When it comes to your super, we know it’s easy to set and forget.

However, accessing your fund and choosing a suitable strategy is important to ensure you meet your retirement aspirations.

Statewide Super Accredited Advisers

The good news is The Hopkins Group are now accredited financial advisers for Statewide Super. A fund recently ranked second in Australia’s list of top performing super funds.

From the five years since its inception, their Statewide MySuper Growth product has delivered annual returns of 10.74 per cent for it’s 149,000 plus members.

Why should you speak to us?

The Hopkins Group have accredited and fully licenced financial planners who can help explore your options for investments, contributions, and more.

Reviewing your insurance, nominating your beneficiaries and checking in with how your super is performing should be practiced if you want to guarantee your super is working as hard as you.

Industry super funds have continued to outperform bank-owned and other retail funds over a one, three, five and ten-year period. According to data available via SuperRatings, the median return for bank-owned super funds sits at 8.13 per cent, compared to 9.4 per cent for profit-for-member organisations.

How can you contact us?

For general questions about your super or to find out if Statewide Super is right for you, request an appointment with one of our financial advisers, or call us on 1300 726 082 today.

 

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John Hopkins Financial Services Pty Ltd is a Corporate Authorised Representatives of WealthSure Financial Services Pty Ltd Level 1 190 Stirling Street PERTH WA 6000 ACN:130 288 578 AFSL:326450.

General Advice Warning: 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.

What’s happening with the stock market?

US equity markets have been resilient to rising trade tensions however last week we saw stocks have their worst day in eight months.

The magnitude of the decline was not normal but the fluctuations we have been seeing across financial markets fits squarely into the narrative that markets are simply transitioning from an environment of ultra-easy monetary policy to an environment where markets must stand on their own fundamentals.

What does this mean for you?

We need to keep the recent weakness and volatility in perspective.

FAANG stocks hit their highs over three months ago and US Semiconductors two months before that. The rotation away from tech and early cycle cyclicals and into more defensive areas of equity markets has also been underway for months and this is no better illustrated than in the relative performance between US versus emerging market (EM) equities. Increased price volatility is normal course for a bull market which is mature and global monetary policy which is transitioning to a less favourable setting. While we don’t expect to continue to see 3% sell-off days as the normal course, we do expect to see a continuation in volatility as sentiment swings between optimism and pessimism and as investors continue to evaluate the robustness of fundamentals into a weaker tailwind from easy monetary policy.

It is also important to note that the Australian market has not seen the same decline that the US has seen this past week – while somewhat reactive to the US falls, our market drops remain modest and consistent with expectations.

What should my strategy be going forward?

We continue to believe that what we are seeing is quite normal (daily price moves like this week are expected). The current stage of the cycle and the near to-medium term outlook supports an investment strategy that reduces risk and adding protection/insurance rather than abandoning risk altogether. Your financial adviser will be in a position to best advise on specific investment strategies as they relate to your personal circumstances, however an overview of some recommendations include:

Equities vs bonds: Equities have historically delivered higher returns than bonds and this trend will continue up until the point where either interest rates enter restrictive territory, the pace of rate hikes surprise on the upside or higher rates begin to undermine economic momentum.

Remain weighted towards areas with strong fundamentals rather than chasing oversold assets: We stick to quality growth assets and areas where fundamentals remain strong and risks low. We continue with our US overweight and EM underweight despite potential for a short term EM rebound and concerns around US equities being expensive. Australian equities are fairly priced but lack earnings growth upside.

Raise insurance/protection against downside risks but don’t go defensive yet: The economic cycle remains intact but downside risks are rising. This calls for greater levels of insurance, not abandoning risk. Insurance comes in the form of exposure to assets with a low correlation to both bonds and equities. We recommend exposure to alternatives investments and real assets (i.e. infrastructure).

Avoid areas exposed to higher interest rates and which have limited earnings growth offset. Minimise simple bond proxy exposure where there is little offset either from stronger earnings growth and/or yield support. Historically REITs have been the worst performing sector into rising bond yields. There is limited scope for outperformance when rate risk is elevated. We prefer yield in areas which are priced for yield delivery rather than for growth.

