Author: Kristy Coulin
Having worked for more than 15 years in the Financial Planning industry, I have heard many popular myths as to why people don’t need specialist advice. So, I want to take this opportunity to bust some of these wide open and focus on the top three financial myths I’ve encountered lately.
Case 1: The Investment Client
“When I have money to invest, I’ll come and see you”
A common goal for many new clients is to accumulate wealth for their retirement and children. This discussion tends to focus on Superannuation accumulation first, as it is often the largest asset people hold.
Whilst discussing asset classes and how you can invest in each of these sectors, people start getting excited. Many are not previously aware that they can change how their Superannuation is invested and tailor it completely to your situation (depending on your fund).
Many might not also know that investment options are available outside of Superannuation. You can establish an investment account via a platform and invest in shares, managed funds or exchange traded funds – or you can invest in these same investments directly.
One client was excited about changing their Superannuation investments to improve capital growth potential and then said, “personally, in the next 12 months, I should be able to save a bit of cash. So, when I have $50,000 – $100,000 available, I’ll come and see you to get advice around investing these funds as well.”
It’s a myth that in order to have an investment portfolio you need a large lump sum. In fact, the opposite is true. You can start an investment account with a balance as small as $2,000 and deposit regular amounts as little as $200 per month. We actually consider these regular deposits to be more important than your initial investment as each dollar is averaging the cost and compounding the income, which has the benefit of faster capital growth compared to if you were to wait to invest. It also reduces the risk of trying to time the market.
Many people wanting to accumulate wealth save into a bank account set aside for their children’s education or house deposit. However, as interest rates are at a record low, leaving funds in cash or term deposits offers little long-term growth. Alternatively, by investing these funds in suitable investments you have the potential for capital growth as well as receiving investment income.
Those who have utilised this strategy are usually pleasantly surprised to find that they save so much in one year and that their account balance had grows significantly more than expected. One client was even able to accumulate enough in their account over 10 years to give their two children enough for a house deposit.
Case 2: The Insurance Client
“I have insurance in place if I die, that’s all I need”
It’s simple enough to understand that Life Insurance is paid when you pass away. But did you know most people who hold Life Insurance are significantly underinsured? *
A large portion of the insurance cover held by Australians is default cover inside of Superannuation, which tends to remain unchanged by the member for the life of the account.
At NFPG, we are passionate about educating our clients on the different cover available and what the purpose of each is. If you cannot clearly identify what you require; you are at risk of not only underinsuring yourself but also paying premiums for insurance you may not need.
One client recently said that they had $500,000 of Life Insurance in place so they were sorted – they didn’t need any further cover.
After advising them on other personal insurance available, such as Income Protection, Trauma and Total and Permanent Disability, they soon realised they weren’t as sorted as they thought.
As the sole income earner supporting a partner and two young children, if they are unable to work due to an accident or illness, the whole family’s income and lifestyle disappears.
This realisation was a light bulb moment for the client, and they were determined to protect their family so and have peace-of-mind that they had the necessary cover in place.
The second part of this conversation was Trauma cover. From our experience, Trauma is one type of insurance most clients feel is unnecessary. However, it generally has the highest claim rate. The more environmental and lifestyle evolution contributes to critical illnesses, the greater the probability that you may need to rely on Trauma cover.
Insurance is an expense we all hate paying for. But why are so many people prepared to insure material items like their car or house so readily when you and your earning capacity are just as, if not more, important?
Case 3: The Centrelink Client
“I just need help filling out the Age Pension Application, I don’t need any advice”
We can all agree Centrelink can be difficult to deal with. We receive many enquiries from people who just want someone to fill out the forms for them and get their payments started.
For a Financial Adviser to do their due diligence, we need to review the client’s overall situation and provide advice which would include their request to apply for Centrelink.
At this point, a client might say that they just want help with the application – not financial advice. However, they may not know that certain assets are exempt from Centrelink, and by simple rearrangements to their current assets, they can ensure their long-term goals are met, whilst increasing their entitlements at the same time.
One particular client in this position was happy to proceed with our recommendations. Their Age Pension entitlements increased by $26,000 over the next three years, whilst the tax payable by their Estate upon their death reduced by $69,000.
The rules around Centrelink are constantly changing and unless you are in the industry it can be difficult to know the options available to you and how to maximise your benefits.
Specialist advice means greater returns for you
These examples highlight the importance of seeking advice from a Financial Planning specialist. With in-depth industry experience and technical expertise, Newcastle Financial Planning Group can support you by ensuring that all aspects of your financial situation have been taken into account and appropriate plans are in place.
We help people achieve their aspirations. We deliver personalised financial planning strategies for your peace of mind – so you can focus on what matters most.
Know that your financial strategy is sound with a complimentary financial health check from one of our Financial Planning specialists. Please book a complimentary appointment here or call our office to make an enquiry.
DJIB Investments Pty Ltd T/A Newcastle Financial Planning Group is a Corporate Authorised Representative of RI Advice Group Pty Ltd, ABN 23 001 774 125 AFSL 238429. This editorial does not consider your personal circumstances and is general advice only. It has been prepared without taking into account any of your individual objectives, financial solutions or needs. Before acting on this information you should consider its appropriateness, having regard to your own objectives, financial situation and needs. You should read the relevant Product Disclosure Statements and seek personal advice from a qualified financial adviser. From time to time we may send you informative updates and details of the range of services we can provide. If you no longer want to receive this information, please contact our office to opt out. The views expressed in this publication are solely those of the author; they are not reflective or indicative of Licensee’s position and are not to be attributed to the Licensee. They cannot be reproduced in any form without the express written consent of the author.