Gurney Financial Seminar - May 2010

Welcome and thankyou to my presenters that have come up from Sydney tonight.

Our first Speaker is Lyndall from ING. Lyndall is presenting us with an Economic Update.

• Economies drive growth!
  GDP = Gross Domestic Product - The total market value of all final goods and services produced in a country in a given year, equal to total consumer, investment and government spending, plus the value of exports, minus the value of imports. The GDP report is released at 8:30 am EST on the last day of each quarter and reflects the previous quarter.
  Economies drive markets and investment returns
  
  
• GDP
  The growth engine
  Consumer Spending +
  Exports +
  Imports -
  Government spending
  Business Investment
  
  The Resources boom in Australia has helped the GDP
  
  Economy Overview – Where are we now?

USA

• Financial markets have been preoccupied with Sovereign stress
• China tightening monetary policy
• Financial sector taxes and re-regulation
• But overall data reading overall positive
• US Economy has moved out of recession:
• GDP at 5.9%
• Manufacturing Index in expansion level for the 6th straight month
• Retail sales are higher – but off as lower base
• Challenges:
• Housing market still weak
• Inflation numbers indicate a weak economy
• Biggest challenge to sustainable growth is high unemployment rate – will weigh on consumer spending
• Fiscal fade – no more government handouts
  

Europe

• Eurozone economy has weakened, GDP expanded only 0.1%
• France was the strongest, up 0.6%
• Germany, the largest economy in Europe, has stalled
• Manufacturing overall remains weak
• Unemployment rate now at 10% - highest since late 1990’s
• Inflation has eased rapidly – economic growth stagnant
• Banking System is weak – high debt and rising defaults
• P.I.I.G.S – (Portugal, Italy, Ireland, Greece & Spain)
• US $1.3 trillion in debt
• Highly risky if contagion occurs
• Will drag on European economic recovery
  

China

• GDP very strong – 11.9%
• Underpinned by domestic demand (consumer spending, housing construction)
• Investment growth has been robust
• Export growth now rising 40% pa above consensus expectations of 30% pa
• Fiscal stimulus of over a trillion CNY has lifted the economy
• But now scaling back due to concerns about excessive growth and inflationary pressures
• People’s Bank of China has put in place more restrictive lending
• Measured approach should ensure economy is not at risk of ‘policy over-kill’
  
  Australia
• Australia has avoided a recession
• Government fiscal stimulus (infrastructure spending, housing and consumer grants) has supported Australia through the financial crisis
• Asian growth has ensured demand for commodities remains strong
• Exports and imports have been strong
• Stronger AUD and high interest rates (relative to other countries) has attracted investment into Australia
• Unemployment peaked at 5.8% - currently at 5.3%
• House prices are now higher – boosting confidence through wealth effect
• Inflation remains tame for now
• But conditions are changing
• Fiscal fade is beginning to be seen
• Monetary policy tightening continues in 2010-05-12
• RBA has implemented it 4th rate rise in 6th months
• Official cash rate now stands at 4.25%
• High debt a concern as interest rates rise:
• Debt has rocketed to above 150% of disposable household income
• Interest paid is - 11% of disposal income and is expected to increase further
  

Economic Summary

• Large debt economies will continue to hurt for some time
• Economies continue to present us with risks
• Sovereign risk – government debt blow-outs, P.I.I.G.S
• China tightening - doesn’t want inflation problems down the track
• Balance sheets still fragile with lending to companies still tight
• The realty of debt:
• High debt economies mean low growth
• Low debt economies means high growth

How does this outlook affect you?

• Why do economics matter?
• Economies drive investment markets
• Investment markets drive investment returns
• Investment returns provide income for future needs
• Investment markets are:
• Volatile – so a long term strategy is needed to accumulate wealth
• Forward Looking – you cant make investment decisions based on historical returns (e.g. 2008 v 2009)
• Risky – economic recoveries and growth don’t occur in a straight line – expect some turbulence

How can you safeguard your future income in turbulent markets?

