5 Considerations in Choosing a Financial Advisor

1. Decide what you want/need from a financial advisor.

What you want and/or need from a financial advisor will depend on what stage in life you’re at, the amount of money you have (or don’t have!) and what it is that you wish to achieve.

The role of a financial advisor is to help you make financial decisions and plan your future. This could include advice about budgeting, investing, wealth strategies, superannuation, retirement planning, succession planning, estate planning, insurance and taxation.

2. Choose the type of financial advice that’s right for you.

It’s your choice on whether you get either general or personal financial advice from an advisor. This will depend on what you need.

General financial advice doesn’t account for your personal situation or goals, or how it might affect you personally.

Personal financial advice is tailored to your unique-to-you financial situation and goals and is designed to be in your best interests. Such personalised advice can include:

  • Scaled advice or “single-issue” advice— allows you to access cost-effective financial advice specific to what’s most important to you right now. For instance, you might just wish to get advice on how much you should contribute to super, or what to do with an inherited property.
  • Comprehensive financial advice— is tailored to your particular circumstances and objectives. Your advisor will help you to develop a plan to secure your financial future.
  • Ongoing advice— is essential as life doesn’t stand still for anyone. As personal or financial events change your world, the best way to stay up to date is to consult your financial advisor by way of regular monitoring and review of your financial plan and affairs.

3. Find a financial advisor.

It may seem to be an obvious consideration. However, this is a really important step in the process. There are a few options open to you for finding a licensed financial advisor, such as through:

  • A financial advice professional association, for instance – the FPA (Financial Planning Association of Australia)
  • Your lender or financial institution
  • A search on the ASIC (Australian Securities and Investment Commission) website’s Financial Advisors Register
  • Recommendations from people you know and whose opinions you respect and trust.

Researching your potential financial advisor is highly recommended. One of the first things to check is their FSG (Financial Services Guide). Their FSG will show:

  • The services they offer
  • How they charge
  • Who owns the practice
  • Any links to product providers
  • Their AFS (Australian Financial Services) licence number.

4. Meet your potential financial advisor.

Financial advisors don’t usually charge you for the first meeting. This presents a good opportunity for you to determine if they’re a “good fit” for you.

When you first meet with them, ask them about:

  • Their qualifications, main client type base and specialty areas
  • Their experience, e.g., the length of time that they have been practising as a financial advisor
  • Their fee structure
  • What information you’ll receive and how often
  • How they’ll consult you on decisions
  • How they’ll monitor and manage your investments
  • What commissions or incentives they receive from financial products and how they’ll choose products to recommend to you. Remember, this aspect of their fees should also be disclosed in their FSG.

A good advisor will get to know you, keep you informed, and help you achieve your goals. They’ll also discuss how much risk you’re comfortable with.

5. Assess your compatibility with them.

Your potential advisor might tick all the boxes regarding their experience, qualifications, fees and so on. Yet, if you can’t establish a rapport with them, the relationship is likely to fail. Ask yourself the following:

  • Do they give you immediate straight answers to questions that you put to them, or do they appear to avoid giving a direct answer when faced with a pointed question?
  • Do their values and principles appear to be aligned with your own?
  • Is their manner professional but friendly?
  • Do they listen to you attentively or is it that they appear to more concerned with telling you how good they are?
  • If you are meeting with them as a couple, do they give full attention to receiving feedback from both of you?
  • Finally, do you like them and feel comfortable in their presence?

Your final choice of financial advisor will be integral to achieving your financial/lifestyle goals. Choose carefully.

 

FOOTNOTE:

The Australian Securities and Investment Commission (ASIC) Rules and Regulations and in particular, REGULATORY GUIDE 175 (RG175) is one that all investors should be aware of.

RG175 is for persons who provide financial product advice to retail clients, and their professional advisors. It considers how certain conduct and disclosure obligations in Pt 7.7 and Div 2 of Pt 7.7A of the Corporations Act apply to the provision of financial product advice.

In summary, this Regulation states that an advisor must always consider the client’s relevant circumstances, that is, the objectives, financial situation and needs of a client that would reasonably be considered relevant to the subject matter of advice sought by the client.

 

Retirement Planning 1

Estate Planning for You, Your Family and Your Business

It’s frightening to know that over 50% of the Australian population (18+ y.o.) do not have a Will. The most common reasons given by those who don’t are along the lines of “I just haven’t got around to it”, or it’s their view that they don’t have enough assets to warrant a Will.

The reality however is that everyone over the age of 18 should not only have a Will, but at the very least, two other estate planning documents as well. They are an Enduring Power of Attorney (EPOA) and an Advance Care Directive. So why? And what are these documents?

