Loading…

Flash Player 9 (or above) is needed to view presentations.
We have detected that you do not have it on your computer. To install it, go here.

Like this presentation? Why not share!

Financial Planning (Not Rocket Science)

on

  • 1,016 views

A simple exlpanation of financial planning, adn how a professional adviser can add value

A simple exlpanation of financial planning, adn how a professional adviser can add value

Statistics

Views

Total Views
1,016
Views on SlideShare
1,011
Embed Views
5

Actions

Likes
0
Downloads
0
Comments
0

4 Embeds 5

https://www.linkedin.com 2
http://www.slideshare.net 1
http://www.lmodules.com 1
http://www.linkedin.com 1

Accessibility

Categories

Upload Details

Uploaded via as Adobe PDF

Usage Rights

© All Rights Reserved

Report content

Flagged as inappropriate Flag as inappropriate
Flag as inappropriate

Select your reason for flagging this presentation as inappropriate.

Cancel
  • Full Name Full Name Comment goes here.
    Are you sure you want to
    Your message goes here
    Processing…
Post Comment
Edit your comment

    Financial Planning (Not Rocket Science) Financial Planning (Not Rocket Science) Presentation Transcript

    • Financial planning (not rocket science) August 2009 Simon Hassan CFP , CLU CM HASSAN & ASSOCIATES personal financial advisers © 2009
    • Preface • Simon Hassan – Professional, fee‐based financial  – planner for 20 years – Certified Financial PlannerCM – Fellow and Past President  Institute of Financial Advisers www.ifa.org.nz • Disclosure Statement: www.hassan.co.nz • Questions: simon@hasssan.co.nz HASSAN & ASSOCIATES © 2009 personal financial advisers
    • What, why, how • What is a personal financial plan? • Why financial planning is important • How to get started  HASSAN & ASSOCIATES © 2009 personal financial advisers
    • WHAT is financial planning? • Making the financial arrangements required  to achieve your life goals • A pyramid  • A graph HASSAN & ASSOCIATES © 2009 personal financial advisers
    • A pyramid • The top brick draws the most attention • But the foundations are essential Investments Retirement Estate Tax Financial management Debt Insurances HASSAN & ASSOCIATES © 2009 personal financial advisers
    • A graph • Changing net worth/wealth … • … over a lifetime Wealth 20 26 32 38 44 50 56 62 68 74 80 86 92 98 Age HASSAN & ASSOCIATES © 2009 personal financial advisers
    • WHY? Protect what you can • Wasted resources (budget, tax planning) • Lost breadwinner (life, TPD cover) • Lost ability to earn (income, trauma cover) • Big medical costs (health, trauma cover) • Lost assets (insurance cover, estate planning) • Retirement lifestyle (KiwiSaver, planning) • Lost investment value (diversification, asset  allocation) HASSAN & ASSOCIATES © 2009 personal financial advisers
    • HOW: Financial management • Not enough income… • …or too much of it spent? • Understand debt, structure and use it wisely HASSAN & ASSOCIATES © 2009 personal financial advisers
    • Insurance, a necessary evil • Before you take insurance, consider the  alternatives • Don’t keep insurance you no longer need  (Would you wear a parachute on the ground?) • Good insurance can be money well spent HASSAN & ASSOCIATES © 2009 personal financial advisers
    • How much life insurance? • Immediate cash – Final expenses, pay bills & tax, and clear debt – Adjustment sum for survivors • Lump sums for future needs – Education and care – Now to retirement for surviving spouse – After retirement for surviving spouse • Less available assets and insurance HASSAN & ASSOCIATES © 2009 personal financial advisers
    • Retirement planning • Every Kiwi who can should join KiwiSaver • $1,000, plus (if over 18) $for$ subsidy up to $20  per week from the government (taxpayer) • Plus (if employed) $for$ employer subsidy • Eg: join at 20, earn $30k pa from 25, rising to  $46k pa over 5 years, and retire at 67 • You save $38k, others add $76k: $362k by 67 • $309 per week for 33 yrs (NZ Super: $239) HASSAN & ASSOCIATES © 2009 personal financial advisers
    • Investment planning basics • Time frame • Diversification • Asset allocation • Risk profile • Look for hidden costs (commissions, fees,  transaction and funds costs can add up) • Allow for inflation by using “real” returns HASSAN & ASSOCIATES © 2009 personal financial advisers
