Tuesday March 2, 2010

Introduction

Welcome to Lakeside's first update for 2010. We would like to invite all of our clients to contact us for a review at anytime on 03 9510 0788.

The information in this newsletter is general advice only. It has been prepared without taking into account your objectives, financial situation and needs. Before acting on any advice you should consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. You should obtain a product disclosure statement relating to any product and consider the statements before making any decision whether to acquire these products.

Please note: Information and advice relating to loans, mortgages and legal matters is provided by staff of Lakeside Consultants independently of Guardianfp Ltd (‘Guardianfp’). Guardianfp is not responsible or liable for provision of these services as it is separate to any ‘financial product advice’ provided by Lakeside Consultants under authorisation by Guardianfp as that term ‘financial product advice’ is defined in the Corporations Act 2001 (Cth).

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Director's Fore

Welcome back to what I hope is a fun-filled 2010 for you and your family.

2009 was quite a remarkable year in terms of the financial stability of world markets, and indeed our own Aussie market. At 1 January 2009 the Dow was approximately 7,000 and the ASX 200 was at 3,500.

By December 31st the Dow had climbed to 10,500 and the ASX 200 to 4,700 (34% increase in our market). Sadly, our market in the last 6 weeks has seen a decline to just above 4,500 points.
As a result, the coming period does not all point to smooth sailing, unfortunately.

I am sure the next few years will be very interesting in Australia – what will happen to the property markets; what will immigration and population numbers be like in 5 - 10 years time; and how will we, as a country, be able to support the ageing population.

Some statistics on this last point are very interesting – In 2010 five people are working to support our population over 65 year of age, whereas in 1970 it was 7.5 people, and it is projected to be only 2.7 people working by 2050.
The above statistics point to more people working longer and sadly, a need to increase taxes.

All the best for 2010 and beyond, and we look forward to seeing you during the year.

Ross Hennig
Managing Director
 

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Insurance Claims

In 2009 twenty seven Lakeside clients were able to claim on their insurance policies.  Twelve of these claims are still ongoing (ie the clients continue to receive monthly benefits).

Of these claims, the occupation of clients varied widely from tradesmen, winemaker, dentists, physios, doctors and business managers. This clearly shows that injury and/or illness can happen to anyone.

Several large lump sum payments were made to clients for Trauma claims, ranging from $255,000 - $382.000.
We can’t emphasise enough, the importance of a Trauma policy, which covers the insured for many specified illnesses (eg cancer, heart attack, stroke, paraplegia, etc). A lump sum, nominated by the Insured, is paid on the diagnosis of any of those specified events, whether you are able to work or not.

Two other significant payments were made during 2009:
• Client A has a terminal illness, and the Insurer paid out the Term benefit in advance - $1,680,000.
• Client B, also diagnosed with a terminal illness was able to claim an advance payment on a term policy, meaning she can now go home, and be cared for by a full-time carer.

Specific Injury and Nursing Care Benefits
Some clients were pleasantly surprised during an annual review of their insurances, to be informed that they could actually make a claim on their Income Protection policy, either for a Nursing Care Benefit (ie > 3 days in hospital) or for a Specific Injury (ie broken arm – 30 day benefit payable).

Please call one of our Insurance Advisors today – 9510 0788 – to check that you have appropriate cover on all your policies.
 

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Legal

 How to ensure your family and loved ones receive the FULL benefit of your Superannuation pay-out on your death

In the event of your death, you would probably like to know that your retirement savings were going to be safe in the hands of the person or people closest to you. Therefore it is a good idea to check that you have made a binding nomination which properly identifies those who are to receive your Super death benefits. If you have not nominated a beneficiary, the trustee of your Superannuation fund can make that decision. The law requires trustees to investigate potential beneficiaries – your spouse, children, financial dependants and people in an interdependent relationship with you, all qualify – and to work out who is most appropriate. But who the trustee thinks is most appropriate may not be in accord with your wishes.

For more information contact Suzanne Jones, Director, Lakeside Legal on 03 9510 0788 or email Suzanne@lakesideconsultants.com.au
 

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Investing VS Paying Down Your Mortgage

A common dilemma for clients with surplus income is whether it is better to:

a) make additional mortgage repayments or;
b) pay off the mortage and invest simultaneously.

Make additional mortgage repayments
Guaranteed return – every dollar paid off the mortgage effectively ‘earns’ the interest that would otherwise have been paid over the balance of the mortgage term.
Forced saving – having a mortgage forces many people who wouldn’t otherwise have the discipline, to save.

Pay off the mortgage and invest simultaneously
Opportunity cost – if your earn more by investing than you save in interest repayments, then it may make sense to invest rather than pay down the mortgage.
Compounding – by waiting to invest until the mortgage is paid off, you may miss out on the effects of compound returns on your investment.
Diversification – it may be prudent to diversify across a number of investments, rather than just in the family home.
Inflation – over time, inflation erodes the real value of money. This means that future mortgage payments will cost less than they do today.

Conclusion
There is no right or wrong answer. It is a personal decision that depends on both financial and emotional factors such as your marginal tax rate, your desire to own your home debt-free, your tolerance for risk and expectations of interest rate movements.

Call one of our experienced Financial Planners on 03 9510 0788 for further information and to discuss your options.
 

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Finance

 Can you afford to buy a new home, or is it out of reach??

The days of purchasing a property without savings no longer exist!

Where a loan is more than 80% of the purchase price, what most people do not realise is, there is a second approval required – that of the Mortgage Insurer.
If the Mortgage Insurer cannot see evidence of savings, or sees any other adverse reason, they can decline a loan application, even if the Lender has approved it.

In the last 12 months all Lenders have removed their 100% Loans, and also reduced the maximum loan sizes to 95% of the purchase price, some even to 90%.
This means that the borrower requires a minimum of 5% of the purchase price, PLUS costs, in order to purchase a new home. Even then, approval is required from both the Lender AND the Mortgage Insurer.

As bleak as this may seem, long term evidence shows that there is never a better time to buy your home than NOW.

Please call one of our experienced Mortgage Consultants on 9510 0788 – they can advise if you can afford to take this step now.
 

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