Salary Sacrifice Endorphin Wealth Management 2

How to Effectively Self-Manage Your Super Fund

Whether you are planning to establish an SMSF (Self-Managed Super Fund) or already have one, there are some “Golden Rules” to follow for its effective self-management.

RULE #1

Unless you are a fully qualified SMSF Specialist Adviser yourself, you would be well-advised to seek the ongoing assistance of one.

NOTE: You are personally liable for all the fund’s decisions — even if you get help from a professional or if another member made the decision.

As the Controller of your SMSF, you take on the role of Trustee and therefore must abide by the rules that apply to anyone holding that position. The ATO even states that “You are the person in control and if you make a mistake, there can be serious penalties”. This extends to making the investment decisions for the fund, for which you’re held responsible for complying with the super and tax laws.

A special point of note here – The Trustee of an SMSF can either be a corporate entity or an individual/s. The advantages and disadvantages of either should be discussed with your Specialist Adviser.

Remember always – an SMSF must be run for the sole purpose of providing retirement benefits for the members or their dependants. The ATO, in its ongoing compliance assessment of your Fund, will apply what’s known as the “Sole Purpose Test”. Additionally, all decisions you make as trustee of your SMSF must be in the best financial interests of the members.

 

RULE #2

Regularly review your Fund’s Trust Deed.

Constant legislative changes are made to the rules governing superannuation, and particularly SMSFs. For instance, you may not be aware that an SMSF can now have up to six members. Does your Trust Deed allow for this?

Interesting fact: A properly constructed Family SMSF can have a child of any age as a Fund Member, from the moment they draw their first breath! This factor presents a wealth of opportunities for the Fund’s Members, but to reiterate, the Trust Deed must allow for it.

 

RULE #3

Upskill your own knowledge.

If you accept the premise of RULE #1, you should still take the time and effort to educate yourself on the basics, as a bare minimum. This includes activities and issues such as:

  1. researching investment options;
  2. setting and following an investment strategy;
  3. accounting, keeping records and arranging an audit each year by an approved SMSF auditor.

As a guide, your SMSF strategy success will be dependent upon meeting compliance across the following key areas:

 

Specifically, and most importantly, familiarise yourself with the “Does the Trust Deed allow it?” step.

An often-productive approach to this is to first write down YOUR objectives as to what you want the Fund to be able to do for you and your family. You can get the ball rolling with these initial suggestions:

  • Provide a secure income in retirement to substitute or supplement the OAP (Old Age Pension) that is, provide an income to meet your retirement expenditure needs;
  • Be invested in the best interests of Fund Members;
  • Take advantage of tax benefits and concessions available to SMSF Funds and their Members;
  • Having a broad choice of investment options, e.g., investment property (commercial and/or residential), precious metals such as gold, shares, government bonds, antiques, art;
  • Have the assurance that your Estate will pass in a timely manner to your beneficiaries in accord with your wishes.

Once you have established what you want from your Fund, it is suggested that you consult your SMSF Specialist Adviser on all the “Can and Can’t Dos” of your Trust Deed and what, if anything, needs to be done to have your Fund providing the benefits you want it to.

 

FINAL WORD

Your SMSF Fund should never be treated as a “set and forget” entity. Changes in markets and investment classes, legislative changes, and indeed, changes in your own personal circumstances or those of your family and/or other Fund Members, require you to be diligent in regularly reviewing your Fund and its Trust Deed. Doing so will help to ensure that you get the very best benefits from your Fund.

 

Here at Endorphin Wealth, we are not licensed or owned by the big banks and financial institutions, so the advice and wealth management we provide is always in our client’s best interests. We have the advantage of being able to access a range of products from different providers that can be tailored to our client’s goals and needs. We have offices located in Sydney and Melbourne, where you will be able to find a financial advisor that is suitable for you.

For an obligation free conversation about your financial future, please contact us on 03 9190 8964 or at advice@endorphinwealth.com.au

5 Considerations to Make Before Retirement

The key to a successful retirement is having a solid plan. The decisions that you make now could affect your financial future, so we’ve put together this brief list of 5 considerations that you need to make before you transition to the next phase of your life in order to be able to retire on your own terms.

1.    Are you ready for retirement?

The issue is that it’s important that when you “retire”, that you retire to something, not from something. If you have a retirement dream, one that will keep you stimulated and happy, one that will result in you waking up each day with a feeling of looking forward to what the day will bring, then DO IT!

With that said, there are several considerations that should be accounted for to ensure that your retirement is everything you want it to be.