Where can I learn more?

For more information on the US stock market drop and for tailored advice, call us on 1300 726 082 and ask to speak to a financial adviser.

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General Advice Warning: This blog may not be suitable to you because it contains general advice that has not been tailored to your personal circumstances. It is important that you consider your own situation before acting on any information contained in this blog. Please seek personal financial advice prior to acting on this information.

Disclaimer: Shane Light is an Authorised Representative and John Hopkins Financial Services Pty Ltd is a Corporate Representative of WealthSure Financial Services Pty Ltd Level 1 190 Stirling Street PERTH WA 6000 ACN:130 288 578 AFSL: 326450.

I’m often left perplexed after having conversations with clients around insurances, everybody is so ready to protect their cars and their houses, but not their lives and their income!

When I ask a client if they have life insurance, a lot of the time the response is something like “I have that in my superannuation fund” or “that’s standard in my super”. When I follow up with “great, how much do you have?’ or “what is the benefit period?” I get a puzzled look.

According to a 2017 report from The Association of Superannuation Funds of Australia, around 70 per cent of life insurance in Australia is held within superannuation. However, “the level of underinsurance within the Australian community remains high” with the median level of life cover meeting only 37 per cent of the needs of families with children.

Personally, I think the answer lies in education – informing clients of their options and the value of investing in risk protection – because as a Financial Adviser, I am just not comfortable making plans with your income on an ongoing basis without securing that income now.

Types of Insurance

There are three broad categories of insurance in Australia:

1. Health insurance provides payment for the provision of hospital and ancillary medical and health services.

2. General insurance covers matters not addressed by life or health insurances including home and contents, car, travel, professional indemnity and product liability.

3. Personal insurance is a type of cover that provides financial security to you and your family for events such as serious injury or illness, total and permanent disability, loss of ability to earn an income and death.

While each of these insurances have their benefits, for the purposes of this blog let’s focus on the one many people seem to forget about; personal insurance.

Personal insurances provide a level of protection against your way of living, with financial support to cover any outstanding debts or general expenses. There are four main types of personal insurance.

• Life
• Total and Permanent Disability (TPD)
• Income Protection / Salary Continuance
• Critical Illness (Trauma)

Life Insurance

Life insurance is designed to pay out your dependents a lump sum in the event of your death and is intended to provide you with the security of knowing that if something were to happen to you, your family and loved ones would not be left with a huge financial burden.

It can be used to assist with funeral costs, mortgage repayments, providing temporary income for your loved ones and contributions to other financial obligations.

Total and Permanent Disability (TPD)

This cover is sometimes bundled or ‘linked’ with life insurance policies and is designed to provide a lump sum benefit if you are totally and permanently disabled.

Income Protection / Salary Continuance

These policies are designed purely to provide you and your family with a steady stream of income if you cannot work due to illness, injury or disability. Most insurers will insure up to 75% of your gross monthly income, providing you with the security of knowing that most of your daily expenses and financial obligations can be met while you focus on recovery.

Critical Illness (Trauma)

Critical illness insurance pays you a once off lump sum if you fall victim to a serious medical condition like a heart attack, stroke or cancer. Insurers will have a list of specific conditions that you will be able to claim a benefit from, this will vary from insurer to insurer and the level of cover that may suit you.

Generally, this is the most expensive of all personal insurances as it is the most claimed.

The aim of trauma insurance is to give you the peace of mind and provide a lump sum benefit to ease those pressures during recovery.

Inside or outside superannuation?

For certain types of insurance cover (life, TPD and income protection) you may have the ability to hold the policy inside your superannuation fund.

The main difference with holding policies inside your superannuation is that the premiums are deducted from your superannuation balance rather than your personal cash flow. There can also be some tax benefits as you pay for the cover out of your pre-tax super contributions. However the types of cover held in super can be quite limited and will understandably reduce your super balance over time.

Group or Retail Cover?

