Looking for a Financial Planner Brisbane?
Choosing a financial planner is not like choosing a plumber. You are handing someone visibility over your income, your superannuation, your debts and your plans for the next thirty years — and the difference between good and poor advice compounds quietly for decades. It is worth taking the time to choose deliberately.
This guide covers what to check, what advice costs in Australia, and the questions worth asking before you commit to anyone. It is general information, not advice about your circumstances.
What a financial planner actually does
A financial planner helps you decide what to do with your money over time, and then implements those decisions. In practice that usually means some combination of superannuation and contribution strategy, retirement planning and Centrelink entitlements, personal insurance, investment and portfolio construction, cashflow and debt reduction, tax structuring, and estate planning.
What separates advice from information is that a licensed adviser must consider your specific objectives, financial situation and needs, and document their reasoning in a Statement of Advice. That obligation is what you are actually paying for.
First, check they are licensed
Every person legally allowed to give personal financial advice in Australia appears on ASIC’s Financial Advisers Register. It is free, public, and takes a minute to search.
The register shows you their qualifications, how long they have been advising, which licensee they operate under, what they are authorised to advise on, and — importantly — any bans or disciplinary action. If someone is not on it, they cannot lawfully give you personal advice. Check before the first meeting, not after.
Understand how they are paid
This is the question that most changes the advice you receive, and the one people are most reluctant to ask. There is nothing awkward about it: every adviser is required to disclose it in writing anyway.
Broadly, there are three models. Fee-for-service means you pay an agreed fee for the advice itself, regardless of what is recommended. Commission means the adviser is paid by a product provider — still permitted for life insurance, and disclosed to you. Asset-based fees charge a percentage of the money under management.
None of these is automatically wrong. What matters is that you know which applies, what it costs in dollars, and whether it creates any incentive to recommend one product over another. At Queensland Financial Group our strategic and investment advice is fee-for-service; insurance advice may involve commission, and either way the figures are disclosed before you decide anything.
What financial advice costs in Australia
Most advisers charge a fixed fee to prepare a Statement of Advice, then an optional ongoing fee if you want continuing service and annual reviews. The cost depends on complexity — a single question about contribution caps is not the same piece of work as restructuring a family’s affairs before a business sale.
Two things are worth knowing. The fee must be disclosed in writing before you commit, so you should never be surprised. And an initial meeting is generally free, which means you can meet two or three advisers and compare before spending anything.
Ask what their advice can actually cover
Not all advisers can recommend the same things. Some operate on an approved product list limited to a narrow range, and some — particularly advice offered through a superannuation fund — can only address that fund’s own products.
That is not necessarily a problem if your situation is simple. It becomes one when your position spans several places: insurance held outside super, a partner’s superannuation, an investment property, or a business. Ask directly what falls outside the scope of what they can advise on.
Questions worth asking in a first meeting
- What are your qualifications, and how long have you been advising?
- Who is your licensee, and what are you authorised to advise on?
- How are you paid, and what will this cost me in dollars?
- What is outside the scope of advice you can give me?
- Who will I actually deal with day to day?
- What happens if I want to stop the ongoing service?
- Can you show me what a Statement of Advice looks like?
A good adviser will answer all seven without hesitation. Reluctance on any of them is itself an answer.
Red flags
Be wary of pressure to decide quickly, or of advice given before anyone has asked properly about your circumstances. Be cautious of guaranteed returns — no legitimate adviser can promise investment performance. Treat vagueness about fees as a warning, and be sceptical of any recommendation that funnels everything into products associated with the adviser or their licensee.
One more: an adviser who never says “you probably don’t need this” is not being careful with you.
Do you actually need a financial planner?
Not everyone does. If your finances are straightforward, your super is in a reasonable fund, and you are comfortable with what you are doing, you may not need advice yet.
Advice tends to earn its keep when there is complexity or a decision that is hard to undo — approaching retirement, selling a business, receiving an inheritance, restructuring debt, blending finances after a relationship change, or working out whether your insurance would actually pay out when it mattered. Those are the moments where getting it wrong is expensive and getting it right compounds.
Financial planning in Brisbane
Queensland Financial Group has advised Brisbane families and business owners since 1989, from our office at Suite 2, Level 22, 345 Queen Street in the CBD. We work with people approaching retirement, business owners planning succession, and families sorting out insurance and estate planning — and we frequently work alongside a client’s existing accountant rather than replacing them.
If you would like to talk it through, the first meeting costs nothing and carries no obligation. You are welcome to bring the seven questions above and ask us every one of them.
Luke Harlow Nominated for Technology/AI Expert Award
We are pleased to announce one of our financial advisers, Luke Harlow has been nominated in the INFIN: Future Financial Leaders 40 under 40 awards for 2025, as a finalist for Technology/AI Expert of the Year. We wish him luck next week.
Details of the event are here: https://www.theinside.network/infin-vic-2025
Sustainable investing on the rise
Sustainable investing is not new, but in recent years it’s moved from the green fringes into the mainstream. From climate change to animal rights and gender diversity, more people are interested in aligning their money with their values.
Last year alone, Australia’s sustainable investment market increased 20 per cent to a record $1.5 trillion. According to its 2022 benchmark report, the Responsible Investment Association Australasia (RIAA) found sustainable investments now represent 43 per cent of total professionally-managed funds.
