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Archive for financial planners

The Pitfalls of DIY Financial Planning

Do you want to do your own financial planning? We don’t provide individual advice online or on this blog, but we can provide you with some questions to ask yourself if you are thinking about doing your own financial planning.

Pitfalls of DIY Financial Planning

Do You Understand Finance?

At Approved Financial Planners, we are licensed through AMP Financial Planning Pty Limited. Not only do we have 40 years’ combined experience in financial planning, we had to learn a lot about finance to obtain licences. We live and breathe finance.

Do You Have the Resources of a Financial Planner?

We have the full resources of AMP behind us. We have near-immediate access to research that those who aren’t “in the business” may not be able to find. From the financial planner you talk to in our Perth office to the AMP Chief Economist, Dr Shane Oliver, we have access to information and insight that is difficult for those who don’t work with finances every day to access and assimilate.

Do You Have as Much Time as a Financial Planner?

As we mentioned, financial planners live and breathe finance. We work with the markets and the numbers every day, all day. When you have a full time job, it is hard to find time to adequately research things that we know as a matter of doing our jobs every day.

Can You Remain Objective?

Can you remain objective when making financial decisions or are you making them based on emotion? Financial planners are looking at your situation from outside. We are totally objective and we base our decisions on sound logic and solid information.

Call Approved Financial Planners Today

To learn more, call us today: 08 6462 0888.

Diversification to Reduce Risk and Volatility

One of the fundamentals of good financial planning is diversification. Even in a market like Perth, which remained somewhat insulated from the worst of the Global Financial Crisis, all segments and sectors are subject to ups and downs. When a portfolio is subject to the ups and downs of any particular market, the dynamic is referred to as “volatility.”

Diversification to Reduce Risk and Volatility

While most markets are subject to ups and downs, it is a rare occurrence when every single market goes down at the same time. In a diversified investment portfolio, the investor isn’t affected as badly by one particular market going down, because the others usually don’t. Occasionally, when one market falls, another rises.

Diversification can provide a form of protection for investors and usually allows them to wait for any particular market to go back up.

How it Works

The popular way to diversify is to invest across asset classes. Examples: cash, fixed-interest bonds or securities, properties, shares and precious metals. Each class has its own risk to reward profile. Those with low risk and low reward, such as cash, are the least volatile. Those with the highest risk and reward potential, such as shares, are considered to be the most volatile.

A financial planner who is providing diversity will recommend that you invest across many or all of these asset classes.

AMP Multi Asset Fund

Our parent company, AMP Financial Planning Pty Limited, has a multi-asset fund that would be classified as a diversified fund. It blends together most asset classes with the goal of producing more revenue at less risk. In other words, the returns are often higher than assets classes which carry low risk. Ideally, a multi-asset fund carries low risk but produces moderate reward.

At Approved Financial Planners, we provide financial planning services and can help you with investments across a variety of platforms. We work with you to determine your risk tolerance and work within your limits.

Call 08 6462 0888.

How are You Spending Your Monthly Income?

According to a recent study published at news.com.au,* the average Australian may be hard pressed to find extra income for superannuation contributions. The data would appear to say that Australians are spending most of their take home pay on necessities and don’t have a lot left over at the end of the month. But is that really the case?

Spending Your Monthly Income

Let’s take a look at what the study says first, then we’ll tell you what we see from a financial planner’s point of view.

By the Numbers

According to the study, 20.5% of the average Australian’s take home pay is spent on housing. This works out to $990 per month for every household in WA spending the most at $1249 per household and SA spending the least at $787. It must be remembered that these statistics include those living in regional areas.

Household bills are the next highest expense, weighing in at 15.5% or $633 per month. For the record, this number, which included power, telephone and Internet bills, surprised a lot of economists. Groceries averaged $531 or 12.1% of monthly income. Transport was $299, which worked out to 6.9%. Australians spent $174 or 4.2% on health expenses.

We still find time to spend discretionary income, too. Clothing accounted for $141 per month or 3.2%, while entertainment and dining out took up 4.3% or $203. The number for holidays was $2952 per year.

9.9% of household income or $428 per month was spent on paying back credit cards. $329 per month or 6.4% was put in savings.

What the Numbers Mean

Adding together the numbers above, 69.1% was spent on necessities such as putting a roof over one’s head, going to work, eating, staying healthy and paying bills. Even if we were to assume that everything charged on credit cards, telephone, Internet and power usage was all “necessary,” we are still spending 30.9% of our income on entertainment, vacations and other discretionary purchases.