Wills

As part of the overall estate planning process, a Will is designed to ensure that your assets are properly distributed to the people that you care about.

Without a Will, your wishes have no way of being known, and the administration of a deceased estate without a Will can be a complicated and expensive process for your next of kin.

In simple terms, there are two types of Wills – “simple” and “complex”.

A simple Will needs to contain some basic information. You as the testator (the person writing the Will) needs to name a personal representative, or the person who will make sure that the Will instructions are carried out as written (the Executor). Then you name the people (called beneficiaries) who will receive your stuff (money, property, land, etc.)

A complex Will is often required to address issues such as:

  • Changing family situations (e.g., blended family)
  • Business ownership
  • Testamentary trusts
  • Protective trusts for incapacitated beneficiaries
  • Guardianship clauses
  • Maintenance of minor children
  • Provision for the children of prior marriages or relationships.

Did you know that there are some things that you can’t give to beneficiaries via your Will?

Your Will can generally only deal with assets that you own in your sole name or that you hold as “tenants in common” with other owners (e.g., land or property).

If you own real estate with another person as ‘joint tenants’ and you die, the property will transfer to the other joint tenant, and not form part of your estate. The same applies for shares or bank accounts in joint names. In both instances, this is very often the case with property and assets jointly owned by marital partners and are not assets that you can gift by your Will.

A properly constructed estate plan not only addresses those assets that pass via your Will. Other assets such as those held within a Trust or company that is not fully owned by you, or held within say, an SMSF (Self-Managed Super Fund) can’t be gifted through your Will.

You may be able to nominate in your Will a person to take control of the Trust however, your Will cannot distribute trust assets.

Of special significance is any superannuation asset. Superannuation is an asset that may or may not form part of your estate after you die. There are factors that will determine the outcome, not the least of which are the type of Death Benefit Nominations (if any) made to the fund Trustees.

 

Depending on the rules of the fund, benefits can be made in the form of a lump sum, a pension/income stream (also subject to regulations) or both. A member can execute a “Binding Death Benefit Nomination” (BDBN) which directs the fund Trustee as to where and how (depending on the terms of the Trust Deed) proceeds are to be paid on their death.

Some of the advantages of having a BDBN include keeping proceeds out of the estate and reducing the risk of a claim on the estate being made by a disgruntled beneficiary, certainty that proceeds will be paid to the intended beneficiary and minimising payment delays.

It is vital to get appropriate advice from your financial adviser regarding the type of superannuation fund you have, what rules govern the fund regarding the treatment of your superannuation death benefits along with any nominations. The taxation implications pertaining to your death benefits should also be considered.

Accounting for all these issues will then allow you to make informed decisions for your super death benefits as part of your overall estate planning strategy.

If you run your own business, a significant part of your wealth may be tied up in the business. Your business assets may be held in various structures such as trusts, companies or partnerships, or even an SMSF.

Careful consideration should be given to who will take control of the entities that hold the business assets after the death or incapacity of a key individual in the business. Successful continuation of the business can be put in jeopardy if appropriate succession planning has not been put in place.

Failure to consider the impact of your death or incapacity on your business can also create problems for your personal estate, particularly if there are loans between you and the business or if you have provided personal guarantees for business loans.

In consulting with your financial adviser, here are some considerations to make regarding your superannuation and/or business assets. For instance:

  • Do you have an up-to-date Binding Death Benefit Nomination in place for your superannuation fund?
  • Who do you wish to control your business, investment entity and assets?
  • Have Trust Deeds been reviewed or updated recently?
  • Have you reviewed your Company Constitution?
  • Are your business insurances up to date?
  • Do you have a buy/sell or other business succession agreement in place setting out the process if a business partner is incapacitated or dies?
  • Have distributions been made to you from a discretionary trust that remain unpaid, or have you loaned or contributed substantial amounts to a trust?

Power Of Attorney

A Power of Attorney (POA) is a legal document, which permits an individual to act on your behalf, when you can’t make decisions for yourself. This can include when you are travelling overseas, are hospitalised or impaired. You can appoint one or more people to look after your legal and financial affairs to ensure that they are managed in your best interests.

You can limit the powers the person has, for example their ability to sell your property or manage your business affairs.

An Enduring Power of Attorney (EPOA) is a Power of Attorney document designed to continue to operate if you lose your mental capacity.

Both POA’s and EPOA’s give a person the power to act for you in legal and financial matters.

Advanced Care Directive

If you become mentally incapacitated, an Advanced Care Directive is a document that allows you to appoint a person, known as a “Substitute Decision Maker,” permitting them to make certain lifestyle and welfare decisions for you.