In addition to traditional shares and fixed interest you can buy sustainable investments in a wide range of assets, including property, alternatives such as forestry and farmland, infrastructure, private equity and cash.
These days, most big super funds offer a sustainable investment option and some even offer this as their default option. You can also buy sustainable managed funds, including a growing list of exchange-traded funds (ETFs).
So what are sustainable investments and how can you tell?
Focus on people and planet
Sustainable investing is also known as ethical, responsible and ESG (environmental, social, governance) investing. But whatever the name, the focus is on people, society and/or the environment instead of an exclusive focus on financial returns.
Sustainable investments are selected using a variety of screening methods, including:
- Positive screening selects the best investments in their class
- Negative screening excludes harmful sectors, companies or activities such as arms, gambling, animal testing, tobacco and fossil fuels
- Norms-based investing screens for minimum standards of relevant business practices
- Impact investing has the explicit intention of generating positive social or environment impacts.i
Increasingly, the term ESG investing is used when a fund or company commits to sustainable investing in these three areas:
- Environmental, including air and water pollution, biodiversity and climate change
- Social, including child labour and labour standards, ethical product sourcing, gambling and human rights
- Governance, including board diversity, corruption, business ethics, corporate culture and whistle-blower schemes.
While climate change is a strong theme these days, the RIAA report found gender diversity and women’s empowerment are gaining popularity.
Yet despite the focus on making the world a better place, sustainable investing is not all warm and fuzzy. Performance still matters.
Performance gains
In the early days, sustainable investing often came at the expense of returns but that is no longer necessarily the case.
The RIAA report compared the performance of what it terms responsible investment funds and mainstream investments funds (on average and net of fees) over the past 10 years to December 2021.
As the table shows, responsible multi-sector growth funds consistently outperformed mainstream funds and their benchmark over 1, 3, 5 and 10 years. Responsible Australian share funds generally outperformed or were on par with mainstream funds. Only responsible international share funds disappointed, underperforming mainstream funds across all timeframes.
Performance of responsible investment funds vs mainstream funds and benchmarks
| Fund categories/benchmark | 1 Year | 3 Year | 5 Year | 10 Year |
| Responsible investment multi-sector growth funds | 16.1% | 14.0% | 10.6% | 10.9% |
| Morningstar category: Australia multi-sector growth | 14.1% | 10.9% | 7.9% | 8.8% |
| Responsible investment international share funds | 18.1% | 17.3% | 12.3% | 11.3% |
| Morningstar category: Australia Equity World Large Blend | 24.6% | 18.1% | 13.4% | 15.1% |
| Responsible investment domestic shares (Aus/NZ) | 16.6% | 14.8% | 11.8% | 11.2% |
| Morningstar category: Equity Australia Large Blend | 18.3% | 13.7% | 9.3% | 10.1% |
| S&P/ASX 300 Total Return | 17.5% | 14.0% | 9.9% | 10.8% |
Source: RIAA Responsible Investment Benchmark Report Australia 2022
Watch out for greenwashing
Not surprisingly, increased investor demand for sustainable investments has led to a rapid increase in the number of products available. The rush to cash in on the trend has sometimes led to what is known as ‘’greenwashing”.
The Australian Securities and Investments Commission (ASIC) describes greenwashing as the practice of misrepresenting the extent to which a financial product or investment strategy is environmentally friendly, sustainable or ethical.
ASIC warns investors to look beneath the green label at the fine print. For example, a fund might describe itself as ‘’no gambling” but the product terms say it may invest in companies that earn less than 30 per cent of revenue from gambling.
It’s also important not to rely on vague language such as “considers”, “integrates” or “takes into account” sustainability-related factors, but to look for a clear explanation of how the product will achieve its aims.
Australian companies lifting their game
It’s not just super funds and managed funds taking sustainable investing more seriously. For investors who like to invest directly in shares, Australian listed companies are also adapting to changing investor preferences and regulatory environment.
In a recent analysis of ESG reporting by Australia’s top 200 listed companies, PwC found the bar has been raised following the formation of the International Sustainability Standards Board (ISSB) in 2021, but there is still work to be done.
PwC found a 13 per cent increase in companies declaring a commitment to net zero emissions. However, only 55 per cent of those disclosed a transition plan or activities that will enable them to reach net zero.
There was also a 10 per cent increase in companies disclosing climate risks and opportunities, and a 30 per cent increase to 77 per cent of companies now disclosing a gender diversity policy.
For investors seeking sustainability along with financial returns from their investments, momentum and choice is growing. So please get in touch if you would like to discuss your investment options.
Buachailli Pty Ltd ABN 57 115 345 689 atf Harlow Family Trust and Wolrah Holdings Pty Ltd ABN 88 651 566 602 all t/as Queensland Financial Group are Corporate Authorised Representative’s of Synchron AFS Licence No. 243313 This advice may not be suitable to you because it contains general advice that has not been tailored to your personal circumstances. Please seek personal financial advice prior to acting on this information. Investment Performance: Past performance is not a reliable guide to future returns as future returns may differ from and be more or less volatile than past returns.
Market movements & review video – February 2023
Stay up to date with what’s happened in the Australian economy and markets over the past month.