• Market Volatility
• Not a concern if you have a long term investment horizon – because returns average out over time
  Critical if you are about to retire soon and need to protect your savings.
  
  
  Thanks Lyndall, a very informative presentation.

Our next presentation is from Michael Bonnet from MLC on Insurance and protecting your family.

• What is Wealth Creation?
  Family business
  Commodities
  Bonds
  Shares
  Property
  Investment policies
  Low risk investments
  
• What is Wealth Protection?
  Health Cover
  Salary Protection
  Car Insurance
  House & Contents Insurance
  Business Protection
  Savings Accounts
  Family Protection
  Emergency funds
  Long term savings – Superannuation
  
• Victorian Fires -
  How many people had there homes insured?
  How many people had there life insured?
  
• Home Fires –
  For every home lost to fire
  There is 3 homes lost through death
  And 48 homes lost through disablement
  
• Case Study – a few years ago now, Michael’s friend was 16 yrs old, with dreams of going to uni to be an engineer. At the age of 16 his father died and he quit school to provide for his mother and 2 sisters. Mother went back to work part time, but due to not speaking much English, and older generation, she is in a low paying job, hard manual labour and can only work part time. She is not well herself. He has one sister in Uni and the other sister in High School. They lost their family home, and now rent. Michael’s friend is still labouring in his 20s now, and still at home supporting his mother and sisters as the main bread winner.
  
• Would you like your children to go out to work for you to pay the bills, the mortgage? Or would you rather have them study and get the best out of life.
  
• Salary Protection – also known as Income Protection or Salary Continuance
  
• Many people insure these assets, yet, all too often they don’t adequately protect what is potentially their greatest asset – their ability to earn an income.
• Take a moment to consider what could happen to your lifestyle if you were unable to work for an extended period due to illness or injury. Your expenses could quickly run down your savings. You may even need to sell your investments to make ends meet.
• By taking out income protection insurance you can protect your greatest asset and avoid putting your family’s lifestyle at risk.
• If you suffer an illness or injury and are unable to work, income protection insurance can pay you a monthly benefit (usually 75% of your pre-tax income) to replace lost earnings. You can generally claim these premiums as a tax deduction.
• You can choose a range of benefit payment periods, with maximum cover usually up to age 65. You can also choose a range of waiting periods normally between 14 days and 2 years.
  You can also have insurance linked through your superannuation to save you extra premiums
  
• If you didn’t have an income how would you pay your bills (mortgage, schooling, rates, electricity, food)
• Sick leave with work
• Holiday pay at work
• Workers compensation – waiting times for payouts and sometimes part payments
• Centrelink benefits – sickness benefits – if approved.
• Selling personal items – jewelry, furniture, garage sales.
  
• Critical Illness pays a lump sum for certain medical illnesses. For example – stroke, heart attack and stroke. (conditions apply)

For more information please contact your financial planner or have a look at the MLC website - www.mlc.com.au

Thanks Michael, very informative and interactive.

Our last presentation for the night is from Angela Anthony of Anthony and Associates, Erina on Estate Planning.

• Estate planning is the process of planning for after death
• It is putting the right funds to the right hands at the right time
• Planning of your estates future
• Will - where your affairs go
• Power of Attorney – Act on your decisions
• Guardianship – act for you medically
• Wills – are where you put can request certain items to go to family.
• Need to review your will and estate, especially if blended families, divorced, second and third marriages and children – including adopted, step and half siblings
• If you have a business – you need to state what is to happen
• Understand and know of anyone you may think they can challenge your estate
• Executor – some one who distributes your estate – make sure it is someone you can trust
• Make decisions sooner than later. When older health and mental status can change or decline
• Testamentary Trusts – for children so that funds can be managed for them – whether under 18, disabled, addictions, etc.
• Wills are set and forget
• Change your will when getting married, having children, divorce
• Make sure the right funds go to the right people
• Update your beneficiaries on your bank accounts, Superannuation and insurance policies
• If you have no will, the husbands estate passes to the wife
• If both pass and no will, then you die “instate” and then the government steps in and sets an executor who will distribute the estate
• Involve your financial planner, and accountant
• Discuss with your family
• Make sure you do binding nominations with your superannuation and update every 3 years
• Think about heirlooms – jewellery, stamps, collections, assets that you wish to leave to a certain person
• Enduring Power of Attorneys – someone who is able to make financial and legal decisions for you
• Enduring Medical Guardianship – someone who is able to make medical decisions for you
• Where don’t you want your assets and money to go to?
• Update your will if you get married or divorced or have children
• Not all assets will become part of your will. Example – property as joint tenants go to the surviving partners
• If you complete a will kit, get a solicitor to check over it. And have it witnessed correctly
• Downside of doing your own – no legal advice
• When you complete a will with a solicitor you get advice and assistance with the decisions and wording.

