The Blogs that appear on this page may be sourced from outdated material so please seek appropriate professional advice. The blog material is in no way intended to be personal financial planning advice.

Catherines Chat

Wholistic Financial Solutions provides a lot of essential information and updates regarding the property investment industry. Check this page for the updates.

Stuart Westhoff from WFS comments

Tuesday, February 16, 2016

If you think “those” types of things only happen to other people, be warned.

In late 2007 the All Ordinaries index was over 6,500 points, my youngest daughter was only a few weeks and life could not have been better.

Two things were about to happen that had a devastating effect on my financial and personal life.

The first event some of you may have already guessed. The Global Financial Crisis hit. By mid-2008 the All Ordinaries had dropped 25% to about 5,000 points. There was more pain to come for the stockmarket but at that time the second event hit me. My wife was diagnosed with breast cancer.

Now in 2016 the stockmarket is hovering around 5,000 points again. It has recovered from its GFC low of around 3,300. My wife and I have not recovered. We are not together and I am still trying to re-build financially.

Financial stress places enormous strain on any relationship, be it personal or business.

Losses such as those experienced during the GFC are magnified by gearing, which is using borrowed funds. Financial losses from a traumatic illness add another layer of pain and when it happens during the GFC well…. as one client put it to me, “You’ve just gone through the perfect storm.”

These circumstances are not planned but do happen and it’s important to discuss the “what if’s” when putting any financial plans together. The things that can go wrong are not comfortable to talk about and that’s why it’s often easier to outsource these things to professionals who can talk through and plan for contingencies.

Please do not hesitate to review all your plans and contact us if you would like help.             

Positive Thinking in a harsh reality

Wednesday, October 21, 2015

It can be really hard to maintain ‘positive thinking’ and belief in ‘whatever is meant to be’ when bad things keep happening. As you probably know my middle Son broke his face in four places 6 weeks ago requiring major surgery. Now my oldest Son made the Raiders squad only to find out he has damaged 4 discs in his lower back an may not be able to play.  This week we find out that a friends beautiful Alaskan Malamute best friends were shot dead by a famer in an act of senseless cruelty and yesterday I find out a good friend is having surgery due to self-harm she caused herself.  That’s just my small circle in turmoil.  Let alone what’s happening out there in the rest of the world.

So for those of you that need a reminder of how to apply ‘The Secret’ repeat after me:

                I promise myself

                To be so strong that nothing can disturb my peace of mind.

                To talk health, happiness, and prosperity to every person I meet.

                To make all my friends feel that there is something worthwhile in them.

                To look at the sunny side of everything and make my optimism come true.

                To think only of the best, to work for only the best, and to expect only the best.

                To be just as enthusiastic about the success of others as I am about my own.

                To forget the mistakes of the past and press on to greater achievements of the future.

To wear a cheerful expression at all times and give a smile to every living creature I meet.

To give so much time to improving myself that I have no time to criticize others.

To be too large for worry, too noble for anger, too strong for fear and too happy to permit the presence of trouble.

To think well of myself and to proclaim this fact to the world not in loud words, but in great deeds.

To live in faith that the whole world is on my side, so long as I am true to the best that is in me.

(Christian D Larson)

The Realistic Money Mindset

Wednesday, October 07, 2015

By now I am sure most of you have heard about the power of ‘The Secret’.  According to Dr Joe Vitale ‘You can have, do, or be anything you want’.  According to the contributors to the best-selling book and movie ‘The Secret’ we can all have as much wealth as we want....(click here to read more)

 

we just need to ‘attract’ it into our lives by believing that we can. Many spiritual advisors, authors, songwriters, etc have picked up on this theme and the literature is abound as to how to make the ‘Law of Attraction’ work for you.  It is said that you just have to visualise your dream, over and over, and most of all you have to ‘believe’ in your dream.  They also say that if you do visualise your dream over and over again and it doesn’t come true then it is just because you didn’t really ‘believe’ it would happen.  Believe harder and it will all be Ok. 

Is this really true or is it just new age mumbo jumbo.  Can I ask you all – have you applied the power of the ‘secret’?  Did it work for you?  If not, why do you think it didn’t work?

What is Financial coaching services

Thursday, February 05, 2015

A new and fast growing advisory service - Financial coaching services

 

Financial coaching definition

 

So what is Financial Coaching?  The industry is so new there is no accepted financial coaching definition.  One can turn to Wikipedia for a definition of Coaching.  Coaching is defined as ‘training or development in which a person called a "coach" supports a learner in achieving a specific personal or professional goal’  So how can this definition be expanded to a Financial Coaching Definition? 