2.    How do I plan for retirement?

Start with you and your specific circumstances and requirements. Look at your spending, income, assets, savings, current investments, insurance, taxes and estate management.

Eliminate debt

Aim to clear any outstanding debts before you enter retirement. By starting your retirement debt-free, you’ll be able to use your retirement income for things that really matter. If you’re already retired and you’re still carrying debt, such as a mortgage or credit card, speak to an Endorphin Wealth Financial Adviser and put a plan in place to become debt-free.

Also, consider how you should approach your retirement saving as you move through different life stages.

All this may require some tough decision-making. For instance:

  • Do you want to live frugally now for future financial freedom or, would you prefer taking steady and consistent saving steps?
  • Are you comfortable with riskier investments which may offer better growth – the type that could keep other people up at night?
  • Would you prefer to let the experts manage your savings or to make the investment decisions yourself?
  • Are there ways you could boost your super while enjoying associated tax benefits?
  • Should you salary sacrifice?

Readjust your portfolio for retirement needs

Throughout your working years, you may have relied on an aggressive investment strategy, taking calculated risks so you could see substantial growth in your retirement savings. But as you near and enter retirement, it’s usually time to ease up on the risk. Your goal is no longer to grow your money but to hang on to what you have. This is when you can begin shifting your portfolio into more conservative investments.

3.    How much is enough?

The answer to this question will be different for every individual and is largely dependent upon the lifestyle you aspire to in retirement.​

Expectation vs reality

The time when you want to retire can often be quite different to when it actually happens. According to the ABS, around 70% of those intending to retire from the workforce indicated that they intend to retire after reaching age 65. But whilst you might be prepared to keep working well into your 60s, there’s a significant gap between that expectation and reality.

For many people it’s a case of being pushed into retirement by circumstance rather than making a carefully planned choice. Almost half of Australians are making this earlier than anticipated move into retirement due to health issues or redundancy – the average age at retirement in recent years was just under 63.

How long will you spend in retirement?

Freedom from working life can be a positive, even if it happens sooner than expected. But it can create problems for your finances when your time in retirement stretches into several decades. A National Seniors Australia survey (2015) found that those aged 55-64 underestimated their life expectancy by almost five years.

That said, many Australians are enjoying a comfortable retirement. How they achieved it is no secret: through sound retirement planning.

Superannuation

These days most people can choose their superannuation fund, and those who do not make a choice will use the super fund nominated by their employer.

Most superannuation funds can be classified into one of these categories:

Industry super funds: Originally developed for employees of certain industries, many of the larger industry funds are now open to anyone to join.

Retail super funds: Usually run by financial institutions, for instance, a bank or an investment company, and open for anyone to join. They often have a wide range of investment options.

Corporate super funds: Organised by companies on behalf of their employees, they may be operated under a board of Trustees or managed by an appointed retail or industry fund.

Public sector super funds: For government employees only.

Self-managed super funds (SMSFs): A private superannuation fund that you manage yourself. It’s a growing sector which appeals to many because it offers greater flexibility and choice in the type of assets you can invest in.

No matter which type of fund you’re in, a sensible approach to savings and maximising the benefits of superannuation at any age is one of the keys to a comfortable retirement.

5.    Estate planning

None of us like to dwell on this, but eventually our lives will come to an end. It’s vital to have a plan in place so that the right assets are left to the right people in the right way.

Having a properly crafted estate plan can assist your family in avoiding the substantial expense of lengthy probate or guardianship proceedings.

 

Here at Endorphin Wealth, we are not licensed or owned by the big banks and financial institutions, so the advice and wealth management we provide is always in our client’s best interests. We have the advantage of being able to access a range of products from different providers that can be tailored to our client’s goals and needs. We have offices located in Sydney and Melbourne, where you will be able to find a financial advisor that is suitable for you.

For an obligation free conversation about your financial future, please contact us on 03 9190 8964 or at advice@endorphinwealth.com.au

2021- Client Referral Prize Draw

2021 – Client Referral Prize Draw

Some exciting news for our clients – we’re re-launching a promotion for our existing clients to reward them for referring friends and family members. We’d love the opportunity to assist the people they know to reach their own financial goals!

Leeuwin Estate Art Series – 2020 Sauvignon Blanc, 2020 Riesling, 2015 Sauvignon Blanc Semillon, 2018 Chardonnay, 2018 Shiraz and 2017 Cabernet Sauvignon

Entering the draw is easy, simply refer your friend or family member to have an obligation-free appointment with us and you’ll be entered into the draw to win a combination of 6 beautiful Leeuwin Estate ‘Art Series’ wines valued at $340.50.

