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James Solomons

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Financial Planners

Get Connected Edition #6 is out !

Thanks for tuning into Get Connected Edition Six !

 

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Ten big challenges facing small businesses in 2016

10 challenges and tips to help overcome them for SMEs and their advisers

 

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Get Connected Edition #5 – v2.0!

Welcome to Get Connected 2.0 ! Edition Five

 

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This weeks edition of Get Connected – #4

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Edition #3 of Get Connected

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Get Connected – Edition Two

Hi everyone, thanks for tuning in to Get Connected Edition Two !

 

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Creating a passive income stream

Passive income comes in many shapes and forms. There are thousands of ways that people have created automatic streams of income, and more are being created all the time.

All sources fall into one of two types of passive income; Investing Passive Income and Business Passive Income. Out of these two primary vehicles, business and investing, an unlimited number of possibilities arise. Mastering just one area and building a portfolio of investments can help you reach your financial and lifestyle goals! This article will focus on how to build passive investment income.
A passive investment may include both a retail financial product and other managed investments where the activities do not constitute the carrying on of a business. Unlike active investors, passive investors buy a security and typically don’t actively attempt to profit from short-term price fluctuations. Passive investors instead rely on their belief that in the long term the investment will be profitable.
There are many arenas of investing that can be used to generate passive income. Stocks, bonds, money markets, managed funds, rental properties and other financial investments can be used to generate income. There a wide variety of products available with differing levels of risk. It is important that before making any investment decisions, that you contact your financial advisor to analyse your current financial situation and develop an appropriate strategy. With the right strategy you could be on your way to building multiple streams of income!

Tax Benefits 
There are also number of tax benefits that relate to passive investment. A number of deductions can be claimed on your tax return such as interest paid on the loan to fund your investment.  With respect to rental properties, you can also claim repairs and maintenance of, rates and taxes, insurance, agent’s fees, travel to and from the property to facilitate repairs, and buildings depreciation. Tax deductions can also be claimed as a result of negative gearing, where the costs of keeping the investment instruments exceed the income gained from it.
Owning rental properties can be a great way to put your money into something that will pay you regularly for many years. Unfortunately many people attempt to get into rental real estate they end up spending all of their time managing, maintaining, and overlooking their properties! This is not passive income. If you are working around the clock to maintain your rental properties, you may be earning money but it is requiring your time! Passive income means automation!

Building a passive income is a vital part of wealth creation and an important aspect of balancing risk. After all, wouldn’t you rather that your money work for you?

For a more comprehensive analysis of your financial situation and for a strategy to build passive income please contact our head financial planner Christine Hallowes CFP on (02) 9868 3900 or email her at christine@elitefinance.com.au.
The ATO has provided comprehensive guideline on rental property deduction. For more information, please visit http://www.ato.gov.au/corporate/content.aspx?doc=/content/00282530.htm

How to choose a financial planner….

Reblogged from James Solomons’ Business Blog

Prior to the Global Financial Crisis (or the GFC as it is affectionately now known), the financial planning industry held a somewhat precarious place in the financial services world. It was often on the receiving end of unfavourable media attention thanks to a small number of unscrupulous and often unregulated advisers who had the sole intention of preying on and ripping off unwitting people of their life savings .

With many Australians not really understanding what a financial planner did or what the financial planning process involved, people steered clear of those offering these much needed advice services, and opted for the typical aussie DIY approach to manage their financial affairs. In many cases, it was (and still remains) a “she’ll be right” attitude. However, does this approach provide someone with ‘peace of mind’?

Post GFC, during the aftermath of its destruction the financial planning industry was dragged into the spotlight as fingers were pointed. But in many cases the blame being laid at the feet of financial planners was misplaced. This was generally as a direct result of the lack of knowledge of what a good financial planner does and what impact financial planners actually had on the losses incurred by so many Australians as well as other investors around the world.

