Bronson Financial Services » Financial Planning

Changes to bank lending

admin — Wed, 09 Mar 2011 04:36:31 +0000

Early in February a change to mortgage lending rules came in that I think requires a bit of discussion – its also worth bringing up as many people still don’t get that bank lending practices are a key determinant in the growth of the value in residential property.

Under the changes, anybody over the age of 40 who applies for a mortgage on their principal place of residence will need to demonstrate how their mortgage will be fully repaid by the age of 65 either from their superannuation (not a very good move in my opinion) or from other assets.

The new lending guidelines mean that anybody who cannot show how they will repay the loan without selling their house by age 65 will not be approved for a loan.

The impact of this is that people in their 40’s tend to upsize to bigger houses etc, many taking on 25 year loan terms because it makes the mortgage more affordable. This option will may no longer be available.

A person of 45 will need to demonstrate that they will have their loan paid off in 20 years – maximum, a 50 year old in 15 years. I think this may reduce the number of people looking to buy, less buyers may lead to price pressure, hence lower growth.

Actually if memory serves correctly back in the day when bank managers knew your name and your details, this was how lending was done. Deregulation and competition changed this, loans were given out to all and sundry, property prices went through the roof (as did other assets) and we had a little thing called a global financial crisis.

I do not think this will prevent us from another “GFC” type event, but sensible lending guidelines should help, but I think there may be a bit of pain for many along the way.

I also suspect that many people who thought their house would be used to help fund their retirement living costs may need to re-evaluate, particularly if property values growing at the levels we saw from 2000 – 2005 are the basis on which these plans have been made.

If you do have any questions about this or would like to know more about us, please email me at admin@bronsonfs.com.au or give us a call on (07) 5577 8653

Please Note:

This publication has been prepared to provide you with general information only. It is not intended to take the place of professional advice and you should not take action on specific issues in reliance on this information. In preparing this information, we did not take into account the investment objectives, financial situation or particular needs of any particular person. Before making an investment decision, you need to consider (with or without the assistance of an adviser) whether this information is appropriate to your needs, objectives and circumstances. This information is provided for persons in Australia only and is not provided for the use of any person who is in any other country.

Australian Share Market Update, February 18th, 2011

admin — Sun, 20 Feb 2011 22:36:03 +0000

The All Ordinaries index gained 0.1 points to end the day mostly unchanged at 5,026.1.

SIMS Metal Management Limited (SGM) gained 2.1% to close at $19.34 after reporting first half net profit after tax of $49.3m, 23.6% higher than 1H10. SGM declared an interim dividend of 12cps, 20% higher than the pcp.

ANZ Banking Group Ltd (ANZ) ended the day 2.9% lower to close at $24.89 despite reporting a 27% increase in first quarter profit to $1.4bn. The group’s first quarter performance was slightly weaker than the market expected, with softer than expected revenues/pre provision profit offset by lower-than-expected bad debts.

Major stock rises:

Billabong International Limited (BBG) $8.51 +6.38%
Myer Holdings Limited (MYR) $3.37 +3.37%
Harvey Norman (HVN) $3.03 +3.06%
QBE Insurance Group (QBE) $19.04 +2.81%
OneSteel Ltd (OST) $3.01 +2.73%

Major stock falls:

ANZ Banking Group Ltd (ANZ) $24.89 -2.96%
Aquarius Platinum Limited (AQP) $6.56 -1.80%
Caltex Australia Limited (CTX) $14.32 -1.65%
Leighton Holdings Limited (LEI) $31.37 -1.32%
Macarthur Coal Limited (MCC) $12.36 -1.28%.

If you do have any questions about this or would like to know more about us, please email me at admin@bronsonfs.com.au or give us a call on (07) 5577 8653

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Australian Share Market Update, February 4th, 2011

admin — Fri, 04 Feb 2011 07:06:38 +0000

The All Ordinaries index gained 39.5 points to end the day 0.8% higher at 4,958.8.

