser, my goal is to ensure that you are adequately protected, with a quality insurance product tailored to your individual circumstances.

Where to from here?

If you would like to discuss the topics raised or if you would like more information, speak to your financial adviser or contact Dan Smith of Plan 2 Prosper on 07 49265 570.

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Dan Smith is self employed and is for many families their trusted Financial Planner based in Rockhampton. He has clients in various locations throughout Australia but predominately in Central Queensland and specifically the geographic area encompassed by the Rockhampton Regional Council.

Vital Career Protection for Professionals

Dan Smith — Thu, 06 Oct 2011 02:43:04 +0000

Insurance is vital career protection for professionals.

Success as a white collar professional is often built on years of education and hard work. Once you’ve made it, there’s probably a temptation to feel like you have set yourself up for life.

There is no doubt a healthy income is a big help when it comes to building a comfortable lifestyle for your family. The challenge can be sustaining this income, and this lifestyle, if you suffer a serious illness or injury.

Serious illnesses and accidents can happen to anyone, at any time. It could happen walking down the street, it could happen milking a cow, if all of a sudden you stop and look out your window it could be happening … right now. (Apologies to an old VB Beer TV advert that had wormed it’s way into my mind while drafting this post).

While survival rates for many of the most common illnesses are improving, such an experience could easily compromise your ability to work – both in the short term while you recover, and in the long term while you make the lifestyle adjustments you need to stay healthy.

For families with large incomes, and large mortgages, this can have a dramatic impact on your quality of life. That’s why life insurance is such a valuable back up to have.

Life insurance encompasses a number of different types of insurance covers including life cover, income protection cover, total and permanent disability cover (TPD), and trauma (or critical illness) cover.

Insurance is also not a set and forget purchase. Each year at the anniversary of your policy you should take a few moments to review any changes in your own personal situation and also in the product environment available to you. The few moments taken reviewing your policy with the assistance of your Financial Adviser will help ensure you and your family won’t be left financially exposed should the unexpected occur.

Where to from here?

If you would like to discuss the topics raised or if you would like more information, speak to your financial adviser or contact Dan Smith of Plan 2 Prosper on 07 49265 570.

Dan Smith is self employed and is for many families their trusted Financial Planner based in Rockhampton. He has clients in various locations throughout Australia but predominately in Central Queensland and specifically the geographic area encompassed by the Rockhampton Regional Council.

New phone number for Aged Care

Dan Smith — Tue, 27 Sep 2011 23:17:45 +0000

Improving Information, Intake and Assessment for Aged Care

The Australian Federal Government is making it easier for older Australians, their families and carers to access the Aged Care System.

On 1 July 2011, the Minister for Mental Health and Ageing, Mark Butler, announced the introduction of single, national information line to make it easier for older Australians, their families and carers to access information about aged care. The new number
1800 200 422
along with improvements being made to the national aged care website http://www.agedcareaustralia.gov.au/ are the first steps in the implementation of a new ‘front end’ for aged care.

The reform is supported by investment of $36.8 million to improve information, intake and assessment and make it easier, not harder, to access the aged care system. It is part of the Australian Government’s national health reform efforts to build a nationally consistent and integrated aged care system.

The new national phone number will initially be answered by the experienced aged care workforce of the Commonwealth Respite and Carelink Centres. The Government is working with Centres and other key stakeholders on continuous improvement to the quality and consistency of aged care information available, both over the phone and online. These improvements will provide information that is more comprehensive, up-to-date and relevant to people’s needs.

By implementing the new front end in stages, it allows time for service providers, care recipients and carers to adjust to the changes and be involved in the development of later stages. It means having sensible steps towards reform and continued opportunities to talk with people about how to roll out the later stages. The Australian Federal Government will continue to talk with state and territory governments, service providers and the aged care workforce. They will also be talking with older people, their families and carers.

The continuing development of the new front end will need to take into account existing regional infrastructure, partnership arrangements, and resources while considering opportunities to build on elements that are currently working well. The system will also be closely aligned with Medicare Locals and Local Hospital Networks to help ensure people’s health needs are detected and addressed, with services coordinated across the health and aged care systems.

As Government continue to work towards improving access and navigation of the aged care system, we urge you to stay informed and up to date by visiting http://www.yourhealth.gov.au/ and to participate in the opportunities to have your say in the future of aged care in Australia.