 

Wiki further goes on to outline a sub category of Financial Coaching being ‘an emerging form of coaching that focuses on helping clients overcome their struggle to attain specific financial goals and aspirations they have set for themselves. At its most basic, financial coaching is a one-on-one relationship in which the coach works to provide encouragement and support aimed at facilitating attainment of the client's financial plans. Recognizing the array of challenges inherent in behaviour change, including all too human tendencies to procrastinate and overemphasize short-term gains over long-term wellbeing, they monitor their clients’ progress over time and hold the client accountable. This monitoring function is hypothesized to boost clients’ self-control and willpower. Previous studies in psychology indicate that individuals are much more likely to follow through on tasks when they are monitored by others, rather than when they attempt to ‘self-monitor’. Although early research links financial coaching to improvements in client outcomes, much more rigorous analysis is necessary before any causal linkages can be established. In contrast to financial counsellors and educators, financial coaches do not need to be experts in personal finance because they do not focus on providing financial advice or information to clients.

 

The obvious flaw in Wiki’s Financial Coaching Definition is that it states that financial coaches do not need to be experts in personal finance because they do not focus on providing financial advice or information to clients.  It is correct that Financial Coaches cannot provide Financial Planning advice as they would need to be Licensed Financial Planners to do so. However, I fail to see how a coach can coach someone on their financial life without having any expertise in personal finance issues.  Even the term personal finance is ambiguous.  The term ‘personal finance’ financial management which an individual or a family unit is required to do to obtain, budget, save, and spend monetary resources over time, taking into account various financial risks and future life events.  When planning personal finances the individual would consider the suitability to his or her needs of a range of banking products (checking, savings accounts, credit cards and consumer loans) or investment (stock market, bonds, mutual funds) and insurance (life insurance, health insurance, disability insurance) products or participation and monitoring of individual- or employer-sponsored retirement plans, social security benefits, and income tax management. Are these not highly specialised areas in which advisors need experience, qualifications, registrations and licenses to advise? 

 

To my way of thinking using a ‘Financial Coach’ who has no experience, qualifications, registrations or licenses in financial fields is akin to paying a sports coach who has played football all their life to coach a girls netball team.  Why would you pay financial coaching fees to someone who is not able to provide financial planning advice, tax advice, or finance advice?

 

So who do you turn to for Financial Coaching Services? 

 

If you are seeking financial coaching services or financial coaching packages you would be wise to turn to professionals or a professional advisory firm that are experienced in their field of advice, and licensed, qualified and registered with professional bodies such as NTAA, CPA, FBAA, MFAA, PIPA, PIAA.

 

 

Coaching and mentoring program's

 

So when looking for Financial Coaching Services I think I have made my point clear enough that the individual or business should be experienced, qualified, licenced or registered.  I also think you should be looking for and individual or firm that offers financial coaching software, financial coaching tools and financial coaching packages.   Coaching and mentoring program's can greatly assist you develop wealth creation strategies.

 

Financial coaching fees can be worth paying if the financial coaching fees are paid to suitably qualified professionals whose advice can greatly assist you create personal wealth.  Financial coaching fees can be reduced via subscribing to coaching and mentoring programs and financial coaching packages as these tend to be cheaper than one on one financial coaching services.  However coaching and mentoring programs and financial coaching packages as they are not one on one take more commitment as you have to be self-disciplined enough to follow the coaching and mentoring programs and financial coaching packages.

 

 

What if you are looking for the coaching definition business?

 

If you are seeking financial coaching for business there is once again no accepted coaching definition business. Some business coaches talk about leadership coaching definition, performance coaching definition or executive coaching definition.  But once again nowhere in all these definitions or explanations do you actually find a requirement for a coach who is holding themselves out to be a business coach to be experienced, qualified, licenced or registered.  

 

Personally I would not take business advice from someone who is not, at the very least, a CPA, NTAA of Chartered Accountant and preferably someone who is also a Registered Tax Agent.

 

What is the purpose of coaching?

 

As explained above coaching is ‘training or development in which a person called a "coach" supports a learner in achieving a specific personal or professional goal’. In terms of Financial Coaching Services financial coaching means to coach a client on their personal finance issues which should include topics such as

  • Protection against unforeseen personal events, as well as events in the wider economy
  • Transference of family across generations (bequests and inheritance)
  • Effects of tax policies (tax subsidies and/or penalties) on management of personal finances
  • Effects of credit on individual financial standing
  • Planning a secure financial future in an environment of economic instability

All of these topics require the financial coaching services person or business to be suitably experienced, educated, registered and licensed.  Don’t sell yourself short or waste your money paying financial coaching fees to someone who is qualified only as a life coach.

