Basically, you can do whatever you like with your money while you’re alive. But what control do you have over your assets when you die? It’s an interesting thought that most people don’t like to dote on, however with more wealth being created through superannuation funds, it’s a thought that will require action at some stage – and the sooner the better.

It has been estimated that members of the baby boomer generation will pass about $600 billion to their children or grandchildren over the coming decades. This wealth will in some cases come in the form of family businesses moving to the next generation. In others, it might be more passive investments, such as shares, property and cash. 

Each of us might only have control over a small piece of this inheritance bonanza. Nonetheless, how much thought have you given to what it will mean to your beneficiaries and how they'll remember you? 

Preparing your legacy

The billionaire US investing guru, Warren Buffett, has some pretty clear views on the legacy he wishes to leave to his children. He has been quoted as saying that he wants to leave them enough money so that they will think they can do anything with their lives, but not so much that they can afford to do nothing.

The first step of course is to determine what assets you have that might form part of your financial legacy. Shares, property, superannuation and life insurance can be treated very differently under estate laws, so it's crucial to have this checked by your trusted advisers.

Next, you might want to think about the opportunities and values you want to leave to your beneficiaries. Do you want to "rule from the grave", or let them make their own decisions about how they tackle life's challenges?

Perhaps other bequests — to charities, for instance — will be your way of reflecting both personal gratitude and your preferred value system.

Who can help?

On the practical side, there are various professionals to help you to create your personal legacy. For example, enlisting a solicitor to draft your will and related documents is crucial. And we can advise you on superannuation and investment matters.

It might be a good idea to take time out to reflect on these important issues. Don’t wait until you’re sick or old to plan your legacy. Start now and plan to have the time of your life so you’ll have something memorable to leave behind!

Sources:
Musgrave, R. "Values based advice: How to create a living legacy", Australian Journal of Financial Planning (Volume 3, Number 1, 2008)
www.familymoneyvalues.com “What does family legacy mean to you?”

Call (02) 4926 2300 or email us. 
To discuss your financial future and that of your legacy, please do not hesitate to contact the team at Leenane Templeton. 

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Achieving any goal in life usually involves starting with a plan. Investing is no different. One of the most important things to understand before you embark on an investment plan is the relationship between risk and return.

Some investors focus only on maximising returns without considering the risk taken to achieve those returns. Others are so concerned about losing money that they seek to avoid risk altogether. Yet the single, most important lesson investors can learn is that risk and return cannot be separated.

Common risk profiles

There are many investments available with different levels of risk to cater for investors of different risk profiles. As the investment timeframe is naturally linked to life stage, risk profiles can be generalised across age groups (that is, the younger you are, the longer investment timeframe you have and the more aggressive you can be). There is no ‘one size fits all' approach to risk profiling among age groups.

There are a number of risk profiles, but for the sake of this article, we have outlined the three main profiles:

Conservative

Conservative investors are generally prepared to accept lower returns with lower levels of risk in order to preserve capital. Conservative portfolios tend to be allocated predominantly to defensive assets, such as cash and fixed interest, with the remainder in growth assets.

For this reason, people in retirement (in the wealth protection phase of their investment journey) may adopt a more conservative attitude to risk. They have less time to ride out the ups and downs of the share market and tend to have less of their portfolios allocated to shares and other high risk asset classes.

Balanced

Balanced investors generally have more of an equal mix of growth and defensive assets, and are comfortable with taking calculated risks to achieve good returns.

Growth

Growth investors are more comfortable with a higher level of risk in order to achieve potentially higher returns. Their prime objective is to accumulate assets over the medium to long-term and capital security is secondary to potential wealth accumulation.

Investors in this category can therefore expect to have around 85 per cent of their portfolio allocated to growth assets, although still diversified across shares, property and alternative assets.

Whichever risk profile you may fit into, the most important consideration when it comes to investing is that your investment plan needs to be tailored to your individual needs and goals.

Source: Macquarie

To learn more about how your risk profile will impact future savings, talk to your financial planner.
Call (02) 4926 2300 or email us. 

