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Financial Advice

The ‘Passport to Prosperity’ or PTP program.

Many people defer introducing any financial rigour into their lives believing it will restrict their spending plans, however under effective management it can have the opposite effect.

Spending decisions are much simpler when you’ve established goals and there is evidence that having control of your financial life can substantially improve your standard of living.

Your personal mortgage is a good example:

The average mortgage can last up to 30 years and can cost more in interest than the purchase price of the house. If you had a $400,000 mortgage and interest rates averaged 6%, over this time the total interest you would pay would be an astonishing $479,416. This is money that you could have better used to create wealth if you were able to repay your home loan sooner. Imagine if you had the capacity and could embrace a disciplined strategy to repay this amount in only ten to eleven-and-a-half years. Then the total interest paid would only be $156,649. That could be a saving of $322,767.*

(*Property Investment Analayst – Pro Series 2014)

The benefits of repaying your mortgage much earlier than the original term flow through your whole financial life.  Interest you would have paid on your mortgage can now be put to other forms of wealth creation and also allow for some life changing decisions.

What is the PTP strategy?

We look to use the equity in your home to start building wealth sooner. Initially, the investments are placed into a professionally managed basket of Australian Shares either via Separately Managed Accounts (SMAs) or Managed Funds.  Shares, while arguably no riskier than property, can be more volatile as they are priced daily. A basket of shares dampens the risk of any share significantly impacting on the strategy and we further mitigate this risk by using a number of professional managers. Australian Shares have been our preference as historically they have paid higher levels of tax effective income which can be an important advantage in this strategy and their liquidity means we can sell a portion of the investment when we can see gains.

The income generated from dividends can then be used to reduce your home loan. Your taxation situation can also dictate whether we pro-actively realise any capital gains to reduce your home loan even more rapidly.

As the mortgage reduces we can then look to use the accumulating equity to invest additional amounts into growth assets. Non-Tax deductible debt (‘Bad’ Debt) becomes Tax-deductable debt (‘Good’ Debt) but we also focus on reducing your total debt position. The level of debt you are comfortable with is very important and as the equity increases in your home you may look to more substantial investments, such as investment properties as an alternative to shares. They do reduce the flexibility of the strategy but their very high levels of leverage have made them very popular with many Australians.

It is important to note that we do not utilise and would never recommend using traditional margin lending products or ‘internally geared’ investments within this strategy.

Why do we use Australian Shares?

The average return for Australian Shares from 1994-2013 (20 years) has been 10.43%. The best year was 37.03% and the worst was –38.44%*. We want to allow the strategy long enough to achieve the long run average. There will be positive and negative years but by buying shares every month we can actually take advantage of this volatility using ‘Dollar Cost Averaging’**.

Additionally Australian Shares have historically paid higher levels of tax effective income than their international counterparts which is an important driver for this strategy. This income can be directed onto your home loan and the ‘franking credits’** included in this income will help reduce the effects of any possible taxation. Historicall this income is surprisingly consistent and its growth has neutralised the impacts of inflation.

Lastly, the professionally managed Australian share funds we use are liquid. We can see the values each day and buy and sell based on that value within 24 hours. If we want to sell the portion which is the gain, we do not need to sell the whole asset, as you would if you we were holding an investment property.

The ‘Passport to Prosperity’ process.

  1. Initial cashflow assessment
  2. Start investment & reduce Mortgage
  3. Ongoing monitoring to eliminate ‘Bad Debt’
  4. Accumulate excess cashflow into investments & reinvest Income
  5. Asset alternatives such as Investment Properties
  6. Reduction of total debt using all sources of income and any gains
  7. Commence the transition into Superannuation
  8. ‘Make work optional’ by letting your wealth provide your income
  9. Nurture, grow and protect your retirement portfolio
  10. Management and transitioning of your Estate

How do we manage risks?

Affordability

Cash flow is king in this strategy and we focus on your ability to meet your current lending commitments as well building a buffer against potential interest rate rises in the future and any other ‘surprises’ life may toss up.

Market Volatility

Investment markets run in cycles and this includes Property, Shares and even Government Bonds. You need to understand there will be volatility and you will need an adequate time horizon to achieve the results you are after. Volatility smooths over time but trying to ‘time’ the market is fraught with risk and has left many investors disappointed. In the long term all investments are driven by fundamentals but in the short term, ‘Fear and Greed’ can cause substantial instability. We will look to take profits in periods of growth and pay down bad debt and this should reduce the overall volatility you experience.

