life insurance misperceptions

New research has revealed the extent to which Australians have misperceptions about their life insurance and are consequentially setting themselves up for disaster.

Zurich today released research that has exposed a ‘misinsurance’ gap in the Australian market and shows that many do not understand what they are and are not covered for through their superannuation-based life insurance.

Called Misinformed, Misinsured? the research polled 394 employed Australians in order to pinpoint what they believe they are covered for through their life insurance, and how this aligns with their own stated risk priorities.

the results are concerning.

“We’ve seen a massive explosion in self-service insurance, and similarly we’re seeing a lot of people that have insurance automatically given to them through superannuation,”

“One of the conclusions is that this is lulling people into a sense of false security. There’s an opportunity for providers at every point to provide education to consumers.”

Almost 80% of those surveyed said they had never conducted a needs analysis of their own life insurance; and big misperceptions included assuming a super fund life policy covered trauma, which it legally can’t, and a complete lack of knowledge about the salary continuance cover offered by a superannuation fund.

“Super funds give a degree of cover that is not tailored to your circumstances, it’s more of a formula,”

 “People assume that the amount they’ve got is the right amount for them, but generally it isn’t because it’s not based on their personal circumstances.”

One important finding to come out of the research was misperceptions about salary continuance cover due to personal illness or injury, which was particularly worrying considering participants’ levels of savings.

Generally income protection will kick in after a three month wait,  however a majority of respondents (38%) said they would survive financially for just one month if they were forced to stop work after injury or illness, before needing to start selling assets.

“A significant proportion of people assumed it was a two week wait or less – so they’ve badly underestimated it,”

a number of participants believed that their super fund insurance covered things like visits to the optometrist and the dentist.

“We’ve got people thinking they can go and get their teeth fixed.”

Advisers are faced with a huge opportunity to educate and help Australian’s to cover themselves correctly.

“There’s no doubt that from an adviser’s perspective this demonstrates that the need for quality advice has never been greater.

An article we just read that may motivate you to contact us for a life needs analysis for your own' peace of mind'.

We could also send you several insurance companies claims paid out for the last year to prove to you that they do pay out so as you can maintain your lifestyle.

Recall  'if we were in your position what would we do so that you are better off in three years time.'

You can call us now on 07 3848 1088 or email us or visit our websites.

John McAuliffe

Lifters not Leaners

 Robert Menzies' immortal phrase, ‘lifters not leaners,’ Mr Abbott told journalists when he was clarifying 

‘Kiwi workers living in Australia will not be entitled to broader welfare benefits, despite them paying local tax’.

We have more than once reflected when flying across the ditch that Australia is not the only ‘lucky country’.

 In fact we have that thought when flying back from several Asian countries.

This week we asked Kim who has two children in Thailand, why would you borrow 500,000 for a house here when you can buy a house there for 50,000?

Will Australia remain lucky?

If the faithful & it has to be faith that keeps voting in another union solicitor then ‘good luck’ as we don’t need another one to hold us back in the 19^th century. It would be fascinating to know what these union heavy weights get paid.

 Surely workers @ Toyota & SPC Ardmona would have been prepared to have forgone entitlements rather than lose their jobs. Apparently some judge Mordy Bromberg says that the workers can’t vote on such matters. A strange decision & probably jumping to a law written by union solicitors ‘fighting for Fair’.

So who are the lifters?

You are.

Do you really want to waste your funds on the leaners?

Where does your taxx go?.

If you need any encouragement to look after yourself then consider

ALMOST one third of Australians expect a large financial shortfall at retirement, a private survey has found.

How are you going so far?

And again from the Courier Mail

THE true cost of buying a house in Australia is more than $1.2 million.

Yes it is a multiple of what you borrow.

After 29 years in financial services it is worse than this as everyone increases their debts to buy cars, renovate the house , take overseas trips & pay school fees & survive through redundancy.

I.e. it is a bigger multiple.

So what do we suggest?

 Ann  who is an accountant emailed us recently.

Hi John

It is time I revisited my financial plan.

Could we catch up on 3rd or 4th January?

Thanks

You could too & yes we do help all including Pat & Lea who definitely didn’t get any advice from their industry fund . You get what you pay for.

They needed advice as Pat is past retirement age & still with a mortgage which is charging more than their funds are earning.

i.e. a very simple debt reduction strategy & eliminated taxx to zero on Pats super .

Pat & Lea will always have the faith & they also have faith in us.