China’s plans to kickstart its economy after the pandemic shutdown have been dominating the news this month and will have worldwide implications, not the least for Australia.
Australian shares were up nearly 8% in January while US stocks climbed by about 5% but the markets are nervously waiting for expected increases in interest rates by major central banks this month to help curb inflation.
Click the video below to view our February update.
Please get in touch if you’d like assistance with your personal financial situation.
Buachailli Pty Ltd ABN 57 115 345 689 atf Harlow Family Trust and Wolrah Holdings Pty Ltd ABN 88 651 566 602 all t/as Queensland Financial Group are Corporate Authorised Representative’s of Synchron AFS Licence No. 243313 This advice may not be suitable to you because it contains general advice that has not been tailored to your personal circumstances. Please seek personal financial advice prior to acting on this information. Investment Performance: Past performance is not a reliable guide to future returns as future returns may differ from and be more or less volatile than past returns.
How much super do I need to retire?
Working out how much you need to save for retirement is a question that keeps many pre-retirees awake at night. Recent market volatility and fluctuating superannuation balances have only added to the uncertainty.
So it’s timely that new research shows you may need less than you fear. For most people, it will certainly be less than the figure of $1 million or more that is often bandied around.
For most people, the amount you need to save will depend on how much you wish to spend in retirement to maintain your current standard of living. One way of doing that is to look at how much you spend now.
When Super Consumers Australia (SCA) recently set about designing retirement savings targets they started by looking at what pre-retirees aged 55 to 59 are actually spending.
Retirement savings targets
As you can see in the table below, SCA estimated retirement savings targets for three levels of spending – low, medium and high – for recently retired singles and couples aged 65 to 69.
Significantly, only so-called high spending couples who want to spend at least $75,000 a year would need to save more than $1 million. A couple hoping to spend $56,000 a year would need to save $352,000. High spending singles would need $743,000 to cover spending of $51,000 a year, and $258,000 for medium annual spending of $38,000.i
Table: Savings targets for current retirees (aged 65-69)
| If you will own your home when you retire and you live: | And you’d like to spend about this much in retirement: | Then you need to save this much by the time you are 65, on top of income from the Age Pension | |
|---|---|---|---|
| Per fortnight | Per year | ||
| By yourself | $1,115 (Low) | $29,000 | $73,000 |
| $1,462 (Medium) | $38,000 | $258,000 | |
| $1,962 (High) | $51,000 | $743,000 | |
| In a couple | $1,615 (Low) | $42,000 | $95,000 |
| $2,154 (Medium) | $56,000 | $352,000 | |
| $2,885 (High) | $75,000 | $1,021,000 | |
Source: Super Consumers Australia
While these savings targets are based on what people actually spend, there is a buffer built in to provide confidence that your savings can weather periods of market volatility and won’t run out before you reach age 90.
They assume you own your home outright and will be eligible for the Age Pension (which is reflected in the relatively low savings targets for all but wealthier retirees), and also make assumptions about future inflation and investment returns.*
Retirement planning rules of thumb
The SCA research is the latest attempt at a retirement planning ‘rule of thumb’. Rules of thumb are popular shortcuts that give a best estimate of what tends to work for most people, based on practical experience and population averages.
These tend to fall into two camps:
- A target replacement rate for retirement income. This approach assumes most people want to continue the standard of living they are used to, so it takes pre-retirement income as a starting point. Once you have an income target you can work out the savings required to generate that level of income for the time you expect to spend in retirement. The government’s 2020 Retirement Income Review suggests a target replacement range of 65-75 per cent of pre-retirement income would be appropriate for most Australians.ii
- Budget standards. This approach estimates the cost of a basket of goods and services likely to provide a given standard of living in retirement. The best-known example in Australia is the ASFA Retirement Standard which provides ‘modest’ and ‘comfortable’ budget estimates updated quarterly for changes in the cost of living.
SCA sits somewhere between the two, offering three levels of spending to ASFA’s two, based on pre-retirement spending rather than a basket of goods. Interestingly, the results are similar with ASFAs ‘comfortable’ budget falling between SCA’s medium and high targets.
ASFA estimates a single retiree will need to save $545,000 to live comfortably on annual income of $46,494 a year, while retired couples will need $640,000 to generate annual income of $65,445. This also assumes you own your home outright and will be eligible for the Age Pension.
Limitations of shortcuts
You may think these spending levels and targets are too low, or out of reach, depending on your personal circumstances and retirement goals. You may also query some of the underlying assumptions, especially if you rent or don’t own your home outright and expect to retire with a mortgage or other debts.
The big unknown is how long you will live. If you’re healthy and have good genes, you might expect to live well into your 90s which may require a bigger nest egg.
If for whatever reason you think your super nest egg is too small for comfort, it’s never too late to give it a boost. You could:
- Ask your employer to put a salary sacrifice arrangement in place or make a personal super contribution and claim a tax deduction, being mindful to stay within the annual concessional contributions cap of $27,500.iii
- Make an after-tax super contribution of up to the annual limit of $110,000, or up to $330,000 using the bring-forward rule.iv
- Downsize your home and put up to $300,000 of the proceeds into your super fund (up to $600,000 for couples).v
Thanks to new rules that came into force on July 1, you may be able to add to your super up to age 75 even if you’re no longer working. As with everything to do with super, strict rules and eligibility hurdles apply so ask us about the most appropriate strategies for your situation.
