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Planning & protecting your wealth
Anthony PriorDirector & Senior Financial Adviser
Thornton Group (Australia) Pty Ltd
20 October 2010
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This information has been prepared by Thornton Group (Australia) Pty Limited (ABN 88 101 789 226) 60 Greenhill Road, Wayville, South Australia 5034.
This presentation contains general information only. This presentation was produced for informative purposes only without assuming a duty of care. It does not constitute financial advice and should not be relied upon as a substitute for financial or professional advice.
This presentation does not take into account your particular objectives, needs or full financial situation. Before making a decision relating to this presentation you should assess whether the advice is appropriate to your objectives, needs or financial situation. You may wish to make this assessment yourself or seek the help of an adviser. No responsibility is taken for anyone acting on the information provided and anyone doing so, does so at their own risk.
No part of this presentation should be used elsewhere without prior consent from the author. Should you wish to obtain personal advice regarding anything in this presentation please contact Anthony Prior on 8561 2400.
The information in this presentation is based on our interpretation of relevant laws as at the date of this presentation and is subject to change.
DisclaimerThornton Group
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Why planning your wealth is important
The effects of financial stress:• Is the number one cause of divorce• Health problems – both physical & emotional• Stress on families
• To provide for yourself and immediate family
• To help extended family and friends• Preferred lifestyle choices • Sense of achievement
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• Australian adults have the 3rd highest average level of wealth per person (after Switzerland & Norway)
SOURCE: Credit Suisse
• 54% of people rate a household conversation about financial matters alongside talking about death…
SOURCE: XXX
Australians & financePoints to ponder…
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Planning your wealthKey principles • your needs
Have a clear understanding of your• financial goals and objectives (short, medium & long-
term)• current financial position• investment timeframe• acceptable level of fluctuation on capital
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Planning your wealthYour planner’s task determine possible
strategies to achieve goals
(i.e. salary sacrifice, Centrelink maximisation,
retirement planning)
financial goals and
objectives (short, medium
& long-term)current financial position
risk tolerance for fluctuation in capital
investment timeframe
assess the risks of the
strategy
determine the strategy
that’s right for you
needs assessment…
strategy assessment…
your planner’s task
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People are in the financial position they are in
today because of the decisions they have made
previously
Make a decision to start planning your wealth today
now
1 yr2 yrs
3 yrs 5 yrs10 yrs
one1on
e
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8”“[Compound interest] is one of the best inventions of all time!
Albert Einstein
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Sally AnnaAge Contribution Year End
ValueContribution Year End Value
19 0 0 2,000 2,092
20 0 0 2,000 4,392
21 0 0 2,000 6,923
22 0 0 2,000 9,707
23 0 0 2,000 12,769
24 0 0 2,000 16,138
25 0 0 2,000 19,843
26 2,000 2,092 2,000 23,919
27 2,000 4,392 0 26,311
28 2,000 6,923 0 28,942
29 2,000 9,707 0 31,837
30 2,000 12,769 0 35,020
31 2,000 16,138 0 38,522
32 2,000 19,843 0 42,375
33 2,000 23,919 0 46,612
34 2,000 27,049 0 51,273
35 2,000 31,846 0 56,400
Case study
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Sally AnnaAge Contribution Year End Value Contribution Year End Value
36 2,000 37,122 0 62,041
37 2,000 42,926 0 68,245
38 2,000 49,310 0 75,069
39 2,000 56,332 0 82,576
40 2,000 64,057 0 90,834
41 2,000 72,554 0 99,917
42 2,000 81,901 0 109,909
43 2,000 92,183 0 120,899
44 2,000 103,493 0 132,989
45 2,000 115,934 0 146,288
46 2,000 129,619 0 160,917
47 2,000 144,672 0 177,009
48 2,000 161,231 0 194,710
49 2,000 179,446 0 214,181
50 2,000 199,482 0 235,599
51 2,000 221,522 0 259,159
52 2,000 245,766 0 285,074
53 2,000 272,434 0 313,582
54 2,000 301,769 0 344,940
