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Wealth Management tips and information from Continuum Financial Planners Pty Ltd
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ContinuumFP eNewsletter August, 2016
- a 5-minute read before links

Greetings!
With Winter almost over, we look forward to those unwelcome colds, flu’s and other viruses moving on – and to the brighter outlook that Spring and Summer usually bring.  We also look forward to fewer events that affect (or is that infect) the investment markets: not that the past couple of months have been as volatile as the earlier part of the year. It seems that the shock of Brexit, the ongoing interest-rate easing by central Banks – and the continuing delay in the next increase by the US Federal Reserve – have been enough to keep the investors guessing; and not too keen to speculate heavily.

The recent lack of volatility, particularly in the US stock, Bonds and commodities markets is accompanied by an almost disturbing setting of new highs in market valuations – but on very low market participation.

The theme that we have mentioned over the past couple of months, of investment returns being ‘lower for longer’ is certainly being cemented into the equation, especially given that higher prices being paid for investments whose income yields are declining make finding adequate returns at acceptable risk levels challenging.

In this issue, we explore some thoughts on
  • how to manage investment portfolios in the light of the prevailing market conditions;
  • how to evaluate the adequacy of your life insurance portfolio; and
  • why estate planning is important for all of us (and this one will lead us into our next expose of a service we provide and that may not have been on your radar).
Portfolio management in the ‘lower for longer’ environment
In the prevailing investment market environment, the key criteria for constructing an investment portfolio take on even more significant roles: the criteria to which we refer, are investor risk profile and investment timeframe.

Each of these criteria place constraints on the way in which a portfolio is constructed and managed during a time when a previously anticipated return for a particular portfolio might have been say, inflation plus five percent, but is now only yielding up to two percent below that – and not expected to return to its former averages for a decade or so.

The investor response to date, has been to move further out on the risk spectrum seeking the yields they need, from the additional risk they take on: we have seen this in European markets, the USA; and more so recently, here in Australia.
The house view at ContinuumFP is to be more vigilant in the selection of the style of managed fund utilised; and in the selection of the manager(s) to manage that style of fund. Whilst there is a lot of talk about Exchange Traded Funds (ETFs) and other index-based/ passive investment styles, we favour active management in the current environment.

Part of the problem for funds managers is that traditional investment assets are becoming ever more expensive during a period when economic activity, productivity and profits (returns) are declining. What were previously considered ‘safe haven’, low risk investments – government bonds (Treasuries) – are now being considered high risk, if not at ‘bubble’ valuations levels. Active managers are looking for alternate investments that: a) have the appropriate risk criteria; b) are less chased by the market; and, c) yield sound levels of return.

We adopt a flexible, though conservative approach to funds management on behalf of our clients, using whatever tools and ‘partners’ that we can to achieve optimum outcomes without breaching their investment risk aversion ratings. Our Investment Strategies Page in our website Services menu outlines some of our philosophy in this area.
 
The lower yields forecast for a longer period into the future as mentioned above, give rise to another area for consideration: the level of life insurance protection you hold; and its adequacy to meet future needs in this environment?

Determining the adequacy of life insurance protection
One stage of the process of advising on an insurance portfolio, is to conduct an Insurance Needs Analysis. From the data collected to undertake this analysis: the types of policy to be held, the ownership structure; and, the amount of cover in each type of policy can be determined.

Whilst Australians are notoriously under-insured, the insurance providers in Australia have worked well to develop a range of products that serve the insured of this country well – far better it appears, than any of our major trading partners including the USA, the UK, Europe and many economies in Asia, especially when the taxation of the proceeds of claims are considered.

Amongst the financial risks that an (intending-) insured need to consider, are –
  • mortgage debt levels
  • ‘final’ expenses
  • capital needs (for vehicle replacement, home renovation/ relocation, bequests, etc)
  • education costs; and
  • living costs
When we consider the last two items on the above (non-exhaustive) list, there are two ways to deal with the costs: either, a) provide for a lump sum to pay the anticipated cost over a period of time; or, b) provide a different lump sum to invest to generate an income to meet those costs. If the latter of these choices is made, then the final point in the commentary above, becomes quite relevant – and is one that should be identified if a detailed insurance annual review is undertaken.

