Q. Why may the unit price for my fund decrease on 1 July?

A  The unit price reflects the value of a fund’s investments, including any income accrued but not yet distributed or reinvested.   As the value of an investment rises and falls, so does the unit price.  When distributions are paid, the unit price will decrease by an amount equivalent to the distribution.  This is because the income included in the unit price value has been paid as part of the distribution.   As a result, if your fund paid a distribution on 30 June 2009, then the unit price will decrease on 1 July 2009

 In reality, you haven't 'lost' money, you are just waiting for the distributed or reinvested amount to be credited to your account.

Q. Why does it take so long to release unit prices after 30 June?

A.  Finalising year-end unit prices is a detailed process and may take some time due to calculation and auditing requirements.  Also, we are unable to release unit prices until we have calculated 30 June distributions.  We therefore expect 30 June 2009 unit prices for most clients funds to start becoming available throughout July 2009 and early August.

Q. Does the reinvestment of my 30 June distribution occur pre-30 June or post-30 June?

A. It occurs post-30 June, but relates to the previous financial year.

Q. Why is the 30 June distribution larger than the distributions I have received throughout the financial year?

A. In general, any distribution payments that occur during the year reflect income returns.  However, if capital gains have been realised during the financial year, then the 30 June distribution may be larger.

Why is superannuation a useful structure for accumulating wealth for retirement?

Since the late 1980's Australian Governments have been encouraging us to save in order that we can fund our own retirement without placing a burden on Centrelink and the aged pension. As a result, they have introduced legislation to make super a more attractive proposition to all Australians, regardless of income or ability to save. Of course at retirement, you can withdraw funds from super, totally tax free.

For many people investing in super permits a lower tax rate on their investment than on non superannuation investments. Around 15% tax on asset interest and growth which is much lower than receiving income and paying tax at the marginal tax rate. 

For those who are receiving an income in retirement, withdrawals from an allocated pension or superannuation is nil.

For some investors, having their own Self Managed Superannuation Fund can offer even greater flexibility in investment choice and assets held under the fund as well as further taxation efficiencies and estate planning facilities.

There are more important benefits permissible within the super environment depending upon individual circumstances, such as:

• Qualifying for the Government superannuation co-contribution scheme to supplement low income earners
• Splitting your super after divorce
• Using a self-managed super fund as an estate planning vehicle

 A financial plan can help you optimise your savings and reduce your tax but most of all, can outline the options available to you within a superannuation environment wether within a platform or managed fund or in your own SMSF or DIY fund. Find out more about superannuation click here. 

What is this I hear about being able to start a pension, even when I am still working?

Our current accepted retirement age is based upon a decision by the German Government in the mid 19th Century which gazetted that an appropriate retirement age for European and subsequently western nations citizens' was 65 years of age. Back then, our life expectancy was much, much lower. As we live longer, compulsory retirement age of 65 is becoming less relevant.  Not only to older people want to maintain at least a part time interest in the workforce, their expertise and experience is becoming more valued. Now you can work longer and enjoy the benefits of your superannuation if you choose. 

Previously, if a worker wanted to 'slow down' after preservation age, up until now age 55 years, they would need to retire to access a pension income from their superannuation savings.  In an attempt to encourage workers to remain within the workforce, the Government now allows you to supplement a designated salary with pension income from your superannuation.

So yes, you are able to begin a pension from your superannuation scheme even while you are still working although specific conditions apply.

There are limitations and rules regarding how this can be done so talk to us about whether you can work productively in your job and draw a pension from your superannuation scheme at the same time.  With the announcements made in the May 2006 Budget, are still able to contribute to superannuation from 2007 but there are limits which apply.  This presents presents even further tax offsets through such strategies as salary sacrifice.  Ask Parkside how to best manage your return to work and minimise your tax.

Why do you say you are 'Fee For Service"  providers. 
How is this different to other Financial Advisers?

Our services have all been identified and costed so that we can offer our clients a fully transparent fee structure. Clients can see and choose what they're paying for.  This also assures clients that we are not biased in favour of any particular fund manager or institution.  We focus on charging for advice and service, not product.