QBE Insurance Group (QBE) gained 7.4% to close at $18.20 after announcing the acquisition Bank of America’s wholly owned subsidiary Balboa Insurance Company, in addition to entering into an initial ten-year distribution agreement with Bank of America for lender placed and voluntary homeowners, contents, motor and other related consumer lines and associated services for an upfront payment of US$700m.

Insurance Australia Group Ltd (IAG) ended the day 0.5% lower to close at $3.73 after announcing the group’s maximum exposure to Tropical Cyclone Yasi will be $125m.

Major stock rises:

• QBE Insurance Group (QBE) $18.20 +7.44%

• Aristocrat Leisure Limited (ALL) $2.99 +3.46%

• Aquarius Platinum Limited (AQP $6.19 +3.34%

• Tabcorp Holdings Limited (TAH) $7.33 +3.09%

• JB Hi-Fi Limited (JBH) $19.08 +2.97%

Major stock falls:

• Paladin Energy Limited (PDN) $5.21 -2.43%

• Fairfax Media (FXJ) $1.38 -1.43%

• Ramsay Health Care Limited (RHC) $17.25 -0.92%

• Oil Search Limited (OSH) $6.60 -0.90%

• Qantas Airways Limited (QAN) $2.41 -0.82%.

If you do have any questions about this or would like to know more about us, please email me at admin@bronsonfs.com.au or give us a call on (07) 5577 8653

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Superannuation – Who has enough?

admin — Thu, 27 Jan 2011 02:32:16 +0000

A survey was released a year or so ago by AMP highlighting the shortfall Australians have in their superannuation savings with approximately 31% of all Australians being on average 11% behind in their savings needs.

While many will be quick to point out that we have recently seen a fairly significant fall in the value of global share markets, I think that we all need to look at ourselves and ask why this is the case – as I would contend that either I see more people unprepared for retirement than the average financial planner or that maybe these statistics understate the real issue.

What I find is that until a person is faced with their actual retirement date – be it as a result of retirement, illness or redundancy, most people just don’t care.

However tell a person that there is only 6 months left until they retire and all of a sudden they cannot stop thinking about how much (or little) they have put away. The reality is of course that by then it is just too late.

I was talking with a 36 year old male today who made the comment that retirement is so far away that he would rather use his super now. This of course gets me thinking what would you do with it now?

Spend it? Maybe, but I am not sure a new flat screen television will keep you fed when your income does not come in.

Invest it maybe? That’s a good idea, what would you invest in – shares, property, term deposits – the same thing your superannuation invests in – but without the taxation advantages.

If you take the time to look at your superannuation and realise that it is one of your most important investments you will ever have, you will see how if you do take the time to review your portfolio with your adviser on a regular basis that it is something you can be involved in and have an influence on.

If however you take the ostrich route and keep your head buried in the sand, then you will only have yourself to blame when you realise that you have just received your last pay cheque and financial oblivion is not too far away….

If you do have any questions about this or would like to know more about us, please email me at admin@bronsonfs.com.au or give us a call on (07) 5577 8653

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Your Personal Risk Management Strategies

admin — Thu, 27 Jan 2011 02:26:41 +0000

Much has been written recently about how to restructure investment portfolios and what to do with your money given the current turmoil surrounding investment markets.

Some of this has been good advice, some a bit questionable. But it does however highlight the need for strategies to

a) cope with the unexpected; and

b) to minimise your own risks in life.

A lot of time has been devoted to retirement incomes and how we all need to save for our own retirements – but what if you don’t get there, or get sick or injured along the way – I know it probably won’t happen to you, but it will more than likely happen to the person sitting next to you.

Consider the following:

In 2006 one of the country’s leading insurers paid out over $136m in claims.

Of that 50% was for death claims with the youngest claimant being 19 years of age.

The other 50% was paid out to those who will either never work again or were off work for an extended period of time.

Some sobering stats – the youngest Income protection claimant was 20.

The youngest Critical illness claimant was 27. More than 82% of these claims were for cancer, heart attack or stroke.

So I ask you, when you have your first heart attack, what are you going to lose, the house or the mortgage?

You see not only do we develop strategies to increase our wealth, but we also need to look at ways to protect it – after all take away your ability to earn an income and your plans will fall apart.

