If you only view one blog on insurance statistics today, make it this one.

Coming up to June 30, everyone thinks about tax (don’t they?).

Unfortunately, it may be too late to do too much for this year (but you could try planning now for next year). More importantly, other important areas are overlooked.

There is no question that tax plays an important role in your wealth management objectives. But more important in my mind, is ensuring the security of your income. For most people, the most appropriate way to do this is via life insurance.

While life insurance is vital, it is regularly overlooked, and an area that people regularly don’t discuss.

Rather than talk about the reasons why insurance is so important, I thought instead that I would post some statistics on claim payouts for the 2011 year, courtesy of the Risk Store.

Product	Term	TPD	Trauma	Income Protection	Total
$ Paid	$1.8B	$629M	$538M	$1B	$3.9B
No. of Claims	18,197	6,930	3,169	34,056	62,353

When business expense cover is added, the totals reach $4 Billion in paid claims and 62,681 individual claims paid.

That sounds like a lot, but to me there are other issues that come to mind.

If the $4 billion dollars wasn’t funded by insurance, where else would it have come from?

How many of these people said ‘it won’t happen to me’?

These aren’t one off statistics. Over the last 6 years nearly $19 billion dollars has been paid in claims.

But with all that said, there is still one statistic that I find the most concerning. Have you guessed what it is?

The average claim is $63,528. ‘Valuing a life’ is not easy, and while something is better than nothing, my guess is for most people, receiving $63,000 on the death or serious illness or injury of a loved one would see them in significant financial hardship.

Viridian Wealth: Origins Part 1

Who are we? Where do we come from?

No. Nothing quite that 'deep', but it sounded impressive, right?

But I did want to spend a few minutes talking about how I came to be a financial planner. Back when I was at high school I thought that working in a bank sounded like just about the best thing EVER. No, not a high flyer corporate banker; a teller. Cool.

After leaving university I went and worked in hotel management for a few years, before deciding that my earlier idea of working in a bank (better hours) wasn't too bad after all.

After working in branches for one of the larger banks in Australia for a few years, I bumped into a guy in the staff lunch room. I had seen him around, but had no idea who he was. He seemed to come and go a little bit as he pleased, and wasn't really part of any branch meetings.

After bumping into him a few times, I asked him what he did at the bank. He answered that he was the financial planner for the area. Hmmph. (I had no idea what that meant).

I asked him further about what that meant, (already the inquisitive mind) and he told me that he helped people deal with super, insurance, debt and investment, among other things. I told him that I thought that sounded interesting.

We talked a few more times, and in particular he explained that it WAS an interesting job, but took a lot of continuing education, and updating of your knowedge. He also told me that you had to want to help people. Looking back, I am glad he told me that, becasue, of maybe ALL the advice I have ever received about planning, those ones are right up there.

At that point, I started doing the Diploma of Financial Planning, and 'unofficially' helping him out. I got promoted to a different area of the bank, and then later moved from the bank, when I couldn't progress any further as a planner within their structure. I never bumped into Macca again (he never answered to Macca, as far as I know), but if by some stroke of luck he was reading this, then Thanks.

Do you have something to add. Feel free to comment. I'd love some feedback.

Warnings for SMSF Trustees

If you googled SMSF, you would find approximately 1.25 million page relating to the subject. The subject, by the way is Self Managed Superannuation Funds. An SMSF in short is a superannuation fund where the members (that's you) are also the trustees, or the the ones responsible for making the decisions. More information is available from the ATO.

The reason that there are so many pages is because it is a massive growth area, within the superannuation industry. From Viridian Wealth's view, an SMSF has a place in the 'tool kit', but there are real warnings for anyone considering them.

From my experience, the two main reasons that people want to get involved, are 'control' and to purchase property. The idea of control is an interisting one, and could likely take up a few blog posts by itself, but suffice to say, with 'control' comes responsibilities.

A recent case, whereby a Parliamentary Joint Committee looked into the Trio fraud case, found that investors who lost money after being invested via an APRA regulated fund, received compensation. Investors investing directly into the funds (including trustees of SMSF's did not receive compensation as a result of the fraud.

The PJC report goes on to say,

“SMSFs typically have more control over and choice in their investment strategy and portfolio than investors in APRA-regulated superannuation funds. These benefits of investing in SMSFs come with attendant responsibilities, one of which is to be alert to the risk of fraud and theft. Unlike APRA-regulated investors, SMSF investors do not have a professional management team to exercise this caution,” the report said.

Recommendation three of the report states that the Australian Taxation Office should include a clear, understandable, large-print warning on its website that self-managed superannuation fund trustees are not covered in the event of theft and fraud."

That brings me on to property.

SMSF's have long been a potentially effective vehicle for holding property assets, particularly for small business owners. However, over the last few years, the ability to borrow to fund a purchase via a complex arrangement called an installment warrant with an SMSF has made property purchasing and SMSFs themselves even more popular.

