20% of Australians are smart enough to have a financial adviser. Despite all the negative press and advertising by industry funds against financial advice, many people still believe you can greatly benefit from getting help from a qualified expert. Intuitively it makes sense, but how do you know who to trust and what does a good adviser do anyway?!
This simple case study will show you in 3 steps a couple of ways we help clients every day. Good financial advice is about a lot more than just investments and numbers.
Step One: Take time to understand your values and goals
James and Claire came to see us at the age of 52, after going through our Financial Road Map® process we got to understand their values and following important goals:
- Both retire at age 60 and travel around Australia and overseas every year. They did not want to skimp on the experience and these had to be memorable trips with family and friends.
- Help their 2 kids get kick started in life with a lump sum when they turn 25.
- On top of this they wanted to take their kids to Europe next year on a very big family holiday before they both finish high school.
This meant they only had 8 years to maximise their retirement savings plus find the money for their other goals.
As well as the usual investment and financial planning strategy we also discussed cash flow. This was an unexpected conversation because they thought only young people needed to monitor cash flow.
Plus, they were 5 years away from paying off their mortgage and had 2 children in private school, the last thing on their mind was surplus cash flow!!
However, after working with them using our Cashflow tool and getting an understanding on their essential and lifestyle expenses they saw that they actually had plenty of potential surplus income, they were just spending it… Sound familiar?
Step Two: Understand your current situation
James & Claire used our easy online interactive tool called the Wealth Report to provide the following information before our meeting. (although it’s not uncommon for people to just bring their documents and have us enter the information).
In order to see what could potentially happen if they just kept doing what they normally do with cash flow, we entered the following information to our system:
- Both retire at Age 60
- Big family holiday next year costing $30,000
- Gift both children $50,000 to help them get started at age 25
- Allocate $20,000 travel per annum in retirement for 12 years
- Reduce living expenses at age 70
- Do nothing about cash flow
The Wealth Report, then produced the following projections:
Pitt Stop: Please only continue reading if you have read the “Important Information” and “About the Projections” at the bottom of this article. By continuing to read this article you agree you have read the “Important Information” and “About the Projections”
By the time James and Claire are in their late 70s, the only asset they will have left is their home and they would be reliant solely on the Age Pension. Of course they could compromise by not gifting to their children or not having the retirement they dreamed of. However, what if they could actually live the life they wanted?
Step 3: Explore potential options
By working with James and Claire we establish agreed and reasonable amounts to put aside. We then create and implement the following strategies to significantly impact their potential financial future:
- Both Salary Sacrifice into their Super
- Allocate 80% of excess cash flow to cash savings
- Make a non-concessional contribution each to Super at retirement
Outcomes of Financial Advice*
Pitt Stop: Did you read the fine print below as asked earlier?
Ok, getting the gist of our world of financial services, disclaimers and compliance? It’s pretty rigorous and we take it seriously… Here’s the potential outcomes based on some modelling, which is not to be taken literally and only as an indication of possible outcomes.
- James & Claire are able to achieve their most important goals with family and travel, plus not compromise on current or future lifestyle.
- They are projected to be able to survive without Aged Pension or drawing from their home in the future
- Their projected Cash balance at the start of retirement is $333,226, a very big difference from their current savings of $15,000. That’s a 2,220% difference (two thousand, two hundred and twenty percent). Yes you read that right, that is the power of cash flow management and ongoing advice.
- Superannuation at start of retirement is projected to be $1,615,000 instead of $1,508,000, that’s a 7% increase worth $106,000. (This is the value just from salary sacrificing)
- Superannuation is projected to last well beyond their life expectancy. In fact, 30 years after retirement they could still have $368,699 in Superannuation.
- Networth 33 years after retirement projected to be $6,035,000 instead of $4,478,000, that’s a 26% increase worth $1,557,000
What does this mean for you?
Very important: This is just an “EXAMPLE ONLY” of the power of cash flow management and financial advice, it should NEVER be used to compare your own personal circumstances. To start the conversation around how you can benefit from financial advice and get your own FREE Wealth Report:
Call US NOW on 0393999088
Email us at: firstname.lastname@example.org
or book in a FREE 5 minute chat to discuss further below.
General Disclaimer: The above calculations were created using the RI Advice Wealth Report and does not consider your complete personal circumstances. You should not act on it without first obtaining professional financial advice specific to your circumstances. RI Advice Group Pty Ltd ABN 23 001 774 125, AFSL 238429. All projections have been calculated on the assumption that the projection is run on the first day of the financial year and that you are your current age for the entire financial year. The calculations have been made based on whole numbers of years. All projected values are expressed in today’s dollars and deflated using price inflation. All calculations are based on taxation and superannuation laws as at July 2018. These assumptions should only be considered current until 30 June 2019. The characters in this example are fictional only, any similarities in name and or financial is pure coincidental and not intended.
*Important Information: Please click here to read the full assumptions on which the above calculations are based.
*About the Projections: The projections shown are for illustration purposes only and should not be considered personal advice.
The technology we use has been designed to aid you in visualising goals and the possible impacts of various financial choices, however does have some limitations:
1.As a projection tool, current data and assumptions are projected unchanged into the future. This may not be accurate given changes to legislation and changes in your personal situation. 2. Super fees and charges my be based on industry average fee assumptions. Your actual product and advice fees may vary. 3.Insurance premiums within super may have not been conserved. This may alter the superannuation projection. 4. The illustrator does not consider contributions previously made to super. This may have an impact on the level of contributions able to be made in the future. 5. The illustrator uses generic financial products (e.g. super, managed funds, insurances). The actual financial product may have limitations that preclude particular scenarios/strategies or which warrant us to consider alternative scenarios/strategies.
Any advice recommendations will be provided in an appropriate advice document
Empowered Financial PartnersTM (ABN: 85033045161) is a Corporate Authorised Representative of RI Advice Group Pty Ltd RI Advice Group Pty Limited AFSL 238429 ABN 23 001 774 125 Phone: (03) 9399 9088
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