If you have not looked at your personal wealth protection portfolio over the last 3 years, now is the time to do it, – why I hear you ask – because no insurer will look at you once you have your heart attack.

If you do have any questions about this or would like to know more about us, please email me at admin@bronsonfs.com.au or give us a call on (07) 5577 8653

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Retirement – Are you ready?

admin — Thu, 27 Jan 2011 02:23:07 +0000

It’s not hard to lose a couple of hours daydreaming about THE TRIP whether it be touring through Europe, or tripping round Australia caravanning under the stars surrounded by miles of emptiness. Most of us hope to do such a trip when we retire along with the hobbies and activities that so far have been pushed aside as we grapple with the mortgage and the school fees.

But how well prepared for retirement are you? It’s never too early to start planning so if you haven’t thought about your retirement yet, here are a couple of facts to get you thinking ….

Surprisingly Australians are one of the world’s greatest investors, beating the Americans, the French and the Swedes in the investment stakes. But we still fall short of the investment needed for a comfortable retirement. If you wanted to retire on a comfortable income equivalent to about $48,000 in today’s terms you need a lump sum of at least $600,000. How do you compare? The average super balance for those over 60 is about a third of what investors need to comfortably retire on. You may need to save more than you expect.

I’m not sure how the Americans, French and Swedes intend financing their retirement but for us Aussies, super is an excellent incentive to save. It provides great tax benefits and it’s also convenient because it’s compulsory and often done automatically by an employer. Super gives you access to a wide range of investments and as a long term investment, it has time to grow. A long term investment strategy also helps smooth the highs and lows that inevitably occur with any quality investment.

Retirement doesn’t happen overnight yet I am still amazed at how many people are financially unprepared for this major life event. For those aged 45 and above, on average 42 percent of their wealth is tied up in the family home with only 17 percent of their wealth held in super. Your home is a worthy asset, but bricks and mortar don’t pay the bills – that is unless you intend selling the family home. Take an active role in preparing for your future by creating an investment plan. Planning investment strategies to suit your circumstances will give you flexibility and choices in your retirement. It’s a good idea to do your homework but with so much information around … where do you start?

From our research we know most people want to learn more about investing and planning for their retirement. Almost one third of Australian use a financial planner, and 84% of those who saw their financial planner in the last 12 months said they were fairly confident they would have enough money to retire on. As a professional, it’s our job to keep abreast of investment information so we can advise you on setting your financial goals, superannuation, retirement planning, managing debt and much more.

So, if you haven’t had a chat to a financial planner about your future, now is as good a time as any to pick up the phone and make that appointment.

If you do have any questions about this or would like to know more about us, please email me at admin@bronsonfs.com.au or give us a call on (07) 5577 8653

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Who gets financially stressed?

admin — Thu, 27 Jan 2011 01:44:42 +0000

With rising interest rates and increasing costs of living, we are being bombarded with stories of gloom and doom as families increasingly battle to feed the kids and pay the mortgage.

We could be forgiven for thinking this is a relatively new phenomenon seemingly happening because of events happening around the world today. However a quick check of the Australian Government’s Insolvency and Trustee Service of Australia statistics shows bankruptcy figures have been steadily increasing over the last 20 years regardless of the economic climate on the day. Twenty years ago there were 7,534 bankruptcies Australia wide. This had increased to 25,961at the end of the last financial year, yet today’s average household wealth is considered to better than ever.

Just about everyone has found themselves in financial difficulty at some stage of their life. Some people manage to work through their financial obstacles and come out all the wiser from their experience. However some people’s money habits never change regardless of their financial experiences and as a result find themselves financially out of control. What causes people to get into debt?

An ANZ study found that unhealthy ways of financial thinking played a major key role in people getting themselves into financial difficulties. Living for today where spenders ignore the consequences of their spending, aspirational spending where people attempt to ‘keep up with the Joneses’, people spending to make themselves feel better, and people relying on credit to provide a lifestyle but somehow forgetting the credit cards need to be paid back at some stage are causing people to live financially unhealthy lives.