Open discussion was held with questions and answer session for everyone.

Thanks Angela that was lovely,

Thank you to everyone who came along. Hope to see you all at our next event.

Disclaimer: The contents of this publication are of a general nature only and have not been prepared to take into account any particular investor’s objectives, financial situation or particular needs. Where this publication refers to a particular financial product, you should obtain a Product Disclosure Statement (PDS) relating to that product and consider the PDS before making any decision about whether to acquire the product. We also recommend that you seek professional advice from a financial adviser before making any decision to purchase any financial product referred to in this publication. While the sources for the material are considered reliable, responsibility is not accepted for any inaccuracies, errors or omissions.

Your Financial Plan is only as good as its cover

Your Financial Plan is only as good as its cover

Most people agree that they are organised and have their family’s budget up to date. However, the process they use is generally simple and down-to-earth – it is unlikely to of a long-term financial solution.

What does financial planning look at -
The best method to create wealth over the long term – for you and your family – is to look at different aspects. These include budgeting, superannuation, insurance and investments.
To avoid confusion, we recommend the right place to start is with a licensed financial adviser.
Your financial adviser can implement strategies for you and your family. These will create, protect and build a succession plan of the wealth. They are the building blocks of a plan that stands the test of time.

Why have wealth protection strategies?

Financial planning is more than just about saving money. It is also about managing future risks.

The common belief “It won’t happen to me” results in many people having a south plan for wealth creation – but not an adequate plan to protect the very things that generates the wealth – themselves!

It is worth remembering that no matter how much expert advice you receive or how astute the money management – your financial plan cannot prevent the risk of you suffering early death or extended time off work through serious illness or injury. In addition, where that leaves you and your loved ones in the future depends on the wealth protection strategy you have in place at the time.

At Gurney Financial Services, we believe that you should protect your wealth whether you are starting a new job next week or moving into a new family home next year. The underlying fundamentals are the same – protection plays the pivotal role between the creation and succession of your wealth.

Creation Of Wealth – is about making your money grow and keep your plan up-to-date. To make sure the pieces are skilfully put into place for your family, it is a good idea to link up with a professional financial adviser.

Your adviser will work with you to:
Identify what type of lifestyle you want and when you want to achieve financial independence.
Make a saving commitment the will help you reach your goals, yet is affordable enough to maintain your lifestyle.
Develop a strategy to build your retirement nest egg.

Create a portfolio of investments that reflects the risk level and potential returns you desire.
Seek opportunities that are tax effective.
Review your plan regularly. Updated annually or when your circumstances change. This way you will always be able to take advantage of your family’s changing situation and goals, as well as differing economic or legislative environments, and new products or services

Protection of Wealth is about protection you assets and making your financial plan secure for you and your family in the long term.

Your financial adviser should look at the whole picture – your needs, wants, and desires – to ensure your treasured plan is covered by a sound insurance strategy that:
Protects you, your family or your business against a range of uncertainties.
Supports you and your loved ones in the event of disability, illness or premature death, so that:
Your mortgage or debts can be paid out
Lost income is replaced
Capital is available to continue funding your investments
An income stream is provided so that your lifestyle, and your family’s, can be maintained.

Succession of Wealth is about picturing what is important, realising your goals and properly managing your future, as well as your families.