    • Inflation and real returns • What do you have to do to turn $100  into $78? Nothing (just wait 10 years with 2.5% inflation) • Gross, net and real returns – eg, invest $100 Gross return 6.0% $106.00 Less tax and costs ‐2.0% ‐$2.00 Net return 4.0% $104.00 Less inflation ‐2.5% ‐$2.50 Real return 1.5% $101.50 HASSAN & ASSOCIATES © 2009 personal financial advisers
    • Risk and return • All investments involve risk Return • Each investment has risk‐ return characteristics • Can’t beat the “Efficient  EF Frontier” (EF) • There is also a “Risk Free” IR option (RF) to consider RF • A tangent from RF hits EF at  the “Ideal Risky Mix” (IR) • Portfolio design is all about  Risk, volatility the right RF‐IR mix HASSAN & ASSOCIATES © 2009 personal financial advisers
    • Time lowers risk • Growth assets are unpredictable over short periods • But – Black Swans aside – uncertainty levels lessen  over time (mean reversion) Return since inception Actual return 30% High end of likely range 15% Expected return 0% Time Low end of likely range -15% HASSAN & ASSOCIATES © 2009 personal financial advisers
    • But investing is like a car ... … without a  windscreen HASSAN & ASSOCIATES © 2009 personal financial advisers
    • And there are Black Swans Just because something hasn’t happened,…. HASSAN & ASSOCIATES © 2009 personal financial advisers
    • And optimistic bias HASSAN & ASSOCIATES © 2009 personal financial advisers
    • Global share markets Down 40%, up 40% $140 $120 40% fall $100 40% rise $80 $60 $40 AORD CAC 40 DAX $20 FTSE 100 NIKKEI 225 NZX50 S&P 500 $0 Jan 07 Jul 07 Jan 08 Jul 08 Jan 09 Jul 09 HASSAN & ASSOCIATES © 2009 personal financial advisers
    • Make room for China (extend left hand scale from $140 to $250) $250 $250 $200 $150 $100 $50 $0 Jan 07 Jul 07 Jan 08 Jul 08 Jan 09 Jul 09 HASSAN & ASSOCIATES © 2009 personal financial advisers
    • Global share markets Shanghai: down 70%, up 100% $250 $200 70% fall $150 100% rise $100 $50 $0 Jan 07 Jul 07 Jan 08 Jul 08 Jan 09 Jul 09 HASSAN & ASSOCIATES © 2009 personal financial advisers
    • But shares usually do well over very long periods $100 $90 US shares since 1950 $80 $70 $60 $50 $40 $30 $20 $10 $0 Jan 50 Jan 60 Jan 70 Jan 80 Jan 90 Jan 00 Jan 10 HASSAN & ASSOCIATES © 2009 personal financial advisers
    • Log scale easier to make sense of over very long periods US shares since 1950 (log scale) $100 $10 $1 Jan 50 Jan 60 Jan 70 Jan 80 Jan 90 Jan 00 Jan 10 HASSAN & ASSOCIATES © 2009 personal financial advisers
    • It can pay to get good advice • Over the 20 years 1986 and 2005: – US shares gained 11.9% pa – But the average investor in US share funds made just 3.9%  pa, and stayed invested for less than 3 years* • The main reason investors do badly?   • Reacting to the news (“noise”), they went in  and out for wrong reasons at wrong times * DALBAR’s ongoing Quantitative Analysis of Investor Behaviour compares investment flows with changes in asset levels to determine returns earned by investors. DALBAR Inc is an independent North American firm specialising in financial services research. HASSAN & ASSOCIATES © 2009 personal financial advisers
    • Choosing a financial adviser • Adviser’s qualifications, experience? • Professional body membership, credentials? • Feel okay? (likely long‐term relationship) • Commission can lead to problems • Fees can help you be sure your adviser works  for you – they can also be less than  commissions HASSAN & ASSOCIATES © 2009 personal financial advisers
    • The process • Initial discussion (typically no charge) • Collect and analyse data (situation, goals,  issues, strategies), draft a plan integrating and  interrelating the issues (financial  management, tax, insurance, estate,  retirement, investments) • Discuss, revise, agree and implement • Periodic review and adjustment  HASSAN & ASSOCIATES © 2009 personal financial advisers
    • Action points 1. Situation audit 2. Review your budget (get tool from  www.hassan.co.nz), collate your financial  details, think about your goals, priorities and  values 3. Identify, prioritise and plan future actions 4. There is a great satisfaction in taking that  first step… HASSAN & ASSOCIATES © 2009 personal financial advisers
    • Thank you • Questions – you can also email these   simon@hassan.co.nz HASSAN & ASSOCIATES © 2009 personal financial advisers