Where to from here?

If you would like to discuss the topics raised or if you would like more information, speak to your financial adviser or contact Dan Smith of Plan 2 Prosper on 07 49265 570.

Dan Smith is self employed and is for many families their trusted Financial Planner based in Rockhampton. He has clients in various locations throughout Australia but predominately in Central Queensland and specifically the geographic area encompassed by the Rockhampton Regional Council.

September 2011 Market Update

Dan Smith — Sat, 17 Sep 2011 22:56:12 +0000

Various commentators have been writing about continuing positive developments in various markets. This reinforces the need to look beyond the negative headlines still prevailing in the media. Shared in this post is a September Market Update prepared by GWMAS trading as Three Sixty.

The Pulse

Gold á 12.2%

Oil (WTI 3 month futures) â 7.2%

 US downgraded by Standard & Poor’s

 European Central Bank helps support markets

 RBA leaves rates unchanged

AUGUST MARKET PERFORMANCE

Global economies

The US credit downgrade in early August, coupled with continuing concerns over the debt issues in Europe shaped what was a volatile month for equity markets.

US economy

Despite the debt ceiling agreement reached on August 2 between US Republicans and Democrats, ratings agency Standard and Poor’s (S&P) took a bold step and downgraded the US from AAA to AA+ with a negative outlook.

This set the tone for a volatile month in risk assets such as equities and some currencies. The flight to perceived safety was highlighted by the rise of gold, which achieved record high prices as investors looked towards a traditional store of wealth.

At the US Federal Reserve’s (Fed) August meeting, there was also discussion around the economy’s weakened state as they downwardly revised growth for 2011 and 2012.

In turn, the August meeting also saw the Fed commit to keeping rates exceptionally low until at least the middle of 2013, which provided more clarity to the market as opposed to “for an extended period”; the Fed’s previous line on rates.

However, talk that the US may go back into recession by market participants raised speculation that the Fed would announce a third round of quantitative easing (QE), or QE3.

With these expectations, equity markets reacted to the news and data released, as well as the anticipation of intervention to stimulate the economy by policy makers.

In the end, Fed Chairman Ben Bernanke didn’t announce a further round of QE, nor hint of one, at his address at the annual Jackson Hole central banks’ conference.

He did point out though that there would be further discussion around the Fed’s kit of “policy tools” available to support the economy at the upcoming September meeting.

Europe

European equities also came under some selling pressure during August as debt concerns in the region heightened.

The main focus of the selling was the banking sector, amid concerns over their holdings of troubled European sovereign debt.

While no major markets escaped the sell-off in risk assets, the German market was hit particularly hard and closed out the month over 19% lower.

During August, the European Central Bank (ECB) entered the debt market to buy and support Italian and Spanish bonds in order to help stabilise and reassure the market.

The ECB also said they would provide unlimited liquidity to member banks for the next six months, with Italy and Spain both announcing further budget austerity packages to reduce their debt.

In Greece, the year-to-date estimates of the Greek Government’s Budget showed that the forecast for deficit reduction was behind schedule.

While the Greek economy remains troubled, the latest official estimates show that the Greek economy did in fact expand by a modest 0.2% in the first quarter after a 2.8% contraction in the fourth quarter of last year. Over the year to 31 March, the economy had contracted by 5.5%.

Mid-month, Germany’s Chancellor Merkel and French President Sarkozy announced there would be no Eurobonds issued.

They also ruled out increasing the size of the European Financial Stability Facility (EFSF) that was recently lifted from €250bn to €440bn in July when the Greek bail-out was announced.

Late in the month, the German Government Cabinet approved Germany’s participation in the enlarged EFSF, however, approval is still needed by the German Parliament which is set for a vote on September 29.

The German economy also revealed that growth slowed from 1.3% in the first quarter to 0.1% in the second quarter, possibly affected by disruptions in supply to the auto and manufacturing industries.

The wider Euro-zone economy grew by an estimated 0.2% in the June quarter, down from the 0.8% pace in the first quarter with annual growth pulling back from 2.5% to 1.7% over the year to 30 June.

China

In China, news was mixed as industrial production and retail sales both posted reasonable growth compared to last month, however, fixed asset investment such as machinery, property and plant looks to have weakened recently.