Wealth Creation Strategies for the Average True Blue Aussie

Thursday, February 05, 2015

 

Wealth creation strategies for the average true blue Aussie

When the average person thinks of wealth creation strategies they generally think of ‘financial advice’.  However, there is a fundamental flaw in the financial advice industry in that it relates very little real wealth creation strategies.  In addition, it is neither accessible nor comprehendible for the average Australian family.  So the very ones that need financial advice, the average Australian family, cannot access it or understand it.  Even those that are lucky enough to be able to afford very basic financial planning, aka wealth creation advice, find it overwhelming and not comprehendible because the very term financial planning is misleading. 

Wealth Creation Strategies Definition

So what is the definition of ‘wealth creation strategies’?  One financial dictionary defines it as Accumulation of assets (especially those that generate income) over a long period of time.

Let’s see if real wealth creation strategies actually relates to financial planning.  It is actually very had to find an agreed definition of the term ‘financial planner’.  However, a ‘financial plan’ is defined as  ‘a comprehensive evaluation of someone's current and future financial state by using currently known variables to predict future cash flows, asset values and withdrawal plans

Yet when the average Aussie thinks of financial planners they generally think the person will be a highly educated and experienced professional that can assist them across all areas of their financial life.  Someone who can help them budget and save, then invest these savings in various investments including property, and also someone who will be able to reduce all the complicated financial strategies into a simple to understand no easy to implement plan.  However, this is not what happens when they see a financial planner. 

Financial Planners

Financial planners are basically product sales people getting paid commissions based on how much they sell. Worse still, some of them, are not highly educated at all, as a financial planning diploma can be obtained via internet based training courses. Some of these courses are quick and easy to complete and are more designed to make the supplier of the course money for course fees as opposed to ensuring a high quality financial advisor.  Financial planners also do not advise on property investing which is a key investment for financial wealth building and an investment that average Aussie wants included in the 'financial plan'.

Why is this such a problem? Clients want wholistic advice cross all financial fields. They want financial coaching that includes saving, budgeting, investing in shares, super, property, tax minimisation, asset protection, finance and more.  But each of these topics is dealt with by different professions.  A financial planner will sell you share or superannuation investments and convince you to take our high commission insurance policies.  But they won't help you invest in property.  An accountant may help you minimise tax, my even explain how to do this by investing in shares and property, but they can't actually advise on investing in such.  Mortgage brokers can advise on the best finance but can't advise on anything else. And the of course are the Property spruikers.  They will advise on property investing but they are generally unlicensed, uninsured and uneducated. They also get seriously high commissions on anything they sell you.  So can you trustee advice.  I think not. 

So why aren't their advisors who are licensed, insured, educated and experienced across all financial fields?  There are, but they are few and far between.  The difficulty for such advisors is the complications that the various governments have introduced via legislation that make it near impossible to give wholistic advice across all financial fields. 

Buying Property in an SMSF

Let's look at an example.  Say you want to buy property in an SMSF.  A very common and effective wealth building strategy at the moment.  Who do you turn to for advice?  If you see an Accountant they can set up an SMSF do you but they can't advise whether you should or shouldn't do so.  You can see a financial planner who needs to do a very complicated and expensive Statement of advice SOA to advise whether you should or shouldn't set up an SMSF.  The price of this Advice alone puts most clients off.  If you’re willing and able to pay for such and they do advise you to set one up, they can't actually set one up, you need to go back to the accountant for that.  Then you need to find a suitable investment property.  The financial planner and accountant can't assist you with this.  So you end up trying to hunt for one yourself and getting caught up with not so scrupulous real estate agents and property spruikers.  Once you find a property you need a loan. A mortgage broker can help you with this but the broker can't advise on whether you should do this and the banks require you to get advice so you are now back to the financial planner for another very expensive SOA to recommend you should take out a loan to buy the property.  Then you need an accountant to account for the SMSF accounting and taxation needs.

Does the process above seem overly regulated, overly complicated, overly off putting or is it just me that finds it ridiculous?  From my own experience what generally happens is that the wealthy who can afford the advice persist and get the right advice and grow wealthier.  The Average Aussie family can't afford the advice or even if they could, it just gets so overwhelming and complicated that they give up and don't get the advice they need to grow wealth.  And so, the divide between rich and not so rich continues to grow. 

So what is the secret to wealth creation?

Find a professional advisory firm that is licenced to advice across all financial fields.  A firm that can assist you create real wealth creation strategies.

New Wealth Drivers: SMSF's and China

Monday, October 14, 2013

By: Jon Giann

 

There were quite a few comments on my last piece that i thought were worth fleshing out a bit.

If you missed it, the argument in a nut shell is that self-managed super funds (SMSFs) are now sitting on a massive pile of cash (bigger than Westpac). They have a fairly small exposure to residential property, and surveys suggest they’d like to increase it. If they did, and took advantage of rules that allow them to leverage, we could see a huge surge into property.