The Advanced Care Directive will include decisions in relation to lifestyle and accommodation and may also include directions in relation to the medical treatment you are to receive should you become terminally ill.

An Advanced Care Directive must be signed whilst you are of sound mind. It will come into force if you are no longer able to manage your affairs due to loss of mental capacity.

Your financial adviser can assist you in ensuring that all relevant aspects of estate planning are addressed. It is likely that your adviser will require the services of other specialists to ensure that your estate is distributed correctly.

 

Financial advisers are finding it more costly and time consuming to be a solo operator.

Endorphin Inspire – Financial Advisors

There’s no denying it. The financial and time costs of running a financial advisory business as a solo operator for financial advisors are reaching unsustainable levels.

The added scrutiny and educational requirements that directly result from the Financial Royal Commission are not necessarily a bad thing. After all, as financial advisors, we play a vital role in the lives of many Australians.

However, with rising costs for licensees and significantly additional requirements of time on financial advisors with the need to sit ethics exams and new units of study to continue operating, solo operators are finding themselves in the middle of a financial and time squeeze.

The result?

More time and money spend on ticking the required boxes to keep their doors open and less time spent on working on their clients and providing outstanding financial advice.

As Endorphin Wealth continues to grow, I find myself speaking to more and more financial advisors, looking to either sell their book or find employment.

For many of these advisors, the increasing time requirements of increased study and increased costs means they are facing some tough choices concerning how much they charge their clients and the amount of time they can allocate to everyone in their book.

As a result, many are now actively looking for a partner or a firm with which they can share their costs and risks to maintain a high quality of service at a competitive price or exiting the industry altogether.

Endorphin Wealth is no stranger to these challenges.

Alongside my experienced and committed team, in particular Director Rob Rich, we have spent hours determining our fees thoroughly and systematically.

However, unlike solo operators, we have the time to and the expertise to dedicate to this exercise because of the incredible team we have built.

As a firm that has grown to now include eight advisors, we also achieve economies of scale that give us increased negotiation power with all suppliers.

At Endorphin we’ve made no secret of our vision to be one of Australia’s best goals-based financial advisory firms.

With an operational team that covers all things compliance for our advisers and their clients, as well as an investment committee that is consistently vetting and learning about the newest opportunities and providing thoroughly researched recommendations and portfolio positioning.

We want to attract the best advisors and set them up so that they can do what they do best and provide their clients with award-winning financial advice tailored to their individual needs and goals.

But we also know that every financial advisor has different goals, wants and needs when it comes to financial advice in Melbourne & Sydney.

So at Endorphin we provide two distinct streams for financial advisors who are looking to spend more time advising their clients and helping them achieve their goals and less time running a business.

The Endorphin employment model caters for self-employed and employed advisors.

Already Self-employed advisors:

  • retain a majority portion of the revenue from their book, even into retirement
  • ability to co-brand and benefit from online leads generated by Endorphin Wealth
  • gain access to all the back-office and operational capabilities Endorphin has to offer
  • increase revenue due to more time for business development, clients and make significant savings on other business expenses

Currently Employed advisors:

  • potentially have access to a generous retainer for first 6 months
  • mentoring and support to get started in their own business and grow their client book

At Endorphin, we are incredibly passionate about helping our advisors make a tangible difference to their clients lives – helping them feel good about their future.

And we know that to do that, our advisors need to be resourced with the best available research, a first-class operations team and a team of experienced advisors who can lend additional support in the way of sharing their first-hand experience and expertise.

For further information about Endorphin Inspire, and opportunities in wealth management in Melbourne, Sydney and more, please contact Phillip Richards (Founder & Director) via phillip@endorphinwealth.com.au or 0477 004 455.

Is My Super Under-performing?

 

Everyone worries whether their super is under-performing. Our clients often raise questions around over-payment in fees or under-performing super investments. According to findings released by the Australian Prudential Regulation Authority (APRA), more than a million Australians have invested $56.2 billion combined in “under-performing” superannuation funds.

“Pass” or “Fail” grades has been given to a total of 76 MySuper investment options. The results revealed 17 per cent of Australia’s 76 MySuper products were under-performing. This is based on APRA’s testing up to August 31, 2021.

Despite almost 84% of products passed the performance test, APRA is more concerned about the funds that did not pass. Under the Your Future, Your Super Bill reforms passed in June, funds must now let members know about their under-performance. Funds could reject clients if they fail to meet APRA’s standards again next year.

Also, APRA has increased its supervision of trustees with products that failed the test. They have asked that they provide a report showing the causes of their under-performance. They also need to show how they plan to address them. Trustees have to watch their products closely and report important information to APRA. This includes data relating to the movement of members and the outflow of funds.

