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Income Protection Insurance

Gareth Daniels from Income Solutions

Authorised Representative, GWM Adviser Services Limited, Australian Financial Services Licensee 

Are you looking at purchasing your first home or planning on starting a family soon? If so this is the perfect time to look at getting an income protection insurance policy in place or re-evaluating your current policy.

Buying a new home or starting a family, or both, is such an exciting time and you’re probably getting lots of different opinions from family and friends on what you should be doing, so let’s break down the facts.

What is Income Protection Insurance?

Essentially, it pays up to 75% of your income if you are unable to work due to injury or illness. If you have debt, dependants, or both. We all know that whether your income is coming in or not, the bills still need to be paid. It is advisable to have income protection insurance to help pay those bills and support your loved ones in unforeseen circumstances.

When paying your income protection insurance, you have main 2 options, paying through your superannuation fund or paying directly from your income.

Paying through your super fund

If you choose to pay your income protection through your super fund, it will cover the premium giving you more money in your pocket to pay for other things. This strategy is useful if you are trying to pay down your mortgage or have school fees to pay as the premium is coming from your superannuation, not your wage, so there is more money in your pocket to pay down your mortgage or pay for childcare or school fees.

However, there can be some restrictions on claims, dependant on your policy, we advise that you speak to your financial advisor to clarify these specifics.

Paying income protection from your wage

Alternatively, you can pay your premium straight from your wage, and in many cases, this can prove a greater tax deduction compared to the tax rebate that will be paid into your super fund.

For example, take the average Australian wage of $60,000. This person will pay around 32.5% tax each financial year (not including the Medicare levy). If they pay their income protection insurance from their wage they will get back about 32.5% of that premium at tax time.

How do I know if I have the right cover?

These days everyone has a super fund, and you may have a level of income protection insurance by default, however this policy may not be right for your personal situation. So, feel free to grab your super fund statement and come in for a coffee and a chat and we can look at the right coverage for your current situation.

 

Any advice in this publication is of a general nature only and has not been tailored to your personal circumstances. Please seek personal advice prior to acting on this information.

The information in this document reflects our understanding of existing legislation, proposed legislation, rulings etc as at the date of issue. In some cases the information has been provided to us by third parties. While it is believed the information is accurate and reliable, this is not guaranteed in any way. 

Opinions constitute our judgement at the time of issue and are subject to change. Neither, the Licensee or any of the National Australia group of companies, nor their employees or directors give any warranty of accuracy, nor accept any responsibility for errors or omissions in this document.

Before making a decision to acquire a financial product, you should obtain and read the Product Disclosure Statement (PDS) relating to that product.

 

 

 

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The “Trump Bump” – Myths Debunked

David Ramsay, Founder & CEO of Income Solutions

Income Solutions Pty Ltd, Authorised Representative, GWM Adviser Services Limited trading as Garvan Financial Planning, Australian Financial Services Licensee

I have been following Nick Murray for over 30 years, and he recently wrote an interesting article about the impact the “Trump Bump” has had on the US economy and it is very hard to argue with such clear and concise data.

Isn’t it funny, the power the media has on our society, they sell us doom and gloom on a daily basis, particularly when it comes to the finance sector, and we tend to believe them and follow their advice day-in day-out, very rarely checking the facts. Now I’m not here to rant about the media, but I am here to give a bit of perspective, and with the help of Nick Murray, break down some facts and figures.

The stats in his June newsletter really caught my eye and I have compiled a list of what I feel are the most relevant and interesting bits and pieces from this article.

Unemployment

  • U.S unemployment rate in April was 4.4% – down from 9.9% in April 2010
  • Part-time workers are increasingly able to find full-time work
  • Labour force participation rate is on the increase

Now isn’t that a great news story, this tells me that more people are working, they are happier and they are building their legacy. This also says to me that industry is booming, people are making more money, but they are also investing that money back into the economy.

Household Net Worth

  • In 2007 (pre-recession) the U.S household net worth peaked at $68 trillion
  • In the first quarter of 2017 this figure is over $95 trillion

Currently, “both single-family home values and financial assets making new all-time highs.”1 This figure astounds, as not only is it at an all-time high, it is set to exceed this peak by half as soon as the end of the year!

