With the recent Royal Commission dominating media headlines, it is interesting to hear all of the problems and complaints within the industry about all the changes and what they will do. Interesting because out of 76 recommendations there are only 4 which have any impact on our business. Of those 4, the only real change will be the inconvenience of a small amount of additional paperwork.
We take great satisfaction from the fact that we don't have conflicts of interest in our business. Our sole purpose is to try and make clients financially better off. So it's business as usual.
It's interesting how much of the media, including industry press, make a lot of noise about fees and short term returns to investors. We recently went to a training day with a number of fund managers (most which we don't use). The first 3 presenters had very different investment philosophies, but had the same over-riding take away. Reducing the size of a loss gives you a much better chance of a reasonable return when markets recover. If your shares drop 40%, you have to make 67% to get back to square one. But if you only drop 20%, you only have to recover 25% to be back to square one. Half the drop, but you only need just over 1/3 of the recovery.
Downside protection is very important and with that you typically won't be making record returns each and every year. We try and implement this with our client's investment portfolios, super and normal money. It is not important to shoot the lights out with the best return in any given year. It is important to grow at a respectable rate and to be well prepared to cope with a large market downturn.
Regarding fees, we don't like paying fees any more than anyone else. We do however, realise that they are only part of the equation. As an example we will use a well known journalist's common recommendation of listed investment company AFIC. They only have a 0.17% management fee, so why would you use an alternative managed share fund with a fee of 0.99%. We think probably because AFIC's 5 year return has been 4.64%pa. One of our low risk Australian share managers has averaged 9.34% pa over the same period. And that is after fees and during one of their relatively poorer periods. There are also much higher returns out there for that period, but typically with more risk.
Don't be blinded by headline grabbing media and the lowest fees. Have an in depth discussion with someone whose only job is to try and make you as well off as possible.
Well, we've finally done it. After a great amount of work and documentation provided to ASIC, we now operate under our own Australian Financial Services Licence. FB Advice (AFSL 506314).
We are now not linked in any way to any large financial institution and have complete freedom to do whatever we think is in the best interests of our clients. Not that that part has changed; it's just a lot simpler to not have to answer to a third party. We can now spend more time looking after clients and less time meeting pointless policies that are forced on most financial planners.
It's a shame to see that a web site that was set up about 12 months ago to allow clients to independently rate their financial planner has changed the way they operate. This previously independant site (adviserratings.com.au) has now taken to charging financial planners to be promoted on their web page. So it will no longer be just put in your area and the planner with the highest ratings will come up first. It will now be whoever has decided to pay for the privelage will be promoted by Adviser Ratings. The planners wth the best ratings may be well down the list. And it was looking so promising as an independant site where the public can go. Now it's just another advertising platform. Looks like it's back to the FPA Find a Planner site and then make it up as you go.
There have been endless things happening around the world that impact on our investment returns; including the new President Trump. However sometimes it's the things that you don't hear about that have the biggest impact. Below is a link to a very interesting article by Schroders head of Australian shares. It doesn't have a very positive outlook for certain types of assets, such as property, infrastructure and some shares.
We can put your mind at ease to some degree in that as one of our clients, you will typically only have around 8% to 10% maximum in property and infrastrucutre and the Australian shares are not index based and actively managed to account for these types of events. This should help minimise any losses created if the article proves to be acurate. However, it is still important to have some exposure to them, as we don't know when it will happen or when they will rise again. These have added considerably to returns over the past few years.
Earlier this year there was a lot of negative media about life insurance companies and their efforts to get out of paying claims. Thankfully we have never used the companies involved and never will. But using good companies with good quality defintions is a whole other story and doesn't get any media attention.
Unfortunately we have recently had a number of claims for clients in trauma and income protection. All I can say is that we, and the clients, are so glad we chose the insurers and products we did. All paid without fuss and 2 income protections claims paid for 6 and 12 months in advance even when the clients are back at work within 2 months. DEFINITIONS ARE CRITICAL! We spend an enormous amount of time researching the cheapest of the best products to get you covered and everyone's scenario is different. If you don't really know what you are covered for, bring your existing policies in and we'll have a look. If they're good we'll tell you and if they're not, we can give you options.
Well, the budget is out and there are some huge implications for the superannuation system; possibly the most in one budget ever. The most important thing to remember is that they are only proposals. This government may not even be in power in 2 months and/ or Labor may block everything. There will be some winners and some losers and if they all happen it will certainly make the system fairer to lower income earners.
The most relevant proposals are:
- maximum lifetime non-concessional contributions of $500,000 (apparently effective immediately if it gets through)
- no restrictions on who can claim a tax deduction on the new reduced maximum concessional contributions of $25,000. Unused amounts can be carried forward for 5 years.
- no work test required to be allowed to contribute, meaning anyone up to 75 can make contributions within the allowable limits.
- pension balances above $1.6m will not be allowed. There will be a cap on how much super can be rolled into pension pension phase. Any excess above that amount for existing pensions will have to be withdrawn or rolled back to acumulation phase by 1 July 2017.
- earnings on TTR pensions will no longer be tax free and will be taxed the same as accumulation phase.
- the spouse contribution tax offset of $540 will be available to anyone whose spouse earns less than $37,00pa rather than the existing $10,800.
- the low income super tax offset up to $500 will be reintroduced for those earning less than $37,000pa.
The best thing you can do is not panic, as none of these are law yet. For a more detailed explanation click HERE to see BT Technical manager's video post budget.
November 4 -
Sometimes people question the value of advice and wonder if it's really worth it. Recent research shows that investors that stayed fully invested in 2008 at the height of the GFC have made on average 8 times more by the end of 2013 than those who pannicked and went to cash. That's right; 800% more. The research found that most of those who went to cash are still in cash 7 years later and the majority of those were not working with a Financial Planner.
Quite often we add the most value by stopping people from making decisions that aren't in their own best interest. It can help to have an external person to guide you through the difficult times.
July 23 - New Premises
We are pleased to announce that we now occupy the building at 44 Wills street Bendigo, beside the Target car park. It’s taken a couple of weeks to get everything organised and other than a few pieces of furniture we are in and ready to see existing and new clients.
March 3 - Accredited Aged Care Specialist
Melissa Butler recently became the only BUPA accredited aged care specialist in the Bendigo region. This means that she has done advanced studies specific to helping people going into aged care and continues to keep up to date with the impacts to families going through this situation. If you're going to get advice; why not get it from someone who knows.
Oct 22 - Life insurance cheaper through advisers
New research by Dexx&r suggests that the recent rise in group insurance premiums has altered conventional wisdom that insurance purchsed inside a super fund is always cheaper.
Following several years of significant premium increases, members of many of the major super funds could now benefit from the enhanced cover and benefits of individual products purchased as a result of personal advice from a financial planner, and at a lower cost. We have found this to be the case and saved many clients considerable amounts on their insurance.
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