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You have heard us talk about investment asset allocation or diversification, but we thought it might be a good idea to expand on that explanation to show you how it affects your investment portfolio.

You already know that asset allocation is spreading the money in your portfolio over a mix of the different investment types available, but what is the right mix and does “one size fit all?”

As with anything personal, your own financial portfolio must suit your specific needs – both now and in the future. So, with each of your objectives and timeframes in mind, the most important aspect to look at when determining your investment spread is risk.

There are three types of risk that must be considered:

1. General market risk – largely dependent upon economic conditions;
2. Market sector risk – a particular sector of the market, e.g. industrial vs resource stocks;
3. Specific risk – a particular share or property.

As you can see, each risk is affected by different factors, so the best way to manage all types of investment risk is to ensure that your portfolio is adequately diversified to cater for volatility and over-reactions. Put simply: when one goes down, another goes up.

Once the risk factors are taken into account, it’s time to look at the specific assets within the portfolio, investing across cash, fixed interest, Australian shares, international shares and property. All of which will provide something unique at the different points of the investment cycle.

Remember that the longer you plan to invest, the more important good diversification becomes. This further minimises risk and your growth potential is maximised.

We hope this explanation helps you to understand why we’re so focused on the right asset spread for you.

Call (02) 4926 2300 or email us.

If you have any questions about asset allocation or your personal portfolio, please contact our expert team of financial planners here at Leenane Templeton.

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Every parent wants the best for their child, so if you are in a position to invest money specifically for your children’s future, you should follow the same approach as if you were investing personally.

Start with clearly identifying why you are investing, set a goal and put the strategy into place. A range of products is available depending on your attitude to investing and the investment time frame. For short-term goals, a high interest earning savings fund may be appropriate and for medium to long-term goals, managed funds and direct shares could be suitable. For longer term goals, a geared instalment program may be appropriate.

One taxing question is in whose name to hold the investment. Children are taxed at penalty rates on unearned income. They can receive income of up to $416 in 2014/15. For example, an investment of $5,942 earning 7% pa this financial year would be tax-free if held in the child’s name.

Other options to avoid the high rates of tax include:

• Investment bonds where income is reinvested and the life office pays tax at 30%. The proceeds of the bond are tax-free after 10 years and the child can be named as the beneficiary.
• Investing in the name of the parent on the lowest marginal tax rate. A parent who has no other income could earn around $140,000 in fully franked dividends and pay no tax. A parent already earning $30,000 could earn around $45,000 in fully franked dividends and pay no extra tax, before medicare levy.
• Investing using an ‘implied trust’ where the investment is held in the parents’ name in trust for the child. The child enjoys the tax-free threshold of $6,000 and the parents keep control. Beware that the investment must be used for the benefit of the child or the Tax Office can attribute the income to the parents and tax them personally.

There are plenty of options, so talk to your financial adviser about an appropriate solution for your situation and that of your children.
Call (02) 4926 2300 or email us.

Source: www.ato.gov.au 

Disclaimer

To discuss Tax and your children's investments please do not hesitate to contact the team at Leenane Templeton.

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Some people may think that a financial advisor’s role is to forecast the direction of the share market from month to month and invest clients’ money accordingly.

This is not the reality, of course. Investments are only one small part of what your financial advisor can provide for you. Some of the key areas that we may be able to assist you with are as follows.

Knowledge is power

Consider for a moment the amount of newsprint, websites and broadcast time dedicated to financial topics these days. Australians seem to have an insatiable appetite for understanding finances.

Whether it's the latest share market activity, economic news or the constantly changing tax and superannuation rules, we can answer your burning questions and save you the hassle of finding it yourself.

Money and time

Sometimes the benefit you receive from a financial advisor can be spelt out in dollar terms. It might be the income tax you have saved by re-structuring your salary, or a new concession from the Australian Tax Office (ATO) or Centrelink that you didn't know you could get.

If you agree that time is money, then think about the time we save you when you make important decisions. If you had to do it all yourself, how would you choose the best super fund, investment options, or insurance cover? How frustrated would you be stuck on the phone trying to get regular information from government departments?