There is no limit to the number of entries. This closes at 12pm on Friday 29/10/2021. The draw will be held on the same Friday as well. We will notify the winner shortly afterwards.

Comprehensive analytics and research

We invest a great deal of time and effort in researching the best tax-effective investment strategies for our clients. We have developed a number of systems to manage and track the marketplace.

The investment landscape always evolves and it is more important than ever to consider your investments and superannuation funds carefully. We pride ourselves on being experts in researching opportunities, investments and strategies that fit in with your retirement goals. We want, our clients to get on with enjoying their life rather than worrying about money.

For an obligation-free conversation about your financial future, please contact us on 03 9190 8964 or at advice@endorphinwealth.com.au

The Team at Endorphin Wealth Management

Investment Property vs Managed Funds

Retirement planning is serious business. You need a solid strategy to be able to see out your golden years in comfort and dignity. When it comes to investing in your retirement, there are generally two strategies that are most recommended: Investment Properties or Managed Funds. Both have their pros. Both have their cons!

The team at Endorphin Wealth have been advising their clients for many years on which investment strategy is best for their situation. We can assist you to:

  • Consider what investment strategy is right for your situation
  • Provide advice and ongoing management for the investments and review cash flows and cost
  • Assisting with changing your investment strategy if the need arises.

What is a Property Investment:

The attractive Australian house market has many people investing in property. Property investments are often seen as being less risky than other forms of investment. They are usually a stable investment, but you are also able to leverage your investment. This means instead of taking $100,000 to put into the stock market, you may be able to purchase a $500,000 home. However, while it may seem more straightforward, there are pitfalls to be aware of. Here’s what you need to consider about investing in property.

Pros of Property Investments:

  • Less volatility – Property can be less volatile than shares or other investments.
  • Income – You earn rental income if the property is tenanted.
  • Capital growth – If your property increases in value, you will benefit from a capital gain when you sell.
  • Tax deductions – You can offset most property expenses against rental income, including interest on any loan used to buy the property.
  • Physical asset – You are investing in something you can see and touch.
  • No specialised knowledge required – Unlike some complex investments, you don’t need any particular specialised knowledge to invest in property.

That sounds rather attractive. However, owning a property is filled with surprise costs. It all adds up — $1,500 here, $2,496 there and then $2,000 on council rates. The bottom line is property is expensive to own, not just buy. This is not to say you cannot make a profit, however, being aware of the real return after costs are taken into account will put you at an advantage when it comes to deciding how to best invest your money.

Cons of Property Investments:

  • Cost – Rental income may not cover your mortgage payments and other expenses.
  • Interest rates – A rise in interest rates will mean higher repayments and lower disposable income.
  • Vacancy – There may be times when you have to cover the costs yourself if you don’t have a tenant.
  • Inflexible – You can’t sell off a bedroom if you need to access some cash in a hurry.
  • Loss of value – If the property value goes down you could end up owing more than the property is worth.
  • High entry and exit costs – Expenses such as stamp duty, legal fees and real estate agent’s fees.
  • Additional home maintenance cost– Cleaning, repairs, termite protection etc.

As you can see, the costs of owning an investment property can be substantial. So, what about managed funds, are they any better?

What is a Managed Fund:

A managed fund involves pooling together money from different investors into one fund that is invested and controlled by a professional investment manager. Funds could be Australian or international shares, bonds, property or cash. You can invest in a single asset class such as shares or fixed interest, or a multi-sector option such as a Growth or Balanced fund, which contain a mix of different asset classes. This is your risk diversification and it should match your objectives from the outset.

When you invest in a managed fund, you hold units in the fund. For example, an investment of $5,000 at a unit price of $1 gets you 5,000 units. The unit price, or value of each unit, reflects the market value of the assets held within the fund at any given time. As such, your units can change in price daily in accordance with the rise and fall of the assets’ market values. You may also earn income in the form of dividends or interest when the fund makes profits from its assets.

Pros of a Managed Fund:

  • Professional Management – You are using professional investment managers who have access to information, research and investment processes.
  • Diversification – You are able to diversify more than would be feasible for you investing directly and this theoretically reduces risk.
  • Liquidity – Assets are publicly listed so they can be sold quickly
  • Cheap Entry Fee – You share costs with a pool of other investors which should reduce your cost of investing.
  • No extra cost for further investments – You can make relatively small investments into asset classes that have large minimum investments because you are sharing the investment with others.