Mary called us this week as her industry fund only pays her for 2 years if she is disabled.

Then what?

 ‘Centrelink is useless ‘she says. We viewed Landline on 9/02/14 & a farmer dumped the paperwork he had to complete. It was a weight.

Mary is very concerned if she can’t work as she still has 177,000 mortgage & ‘what if?’ is of major concern to her. It would take her more than 2 years to pay off the mortgage.

We proposed several solutions to Mary including a solution not out of her cashflow & another non financial holistic solution.

 We help the lifters have a fair go.

You are welcome to call us on 07 3848 1088 or email us  or contact us through our websites as Ann & Mary did & others do.

They are very pleased they did & voted with their money.

Remember ‘ If we were in your position what would we do so that you are better off in three years time?

It costs not to as we discovered with the orthodontist.

John McAuliffe

Why does Lleyton 'reside' in the Bahamas ?

‘Com’on’, ’ Com’on’

‘Why does Lleyton 'reside' in the Bahamas? ‘

We note that his total prize money from his matches is $20 million+.

Would he have kept much of that if he resided in Australia?

He & his advisers  would have studied  TAXATION RULING IT 2650

Com’on, Com’on.

It must be the taxx that Lleyton would pay if he was to reside here.

Our guess when we saw in win against Roger @ Brisbane was he won over 180,000.

i.e. he would pay 57,300 from the ATO calculator if a normal individual tax payer.

The marginal tax rate is 45% over 180,000.

That is a serious amount to waste, maybe paying the nearly 900,00 on disability benefits & a similar number of unemployed. 

As Lleyton said at his post match win ‘he doesn’t train hard all week just to turn up’.

No doubt Lleyton doesn’t win just to waste it in taxx.

You can’t waste your taxx either. However off to the Bahamas is not necessary to minimise yours & we said minimise your taxx.

There are strategies available to you to do so.

However they all depend on your cashflow.

We played the cashflow game for kids recently & it is VERY worthwhile for you too.

Ask us when is the next cashflow  game?.

I.e. how much do you need to live on & meet your lifestyle & other commitments.

The objective is to escape the ‘rat race’.

That  might depend on your age.

If you are under 55 then super maybe a way to maximise as you pay 15% on contributions & 15% on earning in the fund. That might be good for you but only if you are earning more than $37,000.

The only acceptable law that the Red Queen & her court passed was to refund that 15% contributions taxx to those on less than 37,000.  Joe take note as you will need every vote next time. 

However if you are over 55 then why pay that 15% taxx on earnings as it can be a big bite, maybe $2,000, if you look carefully at your annual super statement. 

You don’t need to.

If you are over 60 then you certainly should review your position & certainly before government changes in January 2015.

We were reading yesterday that it is governments & reserve banks that create ‘systemic risk’. i.e. when there are ‘asset bubbles & crashes’.  

They also create ‘legislative risk’ which is a legitimate reason to be circumspect of adding too much to your super.

 There are global examples of government interfering in your super & confiscating your super if ‘lost’ is a very current 740 million  example. Another is the 640 m from bank accounts.

 We are only trying today to use the right form to do so from the ATO for Pat who is aged 70.

Thomas aged only 19  recently pointed out that he would NOT be able to access his super until 67 or maybe 70.

 Ann, an accountant on not quite Lleyton’s earnings recently rightly rejected rental property. She wants to build a portfolio outside super & its government risk.

As everyone is different then the first step to the solution to your problem is lunch here.

A recent visit to the orthodontist reminded us that an x-ray is essential as you never know what the real position is. Also the earlier it is the cheaper it is.

If we were in your position what would we do today so that you are better off in three years time.

We have wondered what Stan has tattooed on his arm.

Call  today 07 3848 1088  or email or visit our websites  as others do.

John McAuliffe

Never underestimate the Power of Income

Yes that was the key message we were reminded  from Matt who speaks on Sky & a key man for Perpetual, a very major fund manager.

We had heard it before & being reminded was very useful. In fact we have written about it before.

The question always is where is the best place to invest?

The answer always is ‘it depends’.

Two important variables are ‘how long?’ & what is your ‘risk appetite’. 

What can we invest in?

Really there are only four major classes: gold, cash, property & shares.

Yes they all have subsets such as property with residential, office, commercial, industrial, international…

Then there is the time frame . 

If it is for a short term then cash is where we go. i.e. cash, term deposits via banks or bonds from corporates or governments or institutions.