It’s no surprise to learn from the study that unemployed households with incomes less than $15,000 per year felt financially out of control. What was a surprise however was the large number of university educated and skilled households earning an income of more than $90,000 annually who also felt financially out of control. Perhaps this last group particularly feels the need to aspire to a certain lifestyle.

There’s nothing wrong with having goals and dreams of where you want to be but take control of your financial health by engaging the services of a financial planner. A financial planner will help you to develop a savings and investment plan to build long-term wealth and help you to protect your assets. Good financial advice can play an important role in everybody’s financial wellbeing regardless of whether they are entering or leaving the workforce, and research shows that those who engage in a financial planner are better prepared and feel more in control of their finances.

If you do have any questions about this or would like to know more about us, please email me at admin@bronsonfs.com.au or give us a call on (07) 5577 8653

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Women Managing Money

admin — Thu, 27 Jan 2011 01:38:39 +0000

I had a bit of a flick through the Financial Literacy Foundation’s recent report Financial Literacy Women Understanding Money and came across some positive results for women in general.

The report confirmed what is already well known about the ladies, that is that the fairer sex have budgeting and saving habits down pat. It is a well known industry fact that women control over 80 percent of household spending and influence 99 percent of household purchasing decisions. It was no surprise then to read that women in general are highly confident in their ability to budget, their ability to save and their ability to manage debt. This is good news for the ladies because good budgeting and saving habits are vital steps for good money management.

It was also no surprise to read that the ladies tend to let themselves down a little when it comes to their retirement planning. Many said they hadn’t thought about their long-term financial plans for their future and retirement or considered retirement to be too far away for them to think about. The real worry however was that some of them felt financial planning was only important for those who had lots of money. I’m not quite sure how much “lots of money” is, but every woman needs to take responsibility for her financial planning regardless of how much or how little money she has.

The real worry about the ladies’ retirement planning is that over a lifetime women on average earn less, have lower super balances, broken work patterns often because of family commitments and statistically speaking live longer. Because of these trends, long term retirement planning should be a must for all the ladies, not one of those jobs that they will eventually get around to.

Interestingly the report found women are very confident in their ability to get information about money with a majority having sought financial information from professionals such as a financial planner, accountant or banks. Even better, women are more likely than men to consider getting information and advice to help with the financial management. It’s a bit like women’s insistence on asking for directions when lost in comparison to the blokes who insist on driving around, in circles if they have to, rather than admitting that they need help!

The ladies do feel a bit intimidated when it comes to complex issues like investing or understanding financial language. This is a bit of a wake call for us in the financial planning industry to ensure that we speak in every day language and not financial gobblygook , an easy habit to get into when you are surrounded by financial staff every day.

Overall women make great clients. They’re thirsty for knowledge, willing to consider all options and fiercely loyal when they find someone they trust. If you’re looking for someone you can trust, that’s interested in your financial needs, then give us a call on (07) 5577 8653.

If you do have any questions about this or would like to know more about us, please email me at admin@bronsonfs.com.au or give us a call on (07) 5577 8653

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Teenagers and their money

admin — Thu, 27 Jan 2011 01:31:10 +0000

Remember the days when you knocked on the neighbours’ doors after school offering to wash the car or do the babysitting for a few bucks in the pocket. Those days are long gone with many teenagers today juggling formal part time work alongside their education. A recent survey noted that nearly half of those aged up to 19 and studying full time were also in paid work.

It’s good to see many of the younger generation are out there working and learning about responsibility. Some of today’s teenagers however are earning a sizeable income with Australian Bureau of Statistics showing year 12 students are today receiving an average of $245 a week. That’s a far cry from a few bucks earned from Dad for washing the car back in my day.

I’m not sure why the Y generation isn’t called the I generation given the amount of i-gadgets and i-gizmos in the market place, but regardless of whether you think they are the “Y” or “I” generation, a Commonwealth Bank survey[1] found many of these young Australians have no plans to save or budget, yet most of them still plan to buy a car or go on an overseas holiday.

What’s frightening is that nearly three quarters of those surveyed had some form of debt, with around half not concerned about their debts stating they do not let the amount of debt they are in affect their daily lives. While the easy availability of credit is causing some problems, it seems that mobile phones consistently seems to top the list for causing debt. It makes you wonder how important those gadgets are …. but I digress.