Annual inflation which is running at 6.5% was higher than expected and well above the target rate of 4%. Food price inflation rose while non-food inflation ticked down slightly from its peak.

Australia

On the home front, the Reserve Bank of Australia (RBA) left rates on hold in August and September. The last change to the cash rate was November last year.

While the second quarter inflation report saw a 0.9% rise, signs that the economy’s growth had slowed impacted the RBA’s decision.

However, despite signs that the Australian economy’s growth rate tempered, the RBA remains concerned about the pick up in the rate of growth of nominal wages and the pressure of labour costs.

The RBA’s latest forecasts for the economy show their forecast for growth this year to be around 3.25% with inflation at the upper end of the 2-3% target range.

Big movers this month

Going up – Telcos +5.8%

Going down – Energy -5.7%

Equity markets

Volatility was higher during August with significant intra-day swings occurring throughout the month and across all major markets.

Australian equities

While Australia is not immune from the current issues surrounding the globe, the All Ordinaries, although still negative, performed relatively well compared to the major indices in August. The All Ordinaries fell 2.9% over August and is down around 1.6% over the year.

Global equities

The Dow Jones also held up relatively well throughout the month despite the volatility, with the index closing the month 4.4% lower; it is however up nearly 16% over the year to 31 August.

Asian and European markets had the biggest falls from a regional perspective with the Hang Seng dropping 8.5%, the Nikkei dropping 8.9%, the FTSE dropping 7.2% and the Eurotop 100 falling 10.7%.

While these indices provided some significant falls, the German market provided the biggest losses to investors as a result of the European debt issues with a fall of 19.2%.

Property

The S&P/ASX 300 A-REIT Accumulation Index bucked the trend in August by posting a 2.9% gain and outperforming its global counterparts. The Retail property sector performed relatively well and offset the losses in the Industrial and Commercial property sectors.

In contrast, global property lost ground with the UBS Global Investors Index falling just over 3% in August. In the global space, Japan performed well on a relative basis.

Fixed interest

Both Australian and Global bonds continued to benefit from the flight to safety with Australian bonds, as measured by the UBS Composite Bond Index, gaining 2% throughout August.

Globally, unhedged bonds performed relatively well compared to their hedged counterpart by returning 3.9% over the month. Hedged bonds, as measured by the BarCap Global Aggregate Index (Hedged) gained 1.7% over the month.

Over the year to 31 August, Australian bonds gained 7.1% compared to their hedged equivalent which returned 6.9%.

Australian dollar (AUD)

After breaking through 1.10 USD and reaching a new post-float high in early August, the AUD traded closer to parity but made a substantial recovery from those lows as market instability began to recede.

By early September, the AUD had recovered around 70% of its early August losses.

The information contained in this Market Update is current as at 15/9/2011 and is prepared by GWM Adviser Services Limited ABN 96 002 071749 trading as ThreeSixty, registered office 150-153 Miller Street North Sydney NSW 2060. This company is a member of the National group of companies.

Any advice in this Market Update has been prepared without taking account of your objectives, financial situation or needs. Because of this you should, before acting on any advice, consider whether it is appropriate to your objectives, financial situation and needs.

Past performance is not a reliable indicator of future performance.

Where to from here?

If you would like to discuss the topics raised or if you would like more information, speak to your financial adviser or contact Dan Smith of Plan 2 Prosper on 07 49265 570.

Dan Smith is self employed and is for many families their trusted Financial Planner based in Rockhampton. He has clients in various locations throughout Australia but predominately in Central Queensland and specifically the geographic area encompassed by the Rockhampton Regional Council.

What is your currency position?

Dan Smith — Tue, 16 Aug 2011 04:15:43 +0000

Every evening (and regularly throughout the day if you are that connected), the news provides comment on what our aussie $$ is doing in comparison to a range of other currencies of our trading partners. Up, down, red triangles, green triangles … over the long term how much does it really matter?

Whilst currency exposure can materially impact returns over short and medium timeframes, over the long-term we’d expect the return on hedged and unhedged global shares to be similar. This is because currency markets are simply exchange mechanisms that do not produce real wealth; in the long term they are a zero-sum game.

A blog posted in 2007 explored the topic – “To Hedge or not to Hedge; Is that the Question?”

What was highlighted then in a different environment holds equally true now. Please read the viewpoint -offered by MLC Asset Consultant John Purtell, “Currency strategies: Managing risk or enhancing returns?” where he looks at this topical issue of currency risk in investors’ portfolios and the different measures which can be taken to address it.