Investment has two outcomes growth & income.

As Matt said & as Rich Dad, Poor Dad wrote.  [A compulsory book for you to read we might  add].

Assets produce income & liabilities cost you. 

Gold doesn’t produce an income & the reason why Warren Buffett doesn’t invest in gold.

Your home doesn’t produce an income & Rich Dad Poor Dad teaches you why that is so.

Very simply your home costs you maintenance, & the interest is bad debt & non deductible. So are the costs of insurance , rates, tradesmen….. There is opportunity cost where your equity could be elsewhere invested

‘A house is like a spouse; it requires money & maintenance.’

Your home is a liability. It is a lifestyle.

If we consider  so called investment property then in most cases the cashflow is negative. So it too is a liability & we have argued that unless you make a nominal 100K over time then you have gone backward.

Let’s look at what Matt demonstrated with both growth & income being the total return.

He took it over a long period of time from the end of 1974.

Gold returned only 14 times the original investment.                       [It pays no income.]

Cash  returned only 20 times.                       [ It does not  grow & the income is variable.]

Residential property 48 times.                 [Matt stated that the costs are 70% of income]

Listed property trusts returned 102 times.        [net income is higher as costs are lower]

Equities produced 180 times.              [profits grow & reinvested which increases prices &      dividends]. [Yes there are industrial shares & resource shares…  but let’s keep it simple.]

 Matt stated that we have the same results over any such long time period.

[The assumptions are very rigorous  & from sources such as RBA & UBS & REIA.]

Yes we can make all the emotional comments which is reflected in our ‘risk profile’.

Investments are like the tides & relationships. They go up & down.

We read today that retirees who have 700K to 1 million houses have on average 200K in their super.

What is 200K or even 500k going to provide in retirement income to you?

Not today’s lifestyle which is why we need to not underestimate the Power of Income.

i.e. asset rich Income poor.

There is too much emphasis on growth. That's impatience.

Remember we as a booming baby expects to  have a long investment horizon of 30+ years.

As we have also read simply reinvesting the income back into the asset & not spending it makes you money over a longer time.

The income & the tax refund is the portfolio & not yours to spend.

 Let’s do it.

‘If we were in your position what would we do so that you are better off in three years time.’

·         We could discuss that your super is not an asset. However if you qualify we might turn it into an asset.

·         We could discuss turning your home into an asset & switching your debt into good deductible debt.

‘It's your responsibility to save so you can enjoy a good standard of living in your retirement’.

You are welcome to call us on 07 3848 1088 or email us or visit our websites.

John McAuliffe

The creators of a new reality TV show featuring financial advisers

The creators of a new reality TV show featuring financial advisers hope the show will do for advisers what MasterChef did for chefs – boosting our profile even if we don't appear on the show. 

The show, Your Best Interests (YBI), goes into pre-production next month and is set to air early 2014.

Negotiations are currently being held with free-to-air channels, which the show’s creators – evolution media group (emg) – declined to name due to commercial sensitivity.

The series will pair Australians currently facing a life-defining moment with financial advisers who can help them. Creators say a broad audience will get to see what advisers do and the value of advice.

“The public traditionally have a poor understanding of what advisers do. Advisers are not understood. But advisers change lives, it’s very, very emotional stuff,” emg managing director Marcus Field told Wealth Professional.

A recent survey  found only 15% of Australians use a financial adviser.

The show, which embeds advice into real consumer story lines, will have an “entertainment core”, said Field.

“Often the life events that prompt people to seek advice – such as marriage, buying a new home or being made redundant – are the events that bring the greatest emotion. This makes good TV.”

According to Field, the eight to 10 advisers featured will become celebrities with significant public profiles.

But advisers in general will gain a boost, much in the same way cooking shows have popularised the chef profession, said Field.

“Hopefully YBI will do for advisers what MasterChef did for chefs.”

The series is complemented by a web version of the show, featuring around 30 to 40 smaller story lines over the course of the year. The Association of Financial Advisers is collaborating, and AFA members will be represented on the show’s website.

AFA chief executive Brad Fox called the series a “game-changer” in making the public aware of what financial advisers really do.  

There has already been great interest in the series, with 93 applications from consumers wishing to appear on the show. Forty-six advisers – chosen from a recent AFA conference – have been through casting calls.




We aren't on the show yet but we have been helping & advising since 1984

You are welcome for lunch as a first step

 John McAuliffe