Your financial adviser will help you decide on the best way to structure your financial plan, to enable you and your family to:
Control your accumulated wealth.
Maximise income during your retirement years.
Implement estate planning and business succession strategies.
Provide efficient, tax-effective transfer of assets.
Reinforce your family’s sense of security and certainty.
So what level of cover do you need?
Use this simple guide to weigh up how much life insurance you might need to adequately protect your wealth.

Naturally, it is best to discuss this fully with your financial adviser to get a professionally balanced assessment of your coverage requirement. As a basic guide, you need to take into account the rising cost of living and other miscellaneous expenses, which you may incur.

What are the risks? Is your financial position, enough for you to be able to stop working tomorrow? While most people are not in a position of such luxury, the death or disability of a breadwinner could have you pondering this very question.
If your income stops, it can have devastating results for your financial plan and can jeopardise your family’s future financial security.

The unfortunate aspect of death or disability is that it can happen at any time and has more far-reaching consequences than just the person involved has.

Finding the right cover

Your financial plan will be created especially for you and your family – to keep it working over time; you need a cover that fits perfectly.

To unlock the right combination of insurance products on offer, you should ask your financial adviser to explain their benefits, pricing and reliability…..and then consider the insurance provider’s reputation.

(information for this article has been courced from MLC)

Happy New Year and Welcome to 2010

Happy New Year and Welcome to 2010.

Well where did the last year go?

Gurney Financial Services is in its 5th year this year and we look forward to assisting more families on the Central Coast again this year.

We specialise in family budgeting, superannuation consolidation, implementation of adequate insurance and debt management.

We look forward to educating our clients and hope with the knowledge our clients recieve, that they will become comfortable and secure in their decision making and planning for their families, lifestyles and retirement.

If we can help you or someone you know, please contact us at www.gurneyfinancialservices.com.au

Get your Estate Planning in Order - 10 Second Insurance Checklist

Get your estate planning in order!

The 10 Second Insurance Checklist!

1. Does your income protection policy still reflect the income you are currently earning?

2. Will your house insurance pay you enough to rebuild your house?

3. Will your life insurance pay off all your debts and be able to support your dependants if you are no longer around?

4. Has your car been modified in any way?

5. Have you recently installed security devices or extra locking systems on your home that could reduce your premium?

6. Have you changed jobs and not informed your insurance adviser that your new occupation is less risk or no more manual work. These changes could reduce your premiums?

7. Assignment of a personally owned insurance policy into a DIY super fund is not allowed, this ‘in specie’ transfer could render your fund ‘non complying’

8. If you have given up smoking for more than 12 months you could change your policies to non smoking status and save substantial premiums.

Using a Super Fund to Save on Insurance Premiums

If you are self-employed, or you have a spouse who is on a low income, you can save on the cost of life insurance premiums by buying insurance cover through a superannuation fund rather than as a separate 'ordinary' policy. In some cases, this strategy can reduce your premiums by almost 50%.

Usually super funds will offer insurance to fund members against death, as well as total and permanent disability (TPD). Some funds also provide additional insurance to protect against loss of income and temporary disability.

How Does The Strategy Work?

The same tax deductions and offsets that apply to superannuation also apply to insurance purchased through a superannuation fund. If you’re self-employed, you can claim a tax deduction on your super contributions, irrespective of whether the contribution is used to purchase investments or insurance. Similarly, if you are making super contributions on behalf of a non-working or low income spouse, you may be able to claim a tax offset of up to $540 p.a.

These tax benefits can make it significantly cheaper on an after-tax basis to insure through a super fund rather than through a non-super insurance policy. All you need to do is nominate how your contributions are to be allocated between the superannuation fund and the insurance policy.

The Benefits

· The amount saved via deductions and offsets can be used to increase your level of insurance cover.
· This strategy is ideal if you have a young family and you’re looking for financial protection.

Case Study

Andrew (age 43) is a self-employed professional married to Vivien (age 40). The couple are raising a young family and Vivien also works part-time. Andrew and Vivien both have super and separate insurance policies for death and TPD insurance in their own names. Andrew is currently paying premiums of $1,337 a year, while Vivien is paying $815 a year.