The good news is that young people are keen to learn about managing their money. The report Financial literacy: Australians understanding money by the Financial Literacy Foundation noted that the majority of teenagers want to learn about budgeting, saving and managing debt and see leaving school as a significant milestone in which they can start gaining control over their finances.

So if you have a significant young person in your life, or you happen to belong to the Y generation, it’s never too early to start down the path of managing money. Start surfing, web surfing that is, because there lots of great websites full of ideas and practical tips that set young people on the right path to managing their money. The Financial Planning Association for example has created Dollarsmart, a web based and CD financial toolkit for teenagers to help improve their financial skills and give them confidence when dealing with financial matters throughout their life.

It might also be of use to start looking for a financial planner who can help you on the road to accumulating enough assets so that you get to decide when work becomes optional. A good place to start is with the planner your parents use, check the websites and make a few calls, it could be an excellent investment for you to make.

If you do have any questions about this or would like to know more about us, please email me at admin@bronsonfs.com.au or give us a call on (07) 5577 8653

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Self Managed Superannuation – Is it for You?

admin — Thu, 27 Jan 2011 01:20:06 +0000

Articles regularly appear the financial press about the growth in Self managed Superannuation funds (SMSFs) and the fact that many people do not understand the requirements placed on them by the legislation and indeed whether or not it is actually appropriate for an investor actually hold their superannuation funds in such a vehicle.

Now what must be stressed first and foremost before we go any further is that superannuation is not an investment – it is a legal structure for holding investments on behalf of the investor until the investor has reached retirement.

Therefore comments about how good an “investment” superannuation is actually reflect a lack of understanding by the commentator on the topic. The same investments that appear in a superannuation fund (whether it be retail, industry, wholesale or self managed) can basically be owned by an individual – shares, property cash and fixed interest investments.

What I see happen is that a person gets “advised” that a Self Managed Superannuation Fund is the best way to hold their assets for retirement. Now this might be the case and in all reality you should have a long discussion with your Financial Planner about the appropriateness of such a legal structure. You also need to look at the costs involved and whether you have the skills, interest and desire to manage the investment process along with all the other things you do with your life.

While there are many stories of people who have managed their SMSFs quite successfully and have actually been able to grow their funds better than if they were invested in another option, I put to you that there are far more who have gone nowhere and in fact have destroyed any chance of a comfortable retirement by taking on a job they cannot really do.

Let me share with you 4 stories about actual people who owned Self Managed Super Funds and could not understand why they did not make much money (please note that these people are not clients, but people who have passed through our practice over the past couple of years):

Case 1: Client was short of cash, had recently lost a court case so he took $50,000 out of his fund to pay his legal fees – there are so many breaches there that I shudder to think to how this fund could pass an audit.

Case 2: Client gets told by a mate that he should look after his own superannuation, as he will get better returns. End result client rolls over his $25,000 into an SMSF at a cost $3,500 to set up the fund, does nothing for 2 years and wonders why his superannuation goes nowhere. At the age of 50, this person has problems.

Case 3: Client sets up a Self Managed with $300,000. Puts the cash into a cheque account for 3 years. When I asked why, the client said he did not know where he should invest the money and could not be bothered learning about the stock market. Hello, don’t the words self managed mean anything to you?

Case 4: Another client set up a fund with about $80,000 and then proceeds to put all the funds into a wrap account. The wrap account has fees of about 1.6% of the balance and the client pays accounting fees of about $1,500 per annum. Why bother?

So before you get involved in the hype you really should talk to a Financial Planner who works in this area as I have not even touched on any of the other issues and obligations that you take on as a trustee. SMSFs – good for some, but maybe not for all.

Please note if you would like to learn more about Self Managed Superannuation, please send us an email to admin@bronsonfs.com.au and we will send you a copy of our e-book – Self Managed Superannuation – is it for you?

If you do have any questions about this or would like to know more about us, please email me at admin@bronsonfs.com.au or give us a call on (07) 5577 8653

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