Tag Archives: Financial Planning

The right times for financial advice

By Robert Wright /December 04,2020/

COVID-19 has created uncertainty everywhere and impacted not just our health but our wealth too. From millennials to retirees, we’ve had to review our finances and adapt to the changing environment.

We’ve seen volatile share markets, slashed dividends on bank stocks, record-low interest rates and sectors like airlines, tourism and traditional retail struggling to survive. On the other hand, online shopping and e-commerce have surged, and more people are saving now than before the pandemic.

During this uncertainty, many people have found their financial adviser to be a critical source of guidance and a valuable sounding board. In many cases, the adviser-client relationship has been a long-term connection. It’s built over many years and based on trust and confidence that the adviser has the client’s best interest at the centre of every decision.

Demand for advice doubles

The financial advice industry is full of examples of clients reaching out to their advisers in recent months, leveraging these long-term relationships at a time of worry and crisis.

Recent research from the Investment Trends 2020 Financial Advice Report showed three in four financial advice clients had been in contact with their adviser to discuss the impact of the COVID-19 pandemic.

Advisers are also fielding an unprecedented number of calls from potential clients who are confused by the current markets and understand they need help.

The instability of recent times has undermined the confidence of those who are retired or are about to retire, with many wondering if they’ll be left with enough superannuation savings for a comfortable retirement. But those who have a long-term relationship with their adviser can rely on the fact their adviser knows them well, understands their unique circumstances and life goals, and can deliver advice tailored to them.

Advice for different life stages

Financial advice can be helpful at a range of life stages, not just when thinking about retirement. Some common things advisers can help navigate financially are:

• saving for and preparing to buy your first home
• getting married or starting a family
• budgeting and money management
• growing wealth
• estate planning
• planning for retirement
• retirement and aged care.

Advisers can help with practical advice in all these scenarios. But more importantly, they can help you focus on your financial priorities and goals and create a plan to achieve them.

Life’s journey has many twists and turns and points at which priorities change. For many people, it’s a journey best navigated not only with partners, family and friends but with a trusted financial adviser by their side.

Source: AMP

How to get Aged Care at Home

By Robert Wright /November 18,2020/

Older people who are struggling to live at home and take care of themselves often face a dilemma. Many don’t want to move into aged care accommodation, but they recognise the gardening, cleaning, cooking or showering is impossible or becoming more difficult.

Some worry about placing a burden on their loved ones, others can’t afford the services they need. This year in particular with coronavirus health concerns for the elderly, many people who were looking to move into an aged care facility may have decided to stay home instead.

For those who might be weighing up or delaying moving into an aged care facility this year, these Government-funded care programs may be of interest.

Commonwealth Home Support Program

For those who are having trouble with everyday tasks and needing a little extra help, the Commonwealth Home Support Program might be useful.

The program is available to anyone aged 65 or older (50 years or older for Aboriginal or Torres Strait Islander people). It’s also open to anyone on a low income or homeless and 50 years or older (45 years or older for Aboriginal and Torres Strait Islander people).

It’s not a free service. You may need to help pay for the cost of services if you can afford it, but you won’t need to pay the full cost.

The program covers services such as meals and other food services, help with showering and grooming, help with medicines, health and therapy services and respite care.

Home Care Packages

Another government-funded service provides a higher level of support for older people living in their own homes.

Home Care Packages are for older people with more complex care needs. The package will help fund and organise many of the same services covered by the Commonwealth Home Support Program but you’ll need to be assessed first to determine your level of need. There are four levels ranging from basic care to high care.

The assessment will also consider how much you can contribute to the cost of your care. There are two types of fees:

• A basic daily fee (up to $10.75).
• An income-tested fee (up to $30.86 per day) is applicable for some. If you have to pay this fee, there are annual and lifetime limits on how much you can be asked to pay.

Where to begin?

Once your level under the Home Care Packages has been assessed and funding has been allocated, it’s up to you to choose a service provider in your area from an approved list on the Home Care Packages website. The government then pays the provider a subsidy to arrange the care that suits you.

Look for flexibility

The providers of Home Care Packages might all be following the same regulations set by the government, but they’re a mix of private and not-for-profit organisations and all operate quite differently, says Dana Sawyer, CEO of My CarePath, a private service that provides advice on aged care options.

Sawyer says it’s important to find a provider that is flexible and “will actually deliver true consumer directed care”.

Everyone’s needs are different, says Sawyer. “For example, you might have someone who will need assistance every morning to shower, dress and get ready for the day. But once they’re up and going, they’re pretty good for the day and they can manage on their own. So, they’ll need an hour of service every day.

“Whereas someone else might live with a partner or family member who helps with showering and dressing. But the helper needs a break, so they might need someone to come in for three hours twice a week so they can go out to shops,” she says.

Understanding the financial intricacies of Home Care Packages is also important, says Sawyer. Providers charge different case management and administration fees, which comes out of the government funding allocated to you.

“Often we find people are in a very vulnerable position when they’re looking at aged care services. They may have had a fall or a hospital admission, or suddenly realise they can’t cope at home or even worse, there may be abuse happening within the home,” she says.

The thing to remember, is that there is plenty of help available – both private and government-funded.

Source: Colonial First State

Nine keys to successful investing

By Robert Wright /November 18,2020/

Introduction

As an investor it’s very easy to get thrown off by the ever-present worry list surrounding investment markets that relates to economic activity, profits, interest rates, politics, and so on.