With all this confronting you, it's no wonder that many important financial decisions stay in the "too-hard basket". Remember, we deal with these things every day. We are in an ideal position to explain everything you need to know, and to simplify your options.

Personalised advice, every step of the way

The finance section of your newspaper probably includes a regular "advice" or "Q & A" column. By law, these columns must warn readers that the advice does not take into account your personal situation or needs and you should consider its appropriateness before acting.

In setting your financial strategy, we don’t use this "general advice warning" because we have taken the time to get to know you and your circumstances. This means that everything recommended to you—the investment portfolio, super contribution strategies, savings plans and insurance advice—is tailored to your personal needs, goals, and tolerance to risk.

As the years go by, some of your financial strategies will need adjusting due to changes in the broader environment or something closer to home. Whatever the case, we are there to help you make the most of the good times and the bad.

And meeting us for a review doesn't always mean major changes, but at least you'll know that you're on the right track – and you’re not alone.

Disclaimer

If you would like to meet one of our advisors to discuss your financial position and to see what a financial advisor's role is and how we can help you then please do not hesitate to contact our office.
Call Leenane Templeton on (02) 4926 2300 or email us.
 

The post What does a good advisor do? appeared first on Newcastle Financial Planners & Financial Advisors.

We will provide you with assistance and guidance on:

• Education – helping you to understand your investments and other key financial matters. This builds your knowledge and confidence.
• Budgeting – reviewing your finances and identifying opportunities to manage debt and save money.
• Estate planning – we work closely with estate planning professionals to show you how best to structure your assets to benefit your estate when you’re no longer here.
• Insurance – guiding you on protecting your family and your assets in the event of illness, injury, disability or death.
• Retirement planning – helping you find answers to the important questions such as “will I be able to retire comfortably now?”; “how much money do I need to retire?” and “what do I need to do before I retire?”
• Government benefits and allowances– determining your eligibility for government assistance for various benefits from pensions to co-contribution allowances and ensuring you receive the correct entitlements.

Quite simply, your qualified financial planner can help alleviate the worry and stress associated with your finances, leaving you with more time to enjoy life.

Disclaimer

To speak with one of our professional advisors about your financial planning needs, please do not hesitate to contact Leenane Templeton.
Call (02) 4926 2300 or email us.

Financial planning advice – Is it the next stepping stone on your path?

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If your footie team didn’t have one, they’d always be “wooden spooners”. You wouldn’t go on holiday without having one and you’d never have friends over for a barbie without one. What are we talking about? A plan, of course! Planning for success is a vital aspect to securing your finanial position.
 

Yet amazingly, when it comes to money, most people don’t have a plan.
 

They make excuses like being too busy or not yet earning enough money. Or it’s too hard and they don’t know where to start. No one plans to fail but by not having a plan, many do exactly that.
 

Managing money is not that hard but most people have never been shown how to do it properly.
 

The truth of instant wealth
 

Unfortunately, there is no magic way to instant wealth. When you’re filling in the squares of the lottery form, spare a thought for the odds of winning first division of the Saturday night Gold Lotto – about 678,755 to 1! And in many cases, even when you win the big prize, if you don’t have a plan, it will simply slip through your fingers.
 

By first learning to accumulate wealth we are able to live the lives we want and achieve our goals.
 

Just do it!
 

The secret to success is to make a start. It doesn’t matter that the plan is incomplete or not perfect. There are proven techniques that can make you wealthy over time. You just need to apply these methods in a disciplined way and stick to a plan over time.
 

The secrets are simple:
• To spend less than you earn.
• To drive down personal debt as quickly as possible.
• To save regularly.
• To invest in assets that will produce tax-effective income as well as growth.
• To borrow money to boost your investments.
 

Applied properly these strategies can reduce tax, helping you to grow your wealth even faster.
 

Being in control
 

In the fast-paced world in which we live, it’s easy to think we are swept along and there isn’t much we can do to influence where we end up. Of course, that’s not true and most of us will know people who were “lucky” and achieved their dreams. But was it really luck?
 