Debt Service Ratio

Nick also states that the “household debt service ratio – that is, household debt service as a percentage of disposable income – was a mere 10%, a level it has not seen since at least 1980.”1 So it looks like it’s not all doom and gloom in the finance sector as the media would have you believe, Americans are doing better than ever!

Corporate Cash

  • Corporate cash as a percentage of a current assets remains around 30%
  • This is twice what it was heading into the stock market collapse of 2000

Bank Reserves

  • Banks excess reserves stand at around $2.5trillion
  • The morning after the Lehman Brothers bankruptcy in September 2008 bank excess reserves were at zero

So, what does this mean? Essentially, these corporations and banks are making money, but they are hoarding this cash on their balance sheets.

S&P 500

  • The 2017 earnings estimate is at $131
  • The 2018 earnings estimate is currently at $147

Both figures will be records for the S&P 500, which is incredible as there was significant pause due to the global oil depression, but these new figures show that corporate earnings are now surging.

“Combining elements of points above, we may observe that never in American economic history have the balance sheets of banks, corporations and households been simultaneously stronger.”1

What does this mean for Australia?

Well, no one can really forecast what the market will do, and in the short term it is hard to predict what impact these results will have on the Australian economy. However, if we are looking long term and we take historical data into account, it shows that the Australian and U.S markets typically move in positive correlation to each other. Now, I’m not saying this will be the case but from where I sit it these figures do look promising.

 

  1. Murray, N. (2017). Nick Murray Newsletters. [online] Nickmurraynewsletters.com. Available at: https://www.nickmurraynewsletters.com/ [Accessed 27 Jun. 2017].

 

 

Any advice in this publication is of a general nature only and has not been tailored to your personal circumstances. Please seek personal advice prior to acting on this information.

The information in this document reflects our understanding of existing legislation, proposed legislation, rulings etc as at the date of issue. In some cases the information has been provided to us by third parties. While it is believed the information is accurate and reliable, this is not guaranteed in any way. 

Opinions constitute our judgement at the time of issue and are subject to change. Neither, the Licensee or any of the National Australia group of companies, nor their employees or directors give any warranty of accuracy, nor accept any responsibility for errors or omissions in this document.

Before making a decision to acquire a financial product, you should obtain and read the Product Disclosure Statement (PDS) relating to that product.

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Generations of Wealth

Alison Adams from Income Solutions

Authorised Representative, GWM Adviser Services Limited, Australian Financial Services Licensee 

 

Sometimes financial advice is not about dollars and cents but instead becomes more about goals and objectives.   As Financial Advisors, in the business of building wealth for our clients, we felt it was important to define “wealth” What is wealth   The concept sounds simple enough, and in many ways it is simple. We like to quote John C Bogle, the author of The little book of Common Sense Investing, “simple but not easy”.  Often, the “not easy” part involves the goal of leaving a meaningful legacy to those whom you love.  We find this is a common theme amongst our clients. It is one thing to invest for your own future but once you have successfully taken that journey, commonly thoughts turn to making sure your hard work benefits your children and grandchildren. So, what is needed?  Successful estate planning takes an investment of time, careful consideration of your desired outcomes and the assistance of a quality Financial Advisor and specialist Estate Planning Lawyer. Did you know that your superannuation account balance and jointly held assets are not administered by your Will?   For estate planning purposes, these types of financial assets are called “non estate assets”. For the majority of people, their superannuation account is likely to be one of their biggest assets. Another contender for biggest asset may be the family home, commonly jointly owned.  In summary, the two assets often representing the bulk of an individual’s wealth may not be dealt with by their Will.  What about if the bulk of your financial assets are deemed “estate assets” and in the event of your death, these assets will be distributed to your loved ones in accordance with your Will. That should set them up for a financially sound future, right?  One of the biggest destroyers of wealth is the transfer of wealth from generation to generation. Consider your own family circumstances. Even if your family has so far been lucky enough to have escaped the statistics around relationship breakdowns, gambling or drug addiction, how do you know what the future holds for your children or even for your grandchildren?  There are ways that a quality Will can provide a regular income stream to your loved ones and at the same time, protect their inheritance.  David Ramsay, founder and Principal Financial Advisor at Income Solutions likes to say “you love your children and grandchildren; at best, you hope to like their partners”. Here’s some food for thought, consider these scenarios:

  1. Sadly your father passes away and in accordance with his Will, you and your brother inherit the family home. The home sits in prime real estate, with upcoming re-zoning changes making you and your brother think it’s a good idea to rent the house out for a couple of years and sell when all of the changes have passed, holding out for a bigger profit. It’s currently worth $1m, however you believe your strategy could triple that value. Your father had a very simple Will and the home passes to you and your brother, held jointly at 50% each (currently a $500,00 inheritance to each brother). Both you and your brother are married, with young children.  3 months later, you unfortunately pass away in a car accident. Your Will makes provisions for your wife and young family.  Your wife meets with the lawyer and lists all of your assets, including the $500,000 share of the inherited family house. Her Lawyer tells her that unfortunately a jointly held asset is not governed by the Will, and by law, the surviving brother is now the sole owner of the inherited family home. Your wife and children have no legal claim over your share of the house.
  1. 6 years ago you met your second wife, married and now have 3 beautiful girls together. You believe that your family is complete; you have your 3 girls and also 2 sons from your first marriage.  Your ex-wife lives nearby and, although you’ve had rough patches in the past, your 2 sons come and stay every other weekend and because you live nearby you are able to attend their various sporting and school events and enjoy a good relationship with them. The boys have a good relationship with their step sisters, however as they are entering their late teens, lately the relationship between your second wife and the boys is often strained.  Your motto is that things will improve once they get through their teenage years. Unfortunately you have an industrial accident at work and pass away.  You have a current Will which makes provisions for your current wife to inherit the majority of your assets, with smaller amounts distributed to all of your children.  You’ve had discussions with your second wife about how you would like her look after all of your children, and upon her passing, distribute your assets evenly. These wishes were reflected in her Will, drafted at the same time you drafted your Will. Your second wife is advised that, following your death, her existing Will is invalid and she makes arrangements with her Lawyer to draft a new Will immediately. After all, she’s the only parent left for her girls.  The new Will is drawn, making provisions for your 3 daughters but excluding any provisions for your 2 sons.
  1. You have worked hard and sacrificed through the years to build a sizeable investment portfolio. The portfolio derives enough income to support your lifestyle and consists of growth assets that should continue to support both your children and grandchildren when you pass.  You have never been in the business of spending money “for the sake of it” and when you hear about DIY Will kits that you can purchase for $69.95 at the local newsagents, you go for it. After all, it’s pretty simple – you want your kids to inherit it, don’t touch it and live off the income, just as you have. When they pass, you want their Will to provide the same directions to their children. You’ve even sat all of your kids down and told them as much and they all agreed.  You pass away a contented man, proud of your life’s achievements and the way you’ve provided for your family’s future. Only problem is:
  • Daughter number 1 has a marriage breakdown 2 years after you pass away.  She directly inherited your assets in her own name, meaning they formed part of the divorce settlement. Half of your inheritance has now been distributed to her ex-husband, who, truth be known, you never really liked anyway.
  • Son number 2 has never been good at managing his money. Before you passed, you asked your other children to keep an eye on him, but they’re so busy with their own lives that they can’t keep track of him as well.  A few ill advised investment decisions later and he’s lost at least 3/4 of his inheritance.
  • Son number 3 is self employed and just prior to your passing, he ran one of the biggest engineering businesses in town (a great source of pride for you). Unfortunately the majority of his business involved supplying and servicing the machinery at 2 local car manufacturers. Since those manufacturers have closed down, he’s put on a brave face but in truth, new business has proved too hard to find and he’s just about to declare bankruptcy.  The only thing that can save him is your inheritance but due to a quirk of bad timing, he is forced to use the inheritance to pay his debts and close his business. He’s not in debt, however he has no business and no inheritance.

These 3 scenarios are fictitious, however similar scenarios are happening each and every day.  Sadly, they are preventable. Advice from a good quality Financial Advisor and specialist Estate Planning Lawyer would ensure sound investment strategies could accompany estate planning protections. The outcome being that the transfer of wealth through generations can successfully be achieved.