Formulate a Budget

Remember that all advice on this blog is general in nature because there isn’t a lot of advice that we can actually guarantee to be relevant to everyone’s situation. However, we think it is safe to say that most individuals and families could benefit from getting a handle on their finances.

The process of creating a budget accomplishes three tasks. First, it forces you to figure out exactly where your money is going. For most people, this is an eye-opener. Second, it forces you to pay attention to your spending. Third, it teaches you how to control your spending and divert discretionary purchases to purchases that further your future.

It is easy to formulate a budget. You simply figure out how much you have coming in and then figure out what you are spending it on. It is easy to figure out which purchases are necessary and which are discretionary. If you figure out how much money you absolutely have to spend, what’s left is discretionary.

You can then choose how to spend your discretionary income. You may want to spend it all on a good time, but if you are reading this post, you probably want to figure out a way to use that money to help secure your future.

Call Approved Financial Planners

For individual and specific financial advice, call Approved Financial Planners. We have been serving Perth since 2005 and our financial planners have a combined 40 years in the financial planning industry.

We can help you formulate a budget and help you formulate an investment plan. We specialise in superannuation and can help you set up a self managed superannuation fund. We have helped a lot of Perth residents secure their futures and set themselves up to fully enjoy their retirements with the incomes they deserve.

There are a lot of things you can do yourself, but we recommend against trying financial planning on your own. Call Approved Financial Planners today: 08 6462 0888.

*Story published 23 June 2014:
https://www.news.com.au/finance/money/ing-direct-research-reveals-how-australians-spend-their-monthly-salaries/story-e6frfmcr-1226963930282

How the Financial Planning Process Can Protect Your Future

How the financial planning process can help you control your future without adversely affecting your current lifestyle.

We often refer to financial planning as a product. In reality, though, it is a process in which your finances are managed in the short term to produce long-term gains and financial security. A great financial planner can not only help you achieve your long-term retirement goals, but also make sure that you are prosperous enough to enjoy your life on the way to retirement.

Financial Planning for Financial Security

To this end, the financial planning process usually involves three phases: risk management, wealth creation and retirement planning.

Risk Management

Risk management involves insuring yourself and your investments to mitigate the risk of losing them if you suffer a permanent injury, severe traumatic illness, premature death or any other circumstance that may prevent your financial plan from reaching fruition. Your financial planner will discuss various covers with you and work with you to ensure that you, your family and your assets are protected in the case of any unforeseen illness or injury.

Wealth Creation

Wealth creation involves turning your current income into enough assets to achieve your financial goals. We take your risk profile, time frame and current resources into consideration and recommend a strategy that will enable you to achieve your goals. This may include debt management, cash flow strategies, asset allocation, investment management, dollar cost averaging, rebalancing and gearing.

Retirement Planning

The first part of the process is to determine how much money you will need to retire comfortably and the time frame for your retirement, including a projected retirement date. We will determine with you the preferred vehicles. First, we can help you identify your preferred superannuation fund structure from SMSF, industry superannuation fund or retail superannuation fund.

We will take into consideration your risk profile, liquidity requirements and retirement objectives to formulate your retirement strategy.

Call Us Today

To learn more, call our Perth financial planners today for a free consult: 08 6462 0888.

Do You Need Financial Planning?

What aspects of finance can be improved by financial planning and why superannuation regulations in Australia can be difficult to navigate without qualified help.

Many Australians ask whether or not they need a financial planner. While we cannot give blanket advice to anyone, we can give you an idea of situations in which a financial planner can be helpful. Ultimately, the decision of whether or not you need a financial planner is yours to make. Here are some services we provide that may be difficult to perform on your own.

Do You Need Financial Planning?

Different people attach different meanings and goals to the word “retirement.” A financial planner can help you formulate a customised retirement plan that can help you retire with the income that you want. The sooner you begin planning for retirement, the easier it is to get you there with the lifestyle you want to live.

Superannuation

Superannuation is designed to provide Australians with a vehicle for investing in and saving for retirement. A good superannuation strategy can help you maximise tax concessions in conjunction with any government benefits you may or may not be receiving to ensure a comfortable retirement.

Self Managed Super Funds

Recent changes have made it possible for Australians to self manage their superannuation funds and use them for investments such as real estate. Setting up a SMSF is an intricate process that usually requires professional help to ensure compliance with all regulations.

Cash Management and Debt Advice

At Approved Financial Planners, we have helped a lot of residents in the Perth area get a handle on their spending habits and reduce expensive debt. We advocate knowing exactly where your money is being spent and how much interest you are paying for debt service. We can help those in debt to formulate a debt reduction plan, including goals for how much you would like to owe in five years and when you would like to become debt-free.