55 2,000 334,038 0 379,434
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Sally AnnaAge Contribution Year End Value Contribution Year End Value
56 2,000 369,533 0 417,378
57 2,000 408,578 0 459,115
58 2,000 451,527 0 505,027
59 2,000 498,772 0 555,530
60 2,000 550,740 0 611,082
61 2,000 607,906 0 672,191
62 2,000 670,788 0 739,410
63 2,000 739,959 0 813,351
64 2,000 816,046 0 894,686
65 2,000 899,742 0 984,154
Name Anna
Contributions $16,000
Number of Years 7
From Age 19 to 26
Amount per Year $2,000
Return on Capital less contribution:
$984,554 - $16,000 $968,154
Name Sally
Contributions $80,000
Number of Years 39
From age 26 to 65
Amount per Year $2,000
Return on Capital less contribution:
$899,742 - $80,000$819,74
2
$148,412
difference
Case studySummary
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Case studySCENARIO: no salary sacrifice
Name Joe
Age 50
Super balance $150,000
Annual income $70,000
SG Contributions 9%
Desired retirement age 65
Assumptions:
Risk profile Balanced
Return on super 7.3%pa
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Case studySCENARIO: no salary sacrifice
$625,000
age 65
$150,000
start age 50
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Case studySCENARIO: Salary sacrifice Age 50
Name Joe
Age 50
Super balance $150,000
Annual income $70,000
SG Contributions 9%
Desired retirement age 65
Assumptions:
Risk profile Balanced
Return on super 7.3%pa
Salary sacrifice $5,000 pa
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Case studySCENARIO: Salary sacrifice Age 50
$742,000
age 65
$150,000
start age 50 $5,000pa
salary sacrifice
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Case studySCENARIO: Salary sacrifice Age 40
Name Joe
Age 40
Super balance $75,000
Annual income $70,000
SG Contributions 9%
Desired retirement age 65
Assumptions:
Risk profile Balanced
Return on super 7.3%pa
Salary sacrifice $2,000 pa
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Case studySCENARIO: Salary sacrifice Age 40
$1.09M
age 65
$75,000
start age 40$2,000pa
salary sacrifice
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Case studySCENARIO: comparison
Scenario 1 2 3
Age 50 50 40
Super balance $150,000 $150,000 $75,000
Salary sacrifice per annum $0 $5,000 $2,000
Balance at age 65 $625,000 $742,000$1,090,000
Difference - +$117,000 +$465,000
Total Sal Sac to age 65 (gross)
- $75,000 $50,000
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Know your risk tolerance - understand the impact of negative returns
two2tw
oexample 1: Market drop of 30%
Original balance $100,000Market rise to return to original:
New balance $70,000
Required market rise 43%
example 2: Market rise of 30%, then fall by 30%
Original balance $100,000Market rise to return to original:
Balance after 30% rise $130,000
Balance after 30% fall $91,000
Required market rise 10%
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DiversificationProven method of reducing downside risk...
Growth of $10,000 invested 1 Jan 01-30 Sep 10
SOURCE: Vanguard Index Chart calculator
Asset classReturn since 1 Jan
01
Australian shares 8.3% p.a.
International shares -4.4% p.a.
Australian property 2.6% p.a.
International property 4.2% p.a.
Cash 5.5% p.a.
Australian bonds 6.1% p.a.
International bonds 8.0% p.a.
Balanced portfolio 5.6% p.a.
Balanced portfolio
DiversificationProven method of reducing downside risk...
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Diversified portfolioRisk tolerance
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+2%
-2%
Avg: 6.6%$196,000
$260,000
$344,000
Diversified portfolioAverage returns
$100,000
start yr 1
yr 15
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Review your strategiesThings change - your current situation, financial goals, tolerance for risk and investment
timeframe will change over time - your
Adviser will ensure your strategies remain appropriate for you.
three3three
Single, full-time employed
Married, dual income
Starting a family
Buying a house
Redundancy Inheritance
Starting a business
Retiring
Salary
sacrifice
Transition to
retirementApplying & maxim
ising
Centrelin
k benefitsRegular
investment
plan
Personal insurance GearingGearing in super
SMSF
Retirement income
Debt
reduction
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• start planning early• know your goals• know your tolerance for risk• review your strategies
key
key
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Questions ???
??? ??
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