What is Financial Planning?
How can We Help You?
Financial Planning (or Wealth Management as it is also known) supports clients to build wealth, become financially secure or navigate difficult financial circumstances. Typically, financial planners review short, medium and long-term goals and develop sustainable action plans. This can include super, SMSFs, insurance, investments, property and any other tangible or intangible goal such as “financial freedom”.
As part of this process, Private Capital Management will thoroughly review your income, expenses, assets and liabilities and partner with you how to best leverage your current situation and achieve your goals.
The Private Capital Management Difference
We are a little different compared to some Financial Planners or Mortgage Brokers. We use our insight from both the Financial Planning and Mortgage Broking industry to support our clients. We leverage our experience and education working within some of the worlds largest banks to provide clients with honest, transparent and intelligent strategies. We are a massive believer in delivering recommendations to clients that saves money as a “penny saved is a penny earnt”.
The beauty of Private Capital Management is that we are not affiliated with any financial product provider – meaning we can select investments or products for clients that we believe are in their best interests, cost effective and not forced upon our valued clients from some higher power within a large financial institution. Every investment product or vehicle is at arms-length through a third-party as we believe in best of breed strategies and not pushing our own investments.
Our advice is honest, thoughtful and intimately considers our clients now and into the future.
Private Capital Management: our financial planning services to clients
Financial Planning touches on many aspects of a clients wealth. As a service to clients, we may work on one (or many) of the services below. Each client has different requirements and we use insight and intuition to understand what best supports our clients to reach their personal goals.
Debt Management and the Efficient Use of Leverage
Debt management services creates client goals regarding how to budget, use offset accounts, determine if they should take on further debt or even reduce the amount of debt they have. Debt management aims to reduce the interest clients pay or use debt in a tax-efficient manner.
Private Capital Management has a Credit Representative Licence, meaning we are able to offer clients mortgage broking services and understand leverage much more intelligently than stand-alone mortgage brokers. This is a powerful combination.
Wealth Creation drives many of our client interactions and can be achieved by increased savings, smarter investment decisions or a more active and sophisticated approach to managing assets.
During our initial strategy session, it is critical that we understand your goals, the investment tools you are comfortable to use, as well your tolerance to risk. The more risk in a portfolio, the potential for greater return but also loss. We will work with you best understand how comfortable you are with risk.
There are many investments that we may use, and includes: Cash, Term Deposits, Bonds and Fixed Income, Shares, Exchange Traded Funds, Managed Funds, Superannuation and Self-Managed Super Funds.
Financial Protection and Insurance Advice
The goal of personal insurance is to limit the impact of a serious event or death on your lifestyle, and includes life, TPD, Trauma or Crisis, Income Protection and Business Insurance.
See our dedicated Insurance page which reviews insurance options in greater details
Retirement planning looks at funding retirement (accumulating wealth) and maximising income during retirement (drawing down wealth and is also known as your “pension phase”).
Increasing retirement income involves growing your asset base to ensure that when you reach retirement, you have enough funds to fund your retirement. This could include putting more funds into super, purchasing an investment property, or using debt to purchase a share portfolio.
Retirement income planning may include maximising government benefits or utilising current assets and super to draw income in an efficient and effective manner.
There are many Estate Planning tools which typically include Wills, Power of Attorney, Testamentary Trusts and nominating Beneficiaries for Superannuation.
We partner with a number of experienced and friendly solicitors to prepare legal documents and for our full-service clients, we even join you for the introductory meeting to share the financial recommendations prepared.
The goal of tax planning is not to be dishonest or unethical though to ensure client finances are structured in a tax efficient and friendly way, which may include: salary sacrifice, borrowing to invest, negatively gearing an investment property or shares. This may also include advising a client to obtain a depreciation report for an investment property.
Nathan Ide as Managing Director of Private Capital Management is a Registered Tax (Financial) Adviser ID 25865204.
Business Financial Advice
Business financial advice allows business owners maximise their business assets, borrowings and protect their business through business insurance.
Check out our link for further detail on business insurance products. Insert business insurance link.
Private Capital Management is also able to partner with our business clients with the ability to obtain commercial finance through our Credit Representative Licence.
Our Advisory model: 4 steps to wealth creation
Frequently Asked Questions
Cash is represented by liquid funds either in the investor’s hands or deposited in an investment or investment account. The investor has complete and immediate access to these funds through a financial institution. Cash assets in this form generally earn the lowest rate of return as a trade-off for their low level of risk and high level of accessibility, or liquidity. A popular Cash Management Account is the Macquarie CMA.
Financial institutions such as banks and credit unions offer term deposits which range from one month to a few years. A term deposit pays a set amount of interest for a fixed term. Typically, the longer the fixed term, the higher the interest rate. Term deposits are a defensive asset class and are used to reduce risk within a client’s portfolio and to provide income. Typical terms include 3, 6, 9 and 12 months from many of the large banks including ANZ and St. George.