Successful people often set goals for themselves and have a plan to achieve them. The plan might not be fool proof, but they adapt it as they go along to give themselves the best chance of succeeding.
 

Like having a personal fitness coach, a skilled financial adviser can work with you to create a plan, monitor it and with your ongoing commitment help make it work for you.
 

Our team of professional and award winning financial planners are at hand to help with any questions you may have regarding this article.
Call on (02) 4926 2300 or email us.
 

Disclaimer.
 

Planning for success should be a priority for all of us as we look to the future. To explore further how we can help you please contact the team here at Leenane Templeton.

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Compounding can be the road to riches and anyone can do it. All you need is perseverance to stay on the savings path and the intelligence to understand what is happening. Basically, compounding is earning interest on your interest. The more money you accumulate the larger the return each year.

Sadly there are two catches. First, it involves sacrifice – you can’t spend it and still save it. And second, it sounds boring – at least it is until the money starts pouring in and then it becomes downright fascinating!

Let’s look at an example.

David started a savings program at age 17 and starting with a $100 deposit. He puts away $1,500 each year for 13 years into a fund that earned 7% a year. From age 30 he didn’t add any more to his savings fund. By that time the balance of his fund was $30,450.

David’s twin sister Jenny was having too much fun at 17 spending every dollar she earned so she delayed her savings program until she reached age 30 – just when David stopped. Starting with $100 Jenny deposited $1,500 per year and maintained that amount every year until she reached age 65. Her fund also averaged 7% p.a. At age 65 Jenny ended up with $208,423. Amazingly through the power of compounding, David, who hadn’t added anything to his fund for the last 35 years has $325,123 in his account that's over $116,000 more! The 13 years that David saved were worth more than all of the 35 years that Jenny saved.

You’re probably asking, “Where would someone under 20 find $1,500?” We have a suggestion. If your adult child is working – even for a few dollars a week – they will probably qualify for the federal government’s co-contribution scheme. As well as teaching your children about compounding, you could gift them a $1,000 superannuation contribution and the government would add another $500 to their account. You could invest $1,000 over 13 years and your child could end up with more than $325,000 at age 65 (based on an average return of 7% per annum).

This suggestion applies to superannuation which they won’t be able to access until later in life, however, the principle is the same if the money is invested outside super.

There are some aggressive investment strategies available for young people who are not as risk conscious. Contact our licensed financial advisors if you are interested in finding out more.

Sources: Australian Tax Office website www.ato.gov.au Super co-contributions. Compund interest calculator – MoneySmart website www.moneysmart.gov.au

Disclaimer

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Ready or not, the end of the year is fast approaching and now is the perfect time to start thinking about the year(s) ahead. In particular, this time of year presents a great opportunity to meet with your adviser to review your financial strategies and goals.

Many people use the Christmas/New Year period to reflect on the year that has just passed, often in a blur, and to begin thinking about the year(s) ahead. In particular, this time of year presents a great opportunity for you to review your financial strategies and goals in preparation for 2014 and beyond.

The importance of reviews

Changes can take place to your circumstances at any time and while you may already be having regular meetings with your adviser to ensure your plans continue to meet your needs, there are other changes that can have an impact, such as legislative and tax changes.

This is why reviews should take place on a regular basis, where you have the opportunity to make informed decisions and factor any of these changes into your financial plan.

Below is a simple guide to tidy up your finances for the year ahead.

1.Have your key financial goals changed?

Our lives are not constant and our goals change slightly (or greatly) from year to year. Also, major life events such as serious illness, the birth of a child, inheritance, marriage and the death of a parent or spouse can all result in significant changes to our wealth management goals.

2.Prioritise your goals.

It is important to rank and prioritise goals and decide in what timeframe you want to achieve them. Being realistic about your timeframe is essential to ensuring that your goals will be achieved.

3.Short, medium or long term?

Most industry experts agree that a short-term goal is one that can be achieved within a year or so. Medium-term goals typically require two to five years, and long-term goals usually take longer than five years.