Group Insurance cover is what most superannuation funds will offer to you as ‘standard’ when you join as a member.

The main difference between group and retail life insurance policies is that group policies are provided by super funds and employers to their members or staff, whereby the super fund or the employer controls the policy. The amount of cover is generally based on your age and occupation.

On the other hand, retail policies are provided through advisers and the policy ownership is determined by you and based on tailored recommendations. They are totally customisable and are based on your individual circumstances and needs rather than a ‘one size fits all’ approach. Some of the customisations available under a retail policy are:

• Insured amount
• Premium style
• Ownership structure
• Policy structure option
• Policy additions/options

What next?

If you’re unsure about the state of your personal insurance, The Hopkins Group has a team of financial advisers that can journey with you to a place of understanding and security. Get in touch with an expert today and take control of your finances.

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John Hopkins Financial Services Pty Ltd is a Corporate Authorised Representatives of WealthSure Financial Services Pty Ltd Level 1 190 Stirling Street PERTH WA 6000 ACN:130 288 578 AFSL:326450.

General Advice Warning: 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.

You may have seen in one of our recent blog that our Head of Advice and Senior Financial Adviser, Shane Light, was selected as a top six finalist in the AFA Adviser of the Year Awards.

While Shane has not progressed to the grand finals (narrowly missing out on a spot in the top three by just two points), we’re excited to announce that he has been invited to appear as a trusted adviser on the Beddoes Institute’s Most Trusted Adviser Network.

Soon you’ll be able to find Shane’s face among those listed as Australia’s best financial advisers – congratulations to Shane on this great achievement!

This invitation came off the back of the fantastic feedback received in the client experience survey undertaken as part of the Award’s judging process, which many of our financial planning clients have completed.

We are humbled by the responses received from our clients as part of this survey process – your feedback is important to us and helps us make sure we’re delivering on the high standards we strive to uphold. We wish the top three finalists for the AFA Adviser of the Year Awards the best of luck as they progress through to the stages.

In late July the news broke that Queenslander Mark McVeigh, a young man with a degree in ecology, was taking his industry superfund manager to court for its inaction on climate change. The story didn’t quite get the traction it deserved as most people weren’t interested in headlines that made the issue out to be a case of ‘another millennial complaining about climate change’. While that isn’t completely untrue, this issue runs much deeper and everyone should know why it relates to them.

For a lot of people, superannuation is a bit of a mystery. Even the most basic questions can confound the average worker: What company is your super invested with? What investment model are they investing your money into? What investment products do you own inside your superannuation?

As a long-term lifetime asset made up of 9.5% of every dollar the average worker has ever made, superannuation really should command more attention from Australians. And that is what this legal battle is about, a demand for information.

Superannuation funds including industry funds, retail funds and self-managed super funds, are all trusts. This may seem like a fancy legal term, but it merely describes a relationship. In this case the trustee (the superfund) is under an obligation to hold and invest superannuation moneys in trust on behalf of the beneficiaries (Australian workers) until such time as they have retired and are eligible to withdraw their hard earned savings. The important point here is that the superfund never owns the money, they are simply the custodians of the money for a period of time.

As trustees hold a position of significant power over beneficiaries, they are subject to strict legislative rules. These include acting with care, diligence and skill, and reviewing the performance of the trust investments once a year. However, there is also a lot of old case law that influences the management of trusts. Mr McVeigh will be relying upon an old ruling that stated that beneficiaries have a right to information which pertains to their property.

As the industry superfund is holding his money in trust, he argues that he has a right to know what the company’s long term strategy to deal with climate change is. It is an interesting argument as the Australian Prudential Regulation Authority has already recognised climate change as a “defining issue for financial stability”.

Should the superfund reveal they have no strategy, could they be found to have failed their duty to act with care and diligence? Do you know what strategy your superfund is using to best benefit you in the future?

As the royal commission turns its gaze towards the superannuation sector, Australia will soon find out why Superannuation companies are so eager to hide information for their customers.