This has been magnified by a digital media where everyone is vying for attention and the best way to get this attention is via headlines of impending crisis. This all adds to uncertainty and potentially erratic investment decisions. Against this backdrop, there are some key things for investors to keep in mind in order to be successful.

Make the most of the power of compound interest

The best way to build wealth is to take advantage of the power of compound interest and have a decent exposure to growth assets. Of course, the price for higher returns is higher volatility but the impact of compounding higher returns from growth assets is huge over long periods.

Don’t get thrown off by the cycle

Investment markets constantly go through cyclical phases of good times and bad. Some are short and sharp, some can spread over many years. The trouble is that cycles can throw investors off a well-thought-out investment strategy that aims to take advantage of longer-term returns. But they also create opportunities.

Invest for the long term

Looking back, it always looks obvious as to why things happened. Looking forward no-one has a perfect crystal ball. Usually the grander the forecast the greater the need for scepticism as such calls invariably get the timing wrong or are dead wrong. 

This has been evident throughout the coronavirus pandemic with all sorts of forecasts as to what it would mean, most of which provided little help in actually getting the market low back in March let alone the rebound. For most investors it’s best to get a long-term plan that suits your level of wealth, age, tolerance of volatility, etc, and stick to it.

Diversify

Don’t put all your eggs in one basket. Having a well-diversified portfolio will provide a much smoother ride. For example, global and Australian shares provide similar returns over the very long term but in the March quarter this year global shares in Australian dollars fell less than half as much as Australian shares.

Turn down the noise

After having worked out a strategy that’s right for you, it’s important to turn down the noise on the information flow and prognosticating babble and stay focussed.

The trouble is that the digital world we live in is seeing an explosion in information and opinions about economies and investments. But much of this information and opinion is of poor quality. Don’t waste too much time on individual shares or funds as it’s your high-level asset allocation that will mainly drive the return and volatility you will get.

Buy low, sell high

The cheaper you buy an asset (or the higher its yield), the higher its prospective return will likely be and vice versa, all other things being equal of course. So as far as possible, it makes sense to buy when markets are down and sell when they are up. Unfortunately, many do the opposite; buying after a big rally and selling after a collapse which just has the effect of destroying wealth.

Beware the crowd at extremes

It often feels safe to be in a crowd and at times the investment crowd can be right. However, at extremes the crowd is invariably wrong – whether it’s at market highs like in the late 1990s tech boom or market lows like in March.

Focus on investments with sustainable cash flow

If an investment looks too good to be true it probably is. By contrast, assets that generate sustainable cash flows (profits, rents, interest) and don’t rely on excessive gearing or financial engineering are more likely to deliver.

Source: AMP Capital

Many Aussies in the dark about retirement

By Robert Wright /November 18,2020/

There’s always been a lot of unknowns when it comes to retirement but throw a global pandemic into the mix, and we’re feeling more uncertainty than ever before. Things we once thought of as quite certain– like being employed, getting decent returns on investments and savings, and a continual rise in house prices – seemingly changed overnight.

And while that’s all led to a whopping 76% of us believing it’s more important than ever to plan for a secure financial future, we still don’t know what that means when it comes to retirement.

The first step is figuring out how much you need. Once you know the figure you’re aiming for, how much you currently have, and how many years you are away from finishing work, you can put a plan in place to help you reach your retirement savings goals.

Ways you might consider doing this include:

• Topping up super with additional contributions. (Be aware of contribution caps).
• Replacing any super that’s been accessed through the COVID early release of super scheme.
• Paying down personal debt like loans or credit cards.
• Making additional home loan repayments so you own your home sooner.

Consolidating your super accounts so you aren’t paying multiple fees. (Check you don’t lose important insurance benefits or won’t be charged an exit fee first).

Plan to protect retirement savings

COVID has made us pay closer attention to how our retirement savings are invested and some people may have seen their super balances drop. If you’ve got 15 or more years before you retire, chances are, your balance will likely have time to recover with the usual long-term market movements. But there’s no guarantee, and it doesn’t mean you can just sit back and relax.

It’s worthwhile checking what type of superannuation investment product your retirement savings are invested in. Diversified or balanced options can help offer some protection against volatile market swings because they’re made up of assets other than shares, like buildings and other infrastructure (although these are still susceptible to fluctuations).

One of the most important things to do is avoid making hasty decisions. Do your research, and if possible speak to your financial adviser if you’re wondering whether it’s the right time to switch investment options or move your super from one fund to another. There may be a risk of locking in losses or unfavourable tax components that could have a significant impact on the kind of retirement you’d like.

Don’t bank on working for longer

Given what we’ve seen with COVID and the economy, it’s hardly surprising 30% of people said they were worried about sequencing risk – a market crash or downturn which significantly reduces the value of super savings. And if that happened, over 50% of us say we’ll work for longer to build our retirement savings back up.

However, that might not be a failsafe backup plan. ABS data shows that of the people who retired in 2018-19:

• 21% had to stop working due to sickness, injury or disability
• 11% retired because they were made redundant or couldn’t find work

Add to that the average retirement age was just 55.4 years, working for longer to top up your super isn’t an option for everyone.

Educating yourself and taking control of your financial future can help alleviate concerns about retirement. Having a plan and feeling financially prepared can give you peace of mind. You spend your life working hard, and deserve to feel excited, not anxious, about retirement.

Source: AMP