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Planning & protecting your wealth Anthony Prior Director & Senior Financial Adviser Thornton Group (Australia) Pty Ltd 20 October 2010.

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Presentation on theme: "Planning & protecting your wealth Anthony Prior Director & Senior Financial Adviser Thornton Group (Australia) Pty Ltd 20 October 2010."— Presentation transcript:

1 Planning & protecting your wealth Anthony Prior Director & Senior Financial Adviser Thornton Group (Australia) Pty Ltd 20 October 2010

2 2 This information has been prepared by Thornton Group (Australia) Pty Limited (ABN ) 60 Greenhill Road, Wayville, South Australia 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 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. Disclaimer

3 3 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

4 4 Australian adults have the 3 rd 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 & finance Points to ponder…

5 5 Planning your wealth Key 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

6 6 Planning your wealth Your 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

7 7 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 yr 2 yrs 3 yrs 5 yrs 10 yrs one 1

8 8 ” “ [Compound interest] is one of the best inventions of all time! Albert Einstein

9 9 SallyAnna AgeContributionYear End ValueContributionYear End Value 19002,0002, ,0004, ,0006, ,0009, ,00012, ,00016, ,00019, ,0002,0922,00023, ,0004,392026, ,0006,923028, ,0009,707031, ,00012,769035, ,00016,138038, ,00019,843042, ,00023,919046, ,00027,049051, ,00031,846056,400 Case study

10 10 SallyAnna AgeContributionYear End ValueContributionYear End Value 362,00037,122062, ,00042,926068, ,00049,310075, ,00056,332082, ,00064,057090, ,00072,554099, ,00081, , ,00092, , ,000103, , ,000115, , ,000129, , ,000144, , ,000161, , ,000179, , ,000199, , ,000221, , ,000245, , ,000272, , ,000301, , ,000334, ,434

11 11 SallyAnna AgeContributionYear End ValueContributionYear End Value 562,000369, , ,000408, , ,000451, , ,000498, , ,000550, , ,000607, , ,000670, , ,000739, , ,000816, , ,000899, ,154 NameAnna Contributions$16,000 Number of Years7 From Age19 to 26 Amount per Year$2,000 Return on Capital less contribution: $984,554 - $16,000 $968,154 NameSally Contributions$80,000 Number of Years39 From age26 to 65 Amount per Year$2,000 Return on Capital less contribution: $899,742 - $80,000 $819,742 $148,412 difference Case study Summary

12 12 Case study SCENARIO: no salary sacrifice NameJoe Age50 Super balance$150,000 Annual income$70,000 SG Contributions9% Desired retirement age65 Assumptions: Risk profileBalanced Return on super7.3%pa

13 13 Case study SCENARIO: no salary sacrifice $625,000 age 65 $150,000 start age 50

14 14 Case study SCENARIO: Salary sacrifice  Age 50 NameJoe Age50 Super balance$150,000 Annual income$70,000 SG Contributions9% Desired retirement age65 Assumptions: Risk profileBalanced Return on super7.3%pa Salary sacrifice$5,000 pa

15 15 Case study SCENARIO: Salary sacrifice  Age 50 $742,000 age 65 $150,000 start age 50 $5,000pa salary sacrifice

16 16 Case study SCENARIO: Salary sacrifice  Age 40 NameJoe Age40 Super balance$75,000 Annual income$70,000 SG Contributions9% Desired retirement age65 Assumptions: Risk profileBalanced Return on super7.3%pa Salary sacrifice$2,000 pa

17 17 Case study SCENARIO: Salary sacrifice  Age 40 $1.09M age 65 $75,000 start age 40 $2,000pa salary sacrifice

18 18 Case study SCENARIO: comparison Scenario123 Age50 40 Super balance$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

19 19 Know your risk tolerance - understand the impact of negative returns two 2 example 1: Market drop of 30% Original balance$100,000 Market rise to return to original: New balance$70,000 Required market rise43% example 2: Market rise of 30%, then fall by 30% Original balance$100,000 Market rise to return to original: Balance after 30% rise$130,000 Balance after 30% fall$91,000 Required market rise10%

20 20 Diversification Proven method of reducing downside risk... Growth of $10,000 invested 1 Jan Sep 10 SOURCE: Vanguard Index Chart calculator Asset classReturn since 1 Jan 01 Australian shares8.3% p.a. International shares-4.4% p.a. Australian property2.6% p.a. International property4.2% p.a. Cash5.5% p.a. Australian bonds6.1% p.a. International bonds8.0% p.a. Balanced portfolio5.6% p.a. Balanced portfolio Diversification Proven method of reducing downside risk...

21 21 Diversified portfolio Risk tolerance

22 22 +2% -2% Avg: 6.6% $196,000$260,000 $344,000 Diversified portfolio Average returns $100,000 start yr 1 yr 15

23 23 Review your strategies Things 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. three 3 Single, full-time employed Married, dual income Starting a family Buying a house Redundancy Inheritance Starting a business Retiring Salary sacrifice Transition to retirement Applying & maximising Centrelink benefits Regular investment plan Personal insurance Gearing Gearing in super SMSF Retirement income Debt reduction

24 24 start planning early know your goals know your tolerance for risk review your strategies key

25 25 Questions ? ? ? ? ? ? ? ?


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