When our clients invest, they expect returns that are commensurate with their goals, their time frame and their comfort levels. At FinGuard we recommend an approach to investing that is designed to produce maximum results without necessarily incurring high levels of volatility.
Please contact us for a detailed copy of our investment philosophy and methodology.
Risk and Return
We analyse our client's 'risk profile' to determine what investments are outside their comfort zone and why. We design an investment strategy that accords with our client's risk profile and then point out any conflicts between the strategy and achieving their goals - i.e. achieving a client's goal may only be achieved by investing in assets they initially wish to avoid. Over time it is our expectation & experience that with appropriate education and advice, any non-alignment of strategy and goals is adequately resolved. This is fundamental to the relationship with our clients as education and bringing understanding is a constant in all that we do with clients.
Investing into managed funds provides access to Australian shares, property, fixed interest (bonds etc) and international shares. Using managed funds allows a relatively small sum to have access to a wide range of investment options. Fund managers use dedicated researchers and analysts as well as a distinct investment process to determine their underlying investments or stock selection.
Managed funds can be what we call sector specific - e.g. investing only in Australian shares or can be diversified across all asset classes as mentioned above (ie. shares, property, bonds etc). Using a diversity of managed funds, a client's investment outcome is catered for by aligning the weightings in the various asset classes within a diversified portfolio to the client's goals.
Investing directly into the various asset classes is possible and sometimes quite appropriate. Investing into shares or property trusts that are listed on the Australian Stock Exchange directly via a broker is an example of direct investments. Clients can end up with a similar mix of sector specific or diversified assets as in a managed fund but the essential difference is that with direct investments, the client (with our advice) directly controls the selection of stocks - more control over stock selection than a managed fund but also, more responsibility in choosing wisely!
Dollar Cost Averaging
The purpose of dollar cost averaging is to provide a client's investments with a more even (or averaged) purchase price. Investing a set dollar amount at regular intervals over time may reduce the average price that is paid for that investment as a client automatically buys more when the prices are low and less when the prices are higher. This process can therefore smooth the purchase price and thereby smooth the investment returns.
Essentially, superannuation is a savings regime designed to help individuals provide for their retirement. The Federal Government provides a number of taxation incentives which makes superannuation the most attractive and effective savings structure available.
At FinGuard, we pay special attention to how superannuation dovetails into a client's overall planning strategies. We have many examples of how a client's financial situation and/or superannuation accumulation has been significantly enhanced by strategically utilising the taxation incentives available in superannuation.
Clients who are drawing a pension from their superannuation accounts are said to be in pension phase. Otherwise clients' superannuation accounts are said to be in accumulation phase.
Anyone under the age of 67 can contribute to superannuation. Clients over 67 may be able to contribute to superannuation if certain employment criteria are met. There are two broad types of contributions that can be made to superannuation; concessional and non-concessional.
Concessional contributions are contributions that attract a tax deduction. This includes compulsory superannuation (currently 9.5% x salary p.a.) paid by employers and any contributions made by the way of salary sacrificing. Self employed as well as employed people that contribute to superannuation will also be able to make concessional contributions. There is currently a cap on how much you can concessionally contribute to superannuation per annum.
Non-concessional contributions are not eligible for tax deduction. If clients contribute funds to superannuation with after tax salary these are classified as non-concessional. Clients are able to contribute up to $300,000 in non-concessional contributions in any three year period provided they are under age 65. Personal contributions, the government co-contributions and spouse contributions each classify as non-concessional.
Superannuation is designed to provide for retirement. Therefore funds can only be withdrawn from superannuation when clients retire after reaching preservation age. Preservation age is currently 55 but for clients born after 1/07/1960, their preservation age will occur between ages 55 to 60.
Between the ages of 55 and 65 clients need to have retired from work in order to access their superannuation; however once they reach age 65 they will be able to access their superannuation regardless of work status.
Once a client reaches their preservation age, they are able to take advantage of specific government initiatives to access their superannuation by way of a limited regular payment even if they continue in full time employment.
Superannuation has a number of unique tax advantages. The maximum tax rate on super contributions is 15%. Earnings in the superannuation accumulation phase are also taxed at a maximum of 15% but this can reduce to nil depending on the tax treatment of the assets in which the fund invests. Withdrawals from superannuation, after age 60, are tax free in most cases.
Additionally, by taking some of your funds as a pension - i.e. converting some or all of your superannuation accumulation to a pension account, clients may receive preferential tax treatment on payments and all earnings within the pension account are tax free. Taxation and superannuation can be quite involved and the complexities can vary greatly between individuals. Therefore clients' overall planning strategies need to be professionally considered in order to take full advantage of benefits that may be available.
Many clients see an advantage in taking greater control of their superannuation. There are a number of options available to help take more control of how clients' funds are invested and how their superannuation is structured. These options range from a basic superannuation account utilising multi-manager investment options to using an internet based administration platform. In certain cases where the overall strategy for a client warrants it, we may recommend using a Self Managed Superannuation Fund (SMSF) which allows ultimate control over structure and investments. In the latter two options, clients can use more sophisticated options such as sector funds and direct equities.
An SMSF allows clients to take control of every aspect of their superannuation fund. They can invest in assets as diverse as direct shares, commercial and residential investment property, art works or even their business premises for small business owners (provided strict legislative guidelines are adhered to). Clients can structure the SMFS to take advantage of estate planning considerations, borrowing to invest and pension options.