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Financial Planning
Planning Content Cluster

Wealth-building in different life stages

There are various strategies a person can apply to successfully grow their wealth for retirement and these all involve careful planning and receiving appropriate advice. Maximising super contributions during its accumulation phase is an integral part of growing your nest egg, however, investors should still consider opportunities and strategies that experts can provide.

Here are some ways how retirement planning professionals and tools can help clients improve their portfolio and finances through the different stages of wealth building.

Goal-setting

Planning for retirement and using appropriate investment and wealth management strategies are necessary to achieve financial independence. However, it’s hard to carry out a strategy without a clear goal in mind. Unfortunately, the farther a person is from their retirement age, the more difficult it can be to narrow down financial and retirement goals.

To assist clients come up with their retirement and investment objectives, fund managers strive to improve their advice modelling engines. This was the goal of AMP when it funded and launched the company’s multi-year investment program as part of its “Goals 360”, which is further discussed in “Investment manager launches crystal ball for wealth goals”.

Engaging the services of financial advisers sometimes prove to be instrumental in the wealth-creation process, especially for those who need assistance with the planning stage. Advances in artificial intelligence modelling engines or robo-advice could also help steer confused clients in the right direction with their money.

Assets selection

Investors can look into what high-net-worth investors (HNWI) are keeping in their portfolio through reports prepared by experts.

One such report is the Credit Suisse Global Investment Returns Yearbook, which revealed that HNWIs tend to select assets that can give them both financial and personal gain. The Knight Frank Wealth Report 2017 corroborates this finding, pointing out that the global ultra-high-net-worth investors allocate up to 6 per cent of portfolios to expensive and valuable collectables.

The Credit Suisse report authors, however, said that the value of collectables are subjective and that some rare items can still generate mediocre returns.

The ‘star-performer’ the ultra-wealthy are collecting” reveals that despite its perceived value, rare books actually generated the least financial gain—even going so far as to call its returns mediocre.

Despite its high prices, historic cars were considered as the star-performer among collectables because of its reported above average financial returns. However, experts warn against simply buying historic cars as part of an investment portfolio because collectables only reflect individual tastes—a person who is interest in art or stamps may not be able to discern a car’s value or see how its prices will move in the future.

Keep track of balance to maximise wealth

Investors may face new opportunities and challenges in wealth building due to the latest set of superannuation changes, but Associate Director Daniel Gumley of Dixon Advisory said that there’s no reason to be discouraged. Individuals may still grow and protect their nest egg in their super.

Gumley pointed out that the 15 per cent tax rate still makes super a more attractive and effective way to build up retirement savings.

He also advised three ways on how to increase super balances depending on the individual’s stage in life.

Those who still have income-generating activities are advised to find avenues to top up their balance without going over the lowered contributions cap.

He also suggested parents to invest in their children’s financial literacy so that they could structure their finances correctly from the start and avoid trying to catch up later in life.

“The super reforms afford less flexibility to ‘top-up’ super savings later in life, which may lead to hard-earned savings accumulating in a less concessional tax environment,” he said.

Gumley expressed that the Australian Taxation Office (ATO) keeps track of transfer balance accounts through a credits and debits system, which means retirees should also keep an eye on the movement of their monies.

Read more of Gumley’s advice in “Wealth management through super: a how-to”.

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