When the mystery that is the superannuation industry is compared to the experience that financial planning clients have when they take control of their own super; the differences are amazing. Financial advisers are subject to requirements to act in their client’s best interests by finding out what clients want to achieve and what levels of risk a client is comfortable with. Moreover, with every statement of advice produced all the research for every investment recommended is provided to the client to review.

If control and clarity around your super appeals to you, contact a financial adviser today.

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General advice warning: The information contained herein is of a general nature only and does not constitute personal advice. You should not act on any recommendation without considering your personal needs, circumstances and objectives. We recommend you obtain professional financial advice specific to your circumstances.

If you’ve got a Self-Managed Superannuation Fund (SMSF) you may know that each year the fund has to sign off on an investment strategy that outlines the types of investments that it’s approved to invest in. This strategy is set by the trustees and is completed within the frameworks stipulated in the Superannuation Industry (Supervision) Act (SISA).

Currently, the SISA outlines obligations to formulate, review regularly and give effect to investment, risk management and insurance strategies. But strangely enough, there are no obligations for trustees to consider the retirement income needs of their members and outline how the SMSF will finance those needs.

In the 2018-2019 Federal Budget the Government proposed a retirement income framework that intends to increase individuals’ standard of living, increase the range of retirement income products available, and empower trustees to provide members with more guidance during their transition into retirement.

As part of this framework, the Government has proposed a further condition to the SISA. If legislated, investment strategies must include a ‘retirement covenant’. This will make it mandatory for trustees to develop a retirement income strategy for their members to ensure that the SMSF can meet the pension and retirements needs of its members.

Trustees must formulate, review regularly and give effect to a retirement income strategy to help members meet their income objectives during retirement.

The Retirement Income Position Paper proposes that a retirement strategy needs to be implemented and trustees need to engage with their members. They state that a number of factors should be taken into consideration when designing the strategy in order to optimise each member’s retirement outcome. These include:

• maximising income for life for members;
• the potential life spans of members and the costs and benefits of managing longevity risk for members as a whole;
• managing risks that affect the stability of income, including inflation;
• providing members with access to capital;
• member needs and preferences for the factors above;
• the costs and benefits to members of developing a CIPR in-house compared with offering a CIPR developed and managed by a third party or a combination of both in-house and a third party;
• expected member eligibility for the Age Pension; and
• whether and how cognitive decline may affect outcomes.

So, what now? If you have an SMSF, the short answer is nothing. Our advisers at The Hopkins Group will track this proposal as it progresses through our legislative system and will keep you in the loop. As the trustees of many SMSFs, our clients can sit back and know that we stick to their obligations. Want to know more? Contact one of our advisers today.

When you seek advice on how to best set yourself up for future success, it’s nice to know you’re dealing with an expert who knows their stuff.

This week, we were thrilled to learn that our Head of Advice and Senior Financial Adviser, Shane Light, has been selected as a semifinalist in this year’s AFA Adviser of the Year Award.

Managing Director of The Hopkins Group Michael Williams says acknowledgement of Shane’s efforts is a team achievement. “This recognition is testament to the quality of service we provide at The Hopkins Group and recognition of the calibre of staff we have working with us,” he said.

“We are proud of Shane and his team for the quality of their work and service, and thrilled that it has earned industry recognition. To make it through to the top six on a national stage is no mean feat and we wish him luck for the coming stages.”

The AFA Adviser of the Year Award has come to stand for many things; vision, leadership, excellence. The award looks to recognise the spirit and high professional standards of financial advisers and is described by the Association of Financial Advisers (AFA) as “shining a spotlight on, and sharing, best practice insights”.

“Many advisers are continuously looking to improve both their business efficiency and their client engagement proposition and [the award] plays a pivotal role [in recognising these efforts].”

Following his nomination, Shane underwent an intensive application process before progressing through to an interview round. It was then announced at the end of July that Shane had been selected as a top six finalist.

“I’ve always strived to be the best adviser I can be but never dreamt of this kind of acknowledgement,” said Shane who champions The Hopkins Group’s philosophy that clients are at the core of our business.