While retirement planning rules of thumb are a useful starting point, they are no substitute for a personal plan. If you would like to discuss your retirement income strategy, give us a call.
*Assumptions include average annual inflation of 2.5% in future, which is the average rate over the past 20 years, and average annual returns net of fees and taxes of 5.6% in retirement phase and 5% in accumulation phase.
i https://www.superconsumers.com.au/retirement-targets
ii https://treasury.gov.au/publication/p2020-100554
Buachailli Pty Ltd ABN 57 115 345 689 atf Harlow Family Trust t/as Queensland Financial Group is a Corporate Authorised Representative of Synchron AFS Licence No. 243313 This advice may not be suitable to you because it contains general advice that has not been tailored to your personal circumstances. Please seek personal financial advice prior to acting on this information. Investment Performance: Past performance is not a reliable guide to future returns as future returns may differ from and be more or less volatile than past returns.
Mortgage vs super
With interest rates on the rise and investment returns increasingly volatile, Australians with cash to spare may be wondering how to make the most of it. If you have a mortgage, should you make extra repayments or would you be better off in the long run boosting your super?
The answer is, it depends. Your personal circumstances, interest rates, tax and the investment outlook all need to be taken into consideration.
What to consider
Some of the things you need to weigh up before committing your hard-earned cash include:
Your age and years to retirement
The closer you are to retirement and the smaller your mortgage, the more sense it makes to prioritise super. Younger people with a big mortgage, dependent children, and decades until they can access their super have more incentive to pay down housing debt, perhaps building up investments outside super they can access if necessary.
Your mortgage interest rate
This will depend on whether you have a fixed or variable rate, but both are on the rise. As a guide, the average variable mortgage interest rate is currently around 4.5 per cent so any money directed to your mortgage earns an effective return of 4.5 per cent. i
When interest rates were at historic lows, you could earn better returns from super and other investments; but with interest rates rising, the pendulum is swinging back towards repaying the mortgage. The earlier in the term of your loan you make extra repayments, the bigger the savings over the life of the loan. The question then is the amount you can save on your mortgage compared to your potential earnings if you invest in super.
Super fund returns
In the 10 years to 30 June 2022, super funds returned 8.1 per cent a year on average but fell 3.3 per cent in the final 12 months.ii In the short-term, financial markets can be volatile but the longer your investment horizon the more time there is to ride out market fluctuations. As your money is locked away until you retire, the combination of time, compound interest and concessional tax rates make super an attractive investment for retirement savings.
Tax
Super is a concessionally taxed retirement savings vehicle, with tax on investment earnings of 15 per cent compared with tax at your marginal rate on investments outside super.
Contributions are taxed at 15 per cent going in, but this is likely to be less than your marginal tax rate if you salary sacrifice into super from your pre-tax income. You may even be able to claim a tax deduction for personal contributions you make up to your annual cap. Once you turn 60 and retire, income from super is generally tax free. By comparison, mortgage interest payments are not tax-deductible.
Personal sense of security
For many people there is an enormous sense of relief and security that comes with having a home fully paid for and being debt-free heading into retirement. As mortgage interest payments are not tax deductible for the family home (as opposed to investment properties), younger borrowers are often encouraged to pay off their mortgage as quickly as possible. But for those close to retirement, it may make sense to put extra savings into super and use their super to repay any outstanding mortgage debt after they retire.
These days, more people are entering retirement with mortgage debt. So whatever your age, your decision will also depend on the size of your outstanding home loan and your super balance. If your mortgage is a major burden, or you have other outstanding debts, then debt repayment is likely a priority.
Older couple nearing retirement
Tony and Elena, both 60, would like to retire in the next few years. Together they earn $180,000 a year, excluding super, but they still have $100,000 remaining on their mortgage. Tony has a super balance of $600,000 and Elena has $200,000.
They want to be debt free by the time they retire but they are also worried they won’t have enough super to afford the lifestyle they look forward to in retirement.
If they do nothing, at a mortgage interest rate of 4.5 per cent it will take five years to repay their mortgage with monthly mortgage payments of $1,864. At age 65, their combined super balance will be a projected $1,019,395.
Jolted into action, they decide they can afford to put an extra $1,000 a month into their mortgage or super.
- If they increase their mortgage payments by $1,000 a month, the loan will be repaid in three years and two months. But their super will only be a projected $931,665 by then, so they may need to work a little longer to fund a comfortable retirement. From age 63, they might consider salary sacrificing into super with money freed up from early repayment of their mortgage.
- If they salary sacrifice $1,000 a month to super from age 60, their combined super balance will grow to a projected $1,082,225 by the time they are 65 and their home is fully paid for.
These are complex decisions, but whichever option they choose they will probably need to consider working until at least age 65 to be debt free and build their super.
All calculations based on the MoneySmart mortgage and retirement planner calculators.
All things considered
As you can see, working out how to get the most out of your savings is rarely simple and the calculations will be different for everyone. The best course of action will ultimately depend on your personal and financial goals.