To claim a tax deduction for premiums on Andrew's insurance cover and a spouse offset for the premiums on Vivien's cover, they arrange their existing insurance cover so that it is provided through their respective super funds.

Being self-employed, Andrew can claim a tax deduction in his annual tax return **. His marginal tax rate is 46.5%.

By contributing $815 on behalf of Vivien, Andrew can claim an 18% offset in his annual tax return (Vivien is assumed to be earning less than $10,800 p.a.). (18% rebate available on a maximum contribution of $3,000)

By changing their insurance arrangements, Andrew and Vivien have a combined saving of $795 p.a.

Tips & Traps

Insurance cover purchased through a super fund is owned by the trustee of the super fund who is responsible for paying benefits.

All lump sum death benefit payments made to a dependant will be tax-free.

If you are self-employed, you can claim a tax deduction on 100% of contributions up to $50,000 (or if over 50 you can contribute up to $100,000pa over a transition period which ends 2012).

You could also reduce the cost of life insurance via a salary sacrifice arrangement. Instead of having separate insurance and paying premiums from after-tax salary, you could have the insurance through your super and pay the premiums from pre-tax salary.

As super funds get a tax deduction for death and disability premiums there should be no contributions tax charged on these premiums.


The advice contained herein does not take into account any persons particular objectives, needs or financial situation. Before making a decision regarding the acquisition or disposal of a Financial Product persons should assess whether the advice is appropriate to their objectives, needs or financial situation. Persons may wish to make this assessment themselves or seek the help of an adviser. No responsibility is taken for persons acting on the information provided. Persons doing so, do so at their own risk. Before acquiring a financial product a person 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.

Refinancing

Before embarking on this route you should be clear about what you hope to achieve by refinancing as it may involve the time consuming task of shopping for finance and the nerve-racking ordeal of interviews.

The most common reasons for refinancing are to:
1. Upgrade Your Home.
2. Reducing Total Interest Costs.
3. Reducing Monthly Repayments.
4. Tapping Into Home Equity.

Home Upgrade:
Upgrading your home provides the ideal opportunity for refinancing as in most situations you are upgrading to a more expensive property and borrowing to cover the shortfall.

** If you currently have a fixed loan and are upgrading your home, it is an ideal opportunity to switch to a new fixed lower rate or a variable loan.

Reducing Total Interest Costs:
If interest rates have fallen since you first obtained your home loan, consider refinancing your fixed rate loan to take advantage of the new low rates.

You could also reduce interest costs by refinancing regardless if loan rates fall, by having a shorter term even though your monthly repayments may be higher.

** Refinancing would reduce your total interest bill and perhaps reduce your monthly repayments.

** Make extra payments whenever you can to reduce your mortgage debt and save interest.

Reducing Monthly Repayments:
You can refinance your loan to reduce your monthly repayments by extending the repayment period. For example, if you have already paid off five years on an existing mortgage, refinancing a new loan on a 30year period will reduce your monthly repayments.

** By switching to a variable interest rate, if you have an existing fixed rate mortgage, it is possible to reduce your monthly interest payments.

However, if the interest rates rise again, your monthly repayments will also increase.

Tapping into Home Equity
For many people, their home is their biggest asset and source of savings. The improved value of your property and the amount you have paid off on your mortgage can be put to work for you, to borrow money.

You can refinance with a new mortgage that is larger than your remaining balance or obtain a home equity loan.

** Consider negotiating with your current lender. They may be willing to offer concessions on costs, etc. in order to retain you as a customer.

Credit card interest rates are usually higher than mortgage rates so you may save money by paying off your cards.

**If you have other debts such as credit cards and other loans, it may be cheaper to incorporate these into your mortgage

The Cost of Refinancing

The time it takes to recover the costs of refinancing should be short enough to make it worthwhile. If you think you will only be in that house for three to five years and it will take you five years to cover the costs of refinancing, then it probably is not advisable to refinance.