Where to from here?

If you would like to discuss the topics raised or if you would like more information, speak to your financial adviser or contact Dan Smith of Plan 2 Prosper on 07 49265 570.

Dan Smith is self employed and is for many families their trusted Financial Planner based in Rockhampton. He has clients in various locations throughout Australia but predominately in Central Queensland and specifically the geographic area encompassed by the Rockhampton Regional Council.

August Market Update Video

Dan Smith — Thu, 11 Aug 2011 06:12:04 +0000

To help you in with your thought during this volatile time, we’ve gained access to two of MLC Investment Management’s specialists and asked them the questions on investors’ minds: What’s happening in the markets, where to from here and, unlike the media, what opportunities are provided by the current circumstances.

Part 1

Global perspective – what’s actually happened to sharemarkets around the world and what positives are in the market at the moment.

Part 2

In part 2, the MLC Investment team look at the following questions on investors’ minds:

- Is it safe to be in markets?
- Should I stay invested?
- What about investors closer to retirement, and
- How Australia is positioned

Where to from here?

If you would like to discuss the topics raised or if you would like more information, speak to your financial adviser or contact Dan Smith of Plan 2 Prosper on 07 49265 570.

Dan Smith is self employed and is for many families their trusted Financial Planner based in Rockhampton. He has clients in various locations throughout Australia but predominately in Central Queensland and specifically the geographic area encompassed by the Rockhampton Regional Council.

Dan’s early August view on global markets and your investments

Dan Smith — Thu, 11 Aug 2011 05:57:57 +0000

With recent reports on falling markets, it’s not hard to imagine you’d be concerned about your investments.

I’ve had a number of clients contact me, some asking whether this volatility is a precursor to another global financial crisis; some wondering how long we can expect market uncertainty to last. Interestingly, a select few have asked if it’s a good time to buy investments cheaply!

Getting a balanced view

Globally, the appetite investors have for risk has significantly fallen since late April, which has seen global sharemarkets fall by around 18% (at 9^th August am). For the most part, this has been a reaction to the building concern for the slow but sure spread of the European debt crisis and the recent US debt situation.

In both cases, the delay in action by policy makers has taken its toll. You’ll have seen in the news the political football that saw President Obama’s debt deal agreed on the last possible day. In isolation, these media reports are disconcerting but there are a number of reasons I have confidence in sharemarkets.

While government debt is large, there are companies around the world faring much better. In the US alone, there’s $1.5 trillion in cash sitting on company balance sheets. These companies are less concerned about cutting costs and more focussed on increasing their capital expenditure.

And, thanks to the learnings from the GFC in 2008, banks are generally stronger, more transparent and the market has more certainty about where the banks are invested. Because of this, I think there are some great opportunities for those with a medium to long-term time horizon.

What this means for your investments

The Australian Federal Government continues to maintain its AAA credit rating and, although the economy has softened in 2011, we do have the benefit of strong export partners such as China and India.

However, we aren’t insulated from the global uncertainty and that’s reflected in large falls in the Australian sharemarket too.

How your money is being managed is even more important during times of global risk. Because of this, I’m receiving regular updates from many sources, including the MLC Investment Management team, to find out what they’re doing with your investment funds.

At a recent teleconference I attended, they described how they expect markets to remain jumpy for a while but they, and their managers, had increased their focus on investing in quality companies with low levels of gearing and strong cash flows. These companies would fare well even in this environment.

They also spoke of risk management strategies; areas they’re avoiding and how they’re testing different investment scenarios with various outcomes. Their investment managers are finding opportunities they expect will deliver long-term returns for investors.

In summary, they were confident in the sharemarket for many of the points I’ve outlined in this post. There was caution around market growth. They expect it would be slow and volatile for some time, but this was quickly followed up by the statement that, even in this difficult environment, they see opportunity.

Where to from here?

If you would like to discuss the topics raised or if you would like more information, speak to your financial adviser or contact Dan Smith of Plan 2 Prosper on 07 49265 570.

Dan Smith is self employed and is for many families their trusted Financial Planner based in Rockhampton. He has clients in various locations throughout Australia but predominately in Central Queensland and specifically the geographic area encompassed by the Rockhampton Regional Council.