As is often the case in life, the fear of the unknown is what stops people from moving out of their comfort zone and this analogy can be applied to the financial planning process. Sitting down to identify your financial and lifestyle goals, then having a plan prepared which shows you how you can achieve these goals and then challenging yourself to trust this advice and make the changes identified are all factors which can take someone out of their comfort zone. With any ‘plan’, financial or non financial, the outcomes are never guaranteed and for many this fact leads them away from getting the advice they need.

The GFC however, has highlighted the need to obtain financial advice from professionals to reduce the risk of making the wrong choices when it comes to one’s financial affairs and since the GFC there have been a wave of reforms to make the financial planning industry more regulated and more transparent so as to give people both financial and legal protection as well as to build faith in the profession.

The Financial Planning Association of Australia (or FPA), the peak body governing and representing financial planners and the financial planning industry within Australia lists the definition of financial planning as; “Financial Planning is the process of developing strategies to help you manage your financial situation so that you can protect and build wealth, enjoy life and achieve financial security” . The FPA website also contains information as to what the financial planning process is as well as when you may need advice along with other invaluable information concerning the industry.

But what really is financial planning? Who are financial planners? And what is a financial plan? Quite simply, financial planning is about identifying what your financial and non financial goals are (B), taking stock of where you are now (A) and working out how you can go from A to B in a comfortable and secure way. Financial planners are the professionals who help you do this and a financial plan is the roadmap you get that outlines how all of this is going to happen. In essence, the financial planning process is all about ‘adding’ value to your financial situation that you otherwise could not have achieved without having received the advice.

That all seems very simple and straightforward, so why are many Australians still scared of the process? For most, it is a question of trust. Who do you trust to give you advice that in most cases is life changing? It’s a tough decision for an individual to make and they would sincerely hope that the person that they put this trust into takes this responsibility seriously and acts in their best interest at all times.

So how do you choose a financial planner? At a minimum, you should always choose a financial planner who is a member of the FPA and if possible is also a CFP. CFP stands for Certified Financial Planner and is a designation which indicates that this planner has undergone extensive formal training and maintains this level of expertise through regular ongoing training. It also means that this person is bound by the FPA’s Code of Conduct which covers many ethical, legal and professional requirements.

From this it is all about building a relationship with the financial planner. Without this relationship there can be no trust and a good financial planner will take the time to get to know you and your entire personal situation. Without doing this, it is virtually impossible for a financial planner to provide advice that is adequately tailored to your personal needs.

Hence why in many cases financial planners who are either your accountant or work within the accounting firm you use are well placed to provide the advice as they have this relationship with you already. But that is not to say that financial planners working on their own or within a financial planning firm are any less competent and it does really come down to the relationship and the level of trust an individual has with their financial planner of choice.

And what about the actual financial plan? What does it actually cover? In reality it covers a whole host of things. A good financial plan takes into account your entire financial and personal situation. It can cover retirement strategies, investment strategies, superannuation strategies, savings plans, budgeting and lending strategies just to name a few areas. It can be for you as an individual or it can be for your business.

And if you have a good financial planner, it will provide advice on the best personal insurance options available to you including income protection insurance, life and disablement insurance and trauma insurance. Because with any plan you have to protect against the unforseen and so insuring the sources of income that will provide the opportunity to achieve these financial and lifestyle goals is a must.

Finally, good financial planners see this financial plan as a ‘work in progress’. A set and forget approach to financial planning doesn’t work and once the process has started and the seeds have been planted it is a life long commitment from both sides. (Hence why the relationship between planner and client is vital to the success of the financial plan).

At a minimum your financial plan should be reviewed on a yearly basis to ensure it remains on track to achieving your goals. Things change and a good financial plan has the ability to be flexible to absorb those changes and allows your financial planner to make adjustments where needed to ensure your short and long terms goals are still achieved.

There are many examples out there of the benefits of engaging the services of a financial planner and going through the financial planning process. The FPA website has published a booklet with easy to read real life case studies which not only highlight the benefits of getting proper financial advice but also to help show the value that a good financial planner can provide to you.

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