But again, there may be a catch.

If you were t purchase a property and do some work on it yourself, this 'unpaid work' is likely to classified as a contribution to the fund without you even realising. With changes to contribution rules, you may end up breaching the contribution limits, costong the fund significant tax imposts. If you bought the materials for any renovations yourself and charged the fund on a labour and materials basis, this may casue the Fund to breach the prohibition of the acquisition of an asset from a related party rule (S66).

If the trustee gets of all these things right, including value their services at an appropriate rate. then they may still be in breach, becasue the regulations state the Trustee can only be remunerated if  the Trustee is “appropriately qualified, and holds all necessary licences, to perform the duties or services” and “the trustee performs the duties or services in the ordinary course of a business, carried on by the trustee, of performing similar duties or services for the public”.

In the end, an SMSF may be a suitable and valueable piece of your strategic armoury, but there are many pitfalls that can be befall you, if you don't seek appropriate advice.

Please feel free to comment, or visit us at www.viridianwealth.com.au

Steve

The problem with regular reporting...

and why we do it anyway.

Over the last few days, we have started sending out quarterly reports to our investment (including superannuation) clients. And do you know something? Most clients have recorded positive returns for the three months to the end of March, 2012 of 6 - 8%. That's an annualised return of approximately 30%.

The All Ords is what now?!

This has come as a surprise to most, particularly given economic news, and property prices. (We even made sure to send ut the reports on April 2 and NOT on April Fools DaY)

So, happy days are back are they? Well, a good quarter doesn't make a recovery, and I don't think it is relevant anyway (I'll get to that in the next blog).

The problem with regular reporting is simply a matter of relevance. What does it mean if your $300,000 portfolio grew to $320,000 in the last 3 months. Well, it does beat the alternative, and positive quarters haven't been too regular over the last few years. But where you aiming for $330,000? Had you been planning to put contributions in that you haven't? Do you even know what you were aiming for?

Without some sort of context, while it is 'good' that balances rose, it doesn't make much sense, unless we know what your target is.

So why do we send the reports out? Maintaining regular correspondence keeps communication lines open. We are developing some new systems that are designed to better incorporate all of our clients goals (even the ones they didn't know they had), and to track progress towards the achievement of them all. We work on, over time, knowing what we are working towards, and so generating the reports allows us to look at the benchmarks, and track the progress. While this is only one aspect of the 5 elements of our Wealth Management Model , it is the most obvious.

And of course, everyone sleeps a little easier when portfolios are going up.

Feel free to comment. We'd love to know what you thought of the blog.

The Sandwich Generation

Does your typical workday include racing home to pick up the kids from school as well as spending time caring for, or worrying about your aged or ill parents? Welcome to the ‘Sandwich Generation’ where you feel squeezed at both ends with very little time for ‘self’ in the middle.

A growing proportion of families, women in particular, are suffering from the combined effects of an ageing population where parents live longer and teenagers are staying at home longer. No wonder we feel ‘squeezed’.

The challenges facing the Sandwich Generation

Juggling the often-competing interests of your parents and your children is fraught with challenge. Both groups require very different types of care and attention, with neither necessarily accepting of the needs of the other. And you are in the middle, feeling stretched and alone.

Despite these challenges, many of us simply can’t ignore the plight of our loved ones, especially our parents, as they begin to age and decline. Our love and care response kicks in to provide support.

What you can do

To better cope with this growing challenge:

1. Never forget your own priorities in life – try to balance your needs with those for whom you are caring. Maintaining a sense of self will help to define what gives your life true meaning and purpose.

2. Take care of your relationship with your partner – the emerging needs of your parents may raise new anxieties in your partner, who is less equipped to deal with the emotional and family bonds that are core to your life. Your partner has an important role in offering his or her support, comfort and shared views on the important issues you face together.

3. Manage your parents’ needs – listening to their needs and gauging their responses will help you address their expectations and assumptions about a mutually agreeable level of care.

4. Manage your children’s needs – be clear about the expectations you have of them and ask for their support and understanding with the importance of caring for family. Listening to their concerns will help you to reinforce your key message that ‘we all need to contribute to be an effective, loving family’.

5. Seek the advice of experts – making the right choices will be your key to success and allows you to share your concerns with knowledgeable professionals. Additionally, experts help to give you confidence that you are making the right choices.

6. Financial issues can magnify stress unnecessarily – good financial management can have many benefits and may be an essential strategy for coping with major, and sometimes costly, transitions like moving your parents to an aged care facility or supporting your kids into their own homes.

Remember, to speak to your financial adviser if you are feeling the squeeze. Your adviser can go through your options to determine the best solutions for you, your parents and your kids. We also have aged care specialist services available to ensure you make the right choices for aged care.