Why are Super Funds under-performing?

Your super fund could be under-performing due to a multitude of reasons.  However, high fees and bad investment options are usually the reason that’s stopping you from retiring with more money in the future. Most people have also reported that choosing the ‘default option super’ that is a median bottom-quartile fund, has cut their retirement savings by almost half, compared to if they chose a median-top quartile fund.

Which Super Funds are under-performing?

The 13 listed funds that ‘failed’ APRA standards are listed below. It is important to note that some of our clients are invested with these companies, however, they have not invested in the default ‘MySuper’ investment options that have been under-performing. We recommend tailored portfolios that have performed much better previously with lower fees.

  • AMG Super – AMG MySuper,
  • Commonwealth Bank Group Super – Accumulate Plus Balanced,
  • Energy Industries Superannuation Scheme-Pool – Balanced MySuper,
  • Colonial First State FirstChoice Superannuation Trust – CFS FirstChoice Superannuation Trust,
  • Labour Union Co-Operative Retirement Fund – MySuper Balanced,
  • Maritime Super – MySuper Investment Option,
  • Retirement Wrap – BT Super MySuper,
  • ASGARD Independence Plan Division Two – ASGARD Employee MySuper,
  • Australian Catholic Superannuation and Retirement Fund – LifetimeOne,
  • The Victorian Independent Schools Superannuation Fund – VISSF Balanced Option (MySuper Product),
  • Boc Gases Superannuation Fund – BOC MySuper,
  • AvSuper Fund – AvSuper Growth (MySuper), and
  • Christian Super – My Ethical Super.

If you are with one of the under-performing funds, then we’d be happy to have a conversation with you about reviewing your super funds and finding the best solution for you moving forward.

Please contact Endorphin Wealth today for advice via phone at  (03) 9190 8964 or at advice@endorphinwealth.com.au .

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 .

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Endorphin Wealth Investment Update Webinar

Endorphin Wealth in partnership with Oreana Portfolio Advisory Services is pleased to invite you to an Investment Update on Friday 19 March between 11.30am and 12.30pm via webinar.

 

About the Webinar

You will hear from 2 professional fund managers, T.Rowe Price and Pendal Group, to gain insights into how they manage portfolios and find the right investment opportunities.

 

About Sam Ruiz (Portfolio Specialist) and T.Rowe Price

Sam Ruiz is a portfolio specialist in the equity division and Vice President of T.Rowe Price Australia, and holds a bachelor of applied finance from the University of South Australia

His investment experience began in 2008 and he has been with T.Rowe Price since 2020. Prior to this he was employed by Macquarie Investment Management.

T.Rowe Price is an independent investment management firm focused on helping clients meet their objectives and achieve their long term financial goals. Their global client base includes many of the world’s leading corporations, foundations and financial intermediaries.

For more information, visit https://www.troweprice.com/content/tpd/au/en/bios/sam-ruiz.html#

 

About Chris Adams (Portfolio Specialist) and Pendal Group

Drawing on over 20 years’ experience in global equities, Chris Adams provides key insights from Pendal Group’s investment teams across Australian and International equities.

Prior to joining Pendal Group in 2014, he spent 8 years as a portfolio specialist with Blackrock & HSBC Global Asset Management, based in Hong Kong. For the last 7 years he has been working with Pendal’s Australian equity team.

Pendal Group is an independent, global investment management business focussed on delivering superior returns for their clients. With $97.4bn in funds under management, Pendal is one of Australia’s largest investment managers.

For more information, visit https://www.pendalgroup.com/about/our-people/?t=chris-adams

 

Webinar Access

The webinar will be delivered via Zoom, please register for the session HERE

We hope you can join the session on Friday 19 March between 11.30am and 12.30pm. As we all get busy we will also send a reminder note a few days prior to assist.

Regards,
The Team at Endorphin Wealth

2020 – Client Referral Prize Draw

We are excited to share that we’re re-launching our referral prize draw 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 – 2016 Sauvignon Blanc, 2016 Riesling, 2012 Sauvignon Blanc Semillon, 2014 Chardonnay, 2014 Shiraz and 2013 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 $300.00.

Promotion Update

We added a third promotional period for our Client Referral Draw Prize which runs from Tuesday 01/09/2020  until 12 pm on Monday 30/11/2020. The draw will be held on Tuesday 01/12/2020 at 2pm and we will notify the winner shortly afterwards. Clients may refer as many as they can and there is no limit to the number of entries.

Comprehensive analytics and research

We invest a great deal of time and effort 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

This information is general in nature and does not take your personal situation into account.

Contact Us for quality financial advice so you can feel good about your future.