Premium Finance Services

Part 7

Part of my role at Premium Finance Services is to help our clients assess their wealth creation options.  I have found the following simple questionnaire an ideal starting point to assist in identifying the options available;

Do you want to pay less tax?                                                             YES  /  NO

Do you want to improve your financial security?                         YES  /  NO

Do you want to pay off your mortgage sooner?                           YES  /  NO

Do you want to retire early?                                                                YES  /  NO

Do you want to provide for your family’s future?                         YES  /  NO

Do you want to retire on a good income?                                       YES  /  NO

If you answered ‘YES’ to any of these questions you will need a wealth creation plan to achieve your goals.

Are you prepared to restructure your current financial position in order to achieve your financial goals?                                                                                                       YES  /  NO

Would you prefer a secure low risk investment strategy in order to achieve your financial goals?                                                                                                                    YES  /  NO

Would you consider purchasing an investment property if it was the best low risk method of achieving your financial goals? YES  /  NO

If you answered ‘YES’ to these questions then you are in a position to consider wealth creation as a means to improving your financial position.

A simple Asset and Liability analysis will then allow professionals at Premium Finance Services to determine the best wealth creation strategy for you.

Wealth Creation – an Overview

At Premium Finance Services we specialise in assisting our clients to improve their financial position and become financially secure without worry, without hassle, and without risk, by helping them understand the basic principles of wealth creation.

Wealth Creation is generally based on the desire to improve one’s financial position and achieve Financial Security;

• Wealth creation is most often driven by two primary emotional concerns and our desire to allay them;
  • “What are my children going to do in the future?” – The increasing cost of living, especially housing affordability mean that we have fears and concerns about how our loved ones will manage under  increasingly difficult financial circumstances; and
  • “How am I going to afford to retire?” – The Government’s ability to fund our retirement is reducing year by year and the burden to provide for our future is most certainly falling upon us.  The Australian Bureau of Statistics figures show that only 4% of retirees have a family income over $50,000 and 84% of retirees have an income under $25,000!  That is 96% do not have enough and retire on a substantially lower standard of living than that which they enjoyed when they worked.
  • These figures are getting worse year by year and it is the role of groups like Premium Finance Services to assist people improve their retirement years

Wealth creation is not complex and can be easily achieved by anyone who has commitment, time, income, and equity;

• To create wealth you need a to identify;
  • Your primary emotional concerns & desires;
  • Your current financial parameters; and
• Develop a blueprint; a financial solution to your concerns & desires within your current financial parameters.

Financial Security

• To achieve Financial Security we must Create Wealth;
• To Create Wealth we must Invest;
• To Invest successfully we must implement a Plan;
• To implement a plan we only need to make a decision to start;
• My role at Premium Financial Services to is help people Start Now – before it is too late!

I often tell my clients that wealth creation is not ‘rocket science’ and is not ‘brain surgery’ – basically it is not complex all it requires is simple common sense and believe it or not the basic concepts used today by groups like Premium Finance Services have been around for over 4000 years!

The Richest Man in Babylon by Samuel Clason published in 1926 is based on a Babylonian fable some 4000 years old and it explains the The Five Laws of Gold – common scene and fool proof rules to creating wealth.  These laws are;

1. Gold cometh gladly and in increasing quantity to any man who will put by not less than one-tenth of his earnings to create an estate for his future and that of his family. In other words, a person should pay themselves first and then live of the rest put away 10% of your income for the future as a bare minimum. This rule is so incredibly fundamental, yet only a small minority even bothers to follow it.
2. Gold laboreth diligently and contentedly for the wise owner who finds for it profitable employment, multiplying even as the flocks of the field. If you invest your money well, your money will simply make more money.  Again, a very simple and obvious rule, but one that many people overlook because they didn’t follow the first rule.
3. Gold clingeth to the protection of the cautious owner who invests it under the advice of men wise in its handling. This rule encourages caution on behalf of the investor and requires the investor to be informed and seek advice from people with relevant experience.
4. Gold slippeth away from the man who invests it in businesses or purposes with which he is not familiar or which are not approved by those who are skilled in its keep. This goes hand in hand with the third rule: if you invest in stuff you don’t understand, you’re likely to lose money and if you don’t fully understand let someone who does look after things for you.
5. Gold flees the man who would force it to impossible earnings or who followeth the alluring advice of tricksters and schemers or who trusts it to his own inexperience and romantic desires in investment. This rule is the original version of “If it sounds too good to be true it probably is not true” and at it simplest means don’t be greedy, don’t try to outperform a market and don’t get involved in get rich quick schemes.

The Five Laws of Gold really are all you need to know to create wealth:

1. Save at least 10% of your income for your family’s future
2. Invest (shares or property) these savings– make them work for you
3. Become informed and seek experienced ongoing professional advice
4. Don’t invest in things you don’t understand & always invest with experienced professionals
5. Be content with average returns – don’t try to outperform the market

Simple really!

At Premium Financial Services we teach our clients how to apply these Five Laws of Gold to their own financial circumstances and goals making wealth creation simple, worry free, hassle free, and risk free.

Saving Tax is not only a priority for most investors but seems to be almost an obsession with many Australian Tax payers.  When saving tax is viewed as a goal rather than a tool then investment strategy is often left wanting with the result being poor, bad, or even disastrous investment returns.

The fundamental starting point for any wealth creation, or wealth preservation, plan (other than the plan itself) is to ensure that the investment strategy is sound.  Groups like Premium Finance Services always start with designing or creating a blue print that is client specific identifying and meeting the specific needs of the clients in question.  The next step is to identify an investment strategy and then, and only then, should tax minimisation (savings) be introduced.

