08 Jan When should I talk to a financial adviser?
But as a general starting point let’s look at some other crucial events.
1. On entering the workforce and after serving out your probationary period. This may require only an initial meeting. We would discuss savings plans, goals and possibly protect that income with personal insurances. Setting up appropriate investments in superannuation will be a starting point also. We may discuss compound interest and how your age is your best investment asset of all. It may be several more years before another meeting is required.
2. Buying a home or some other major financial commitment. Reason: you may wish to protect your earning capacity against loss of income through illness or injury. You may have a loan that your parents have gone guarantor for you that needs to be protected. You may have received a physical loan from your folks that need to be protected. Talk to an adviser to get the right advice.
3. Getting married or divorced. Reason: Either of these will either work to create long-term wealth foundations or very quickly erode any wealth that has been created. Marriage brings a commitment to care for one another. Insurances need to be reviewed and plans made. Divorce will require a separation of assets. It may mean that you are each seeking separate financial advise. This has far-reaching consequences for your existing insurances to superannuation to any joint assets you may have held. It’s starting again but with the emotional scars.
4. Having children. Reason: too many to mention here. Increases in insurances and planning for schooling are a few. It may see one of you out of the workforce for a period and so cash flow may be constrained. You may need to review your coverage and your goals and review funding options.
5. Receiving a redundancy. Reason: whilst the options around redundancy are more limited these days there is still many considerations you must analyse. This is something best advised upon with the assistance of your accountant. Future tax obligations on these funds will be a major consideration but your superannuation, insurances and all the factors of changing jobs, retirement all come into play.
8. Making a decision to start an SMSF. Reason | Too many to mention. The ATO is actively involved in the monitoring of SMSF’s. Are you setting it up for the right reasons, are you up to date on your trustee obligations. What about your investment strategy? How will you deal with assets on the passing of a member? The list goes on and on. In short, get advice.
9. TAX minimisation through super or negative gearing. Reason | You need to be clear on what you can and can not do. You need to be aware of the risks and the opportunity costs of one strategy over another. In short, get advice.
10. Planning for retirement factoring in debt repayment and saving. Reason| How much will you need in retirement, when can you retire, what will it look like? Will you have debt when you retire or will you have cleared it? How will your assets be structured in the years leading up to retirement? Will you need to review your asset allocation, be a bit more defensive, before retirement? If you are looking to restructure assets we lik eto do this around 3-5 years before you retire. Do you remember the GFC, well we do. Get advice.
11.5 years prior to retirement. Reason | I thought this worth mentioning twice. To ensure that your assets are apportioned between defensive and growth to mitigate any short-term market fluctuations.
12. At retirement Reason | This is when we convert pensions, commence income streams and budget returns.
13. Any time your health takes a serious turn for the worst. | Reason pre-retirement we would like to think you had insurances in place and post-retirement there may be restructuring we need to attend to especially with super. We would do this with the assistance of your legal professional.
14. When mental capacity starts to fade. Reason | This is a sensitive subject but one that must be addressed, usually with a lawyer but definitely with your advisor and accountant. Loss of mental capacity carries so many issues and so this needs to be addressed sooner rather than later.
15. On passing of a spouse. Reason: the transfer of assets, the changes of SMSF trustee details and assets. The consideration of the appropriateness of any plans you had made whilst your spouse was alive especially in relation to such things as gifting assets or disposing of assets these all need to be reconsidered.
16. On the passing of your last surviving parent. Reason: all too often clients come to us after they have received the proceeds of any estate. Sometimes, it can be better to retain those assets from the estate. Having a chat with us on the passing of your mum or dad may help to better consider how those assets should be passed on.
17. Anytime you are gifting assets to children or family. Reason: consider the tax consequences of any assets being sold. Consider the asset protection considerations of your child’s future spouse or significant other that could inadvertently get access to this loan. Ultimately you will need a solicitor for this part but your adviser can recognise any other issues that shall need to be attended to.
18. Receiving a share option incentive bonus. Reason: these can be a two-edged sword. Whilst these can seem like all of your Christmases have come at once they can be notorious tax traps. Contracts are complex and tax consequences are not fully explained. As a closing warning on this topic, you may find yourself responsible for tax on money that you have not even received yet! Sound unfair, that’s the ATO. Ultimately a lawyer will give you contractual advice but your advisor can recount issues to be aware of. Get advice.