** Make sure you fully understand the fees that you will pay both going into and getting out of the loan.

The cost of refinancing can be considerable, particularly if you are exiting a fixed term loan. You may incur costs for ending your current loan and costs for starting a new loan such as:

· Break costs - terminating a fixed loan (perhaps thousands of dollars);
· Early termination charges - ending a variable rate loan;
· Mortgage discharge fee - an administrative cost;
· Mortgage stamp duty - on your new loan (varies from state to state);
· Valuation fees - to establish value of property to be refinanced;
· Lender’s Mortgage insurance - if you are borrowing more than 80% of the value of the property;
· Ongoing fee - monthly cost for having the loan;
· Establishment or Loan Application fee - cost for applying for a loan.

** Keep accurate records of all repayments, and check your lenders statements regularly for errors.

** Allow for an extra 1 or 2 percentage points when budgeting for repayment. Interest rates have a habit of changing.

Finally:

** Don’t compare loans based on interest rate alone. This won’t tell you exactly how much you will save on your total interest repayment compared with your current loan. You should also compare refinancing with getting a second mortgage, an equity line of credit or not refinancing at all.

We will be more than happy to refer you to a mortgage broker!

The advice contained herein does not take into account any persons particular objectives, needs or financial situation. Before making a decision regarding the acquisition or disposal of a Financial Product persons should assess whether the advice is appropriate to their objectives, needs or financial situation. Persons may wish to make this assessment themselves or seek the help of an adviser. No responsibility is taken for persons acting on the information provided. Persons doing so, do so at their own risk. Before acquiring a financial product a person 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.

What to expect when you meet withGurney Financial Service

In the beginning…
After your initial contact with Gurney Financial Services, you will be asked to complete a personal questionnaire; this will assist and prepare you for your first appointment. It will also allow you to put together any questions, issues or thoughts you might have on financial planning or your financial future.

Your first appointment will be of a relaxed nature, where you will talk about your current financial set-up, and then look at where you would like to be in a year, maybe five, ten or even twenty years time. You will also discuss how you feel about investment risk and other information your adviser needs to prepare a comprehensive plan for you. You will be fully informed of the costs before you make any commitment to proceed.

Some topics that are covered in your first appointments will be:
o Budgeting: working out what is going where, and why.
o Savings: for debt payments, purchases, holiday’s education, retirement.
o Debt Management: how to get out of debt.
o Superannuation: looking at your current superannuation, and making sure it works for you, consolidation of superannuation products, investing into the correct investment allocation.
o Insurance: what is needed for you and your family, debts and lifestyle?
o Estate Planning: making sure your financial affairs are in order

If you own a small business, then we also look at the requirements for you as an employer, and in relation to superannuation and protection for your employees.

Before a strategy and plan is put together, Gurney Financial Services will provide you with some general information and quotations for you to think about, as well as their fees and charges. On your approval, we will then go on to the next stage which will be to design a personal and strategic holistic plan for you and your family and business.

Develop the strategy
Your adviser will view your financial situation from every angle to produce a complete financial plan. They will then present it to you in person and in writing. At this stage you can fine-tune your plan, making sure that you are perfectly comfortable with the potential outcomes.

Implementing your plan
When you’re happy with the plan, your adviser will set the wheels in motion and ask you to authorise any paperwork required.

Your adviser will prepare and follow up all documentation until completion, where you will be informed in writing that this finalised.

Keep it fresh
Your financial plan will need to be adjusted regularly to sustain the changes in your life, be they around your goals or your financial situation as well as changed in investment markets and legislation. Your adviser will discuss the level of ongoing service you require as well as costs.

Gurney Financial Services provide Annual Reviews, regular updates which include general information from the market place, aswell as personal touches. We believe in relationship building, and as a client of Gurney Financial Services, our mission would be that we would work with you to create a financial lifestyle that you and your family desire.

Gurney Financial Services, Looking after you and your family.

If you would like to meet with a representative of Gurney Financial Services, please contact us and we will be excited to meet with you, at your place or mine.

Kind Regards


Tarnia Gurney