It is worth noting, that when all of the above needs are taken into account, there is also a need to make allowance for the offset of any assets available for disposal in the event of financial need, as well as for any existing insurance protection that will apply to the risk concerned. (Our advisers work to a documented Insurance Philosophy and can guide clients in such a review and provide comfort that the financial needs of dependants are adequately provided. For further information on our Personal Risk Insurance Strategy services, check out our website Services Page.)
The importance of Estate Planning
Whatever view we have of the state of our assets at any particular time, it is worth considering what an estate will look like in the event of our death. Whilst there are a number of assets that can be at the disposal of our family (or satisfying personal needs), not all of these are actually estate assets: and some surprising things emerge to form part of an estate that might not have been considered when the thought that “I don’t have enough assets to make it worth having an estate plan” goes through your mind.

For instance: if you own property that is held in joint tenancy with others, that property will not form part of any estate until the last survivor dies; whereas, if you are a tenant-in-common with other co-owners, your portion of the property value will form part of your estate. This particular circumstance can arise in unusual circumstances – and you should be aware when somebody else has named you as a tenant-in-common so that you can make proper provision in your Will for that property.

Another asset that people tend to overlook, is the value of their superannuation account, particularly younger people. What they tend to overlook is that most employer-sponsored superannuation funds provide for a level of Life Insurance which, on the death of the member will pass to either their nominated superannuation death benefit nominees – or in absence of a nominee, to the estate. If there is no estate plan (or at least a Will), this can lead to some perverse and undesirable outcomes.

We have published articles in our website Library regarding the problems of not leaving a Will: they include “Consequences of dying intestate”; and “Invalid Will negates Estate Planning”. Our Estate Planning Services Page is also a good introduction to this topic.

The consideration of Estate Planning for you and your family nicely leads into the ‘overlooked’ service that we would like to remind you about in this issue – ‘Intergenerational wealth management’.
ContinuumFP services – a reminder:
Intergenerational wealth management – particularly helpful for families who have accumulated (or who are accumulating) significant wealth, but who are aware that their prospective beneficiaries are ill-prepared to deal with the capital that will flow to them (and we also assist such families where the next generation is accumulating their own substantial asset base).

That's it for this month: please feel free to comment on any of the items, or to request particular topics to be presented for future editions. 

The Team at
Continuum Financial Planners Pty Ltd

Remember that we are taking on new clients at present: we offer the initial appointment to prospective new clients at no cost to them - and no obligation to commit to working with us. Once an engagement is confirmed, we work on an agreed fee for service basis. We welcome your contact to pass on names and contact details to us for potential clients; or to let us know about referrals you have made directly.

If you know of anybody who may be interested in the topics raised herein, or in the articles we have linked within this newsletter, please share the link with them: we would also appreciate you sharing the link on any social media channels you use. The buttons at the top of this eNews are directly linked to the most popular social media platforms.
Brisbane
LOCATION MAP

Continuum Financial Planners Pty Ltd
2042 Logan Road

Upper Mt Gravatt Q 4122
Phone: 07 3421 3456
Fax: 07 3421 3400
NOOSA
LOCATION MAP
McAdam Siemon Pty Ltd
Suite 12 Noosa Central
4-12 Bottlebrush Avenue
Noosa Heads Q 4567
Phone: 07 5474 8992
Fax: 07 5474 8954
WARWICK
LOCATION MAP
Paul Ashton & Associates
2 Alice Street
Warwick Q 4370
Phone: 07 3421 3456
Fax: 07 3421 3400

 
DISCLAIMER: The information contained in this newsletter is general in nature and does not take into account personal circumstances, financial needs or objectives. Before acting on any information, you should consider the appropriateness of it and the relevant product having regard to your objectives, financial situation and needs. In particular, you should seek appropriate financial advice and read relevant Product Disclosure Statements or other offer documents prior to acquiring any financial product.
Copyright © 2016 Continuum Financial Planners Pty Ltd, All rights reserved.


Continuum Financial Planners Pty Ltd is a Corporate Authorised Representative of Securitor Financial Group Limited ABN 48 009 189 495 | AFSL 240687 Level 8, 260 Queen Street, Brisbane QLD 4000


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