1. The need for a New Approach to
Personal Financial Planning
by: Paul A. Overy
The Business Practice
Conference
St Helen’s Radisson Blu Hotel
July 20th 2012

2. Good Economy, bad planning
 HSE means test of Free Medical Cards
finds 95% of recipients should retain their
cover
 After close to 20 years of economic boom,
most people came out the other side with
more debt than assets
 This tells you that economic environment
does not dictate personal financial success
 It is how you act, either in boom or bust
times, that dictates your personal financial
success

3. What has caused the poor results?
(forewarned is forearmed)
 Poor tax planning
 Inflation dragging us all backwards
 Institutional fees & charges hidden
from view
 Biased financial advice
 Isolated financial decision making

4. Tax Planning
 Tax is the greatest obstacle to achieving
our financial goals
 Oireachtas Committee reported in 2007
that “Irish taxpayer’s routinely fail to
claim €500 million in annual tax
concessions to which they are
entitled”
 Most people only give thought to the
matter when tax year is over
 No time for proper planning when always
working a year behind

5. Tax Planning (cont’d)
 Financial success is about KEEPING
money
 Planning taxation in ADVANCE will
help you keep more
 This change means a change to the
way we take tax advice
 Do we really understand the role of
our Accountants?

6. Tax calculations
Couple earning €100,000 per annum
(Tax Calculator available online at www.hookhead.com)
Single Income Double Income
Male’s Income: Male’s Income:
€100,000.00 €70,000.00
Total Tax & Levies: Females’ Income:
€ 40,886.64 €30,000.00
Total Tax & Levies:
€30,321.28
Net Income Received:
€59,113.36 Net Income Received:
€69,783.72
(18% MORE)

7. Inflation (Tax’s evil twin)
 “Compound interest is the second
most powerful force in the Universe”
 Any investment’s real return can only
be judged after ALL costs have been
taken into account
 After taxation and inflation, many
people’s investments are delivering
REAL losses

8. 3% inflation & 30% taxation
Due to the twin ‘costs’ of inflation &
taxation, ALL your investments must
deliver 4% + per annum Gross to
Break Even!

9. Institutional Fees & Charges
 Many costs ignored by the customers,
many more hidden from plain sight
 Lack of independent guidance means
buyers at a disadvantage
 Most loans, for example, have 5 – 7
separate costs attaching, while most
borrowers perceive just one
 Do you know the true costs of your home
or investment loan, your Pension, your
Stock Portfolio….?

10. The True Cost of Property
Purchase
 €500,000 property purchased over 20 years on
Capital & Interest Loan costs €802,000 to repay
(60.4% MORE)
 Top rate tax and levy payer has to earn circa
€1.6M over 20 years to pay the debt
 Over 20 years outlay is: -
€500,000 on Property
€302,000 on Interest
€800,000 on Income Tax
To keep pace with inflation of 3% p.a. property
needs to be valued at €903,055 net (€1.075 M
gross of 30% CGT) to retain original value

11. If an Investment Property
(assuming a 4% p.a. rental yield)
Property has to grow by 11% per
annum to give the investor a 5%
per annum REAL return!
Why? To pay the institutional
charges and taxes!

12. Biased Financial Advice
 Generic Financial Products being SOLD
 Manufacturer’s/Salesman’s profit already
enshrined in terms & conditions
 Placing your profit in no better than third
place
 Vast array of financial products ignored by
“advisers” as they cannot get paid for
delivering them
 He who pays the piper calls the tune!

13. Pensions underperforming
 Along with property, a corner stone of
efforts to provide for our future.
 Excellent tax breaks, but poor products
and high charges
 90% + of pension savings invested in
Managed Funds, delivering an average
annual growth of just 0.9% per annum
 Private Pension Funds can help, but most
advisers cannot get paid for their delivery

14. Isolated financial decision making
 Probably the most costly mistake all
of us make
 Multiple advisers but no one person
taking an overall view
 Allows financial inefficiencies to infect
our financial lives
 Most costly mistake of all:
“borrowing your own money and
paying for the privilege”

15. Profits can appear bigger….
 Profits made in one area of your life,
can be eroded by another
 Pre-tax profits may be positive, but
net of tax and inflation, Gross Profits
quickly become REAL losses
 It is not the number that dictates
profit, it is the value

16. Lessons to be learned?
 Educate yourself as much as possible, you are the one
most interested in your money
 Spend 80% of your time creating income and 20% of your
time creating wealth
 Stop taking financial advice from those paid to make other
people profit
 Pay for your financial advice, otherwise the “piper” is
playing someone else’s tune
 Change how you plan taxation, seek out the help you need
and pay only the taxes you must pay
 The most important first step? - Create a
Personal Financial Plan, with clear
objectives and timeframes, and obey the
basic rules of planning

17. Questions?

18. Financial Intelligence Coaching
Available now from
PAO Communications Ltd,
26, Beaverbrook,
Donabate,
Co Dublin
Ph: 01-8085000
Email: paulovery@paocommunications.ie