Buying a home and saving for retirement are both long-term financial commitments that require regular review. If you would like to discuss your overall investment strategy, give us a call.
i https://www.finder.com.au/the-average-home-loan-interest-rate
ii https://www.chantwest.com.au/resources/super-members-spared-the-worst-in-a-rough-year-for-markets/
Buachailli Pty Ltd ABN 57 115 345 689 atf Harlow Family Trust t/as Queensland Financial Group is a Corporate Authorised Representative of Synchron AFS Licence No. 243313 This advice may not be suitable to you because it contains general advice that has not been tailored to your personal circumstances. Please seek personal financial advice prior to acting on this information. Investment Performance: Past performance is not a reliable guide to future returns as future returns may differ from and be more or less volatile than past returns.
How to turbocharge your investment returns
If you’d invested $10,000 into the whole Australian share market back in 2002, your initial investment amount would have grown to almost $50,000 by 30 June 2022.
It’s a huge gain. Around 385 per cent to be precise. And, to achieve it, all that you would have needed to do is reinvest all the Australian company dividends you’d received over the last 20 years back into the Australian share market.
You could have achieved similar returns by investing through a managed fund or an exchange traded fund (ETF) that tracks the broad Australian share market.
Yet, as good as that all sounds, you could have done much better if you had added to your initial $10,000 investment by making regular monthly investment contributions.
How much better? Just by adding $250 per month your Australian share market investment would have surged to more than $180,000. That represents a 1,729 per cent total return.
In other words, for $60,000 in total additional contributions over 20 years, your end investment would have been worth over $130,000 more than if you had made no extra contributions.
The numbers obviously get larger if you had made higher regular monthly contributions.
By adding $500 per month to the initial $10,000 amount your investment would have compounded by 3,074 per cent to more than $317,000.
That’s a $130,000 total investment ($10,000 plus $120,000 in other contributions) over 20 years to achieve an investment worth $270,000 more than if you had just left your initial investment to grow on its own.
Here’s how those numbers would have looked based on the actual performance of the All Ordinaries Accumulation Index (which measures the Australian share market) from 1 July 2002 to 30 June 2022.
The benefits of regular contributions
|
Date |
No extra contributions* |
$250 per month |
$500 per month |
|
1 July 2002 |
$10,000 |
$10,000 |
$10,000 |
|
30 June 2007 |
$24,432 |
$52,047 |
$79,661 |
|
30 June 2012 |
$19,832 |
$57,104 |
$94,378 |
|
30 June 2017 |
$34,329 |
$117,332 |
$200,335 |
|
30 June 2022 |
$48,503 |
$182,931 |
$317,359 |
Source: Vanguard. *Assumes the reinvestment of income distributions only.
It’s only when you compare the results side by side that the full picture becomes much clearer.
An initial contribution amount combined with a regular investment savings strategy and the reinvestment of distributions over time will deliver much higher long-term results.
In the example used above, there would have already been a significant gap after just five years (in 2007) between investors who had not made additional contributions versus those that had.
And you can see that gap would have kept on widening over time. After 20 years, any investors who had followed a $250 per month regular contributions plan would have ended up with more than three times the amount of money than investors who had made no additional contributions.
A $500 per month contributions plan would have increased the differential to more than six times.
Understanding dollar-cost averaging
There’s another major advantage in making regular investment contributions, which brings into play a well-known portfolio strategy called dollar-cost averaging.
You may not realise it, but you’re probably already undertaking this strategy (indirectly) if you’re a member of a super fund.
Here’s how dollar-cost averaging works. Every time your employer makes a contribution into your super fund account it’s automatically invested by your fund according to the default investment strategy that you’ve chosen.
Maybe you’ve selected a “high-growth” super option, a “balanced” option, or a “conservative” option.
Behind the scenes your super money is most likely being directed into different managed funds, which invest into shares, bonds, cash, and other types of assets.
While the amount of super your employer pays doesn’t change, your investment purchasing power does change every time you receive a new super contribution.
That’s because the prices of the managed fund units your super fund is investing into does change every day.
If those managed fund unit prices have risen since your last contribution, then your super fund will be purchasing fewer units than last time.
Likewise, if the managed fund unit prices have fallen in value, your super fund will be purchasing more units than last time.
This strategy works in exactly the same way if you make regular contributions at set intervals outside of your super to buy units directly in other managed funds and ETFs.
You’ll automatically buy more units when market prices are lower and fewer units when prices are higher.
Over the total period that you keep investing, your average entry cost into specific assets will potentially be lower than if you’d try to guess the best time to buy in.
As your unit balance grows over time, your corresponding distributions via company dividends and other payments will also keep on growing. That’s the magic of compounding investment returns.
Just like your super contributions, it’s all really about sticking to a disciplined, non-emotional approach to investing that’s not affected by what’s happening on financial markets at any point in time.
Making regular contributions, and taking advantage of dollar-cost averaging, really adds up.
They’re a powerful combination in helping you to focus on achieving your investment goals, ideally through an appropriately diversified portfolio, to give you the best chance of investment success over the long term.
Source: Vanguard
Reproduced with permission of Vanguard Investments Australia Ltd
Vanguard Investments Australia Ltd (ABN 72 072 881 086 / AFS Licence 227263) is the product issuer. We have not taken yours and your clients’ circumstances into account when preparing this material so it may not be applicable to the particular situation you are considering. You should consider your circumstances and our Product Disclosure Statement (PDS) or Prospectus before making any investment decision. You can access our PDS or Prospectus online or by calling us. This material was prepared in good faith and we accept no liability for any errors or omissions. Past performance is not an indication of future performance.
