Making sense of your financial strategy: Perpetual

Chris Balalovski, Head of Strategic Advice at Perpetual Private Clients, explains that it's not just your investments that matter during times of market volatility.

It's understandable that many investors are concerned about the recent volatility in investment markets, and the effect that negative returns could have on their superannuation and other portfolios.

While it's natural to focus on your investments during times of uncertainty, it's just as important to make sure the rest of your financial affairs are in order.

This includes:

asset protection

estate planning (including your will and powers of attorney)

personal risk insurance (salary continuance, life, trauma and total and permanent disability), and key-person business insurance where relevant.

Asset protection

A sound asset protection strategy uses sophisticated and legally permissible techniques to ensure that, as far as possible, assets are safeguarded should an unfortunate scenario eventuate.

When the economic situation takes a turn for the worse, an asset protection plan can be more relevant than ever – particularly if business assets are involved.

Case study – A business owner

Megan runs her own accounting business. Due to the downturn in the economy, a couple of her major clients are closing their businesses, which has a big impact on Megan's revenue. At the same time, another client is taking her to court over a dispute. With a possible liability to pay in addition to the reduced revenue she's experiencing, Megan is worried about losing her assets and business.

If Megan had sought professional advice early enough, she could have put measures in place to secure her personal and business assets in the case of litigation or bankruptcy. She also could have developed a wealth accumulation plan to reduce the impact of a business downturn.

A well-developed asset protection plan doesn't just look at appropriate asset-holding structures, such as trusts, in isolation. Rather, it contemplates tax-minimisation principles as well as estate planning outcomes, so that a personalised and completely individual solution can be created.

Estate planning

Sound estate planning affords you peace of mind that your accumulated wealth will be transferred according to your wishes after you are gone, and that your financial affairs will be dealt with tax-effectively. Regardless of the economic situation, having an up to date estate plan with the appropriate documentation and structures in place is essential. Without one, you risk having your estate going into the wrong hands or being passed on in a way that was not your intention.

If you have a complex financial or family situation, or are concerned about changes to your investment portfolio and how it has impacted your estate plan, you may benefit from reviewing your plan with a financial adviser.

Risk insurance

Risk insurance is a crucial aspect of any financial plan as it protects one of the greatest assets an individual has – their ability to earn an income against loss of earnings due to ill health or death. The following case study shows that personal insurance can be even more important when the economic environment is uncertain.

Case study – A small business owner with a young family

Steve has a small IT business. His wife Jennifer works part-time on the accounts while also caring for their two young children. Unfortunately, Steve is unexpectedly diagnosed with bowel cancer. He stops working immediately to receive treatment which means there is no one to run the business. Jennifer is forced to find a full time position to support the family but is finding this increasingly difficult in the current economic climate.

If Steve had appropriate personal and business insurance in place, he could have been paid a lump sum benefit to help cover medical costs, and could have also received ongoing benefits to cover most of his salary. These payments would have given the family financial peace of mind and relieved the stress of Jennifer needing to find full time work while trying to care for her family.

Having appropriate levels of insurance cover means that in the event of death, disability, illness or accident, a person and their family can:

eliminate debts

maintain their lifestyle

have some certainty about their ongoing ability to save for retirement

provide their beneficiaries with equal entitlements (in the case of death)

maintain the important role of the primary child-carer and home-maker

protect assets which are accumulated over a lifetime without needing to sell to fund expenses, eg car, properties, business assets.

Is your financial strategy up to date?

If your financial strategy needs updating or you need advice during these volatile times, why not speak to a financial adviser? A Perpetual Private Client Adviser can provide specialist advice and solutions to help get your investments, asset protection plan, estate plan and insurance needs in order.

Contact Perpetual Private Clients on 1800 631 381 or read more about our advice services for individuals and families.

Perpetual Private Clients advice and services are provided by Perpetual Trustee Company Limited (PTCo), ABN 42 000 001 007, AFSL 236643. This article has been prepared by PTCo. It contains general information only and is not intended to provide you with advice or take into account your objectives, financial situation or needs. You should consider whether the information is suitable for your circumstances and we recommend that you seek professional financial, tax and/or legal advice.