However, the main issue that people worry about when investing in managed funds and shares is volatility. Or, basically, will the markets fall? Volatility can be caused by a number of factors but it’s not all bad. For one, you make an informed choice on how much risk you are willing to take when investing in managed funds. Each managed fund has different risk profiles, but it is important to understand the cons that come along with a managed funds account.

Cons of a Managed Fund:

  • Underperformance – Managed fund investments may underperform or decline in value. This will affect your return.
  • Regulatory and Tax Risk – Government or a regulator may introduce regulatory or tax changes which can affect the value of securities
  • Fees – Some funds charge large fees to manage the portfolio and access markets or stocks which would be difficult to access for an individual

For reasons like these, seeking good financial advice is important and provides great insights into constructing an initial portfolio of managed funds. Endorphin Wealth has always strived to ensure customers get their bang for their buck. We will also help you adjust your investments over time ensuring you remain in high-quality positions over the long term.

Verdict: Property Investment or Managed Funds

When comparing the two options for long-term retirement strategy, managed funds make the stronger case. When comparing the cost involved with owning an investment property and setting up a managed funds account, the cons outweigh the pros for investment properties.

The simple truth is when you compare the costs of investment properties vs. managed funds, your money and your future are in much safer hands with a qualified fund manager. And, as they say, the best two times to invest for the future are 15 years ago and right now!

Looking to start investing in a managed fund or thinking of purchasing an investment property? Contact Endorphin Wealth today for advice via phone at  (03) 9190 8964 or at advice@endorphinwealth.com.au .

What is a Self-Managed Super Fund (SMSF)?

A Self-Managed Super Fund (SMSF) is essentially a private super fund that you manage yourself or with the assistance of a financial advisor. Instead of putting money into a retail or industry super fund, you can make contributions into your own fund and invest in the assets that are most appropriate to your plan.

The team at Endorphin Wealth have been advising their clients for many years on their SMSFs. We can assist you to:

  • Consider if establishing an SMSF is appropriate in your circumstances,
  • Provide advice and ongoing management for the investments and insurance policies within your SMSF, and
  • Assist with winding up or considering alternative options if your existing SMSF is no longer appropriate.

The Australian Prudential Regulation Authority’s (APRA) recent statistics on SMSF funds showed there were 595,840 SMSFs operating in Australia, holding $712 billion in assets. More people are setting up SMSFs due to recent findings that have shown that retail super funds lack clarity with their investments and have a tendency to focus on profit rather than the interests of members.

Should I invest in an SMSF?

In recent years, the Australian Securities and Investments Commission (ASIC) conducted an online survey of 457 SMSF members who had set up their own fund in the preceding five years. The results showed that they were unaware of a large number of risks and responsibilities that comes with running their own SMSF.

The main reason for setting up an SMSF is greater control over investment decisions. However, according to ASIC, around one-third of SMSF trustees are unsure about what is required to run their own fund and the benefits of diversification.

In one case, an SMSF member, believing the property market was “over-inflated” and the stock market was too “risky”, held 100 per cent of their SMSF balance in cash, hoping to invest in property “in maybe three or four years”.

Survey respondents reported mis-judgement of their expectations and actual experiences as SMSF members in a number of key areas, including:

  • the risk and responsibilities of running an SMSF, and
  • costs to set up and run an SMSF,
  • time spent on administering an SMSF,
  • individual understanding of SMSFs and their legal responsibilities as SMSF trustees.

Risks and responsibilities of running an SMSF

All members of an SMSF are responsible for the fund’s decisions and for complying with the law.

These responsibilities come with risks:

  • You are personally liable for all the fund’s decisions — even if you get help from a professional, or if another member made the decision.
  • Your investments may not bring the returns you expect.
  • You are responsible for managing the fund even if your circumstances change — for example if you lose your job.
  • There may be a negative impact on your SMSF if there is a relationship breakdown between members, or if a member dies or becomes ill.
  • If you lose money through theft or fraud, you won’t have access to any special compensation schemes or to the Australian Financial Complaints Authority (AFCA).
  • You could lose insurance if you’re moving from an industry or retail super fund to an SMSF. See consolidating super funds.

The ATO can conduct a random audit of an SMSF at any time. The penalties for non-compliance are high and receiving a notice of non-compliance from the ATO usually has devastating tax consequences.

Costs of setting up and running an SMSF

Individuals looking to set up an SMSF need to factor in all costs to start and run their SMSF including amounts to cover any initial and/or ongoing advice, as well as start-up costs, including the appointment of the trustee and registration of the fund.