© 2022 Vanguard Investments Australia Ltd. All rights reserved.
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Any information provided by the author detailed above is separate and external to our business and our Licensee. Neither our business nor our Licensee takes any responsibility for any action or any service provided by the author. Any links have been provided with permission for information purposes only and will take you to external websites, which are not connected to our company in any way. Note: Our company does not endorse and is not responsible for the accuracy of the contents/information contained within the linked site(s) accessible from this page.
Buachailli Pty Ltd ABN 57 115 345 689 atf Harlow Family Trust t/as Queensland Financial Group is a Corporate Authorised Representative of Synchron AFS Licence No. 243313 This advice may not be suitable to you because it contains general advice that has not been tailored to your personal circumstances. Please seek personal financial advice prior to acting on this information. Investment Performance: Past performance is not a reliable guide to future returns as future returns may differ from and be more or less volatile than past returns.
How to manage rising interest rates
Rising interest rates are almost always portrayed as bad news, by the media and by politicians of all persuasions. But a rise in rates cuts both ways.
Higher interest rates are a worry for people with home loans and borrowers generally. But they are good news for older Australians who depend on income from bank deposits and young people trying to save for a deposit on their first home.
Rising interest rates are also a sign of a growing economy, which creates jobs and provides the income people need to pay the mortgage and other bills. By lifting interest rates, the Reserve Bank hopes to keep a lid on inflation and rising prices. Yes, it’s complicated.
How high will rates go?
In early May, the Reserve Bank lifted the official cash rate for the first time since November 2010, from its historic low of 0.1 per cent. The reason the cash rate is watched so closely is that it flows through to mortgages and other lending rates in the economy.
To tackle the rising cost of living, the Reserve Bank expects to lift the cash rate further, to around 2.5 per cent.i Inflation is currently running at 5.1 per cent and while unemployment is below 4 per cent, annual wages growth of 2.4 per cent is not keeping pace with rising prices.ii
So what does this mean for household budgets?
Mortgage rates on the rise
The people most affected by rising rates are likely those who recently bought their first home. In a double whammy, after several years of booming house prices the size of the average mortgage has also increased.
According to CoreLogic, even though price growth is slowing, the median home value rose 16.7 per cent nationally in the year to April to $748,635. Prices are higher in Sydney, Canberra and Melbourne.
The table below shows the impact a rate rise of 1-2 per cent rise would have on monthly mortgage repayments in Australia’s capital cities. For example, a 1 per cent rise would add $486 a month to repayments on the median new home loan in Sydney, and an additional $1,006 a month for a 2 per cent rise.
How much could mortgage repayments rise for a new owner occupier?
| Monthly mortgage repayments | |||||
| Median value | Loan amount (80% LVR) | Current (*) |
Increase with 1% rise |
Increase with 2% rise |
|
| Sydney | $1,127,723 | $902,178 | $3,560 | $486 | $1,006 |
| Melbourne | $806,144 | $644,915 | $2,545 | $348 | $719 |
| Brisbane | $770,808 | $616,646 | $2,433 | $332 | $687 |
| Adelaide | $619,819 | $495,855 | $1,957 | $267 | $553 |
| Perth | $552,128 | $441,702 | $1,743 | $238 | $492 |
| Hobart | $735,425 | $588,340 | $2,322 | $317 | $656 |
| Darwin | $501,182 | $400,945 | $1,582 | $216 | $447 |
| Canberra | $947,309 | $757,847 | $2,990 | $408 | $845 |
Source: CoreLogic. *Assumes current average variable rate of 2.49%, monthly P&I repayments over 30 years.
While the big four banks are not obliged to pass on the cash rate changes, in May they passed on the Reserve Bank’s 0.25 per cent increase in the cash rate in full to their standard variable mortgage rates which range from 4.6 to 4.8 per cent. The lowest standard variable rates from smaller lenders are below 2 per cent.iii
Still, it’s believed most homeowners should be able to absorb a 2 per cent rise in their repayments.
The financial regulator, APRA now insists all lenders apply three percentage points on top of their headline borrowing rate, as a stress test on the amount you can borrow (up from 2.5 per cent prior to October 2021).
But with prices increasing for food, fuel, childcare and other basics, budgets are tight, and households may need to cut back non-essential spending or increase their hours of work.
Before you take drastic measures, it’s worth looking at some painless ways to improve your household budget.
Rate rise action plan
Whatever your circumstances, the shift from a low interest rate, low inflation economic environment to rising rates and inflation is a signal that it’s time to revisit some of your financial assumptions.
The first thing you need to do is update your budget to factor in higher loan repayments and the rising cost of essential items such as food, fuel, power, childcare, health and insurances. You could then look for easy cuts from your non-essential spending on things like regular takeaways, eating out and streaming services.
If you have a home loan, then potentially the biggest saving involves absolutely no sacrifice to your lifestyle. Simply pick up the phone and ask your lender to give you a better deal. Banks all offer lower rates to new customers than they do to existing customers, but you can often negotiate a lower rate simply by asking.