Investment Risk

The historically proven method of reducing risk is through diversification. If your chosen investment strategy is reliant on the performance of one asset, you are at the mercy of that assets performance. If you are diversified across a range of investments and those investments perform at different times in the investment cycle, you have substantially reduced your risk. For this reason we favour professionally managed portfolios and we seek to further reduce volatility by using a number of portfolio managers.

Security Risk

All of your investments are held within portfolios in your name and linked to your nominated bank account. Any transactions need to be authorised by you and any proceeds of a transaction or potential purchase would flow through to your bank accounts.

Shortfall Risk

This is the risk that if you do not take on a course of action that you will be left with a retirement shortfall and not meet what is most peoples goal, to have a long and pleasurable retirement. It is also the possibility that the purchasing power of your money may not keep pace with inflation (e.g. by not investing at all or not investing sufficiently in growth products).

Regulatory Risk

This risk relates to the potential negative impact of changes to government policy(s) on your financial strategy (e.g. superannuation and retirement income policy). We need to constantly monitor your strategy and adapt to any changes in legislation. Historically legislative changes have ‘grandfathered’ existing arrangements and apply at a certain time in the future. This gives us time to modify future strategies and invest confidently now based on current legislation.

Insurance

Life Insurance

Let’s face it; this is a topic most people would prefer not to think about and yet we are quick to insure cars, houses and contents. Your primary asset is your ability to earn income and without that your material goods won’t be insured.

You also need to consider the ownership of insurances as incorrectly structured insurances can have unexpected tax consequences for beneficiaries and may render your wills inoperable.  There is a chronic underinsurance problem in Australia and for many; it is simply not understanding the real risk to their families future if something should happen to them.

Total and Permanent Disability Insurance

What if you are injured or ill and are unable to perform your normal occupation? This is the area of Total and Permanent Disability (TPD) cover. This cover is designed to provide a lump sum payment if you are unable to either return to work in any capacity or in a limited capacity or role. This can be agreed at a level that covers any debts and still provides a residual lump sum to help provide for the family, care and modifications to a car or home due to this disability.

Trauma Insurance

Events such as cancer and heart attack can strike anyone at any time. Trauma insurance is designed to pay a lump sum payment if you suffer specific medical events or conditions. You need money at the time you have the trauma event to allow you access to medical treatments, cover any ‘gaps’ in your health insurance and protect the family from any financial burden while you recover. Trauma insurance will generally be paid either upon diagnosis or upon survival for a period after the traumatic event, depending on the insurer and the policy you have selected.

Income Protection Insurance

What is the difference between poverty and our ability to function as we would like to every day? It is our ability to pay the bills. This is where Income Protection (IP) insurance protects everything we have. IP is an excellent way to make sure your regular monthly bills and expenses will be paid in the event of you becoming ill or injured and unable to work. This type of insurance pays up to 75% of your regular income and no one who is working for a living can afford to be without this type of insurance.

Who needs insurance?

Anyone who has a family, debts, business partners or someone that would be affected if you were unable to work or no longer here.

 

Service Offering

Initial Service

In the initial meeting we will assess your situation and determine what you want to achieve and whether we can help you.

After our assessment of your situation and if you are satisfied with our recommendations, we would set up the following course of action:

  1. Initial strategy meeting
  2. Gather information (budget service offering)
  3. Assess cashflow affordably
  4. Assess tolerance to risk and debt levels
  5. Develop strategy
  6. Prepare your individual cashflow plan
  7. Prepare your individual asset/ Investment plan
  8. Prepare your individual risk assessment
  9. Present and implement strategy
  10. Monitor and modify the plan as needed
Ongoing Services

Robina Financial Solutions will provide you with the following services:

  • Quarterly reporting on progress of plan
  • Quarterly investment communications
  • Monthly electronic news updates
  • Invites to our educational seminar series
  • Mortgage and debt Reduction monitoring

My family and I started working with Robina Financial Solutions (RFS) in 2010. I had been steadily paying down my home loan over many years before Troy introduced me to the Passport program.

This program and its ongoing implementation has allowed me to accelerate my payment schedule and nearly halved the time it would have taken me to pay out the balance. I now have my mortgage paid off and have utilised that equity to build an investment portfolio and invest in additional property assets.

I continue to use the program and I am only disappointed I was not introduced to Troy sooner.

NATALIE, S

We specialise in the following services:

  • Financial Planning
  • Mortgage Reduction
  • Wealth Creation
  • Retirement Solutions
  • Superannuation
  • Managed Fund Investments
  • Life Insurance
  • Total and Permanent Disablement Insurance
  • Income Protection Insurance
  • Trauma Insurance
  • Aged Care Advice

Make an enquiry today

You can arrange an appointment with RFS Advice today by filling out the form below.


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