The annual cost of running the fund, including accounting, auditing and reporting costs. This ensures the fund is compliant, and members are able to extract relevant information during any period of the financial year.

Time spent on SMSF administration

The time required to manage and administer an SMSF can be significant. This will often depend on the type of investor your activity when managing your SMSF investment portfolio. Having said that, 38% of respondents in the ASIC survey said running an SMSF was more time consuming than they expected. On average, SMSF trustees spend eight hours a month managing an SMSF.

All SMSF trustees will need to undertake some level of regular investment research on their investment options. This includes ongoing monitoring of the investment strategy and the performance of current and future investments. They may also need to organise annual valuations of assets such as direct property investments.

Trustees also need to be mindful that they meet their regular reporting obligations. This ensures the fund is compliant and are updated on changes in regulation or super laws.

Trustees would be responsible and will be held accountable, for their SMSF at all times.

Understanding of SMSF and legal responsibilities as a trustee

SMSF trustees must have sufficient financial knowledge. This is to make choices that are in line with their fund’s investment strategy. Individuals should also be made aware they – not their financial adviser, accountant or lawyer –are legally responsible for their SMSF.

You need the financial and legal knowledge and skills to:

  • understand different investment markets, and build and manage a diversified portfolio
  • set and manage an investment strategy that meets your risk tolerance and retirement needs
  • comply with tax, super and investment regulations and laws
  • organise insurance for fund members

If you want to know more about Self-Managed Super Funds or starting up your own SMSF, please contact Endorphin Wealth via phone at  (03) 9190 8964 or at advice@endorphinwealth.com.au .

Changes to Income Protection Insurance

On the 31 March 2020, the Australian Prudential Regulation Authority (APRA) announced that life companies have been keeping income protection premiums at unsustainably low levels to compete for customers. APRA expects life companies to change and review these policies. They will focus on long term sustainability and making sure products continue to meet the needs of consumers. As such, insurance companies have stopped selling ‘agree value’ policies. These policies are based on the income you earn at the start of the cover, despite any future change in income.

What is Income Protection?

Income protection pays part of your income if you are unable to work for a period of time. The cause could be due to injury or sickness and repayments could be up to 75% of your annual income. These policies have a waiting period and a payment period. The waiting period is the time you must wait from when you make a valid claim, to the time you are able to start receiving payments. The payment period is the period during which you are unable to work that is covered. The industry is putting into place new terms and conditions. This is causing changes to the policies, affecting the amount of premiums you pay.

What will happen to my existing policies?

Current retail policies with ‘Guarantee of Renewability’ in the policy wording, is automatically renewed each year. Thus, your policy will continue with no changes.

Any other APRA changes?

With effect from 1 October 2021, APRA expects that life companies will offer new income protection contracts where:

  • The insured income will be based on your annual income at the time you make a claim. It is unchangeable for more than 12 months
  • In the first 6 months, up to 90% of income repayments could be distributed and 70% thereafter. There are no limits on the monthly benefit
  • Insurance providers must have adequate risk management processes to reduce the risks involved with long term payment periods

APRA has deferred the following measure until 1 October 2022:

  • 5 year renewal term – renewal will not be medically underwritten however declaration of income, occupation and pastime details is needed

Are policies which meet APRA’s new measures available now?

Yes, life companies are starting to release new income protection policies which meet these guidelines. However, most insurers will launch these new policies with new Product Disclosure Statements, from 1 October 2021.

If you need any more information about these changes, please contact Endorphin Wealth via phone at  (03) 9190 8964 or at advice@endorphinwealth.com.au .

Endorphin Wealth welcomes Steven Alesi

We are excited to announce that Endorphin Wealth has expanded the team in the Melbourne office – welcoming Steven Alesi. Steve officially joins us as an Implementation Officer, whilst also currently completing his Bachelor of Commerce.

Initially, I joined Endorphin Wealth Management as an intern, where I was deeply immersed into the world of financial advice.

I find it extremely fulfilling to see the various ways our advisors support and guide clients, helping them become more confident about their lifestyle and financial goals – Steven Alesi

Steven Alesi

Steven has already impressed us with his ability and dedication to helping us provide goal-based advice to our clients. See below Steven’s email and LinkedIn. If you would like to find out more about the services Endorphin Wealth provides, please contact us via phone (03) 9190 8964 or email advice@endorphinwealth.com.au.

steven@endorphinwealth.com.au

Steven Alesi | LinkedIn