“It’s testament to the quality of the team I have around me and the holistic approach we take to helping our clients.”

From here, a selection of The Hopkins Group’s financial planning clients have been asked to participate in an independent survey conducted by the Beddoes Institute, to provide feedback on their experience with Shane and The Hopkins Group as a whole. This process will help the AFA select their top three finalists, before a winner is announced at the AFA 2018 National Adviser Conference in October.

Over the past few weeks, I have had some startling conversations with some of my friends regarding their super.

They’re all in their early 20s, and half of them do not know who their super fund is or have no idea how to log in to their super. The other half are aware of how to do this but have not bothered to check up on their super because, “I’m not even 25, I won’t be touching that money any time soon so what’s the point in worrying about it?”

Granted, your early 20s may be a bit soon to begin salary sacrificing – though, that is a fantastic idea if you can afford it. It is very important to consider the impact that a couple of decisions early in your life can have on your super balance come retirement.

The easiest thing to do is to login to your super and check out what investment option you’ve been allocated to. Why? Because for most super funds the default investment option is a ‘balanced’ allocation. Generally this means that 60-70% of your funds will be allocated to shares and property while the rest will be in fixed interest and cash.

While you should ensure that your super is invested in line with a level of risk that you are comfortable with, as someone in their early 20s who won’t be seeing their super funds for at least 40 years, I am a ‘growth’ investor. A growth allocation typically invests 70-80% of your funds into shares and property.

To illustrate why this difference can be so important to your super balance come retirement, I have used the superannuation calculator on ASIC’s Moneysmart website (a fantastic resource for financial guidance).

Below you’ll find a comparison of super balances invested in balanced verses growth allocations. I’ve used the average Australian salary ($61,932) as a basis, set the age at 25 years old, and set the super balance at $15,000 relying solely upon Super Guarantee Contributions.

As you can see, there is a $21,646 difference between the balanced and high growth option. This is because over the 40 year time frame, the risk associated with the larger allocation of risky assets (shares) in the high growth option, is slightly higher and has therefore generated a higher return on investment as a result. This ASIC calculator uses a 4.8% p.a growth on investment under the ‘balanced’ allocation, and a 5.2% p.a growth on investment under the ‘high growth’ allocation to reflect the difference in risk levels.

Obviously these figures are only a guide but the point is it pays to give your super the attention it deserves. Your future self with thank you for it!

If you’re ready to get serious about your super, why not speak to an expert? The team here at The Hopkins Group are across all things finance and are here not only to help you understand all things super, but also help you on the way to achieving some of your other life goals as well. Remember that things take time, so the longer you have your super working for you, the greater the potential result.

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General Advice Warning: This blog may not be suitable to you because it contains general advice that has not been tailored to your personal circumstances. It is important that you consider your own situation before acting on any information contained in this blog. Please seek personal financial advice prior to acting on this information.
Disclaimer: Josh Keplac authored this blog with guidance from Michelle Kelada. Michelle Kelada is an Authorised Representative and John Hopkins Financial Services Pty Ltd is a Corporate Representative of WealthSure Financial Services Pty Ltd Level 1 190 Stirling Street PERTH WA 6000 ACN:130 288 578 AFSL: 326450.

“How will I support my lifestyle when I am no longer able to work for an income?”

“Will I have enough money in retirement?”

These questions (or variations thereof) are generally the first questions that come to mind for investors approaching retirement age.

In response, my mind jumps to the old adage “those who haven’t learnt to make their money work for them will always have to work for their money”.

Knowing what level of capital is enough to retire on, or how much income you will need in retirement, are tricky questions to answer. But they’re not necessarily the most important questions to ask. A better question?

“What are the biggest risks threatening the longevity of my retirement nest egg?”

Given recent volatility in national and international markets, this question is perhaps the most pertinent. And in my experience, one of these threats is something called “sequencing risk”.

What is sequencing risk?

Sequencing risk (also known as sequencing of returns risk) is a process whereby the order of market returns has a huge overall effect on your retirement balance. It is a process that is exacerbated by selling equities in your retirement portfolio, to fund expense, after a drop in the equity market.