The big four banks’ discount rates are more than 2 per cent below their current headline rates, a potential saving of tens of thousands over dollars over the life of your loan. If your bank won’t budge, then consider switching lenders. Just the mention of switching can often land you a better rate with your existing lender.
The challenge for savers
Older Australians and young savers face a tougher task. Bank savings rates are generally non-negotiable, but it does pay to shop around.
The silver lining is that many people will also see increased interest rates on their savings accounts as the cash rate increases. Banks can, however, be slower to pass on the full increase in the cash rate to savings accounts. By mid-May only three of the big four had increased rates for savings accounts. Several lenders also announced increased rates for term deposits of up to 0.6 per cent.iv
High interest rates traditionally put a dampener on returns from shares and property, so commentators are warning investors to prepare for lower returns from these investments and superannuation.
That makes it more important than ever to ensure you are getting the best return on your savings and not paying more than necessary on your loans. If you would like to discuss a budgeting and savings plan, give us a call.
i https://www.rba.gov.au/speeches/2022/sp-gov-2022-05-03-q-and-a-transcript.html
iii https://www.canstar.com.au/home-loans/banks-respond-cash-rate-increase/
iv https://www.ratecity.com.au/term-deposits/news/banks-increased-term-deposit-interest-rates
Buachailli Pty Ltd ABN 57 115 345 689 atf Harlow Family Trust t/as Queensland Financial Group is a Corporate Authorised Representative of Synchron AFS Licence No. 243313 This advice may not be suitable to you because it contains general advice that has not been tailored to your personal circumstances. Please seek personal financial advice prior to acting on this information. Investment Performance: Past performance is not a reliable guide to future returns as future returns may differ from and be more or less volatile than past returns.
The trouble with intuition when investing
Knowing how your mind works can help you avoid the more obvious traps many investors fall into.
Cognitive bias has become a bit of an investing buzz phrase in recent years.
The theory is that the human brain predictably makes errors of judgment that can lead us to be emotional, short term and come to other incorrect conclusions.
Cognitive bias has been of particular interest to the investing community and long lists of biases – confirmation bias, anchoring, the recency effect and dozens of others – are now the stock-in-trade of beginner investors worldwide.
The Nobel-prize winning economist Daniel Kahneman first researched bias in human thinking, distinguishing two ways in which we think: an automatic, instinctive and almost involuntary style contrasted with effortful, considered and logical thought.
That original research has grown into an industry.
Researchers and psychologists have identified endless ways in which the human brain is prone to bias, errors and poor judgment – and the investing community has latched on.
But underlying it all is that original finding that we spontaneously seek an intuitive solution to our problems rather than taking a logical, methodical approach.
Kahneman wrote that when we are confronted with a problem – such as choosing the right chess move or selecting an investment – our desire for a quick, intuitive answer takes over.
Where we have the relevant expertise, this intuition can often be right. A chess master’s intuition when faced with a complicated game position is likely to be pretty good.
But when questions are complex and rely on incomplete information, like investing, our intuition fails us.
The very fact we find the concept of cognitive bias so appealing is simply another example of our innate desire for simple, intuitive answers.
Unfortunately, the world is complicated, and almost everything that happens in investment markets emerges from the combination of a web of unrelated, intricate and multi-faceted events.
Our bias towards simplicity is reinforced by the nightly news and the morning newspapers that persist in providing simple explanations for complex events. Each day, market movements are distilled into ‘this-caused-that’ explanations that obscure the true drivers of change.
It is our intuition that is reacting when we find ourselves excited that markets rose 100 points – and a little nervous when markets ‘wipe off’ billions. We experience these emotional reactions even though the effect on our overall wealth from either event is likely to be tiny.
Our understanding of history is similarly simple, reducing wars, recessions and pandemics into simple cause and effect stories that are easy to remember and teach.
These stories help us understand the past. But they do not help us predict the future.
This explains why investment opportunities that seemed certain at the time we made them so often go awry.
It is not bad luck or circumstances changing against us – it’s the fundamentally simplistic cause and effect model in our minds that doesn’t allow us to understand all the possible outcomes.
So how can we best use the science of cognitive bias to become better at investing?
It is certainly worth learning about the wide and growing range of cognitive biases scientists are identifying that can stand in your way of being more successful.
Knowing how your mind works can help you avoid the more obvious traps many investors fall into.
We can use the basic principles of successful investing to avoid becoming victim to our own cognitive biases. Stick to a plan and don’t react to market noise or your emotions. Stay diversified to reduce the risk of permanent loss. And ensure you do not spend too much money on unnecessary fees.
But it is also a trap to rely too heavily on the science of cognitive bias, thinking that it can provide you with the keys to investing success.
The serious research being done by psychologists has been co-opted to offer you yet another tempting short cut – and in successful investing, there is no such thing.
Source: Vanguard
Reproduced with permission of Vanguard Investments Australia Ltd
Vanguard Investments Australia Ltd (ABN 72 072 881 086 / AFS Licence 227263) is the product issuer. We have not taken yours and your clients’ circumstances into account when preparing this material so it may not be applicable to the particular situation you are considering. You should consider your circumstances and our Product Disclosure Statement (PDS) or Prospectus before making any investment decision. You can access our PDS or Prospectus online or by calling us. This material was prepared in good faith and we accept no liability for any errors or omissions. Past performance is not an indication of future performance.
