Do Nothing and Save Money

By Jason Fittler

Ever thought “I wish I didn’t do that”.

Investors tend to focus on the upside, the profit, and the benefits of investing and rarely take a close look into the downside or the losses, which could occur.

Many years ago, I was reviewing a client’s portfolio when they told me they wanted to invest in a privately owned company. For me, this immediately raised a red flag. Privately owned means small and illiquid, this increases risk. On further discussions, I was advised that the investment would receive interest of 20% per month. No, that is not a typo. This sort of return is not a red flag, it is a giant blinking red light, which reads DANGER. 

After further discussions, I was able to obtain some information about the company its workings, cash flow and business model as well as the owners and their experience.

Based on what I knew about the company and the information the client supplied it was clear that this company was about to fail.

My advice was not to invest.

A couple of weeks later the client advised me that they had invested $250,000 into this company against my recommendation. They were initially going to invest $1 million. 6-months later, the company went bust. The media reports confirmed my fears. The company was trading insolvent for around 12-months. The company left a trail of financial disaster.

My client lost their $250,000.

My advice saved the client $750,000.

Investors generally focus on the money that their adviser makes them and rarely focus on the money that their adviser saves them.

Creating wealth is not just about making money; it is also about not losing money. 

As a rule of thumb, if an adviser tells you not to invest and forgoes commission because of that advice, best you listen. 

Insurance – How to Make the Premiums Deductible

By Jason Fittler

Insurance is something we all have but most will never use.

When it comes to Life, Trauma, Temporary and Permit Disability (TPD) and Income Protection insurance it makes sense to obtain the maximum insurance at the cheapest price.

By having your Life, Trauma, TPD and Income Protection insurance within your super fund there are two benefits.

First, the premiums are deductable to the super fund, if you have a Self Managed Super Fund then this will help reduce the cost of the insurance to you. If you are in a retail super fund this allows the super fund to provide you with the cover at a cheaper price as they can pass the benefits of the deductibility of the premiums on to you.

Second, the super fund is able to obtain group rates from insurance companies again allowing you to obtain the cover at the best possible price.  We all need to have Life, Trauma, TPD and Income Protection cover, but if you speak to your Financial Planner they can structure it so you have the maximum cover for the minimum price. With the extra benefit of having your superannuation pay for the cover instead of having to pay for it out of your take home pay.

Who said you have to wait to retire before you can access you superannuation, with the right advice your superannuation can benefit you right now. 

For more information please call us on 4771 4577. 

Financial Protection in Uncertain Times

By Jason Fittler

With the considerable movements in the Australian and global sharemarkets in 2008, it is understandable that you may be concerned about the effects of market volatility on your wealth and assets. Whilst market volatility may be out of your control, protecting your assets in personal adversity is well within your control.

ABN AMRO Morgans is well known for its investment advice, but we are also able to provide easy to understand, straight forward, cost effective advice that can assist you to achieve the following:

•    Accumulate Wealth whilst protecting what you have
•    Get maximum value from your superannuation through insurance benefits
•    Protect yourself and your assets
•    Plan your estate so that your family and loved ones are looked after

The type of protection available ranges from:
•    Life cover
•    Total and permanent disablement cover
•    Trauma cover
•    Income protection

You can't predict the future in these uncertain times, but you can protect it!

No matter what stage of life you are at, wealth protection should be a major consideration in your financial plan. We can help you obtain the right cover and structure for your personal circumstances, so that you are protected against the unexpected. We can also structure your insurance in tax and cash flow effective ways.

It’s critical that your insurance is reviewed regularly in line with your unique needs. This will ensure you have the right protection and stay in control of your future.

Insurance – How much should you have?

Insurance is a very important part of growing your wealth. It is what saves you when things go wrong. Ever had a car accident, did you plan to have an accident. What would have happened if the car was not insured? Glad you had the insurance, happy to renew the insurance the following year.

What if you had been personally injured in the accident, your car would be repaired, would you be? How would you make house payments, car payments, buy food pay for medical expenses. I guess you could always sell the car once it was repaired.

Insurance is the safety rope which stops use from falling back into poverty and hard times. Could you image taking your kids out of their school because you could not afford fees. Try explaining to them that although you insured the car you did not insure their lifestyle.

It’s time to start looking at Life, Total and Permanent Disability (TPD), Trauma and Income Protection. But how much do you need? Let’s take a look.

Income Protection – most policies will pay you 75% of your current income. You need at least a policy which covers you for 2 years and has a 30 day waiting period. Most super funds will do this.

Trauma – At least $100,000 worth and you should have your children covered as well, they can be covered on your policy.

Life and TPD insurance – To work out how much you should have, multiply your gross income by 16… add to this the amount of your home loan, personal loans and credit cards… this is the amount of Life and TPD insurance you should have. It may look high however Life and TPD is general cheap for the cover you receive.

Before you do anything, contact us first so we can explain the benefits and pit falls of the different type of insurances. Plus we’ll make sure you get the best value for money.

Call us at ABN AMRO Morgans Townsville, 07 4771 4577 we are always ready to listen, explain and help.

Until next week.