But back to saving tax – in simple terms a tax refund (for investment purposes) is only payable when the investor makes a LOSS and a LOSS means just that – on our tax paperwork we are going backwards – either the investment is losing value and we have realised our losses through a sale or the cost of keeping the investment is more than the income we are making – running at a loss!

So the easiest way to get a tax refund is to make a loss on an ‘investment’!  Believe it or not most “tax driven” investments do just that – they give you a big loss and no investment return.  Common tax driven investments are agriculturally based – emus, pine trees, alpacas, etc, and anything that is promoted primarily as a “tax saving” rather than a quality investment should be avoided

If all you want is a tax deduction then make that decision and give your money to the Salvos or other charity – it will make you feel good, help someone in need and give you a tax deduction without the anguish of a massive investment loss and failure to provide for your future.

If however you want to make money rather than lose it, that is to create wealth or preserve wealth, then Premium Finance Services believes you should set making money as your primary goal rather than saving tax and the best way to do that is to plan to pay $1 million in tax remembering that if you paid $1 million in tax then there must be $2 Million or $3 million in profit left for you!

Tax avoidance is illegal but tax minimisation is just prudent investment management.  With help from professionals like Premium Finance Services the maximum tax savings (tax minimisation) can be planned for and obtained once the appropriate investment strategy and wealth creation blue print has been identified.

In many instances a properly structured wealth creation plan can see the cost of creating your future wealth reduced by 30% to 50% by simply using prudent tax minimisation strategies to invest into quality investments.  That means with proper tax planning you can create 30% to 50% more wealth for the same investment.

The rule for today is to not let saving tax stop you creating wealth.

Today I want to address and differentiate between an investment, a tax strategy, and a wealth creation strategy (financial plan). This may seem a simple concept, and in reality it is, but the media, the government, and to some extent the financial planning industry, have all confused the issue in order to make their job easier leading to confusion within the general public about their wealth creation plans.

An investment is, as the name implies, an asset that can (and should) over time appreciate in value. There are three main investment asset classes
1. Cash & Fixed Interest;
2. Shares; and
3. Property.
There are other investment types that are often more speculative and less reliable as wealth creation vehicles and are not considered main stream investments including, collectables and anything that can live (and die).

A tax strategy exists at two levels and includes the inherent tax advantages of a particular asset class as well as the structure in which we hold those assets. The two most common tax structures for investment purposes are Superannuation; and Negative Gearing.

A wealth creation or financial, plan is the financial path along which we intend to travel to reach our desired financial / wealth creation goals.

It does not matter how good the tax strategy is if the investments are poor – you still will not create any wealth so it is imperative that you focus on sound investments before considering which tax strategy suites you best. Similarly it is important to have a goal or outcome in mind before determining which investments or tax strategies are best.

The most common mistake made in the financial services industry is believing that Superannuation is an investment and a wealth creation plan/vehicle; it is NOT it is a merely a tax strategy and just having a tax strategy is NOT sufficient to create wealth. The massive losses suffered last year by investors and retirees in superannuation funds was in a large part due to not understanding the difference between the investments held (shares) and the tax strategy (superannuation) and the financial goals of the investor.

Companies like Premium Finance Services will not only differentiate between tax strategies and investments, but between tax strategies and wealth creation plans or blue prints. At Premium Finance Services we assist each client (most often a couple) to identify their financial goals first, then we show them the options available to create wealth and finally they choose which options (including tax strategies) best suit them to meet their wealth creation plans. A great wealth creation plan is;
1. Financial Goals first
2. Investment Strategy second
3. Tax Strategy third

Wealth Creation with Premium Finance Services Brisbane and Melbourne

Part 1

I will start with an introduction of who I am and what I intend to do with this blog.

I have been involved as a practitioner and advisor in the financial planning, investment advisory and wealth creation industry since March 1987 so I have seen the industry’s birth from the life insurance industry in the early 1980’s and its evolution since.

During this time life expectancies have increased, retirement ages decreased and at the same time the Government’s ability to support retirees has drastically decreased. It is no wonder then that 95% of retirees fail to maintain a comfortable (pre-retirement) standard of living with 84% effectively living on less than the minimum wage.

The rise of wealth creation specialists like Premium Finance Services and an invigorated financial planning industry focussing on wealth creation in addition to the old staple of wealth preservation are working towards improving these statistics by offering solutions that can be used to improve the retirement outlook for the vast majority of Australians.

This blog will deal with ad hoc topics that come to mind dealing with wealth creation and retirement planning with the aim of assisting those interested understand the options and choices available to improve their chances of a comfortable retirement.

Bt way of background I have an Honours Degree in Science from the Australian National University, Graduate studies in Micro & Macro Economics From Canberra University, a non-accredited Diploma of Financial Planning from Monitor Money, an accredited Diploma of Financial Planning from Deakin University, an accredited Diploma in Financial Services (PS146 compliance) and a Certificate IV in Property plus over 22 years as a financial planner and wealth creation expert.

I have worked as a licensed financial planner (authorised representative) managing over $20 Million in private client funds for one of Australia’s largest independent financial planning companies (Monitor Money in Canberra) as well as a similar role with the NSW Labor Council (Chifley Financial Services Southern NSW), a wealth creation specialist and researcher (Phoenix Financial Consultants – Sydney & Brisbane), and now a Relationship Manager (wealth creation expert for Premium Financial Services in Brisbane).