Wealth Protection

We also offer a wealth protection program whereby we use insurance to protect your money from tragic, unexpected events. We can tailor a basic risk prevention strategy to your family’s specific needs and review your policies on an annual basis to make sure they are still providing the protection you deserve.

For more information, call (08) 6462 0888.

Survey Says: 70% of Property Investors Use a Home Loan Broker

Why do so many property investors use a home loan broker? Read further.

Recently, the Property Investment Professionals of Australia (PIPA) surveyed 800 property investors in conjunction with the magazine Smart Property Investment. More than 70% said that they use the services of a home loan broker. In sister magazine The Advisor, Ben Kingsley, who is the Chair of PIPA, shared a broker’s view of why so many property investors use mortgage brokers.

Why Property Investors Use Home Loan Brokers

Engagement

Many officers in banks or other lending institutions don’t have the time to “go the extra mile” for customers due to heavy workloads and limited selection of credit products. Mortgage brokers, on the other hand, have plenty of time and specialise in finding a custom solution for each individual based on their financial situation, goals and ability to meet mortgage repayments.

Brokers Provide More Access

A home loan broker has access to a lot more credit products than any single lender, because they use multiple lenders. This gives us the flexibility to find a loan that is tailored to your situation. We also help you with your paperwork because we know that it may be the difference between obtaining the right loan and being turned down.

Basically, you fill out your paperwork once and we send it to the lenders we deem appropriate, saving you a lot of running around.

Holistic Approach

At Approved Financial Planners, we offer a full range of financial planning services and insurance protection, as well as home loans, in the Perth area. It is much more efficient for you to have all of these services under one roof. It ensures that you don’t ever run into a situation where one aspect of your financial plan is working against another, because the “left hand” always knows what the “right hand” is doing.

Strategy

When an investor works with a home loan broker on a regular basis, the broker becomes more adept at tailoring the credit product around the investor’s purchase and investment strategy. As the investor grows, his or her needs change. A mortgage broker is right there to adjust credit products as the investor grows.

Before you purchase your next investment property, call Approved Financial Planners and talk to a home loan broker: (08) 6462 0888.

What Your Financial Planner Can Do for You

Why financial planning is worth the fees you may pay for their services and how you can benefit from a great financial planner.

Hiring a great financial planner can make the difference between a prosperous retirement and a small nest egg, but many people don’t know exactly what a financial planner does. Here are some services you can reasonably expect from most financial planners.

What Your Financial Planner Can Do for You

Assess Your Financial Situation and Ask about Your Goals

Your first appointment, more of a “getting to know you” than a strategy session, allows the planner to know what you want and what resources you have at your disposal. He or she will compare your income and assets against your expenses and debts to gain an accurate picture of your situation.

During the first session, you can tell the financial planner what your goals are and together you can figure out how much money you need to attain them.

Customise a Plan for You

Next, your financial planner can customise a plan to suit your needs and resources, while considering your attitude toward investment risk. The planner will review and confirm your financial objectives and any instructions you have for the planner. Your planner will also confirm your desired amount of exposure to financial risk.

Then, you will receive advice and recommendations concerning both products and strategy. We will also cover your requirements for insurance and any estate planning requirements. We will then detail the fees for the services and then get permission to proceed with your financial plan.

If you wish to change parts of your financial plan, we can take care of the changes and present you with an amended financial plan.

Insurance Review

Appropriate insurance protection is a part of any financial plan. We will go over your protection and recommend other products if necessary.

Implementing Your Financial Plan

After the above details are taken care of, it will be time to set your plan in motion. We will implement and execute your financial plan and keep you informed along the way.

Periodic Reviews of Your Financial Plan

Your financial planner will review your plan and results periodically. We recommend reviewing your plan at least once every year.

Call our Perth firm on (08) 6462 0888 to learn more.

Wishful Thinking Best Left to Others: Don’t Skip Income Protection

Why best case scenarios concerning income fail to protect your interests.

What is your biggest asset? Your home? Your business? Your yacht? No matter how many assets you have amassed, your biggest asset is your ability to earn income. Without the ability to earn income, the other assets are not possible unless you already have more money than you can ever spend.

Don’t Skip Income Protection

Therefore, it is important to protect your biggest asset with income protection. Income protection cover protects you in the event you are unable to work due to injury or illness. Usually, it pays around 75% of your income until you can get back to work. Income protection cover is tax deductible and you can spend it on whatever you choose to spend it on.

Determining the Cost of Income Protection Insurance

Numerous factors go into determining the price of income protection insurance. Whether or not you smoke, your age, your gender, your occupation, your health, your income and the amount of desired coverage are all factored in to the price. Most people choose a financial planner to advise them on how much cover they need.

