Skip to main content Skip to search

Archives for February 2017

Let’s Agree On Risk

When a couple presents for financial planning advice, one of the first things I’ll ask them to do for me is a risk profile questionnaire.

This is a multiple choice questionnaire designed to get a gauge of an individual’s attitude to risk. That is, how do they feel and react with movements, sometimes large movements, in the value of their investments. The answers to the questionnaire generate a score, and with this score we can, in broad terms, attribute to the individual a higher or lower tolerance for risk.

There’s no ‘right’ or ‘wrong’ in completing this questionnaire. A low or a high score isn’t good or bad, better or worse. However, it is a vital input when we come to prepare our investment recommendations.

And, it’s very important that each member of a couple completes their own questionnaire. Why? Because if there is a difference in how each member of a couple think and feel about risk, we’d want to identify this, discuss it and agree on the risk we’re prepared to accept in respect of what are, after all, investments that they have a common interest in (even though the assets themselves may be held in different names).

What might happen if we don’t consider each member of couple’s individual risk profile?

Say one member of a couple may have a high tolerance for risk. We might call them a ‘growth’ investor, comfortable with a higher level of exposure to growth assets like shares and property. The other member may have a lower tolerance for risk. We might call them a ‘conservative’ investor, more comfortable with a higher level of exposure to defensive assets like fixed interest.

Ignoring their differences on risk, and simply investing on the basis of ‘growth’ is likely to create all sorts of problems in the future. For example, say after 6 months the growth portfolio, which was constructed taking into account only the ‘growth’ investor’s preferences, drops 20%. The ‘growth’ investor won’t like it. However, he or she may be reasonably comfortable with the situation knowing perhaps that it’s a longer term investment in quality investments and is likely to recover in due course.

Their spouse, on the other hand, may well be fraught with concern and anxiety.

Having each of them complete their own risk profile questionnaire would have provided an opportunity at the beginning of the process to identify their differences on this point; discuss them and agree on an investment approach that met and managed both their expectations. It’s important to agree on risk.

Are you interested in a free initial consultation with one of our friendly advisers to know if your investments are invested for the right amount of risk? Contact us today, one of our friendly advisers would be delighted to speak with you.

The information provided in this article is general advice only. It is prepared without taking into account your objectives, financial situation or needs. Before acting on the advice in this article, please consider the appropriateness of the advice, whether the advice is appropriate to you, your objectives, financial situation and/or needs, before following this advice.

Read more

I want to be able to help my kids financially

Can I give my kids some money?

I hear this question quite often from my clients.  There are several answers to the question.  Underlying it all is the normal parental need to be able to assist our family while they are juggling the usual expenses of home and children, from an income that doesn’t always stretch quite as far as they would like.

The first part of the question is – can I afford it, and your answer to that may be that you think you can.

The next part of the question is – are there consequences for me?

There may be – for instance if you receive a Centrelink age pension there is a limit as to how much you can gift to your children.  The current limit is $10,000 per year up to a maximum of $30,000 over a three year period.

If you are a fully self-funded retiree the consequence could be that your ability to maintain your own lifestyle in retirement is compromised, so it is a question that needs careful thought.  It is recommended that you seek advice from your advisor.

Is giving cash the best way to help?

It is debatable as to whether straight out cash gifts are really the best way to help – you can’t direct where the cash is spent, and it may not be put to its best use.  What if we paid an essential expense instead?  Examples might be to contribute to the grandchildren’s school fees or to pay the life insurance premium for your son or daughter?

Paying a life/TPD (total and permanent disablement) insurance premium for an adult child may mean the difference between them being properly insured, or having little or no life or TPD insurance.  This not only protects your child and his/her family, but it protects you too, as you may be called upon for support should your child become ill or disabled.

I would like to start an investment for my child/grandchild.

This is also an excellent way to give your family a helping hand as it is a long-term solution that will provide some passive income and capital growth in the future.

A small investment in the Capricorn Diversified Investment Fund, with distributions set to be reinvested, is one way you can achieve this, and it is even better if you add extra contributions from time to time.  By the time the newest grandchild is old enough to attend university or wants to buy a car for example, there will be a tidy little nest egg they can draw from.  You can view details of the Fund here or contact us for information and assistance.

Want to learn more about helping out your children/ grandchildren? For your free initial consultation with one of our friendly advisers, contact us today! One of our advisers would be delighted to assist you.

The information provided in this article is general advice only. It is prepared without taking into account your objectives, financial situation or needs. Before acting on the advice in this article, please consider the appropriateness of the advice, whether the advice is appropriate to you, your objectives, financial situation and/or needs, before following this advice.

Read more

Are your kids protected?

Did you know?

Heart disease in children is the leading cause of death, accounting for more than 30% of childhood deaths?  Or that 200 children under the age of 14 are diagnosed with leukemia each year, with treatment taking approximately 2 years?

What would happen if this was your child, or grandchild? Would you have adequate funds available to cover costs of hospital and treatment? Would you or your partner be able to stop work indefinitely to care for your sick child? Unfortunately for most people there would not be sufficient funds simply ‘lying around’ to eliminate the financial stress of coping with a sick child.

Thankfully, there is great news, a low cost solution that will ensure dollars are available to you when needed most – Child Trauma Protection.

Trauma Protection is designed to pay a lump sum amount in the event of a specified illness or event, for example, cancer, stroke or heart attack. It is now possible to not only ensure your health, but the health of your children.

In the event your child suffers a major illness or dies, you will receive a lump sum payment (as determined by you) to ease the financial burden and help allow for:

  • Parents to stop work and take care of the child full-time
  • Funding for medical treatment & hospital costs
  • Funding to provide for ongoing care or other objectives (e.g. family holiday)
  • How much does peace-of-mind cost?

Child Protection must be taken out in combination with trauma protection for an adult, the cost is approximately $150 per annum. Once the child is age 18, they are eligible to convert the policy to an adult policy without any health assessment.

Are you interested in gaining a better understand of protecting your children? Do you want make sure you have the right insurance to protect all of your family members? For your free initial consultation with one of our friendly advisers, contact us today! One of our advisers would be delighted to assist you.

The information provided in this article is general advice only. It is prepared without taking into account your objectives, financial situation or needs. Before acting on the advice in this article, please consider the appropriateness of the advice, whether the advice is appropriate to you, your objectives, financial situation and/or needs, before following this advice.

Read more