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Buachailli Pty Ltd ABN 57 115 345 689 atf Harlow Family Trust t/as Queensland Financial Group is a Corporate Authorised Representative of Synchron AFS Licence No. 243313 This advice may not be suitable to you because it contains general advice that has not been tailored to your personal circumstances. Please seek personal financial advice prior to acting on this information. Investment Performance: Past performance is not a reliable guide to future returns as future returns may differ from and be more or less volatile than past returns.
Guide to aged care at home
As we get older, most of us want to remain independent and in our own home for as long as possible, but this can be challenging without some help with household tasks and personal care.
Recognising this, the government runs a Home Care Packages program where approved aged care service providers work with individuals to deliver co-ordinated services at home.
Approval for a Home Care Package starts with an assessment by the Aged Care Assessment Team (ACAT). Eligibility for a Home Care Package, or other government subsidised help at home, is based on your care needs as determined through the assessment. You must also be an older person who needs co-ordinated services to help them stay at home or a younger person with a disability, dementia, or other care needs not met through other specialist services.
You can make your own referral via the government’s My Aged Care website or by calling 1800 200 422 and answering some questions.
Financial eligibility
Your financial situation won’t affect your eligibility. But once you have been assigned a package, you will need a financial assessment to work out exactly how much you may be asked to contribute.
There are four levels of Home Care Packages – from Level 1 for basic care needs to Level 4 for high care needs.
The annual budgets for the packages are (in round figures) $9,000 for a Level 1, $16,000 for a Level 2, $35,000 for a Level 3 and $53,000 for a Level 4. The government contribution changes on 1 July each year.
The idea is that a person, using a consumer directed care approach, can decide how they would like to use that money for help which may include equipment such as a walker or services such as household tasks, personal care, or allied health.
Your contribution could be a basic daily fee up to $11.26 a day, as well as an income tested fee up to $32.30 a day or $11,759.74 a year.i These fees are adjusted in March and September each year.
Expect a wait
Demand for packages is high, with a wait of 3-6 months for a low-level package and 6-9 months for a higher level package.
It’s not unusual to be approved for a high-level package but be offered or ‘assigned’ a lower level package as an interim measure.
Once approved for a Home Care Package, you must appoint a provider approved by the government, whose role is to administer, and manage the package for you.
The provider will charge a fee for their services which is deducted from the Home Care Package. This essentially reduces the amount of money from the package that can be spent on services. Administration costs can be 10-15 per cent of the package and case management another 10 per cent, or thereabouts.
The services offered and the way they are delivered can vary between providers, so comparing offers is important.
How much help you get from a package will depend on your care needs and fees, but generally a Level 1 package might provide two or three hours of help a week, a Level 2 about four hours, a Level 3 package about 8 hours and a Level 4 about 12 hours.
A recent Fair Work Commission ruling mandating minimum two-hour shifts for casual home care workers, while improving conditions for low-paid workers, is also expected to lead to increased costs for providers and ultimately Home Care Package recipients.
Self-managed home care
One way to get more hours of help and have a greater say in who delivers it, is to self-manage your Home Care Package. As well as saving the case management fee you can generally negotiate directly with workers the hours worked and the rate of pay.
You still need an approved provider to administer the package, with the fee being about 10-15 per cent.
There are currently five providers offering a self-managed option. One way to find support workers to assist with your care needs is through one of several online platforms where carers register their willingness to help, along with their hourly rates.
When paying privately makes sense
While home care packages can provide some welcome financial assistance, if all you need is a couple of services such as cleaning or gardening, it can be more cost effective to pay privately.
Nick is the main carer for his wife Jean, who has a diagnosis of Alzheimer’s Disease. Following an ACAT assessment Jean qualified for a Level 4 Home Care Package but received notification that she had been assigned a Level 2 package. The only help they currently needed was regular cleaning, although they knew the time would come when respite care would be useful to give Nick a break.
After crunching the numbers using the government’s fee estimator, on a Level 2 package it worked out that after paying the income-tested care fee and case management and administration fees they would have about $1,500 a year of government support to spend. It was cheaper to employ a cleaner privately and rely on family for other odd jobs.
Jean opted to decline the lower level package and wait for the approved Level 4 package, which would deliver financial benefits closer to $40,000 a year after costs at a time when she was also more likely to use more services. By declining the lower level she did not lose her place on the waitlist, which was based on her priority and care needs at the time of assessment.
Further reforms on the way
To improve delivery of help at home, further reforms are on the way from July 2023 with a new Support at Home Program.
If you are weighing up your aged care options for yourself or a loved one, and would like to discuss financing arrangements, please get in touch.
i https://www.myagedcare.gov.au/home-care-package-costs-and-fees#basic-daily-fee
Buachailli Pty Ltd ABN 57 115 345 689 atf Harlow Family Trust t/as Queensland Financial Group is a Corporate Authorised Representative of Synchron AFS Licence No. 243313 This advice may not be suitable to you because it contains general advice that has not been tailored to your personal circumstances. Please seek personal financial advice prior to acting on this information. Investment Performance: Past performance is not a reliable guide to future returns as future returns may differ from and be more or less volatile than past returns.