The fixed interest asset class includes term deposits, bonds, debentures, mortgages and certificates of deposit. Essentially, fixed interest is similar to cash because it represents loans to entities such as governments or corporations. The major difference lies in the maturity of the underlying debt. Fixed-interest securities may be loans for a specified period, after which the agreed interest is paid, or loans that pay a periodic interest payment (e.g. a bond).
The lower the certainty of repayment, the higher the interest rate the security offers to compensate the lender for additional risk. Portfolios of fixed-interest securities typically offer higher total returns than cash but can also provide a negative return in certain circumstances.
The capital value of most fixed-interest assets can rise or fall until maturity, which can create potential gains or losses. If held until maturity and the issuer does not default on the debt, fixed-interest assets return the initial capital invested. Therefore if held to maturity, they are an income-type asset similar to cash.
Shares represent an ownership (i.e. equity) stake in a company. Unlike bonds, ordinary shares offer no fixed terminal value and no fixed regular payments.
Dividend income streams are inherently less certain than interest payments on debt, even for companies with fairly predictable earnings growth and consistent dividend payments. This is because the future financial health and credit rating of a company is difficult to predict. Furthermore dividends in listed shares are paid at most twice a year, and in some cases only once a year, whereas bonds and term deposits can pay interest monthly, or even fortnightly.
Shareholders therefore face uncertainty and so are placing their money at risk. The reward for this risk is usually incorporated in a sufficiently low share price as compared to the expected dividend payment plus capital growth, to generate an expected total return greater than that available from fixed interest.
Another benefit of shares is that the income paid, the dividends, can come with tax credits that the investor can use to reduce their own tax liability. This makes shares much more tax efficient than cash or fixed interest where the income does not come with any tax credits. These tax credits are known as franking credits.
Well known Australian Shares include companies such as Wesfarmers (Ticker: WES) and Telstra (Ticker: TLS).
Investors buy into and sell out of the fund, as well as trade existing units on ASX.
This structure means that the market price of an ETF correlates closely with the value of the underlying portfolio. Prices are therefore determined by the value of the assets the ETF holds rather than by other factors, such as investor sentiment.
ETFs can also be categorised as either conventional or synthetic. Conventional ETFs invest in a portfolio of securities, which may include Australian shares, international shares, fixed interest securities, REITs or a combination of asset classes. This type of ETF usually tracks an index and will primarily invest in the securities of companies or other assets that are included in a selected market index or benchmark. They will invest in either all of the securities or a representative sample of the securities included in an index or benchmark.
Synthetic ETFs achieve exposure to an index or market by holding derivatives such as swaps or futures contracts. They may or may not match performance of the index or market, depending on
the derivative contract used by the fund.
ETFs can also be classified as either indexed or actively managed. Indexed ETFs are generally based on a particular index (such as the S&P/ASX 200), and actively managed ETFs endeavour to outperform the index. Most ETFs are indexed.
Most ETFs are designed to be cost-effective vehicles, applying low charges to investors compared to unlisted managed funds. Examples of conventional indexed ETFs are the SPDR S&P/ASX 200 and SPDR S&P/ASX 50.
Popular ETF providers include Vanguard, iShares by BlackRock and SPDR ETFs by State Street Global Advisors.
Sometimes it is not feasible or desirable for an investor to own an asset directly. This may be because they do not have the knowledge or expertise to select individual investments, do not have sufficient funds to purchase an asset on their own, nor sufficient funds to allow for adequate diversification through direct ownership. In this case, it may be appropriate for an investor to gain exposure to assets through managed or indirect investments.
Managed investments, also called ‘collective investments’ or ‘pooled investments’, are classified as indirect investments. Managed investments are known by a number of different names, including: investment funds, managed funds, unit trusts, funds or managed products.
Well-known managed fund providers include Magellan, Vanguard and BlackRock.
Superannuation is a specially designed, concessionally taxed, long-term investment vehicle for retirement savings. Many superannuation providers pool small amounts of money that are saved regularly by their members into a large fund of money. This fund is then invested into a broad range of asset classes including shares, property, fixed interest and cash deposits.
There are many different ways to access superannuation including Industry Funds such as Australian Super or SunSuper or cost-effective retail funds such as Macquarie Super Manager.
A small superannuation fund is a superannuation fund that has less than five members and includes two categories: SMSFs and Small APRA funds (SAFs).
The main difference between these two categories is the trustee structure. With an SMSF, the trustee entity is generally designed to be the same as the membership. Small APRA funds have an independent trustee, known as a Registerable Superannuation Entity (RSE) licence holder.
The rules that apply to SMSFs and SAFs are broadly the same since both types of funds are regulated superannuation funds. However, different rules do apply in certain circumstances and these are discussed where relevant.
Superannuation funds that have five or more members, known as large APRA Funds are not discussed in this course as the reporting requirements and rules can vary.