The financial planning industry generally relies on commissions from product to underpin its profitability.  This can lead to clients being taken advantage of by unscrupulous Advisers who charge hidden commissions and receive rewards from product providers which are largely undisclosed to the client. Many of these practices have been declared unlawful since the passing of amendments to the Financial Services Regulation Legislation but there are still strong affiliations between many Advisers and the large fund managers and banks to whom they are licensed.  This is not to say that all Advisers associated with such managers or banks are 'bound' to recommend products on their licensees recommended list, or that such products are in some way inferior but it does create questions in the client's mind about their impartiality.  However, some of our clients actually prefer to have their fees calculated as part of our trail commission.  At Parkside, we are flexible enough to accommodate your preferences

Fee for service means that you receive comprehensive services and advice that is not linked to product, fund managers or other large institutions.  The transparency we find, gives our clients more confidence that we are recommending an appropriate investment portfolio for their needs.  .

What is a Do it Yourself or Self Managed Superannuation Fund?

We prefer the term 'self managed superannuation fund' (SMSF) because very few people are indeed able to 'do it themselves' unless they have significant administration and financial skills.  However, a Self Managed Superannuation fund allows up to 5 people to become trustees of their own super fund and permits flexibility in terms of the assets that can be held in the fund.  They also put full control of the fund's investments into the hands of the Trustees rather than any particular fund manager. For instance, you can include your investment property, collectibles and valuables as well as managed funds and direct equities within the superannuation fund.  Naturally, the fund enjoys the same tax benefits as Managed Superannuation Funds and is perfect for those who have assets over $250,000.  Fees are more manageable in a SMSF but you will need assistance in developing the right investment strategy and in the setting up and running of your fund which requires Trust Deeds, regular Trustee Minutes and diligent record-keeping plus the necessary submission of ATO documentation such as BAS, IAS and Taxation Returns. Parkside can help in all of these eventualities - we can package a complete financial advisory, insurance and administration service for your SMSF.  Find out more about our super fund facilities.

What does diversification mean in investing and why is it important?

Diversification in investment terms is making sure that you have assets in your portfolio that expose you to every corner of the investment world in an asset allocation (proportions) that suit your level of risk.  Simply put, it means not putting all your eggs in one basket.  Over exposure to one single asset class, say International Shares during a volatile market could see you lose significantly. However, a balanced and fully diversified portfolio that includes, Australian Shares, Cash, Fixed Interest and a number of other asset classes can 'balance' out any poor performance by a single asset class.

Many of our clients have benefited by the great performance of the Australian Share market over the past 12 months and are tempted to widen their asset net to include more Australian shares. It's vitally important that you retain diversification and balance, should you have a disproportionate asset class and it performs badly, the effect on your total portfolio can be devastating.

Never time the market or think that buying more of a good thing will guarantee better performance. We never know what the effect of emotion, geo political movements or natural disasters will be on any asset class - don't leave anything to chance. You need specialised advice on constructing a fully diversified investment portfolio that will provide steady returns according to your preparedness for investment risk.

I'm concerned that if something happened to my business partner we would lose not just intellectual property but also his wife could become my partner and she doesn't know anything about our business.

Indeed.  If you have a key person in your business you need to ensure that business life continues in the event they are injured, disabled or worse still die.  You need to ensure that you can afford to replace their expertise, play their salary, deal with creditors and keep your business afloat during tough emotional times.

Another factor worth considering is whether your partner's share in the business is to be left to his spouse.  In the event the spouse has insufficient skills to be of value in the business, you would need a 'buy / sell" agreement which would ensure you have enough insurance to purchase your partner's shares without jeopardising the business or stretching your financially.

Many people think of life insurance as just that but it can be applied to a number of very successful investment and business strategies which will help you cope in the event of a personal or business tragedy.  Ask our Risk Specialist for more information on insuring your life, your business and your partner.

If you have questions that you would like to put to our expert team of financial Advisers, click on this link or email mail@parksideinvestorplus.com.au