 

Any advice in this publication is of a general nature only and has not been tailored to your personal circumstances. Please seek personal advice prior to acting on this information. The information in this document reflects our understanding of existing legislation, proposed legislation, rulings etc as at the date of issue. In some cases the information has been provided to us by third parties. While it is believed the information is accurate and reliable, this is not guaranteed in any way.  Opinions constitute our judgement at the time of issue and are subject to change. Neither, the Licensee or any of the National Australia group of companies, nor their employees or directors give any warranty of accuracy, nor accept any responsibility for errors or omissions in this document. Before making a decision to acquire a financial product, you should obtain and read the Product Disclosure Statement (PDS) relating to that product.

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my.solutions On Demand

Our aim is to give you access to all your Income Solutions presentations and information in 1 easy-to-use portal. We save all your past presentations in your account to provide you a snap shot in time. This makes it easy for you to see how far you have come and what goals you have achieved. If you need a reminder of what strategies you have been presented, simply log in and open the presentation.

First, make sure you have your my.solutions login details handy.  This is typically the email address you have provided to us, and a password you have created.  If you are unsure what your password is, and have tried the forgot password tool, please contact us.

Past presentations can be accessed by logging into my.solutions, clicking the Knowledge Centre on the left-hand side menu, then Toolbox.  You’ll then see a list of presentations available for viewing.

Across the top you’ll see grey boxes– clicking these enables you to instantly view your last key strategy slides presented during your last Big Picture meeting.

Click on the image below for direction:

my.solutions presentation blog

 

Below the grey boxes, on the left hand side of the screen there is a list of Presentations – here you will find every meeting ever presented to you using my.solutions.

For example, you can view all slides during your last review meeting, these can be found under the Staying on Track tab.  Click this and the menu will expand showing all past meetings.

If you have any questions about my.solutions or would like a demonstration of the portal please do not hesitate to contact the office and we can give you a hand.

Geelong: 03 5229 0577

Melbourne: 03 9654 0555

Colac & Hamilton: 03 5232 1200

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The Ingredients to Achieving Great Things

Looking for something to read as I ate my lunch today, I settled on the latest edition of Time magazine titled “The 100 Most Influential People”; a couple of things struck me…

One was that they had a world map, pinpointing the country of origin of everyone who had been selected.  Time is an American publication and, in my opinion, there was an over-representation of the USA.  The spread of dots pinpointing where the 100 people originated however, highlighted that we truly do live in a global village.  Nationality, religion and even wealth don’t appear to have been defining factors for the people who have been selected.  The other thing that struck me was the passion demonstrated by many of those selected.

Guus Velders, an atmospheric chemist exploring how small and extremely common pollutants have the power to harm our natural world, or Glenda Gray, who’s inclusive attitude and tireless efforts have contributed to the mother to child transmission of HIV drop from 600,000 births a year to 150,000.  There is the story of Hamdi Ulukaya, a Kurd born in Turkey who moved to the US & started the Chobani yogurt company.  He has created an engaged workforce by deliberating locating his factories in areas that industry has long abandoned, re-engaging disconnected people.  In addition, he has actively expanded his team through hiring refugees to work alongside his local workforce.

What a great example of how respecting and empowering your workforce contributes to success.

I love basketball and particularly enjoyed the LeBron James documentary “More Than a Game”, which follows LeBron in his high school basketball team.  Perhaps the respect he has for those who helped him and his teammates succeed are what drives him to invest in the promise of future generations through his foundation.

There was the story of Raed Saleh, who leads the “White Helmets”, a group who provide emergency services in war torn Syria, helping injured residents get to safety.  Saleh’s mission has been quoted as getting more people to “work on the side of life”.

It was a very humbling lunch time read.  It prompted me to reflect on how sometimes great things are achieved by everyday people who are just diligently practicing and perfecting what they do until they are doing it so well they have managed to achieve great things.  In a way, this mirrors the message Income Solutions provides to our clients.  First, set a goal then we’ll work with you over the long term to achieve it.  Every step taken towards the goal is a step in the right direction.  It is an absolute privilege when we see clients achieve their financial goals and it is particularly rewarding to know that we’ve been there for the journey.

Like the people in my lunch time read, the majority of clients who achieve financial success have not started with great wealth, but rather they have taken accountability for their goals, they have gained knowledge along the way and have respected the advice they have received.  All great ingredients for achieving great things!

By Alison Adams

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