Why Income Protection Cover is Important

Income protection insurance fills in the gaps that other coverages leave out. For example, a standard sick leave entitlement may be 12 days a year that you can take off due to illness or injury. Workers Compensation covers you for injuries but not illness. Private health cover helps defray medical expenses and hospital stays, but doesn’t cover incidentals such as mortgage repayments, electric bills and food. In most cases, Government disability insurance won’t pay nearly enough to sustain your current lifestyle.

Call Approved Financial Planners

At Approved Financial Planners, we provide a full range of services in the Perth area, including financial planning and insurance. That means that we can advise you on how much insurance cover you need and provide you with insurance from a respected and reputable company.

We also offer other services, such as retirement planning, establishment and maintenance of superannuation funds and self-managed superannuation funds, wealth protection, investment planning, estate planning and a plethora of business solutions.

For help from financial planners and insurance consultants who care about you, call (08) 6462 0888.

How Will Potential Changes to the Age Pension Affect Your Retirement?

New regulations regarding deeming rules for Age Pension took effect on 31 March of this year. For many Australians, the new deeming regulations will decrease the amount they can collect on Age Pension. For the purposes of this post, we will try to simplify the analysis of the changes.

Deeming Rules for Age Pension

What is Deeming?

If you own investments, such as term deposits or shares, the Government uses a formula to “determine” your “earnings” from them and counts that number as “assets” on your Age Pension income test. This “income” is called “deemed income.” Deemed income assumes that you are making a certain amount of income on your investments; deemed income may be more or less than you are actually making.

How Superannuation Funds are Currently Assessed

The current formula for counting superannuation pensions against the Age Pension income test counts both the account balance and return of capital of your super fund.

For the Age Pension income test, any income stream that you are now taking from your super fund is counted by a formula that counts what you have received for the year and then subtracts a deduction amount. The deduction is to ensure that income isn’t counted on both the income and assets tests.

On the allocated pension, which is older, or the account-based pension, which is newer, the entire balance of your account counts towards the assets test. A term allocated pension or older complying pension may not require you to count any of your pension assets toward the test or may only make you count half.

Grandfathering

Pensions and superannuation funds that started before 1 January 2015 will be grandfathered and tested under previous rules. All pension income will use a deductible amount to adjust “income” that is used for the Age Pension income test. However, if you change your superannuation product on or after 1 January 2015, the new rules will apply. If you are not receiving Age Pension as of 1 January 2015, the new rules will apply.

What We Can Do for You

Our financial planners are superannuation specialists who can help you navigate the maze of regulations and maximise your retirement income. Those who finalise their super funds by 1 January 2015 can take advantage of grandfathering.

Call (08) 6462 0888 today.

Is Your Small Business Ready for the SuperStream Changes for SMSFs?

On 1 July 2014, superannuation fund payments will be made electronically using the new SuperStream system. According to the Australian Taxation Office, the new system has been introduced to assist employers in making their contributions in a more efficient, timely and consistent manner into a member’s account. SuperStream simplifies the process by which funds are deposited by providing the common standards that are lacking under the current system.

SuperStream Changes for SMSFs

Members will be required to ensure that their SMSF bank accounts are set up to receive electronic payments and messages containing information about contribution payments. One projected benefit is that record-keeping will be improved for the purposes of taxes and auditing.

On the deadline date, all employers with twenty employees or more will be required to send all payments and contribution data through SuperStream. Smaller businesses, with 19 or less employees, will have an extra year (until 1 July 2015) to become compliant with SuperStream.

Employees of small businesses will be required to update their information with their employers by 31 May 2014. This includes the Australian Business Number (ABN) of their SMSF, the bank account in which their SMSF receives contribution payments and an electronic service address where receipt of contribution messages can be received.

Related-party employers will be exempt from SuperStream and allowed to continue using their current method of contribution payments.

Every contribution payment will generate at least the minimum data required by the ATO. This includes: employer details, employee details, the types of contributions and amounts, including those amounts earmarked as concessional and the details of the payment, including a reference number unique to that transaction.

SMSF members will have the option of choosing an SMSF message provider to help them become compliant with the SMSF standard. The SMSF providers simplify how SMSF members receive the contribution messages that their employers send. The messages are received by a secure network that translates the messages into a format that provides easy access for SMSF trustees.

We Can Help

We offer a complete range of SMSF services in Perth and will be happy to help you. If you have any questions or would like us to provide a complimentary analysis of how your SMSF is performing, please call (08) 6462 0888.