The order or the sequence of annual investment returns is a primary concern for retirees who are living off the income and capital of their investments, as an unfavourable sequence can lead to less money to live off in retirement.

How does sequencing risk come into play?

Many retirees will have investments in one of, or a combination of, the following asset classes:

• Equities (personal name or via a superannuation/pension)
• Bonds (generally via superannuation/pension)
• Property
• Fixed interest
• Cash

The correct mix of these assets proves to be very individualised, but as a general rule you need to keep adequate funds in low risk asset classes so that when we face a “global financial crisis event” you are not a forced seller. For most people this means around four to five years of expenditure, but again it all varies on the individual. Generally those with greater retirement savings and more investment experience tend to have a lower proportion of savings in low risk assets.

As we can see in the above graph, the Australian equity market has delivered a higher yield or income for retirees than term deposits. Most investors understand this, and as a result a reasonable proportion of investor savings are tied up in equity markets, both Australian and international.

It’s widely known that equities tend to deliver higher returns when compared with other asset classes over the long term. However, in the short term, they can be highly volatile; from 26 January 2018 to 8 February 2018, the Dow Jones industrial index dropped over 10%.

This volatility has less impact on an accumulating investor than one who is drawing on their capital – like a retiree. The reason for this phenomenon is that if you lose ten per cent of your capital it requires an 11 per cent return in the following period to restore the capital to its original amount. If you are then drawing down on that capital, like you would do in retirement, you are then crystallizing those losses so you will need an even greater return than 11 per cent to return to your original amount.

How does this play out in real life?

A simple example from Challenger Life Limited takes a hypothetical investor and looks at historical Australian market performance data for the period 1979 to 2011. It illustrates how sequencing risk can impact retirement outcomes.

Source: Challenger Life Company Limited estimates based on data from Bloomberg.

Looking at the above graph, the investor illustrated in Path 1 retired at the end of 1979 with an investment balance of $148,000. His portfolio was 50 per cent invested in Australian equities and 50 per cent in Australian bonds. Following his retirement, he lived off his retirement savings, drawing $10,000, indexed to inflation each year. By 2011, the drawdown is equivalent to $40,000 a year.

The retirement capital remaining at the end of each year is shown by the dashed blue line in the chart. The light blue line (Path 2) shows what would have happened if exactly the same returns were achieved, but in reverse order – i.e. 2011 returns first. This change in the sequence of returns would mean that the investor’s money would have run out ten years earlier. As can be seen in the chart, after 22 years in retirement, the other sequence of returns had doubled the retiree’s capital.

How can sequencing risk be avoided?

The short answer is nothing can be done to avoid this risk completely, however it can be reduced by diligent investment management. Some of these strategies may include:

• Investing in guaranteed income products like annuities, as this means a component of expenses are accounted for.
• Ensuring wide diversification of investment portfolios i.e. global and Australian shares across all sectors, bonds, property listed and unlisted, as well cash and fixed interest investments.
• Investment in lower risk asset classes and then strategic drawdown of this lower risk asset class in the event of a downturn.

Ultimately, knowing what level of capital is enough to retire on or how much income you will need in retirement, are both very difficult questions without understanding your unique situation in more detail. However when trying to obtain the answer to these questions and establish an appropriate asset allocation, it is imperative that sequencing risk is considered and minimised.

For more information, and to look at your own financial situation in more detail, please do not hesitate to contact The Hopkins Group for a confidential chat with a financial adviser.

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General Advice Warning: This blog may not be suitable to you because it contains general advice that has not been tailored to your personal circumstances. It is important that you consider your own situation before acting on any information contained in this blog. Please seek personal financial advice prior to acting on this information.

Disclaimer: James Weir is an Authorised Representative and John Hopkins Financial Services Pty Ltd is a Corporate Representative of WealthSure Financial Services Pty Ltd Level 1 190 Stirling Street PERTH WA 6000 ACN:130 288 578 AFSL: 326450.