For example, reducing credit card debt is likely to be a short-term goal, whereas saving for a home deposit would often be a medium-term goal. Depending on your age, providing for retirement is a long-term goal.

4.If your financial goals have changed, how will this affect your financial strategy?

This is where the advice of a financial planner is critical. An adviser has the tools and knowledge to create projections that take into account changes to your goals, and changes to your timeframes for achieving them. These projections will help you to see where your plans for savings, assets or investment contributions may need updating.

5.Be savvy.

Make sure that your investments and level of protection support your level of risk and your goals. An adviser can develop a tailored analysis that best suits your individual needs and provide ongoing portfolio.

Reflecting and thinking about your financial position, as well as setting a clear path, is critical to making sure you can reach your goals. You don’t have to wait until the first day of January to review your financial situation…contact your adviser today, so that you can get the help you need to achieve your “New Year” resolutions.

Our Office will re-open on Monday 6 January 2014 and we would love to help you set your financial goals for 2014 and beyond. Give us a call!

Source: Zurich, October 2013

Disclaimer

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Living the good life, retiring happy, wealthy and wise

Retirement is a little like Clark Kent taking off the Superman suit. It’s peeling off an identity – from an industry, a company, or a personal work history – and entering an entirely new life stage.

There’s freedom and excitement, the time to do all the things we’ve been waiting for, but there’s also some fairly key life changes and adjustments to make, some of which may be totally unexpected.

Although retirement is one of life’s most mentally challenging milestones, retirement advice usually focuses on finance rather than feelings. Planning for both can make a tremendous difference.

The bright side & the down side

So, what are the changes we face when we step into the retirement phase?

Time stretches luxuriously in front of us, something many of us have craved our entire working lives. Time to travel, read the books we’ve always wanted to read, take up a new interest or spend hours doing what we love. Some of these activities require money; many just need a good attitude and a mind that loves a challenge. However they all hinge on what retirement offers: time, and a lot of it.

But retirement can carry a downside. As Dr. Robert Delamontagne writes in The Retiring Mind: How to Make the Psychological Transition to Retirement, “For the first time in my life, I had no answers. I had fallen into a black hole where there were no guideposts for me to follow. What had happened to me? I built a successful company and lived a very active and dynamic life…yet I had no clue what to do next. For the first time in twenty-five years, I did not have a company to manage, nothing that urgently needed to be done, and, most troubling, no one who needed me to make a decision or contribute to a discussion. I did not play golf, nor belong to any clubs, and had little interest in doing either.

I wish that I had though, because brother, was I stuffed.” 1 The challenges of retirement can be numerous – from dealing with a change in identity and filling the hours previously spent working, to being labelled ‘retired’ or feeling unneeded. With no job, industry, company or colleagues to confirm who we are and where we fit, it’s easy to forget our own sense of purpose.

Charting a new course

Whether retirement is a goal or an unexpected curve ball, planning for retirement mentally as well as financially is key. Some people take a hybrid approach and continue working – either part time, in a consultancy role, or in a new industry with reduced pressure (and salary).

Many choose to get involved as a volunteer, evidenced by the 34% of the adult population of Australia who volunteer at least one hour every week with community organisations.2 Others take on a new project, sign up for courses, or help family raise young children.

Charting a new course for retirement means we need to think about our values – and act on them. What we do with retirement will give us satisfaction if it lines up with what we truly value. It’s wonderful to take care of the grandkids, for example, but extremely important to decide upfront how much time you’re happy to give. And buying that beach house is only a good idea if you love relaxing, which some people actually don’t.

Feeling good about retirement is an important goal, but it may not come as naturally as we think. It’s important not to underestimate the psychological impact and that’s where planning can help. Sorting out real values from perceived values will help us transition into retirement – and live the good life we’ve been waiting for.

1 Delamontagne, Dr Robert P. The Retiring Mind: How to Make the Psychological Transition to Retirement, Synergy Books, 2010, pp.1 – 2.
2 Volunteering Australia FAQs. www.volunteeringaustralia.org

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