First of all, thanks to Greg M for picking up on a mistake. I said that SMSFs could leverage against assets. As he correctly points out they can’t. SMSFs are allowed to borrow to invest, though the exact rules have changed a few times in recent years.

My reading is that it works the same for SMSF as it does for you and I, with certain deposit and loan to valuation ratios enforced by the banks. This means that SMSFs can leverage, but only off cash holdings.

I got a bit lazy with the distinction between cash and assets there. But it doesn’t change the numbers at all. SMSFs have more than enough cash to cover the kinds of property exposure they’d reportedly like, so those quick back-of-the-envelope calculations I did still hold water.

But thanks Greg for keeping me on my toes. It’s good to know my readers won’t let me get away with intellectual sloppiness.

Second, Amanda was wondering that if there was a demand for 700,000 properties from SMSFs, who would fill them? As she rightly says, “they have to fill those houses with tenants to see a return on investment… 700,000 or so more tenants need to be found in a very short time…”

The answer to Amanda’s question is exactly the dynamic that is going to drive prices higher.

If SMSF demand suddenly caused an increase in supply of 700,000 homes, then that’s right, there would be a glut of rental properties, and rental and property prices would fall.

But that’s never going to happen.

It’s funny. I write around 1,000 words per article and some people get a fixation on one single point like the 700,000 homes. The reason I mention it is to highlight how much money is in SMSF’s and what potentially is possible.

Here’s the reality…

As I said, we build about 70,000 homes a year at the moment, so unless we really start cranking up production, it would take ten years to build that many homes.

And as Amanda says, SMSFs are going to want to see a return on their investment. So the most likely scenario is that the SMSFs will just go after existing properties that are tenanted already.

That means they’re going to start competing for the existing investment properties already out there. Maybe some will build off the plan, but typically investors favour established dwellings.

But there’s only a limited number of those. So that means that all this extra demand is just going to jack up the price.

Remember it’s 700,000 properties at current price levels. As the price level goes up, SMSFs will need fewer actual homes to get the exposure they want. Some other investors will cash-out or get squeezed out of the market, and at some point, the market will find a new equilibrium.

I don’t know exactly what that end point would look like, but the only guarantee in that scenario is that prices will be a heck of a lot higher.

My mate John Fitzgerald pointed me to some back-of-the-envelope calculations he did. Now John is worth squillions, and has over 5,000 property transactions to his name. When he talks, I listen.

John agrees with the basic maths I’ve got. But he compares the SMSF appetite to the value of sales. He says that in Australia we sell around $190 billion in residential property each year.

With gearing, he reckons 30 percent of SMSFs alone could buy every residential property sold in Australia, for the next three years!

As he says, almost 3,000 SMSFs are being set up every month! In his mind, it’s a total game changer.

He reckons this is one of the factors that helps explain one of the property market puzzles of recent times. We’ve seen prices, particularly in Sydney growing strongly (if we annualised September’s growth we get something close to 30 percent!).

But credit is only growing at 4.7 percent. How can that be? How can we have a boom without credit growth? That’s never happened before.

He reckons the answer is that there are new buyers in the market that we’ve never seen before. One is SMSFs.

The other is the Chinese.

And he reckons it’s taken the market by surprise, because 6 years ago, neither buyer existed.

As he says, “I look at China and you can take my numbers on SMSF and quadruple them and still not come near the capacity there. John McGrath told me that one of his Sydney auctions in September had 16 registered bidders – all Chinese origin and all cash buyers.”

“The top two house sales in Australia this year were for $52m and $33m, both to the Chinese and both in cash.”

I’ve been saying this for a while too. I don’t think most people realise the kind of wealth machine that China has become.

Before the GFC, to make the top 50 wealthiest list in China you needed $6 million. Today, you need $3 billion. These days, they’re creating 25 billionaires per month!

China’s top 20 percent had $1.4 trillion in bank savings last year. John notes that just 13 percent of that would buy every house in Australia, in one year.

Thanks John. That’s some serious food for thought.

(And I think this probably answer’s Tom’s question from the last post, right?)

We’ve got a cyclical upswing combining with a massive paradigm shift in the make up of the market, with the twin giants of China and the SMSFs letting their presence be felt.

It’s going to be HUGE!

And thanks everyone for the comments. I don’t often have time to respond but I do follow them closely, and I’m always impressed and humbled by the intelligence and knowledge that’s on display.

As I said, it definitely keeps me on my toes. I can’t slack off with you lot around!

New Generation Seeks Property

Tuesday, August 27, 2013

The Global Financial Crisis (GFC) has spooked the younger generation into shaking off the party lifestyle and instead aspiring to own property to ensure financial stability, according to recently released research.

The Future Leaders Index is a groundbreaking research series lifting the lid on the views of over 2000 young, educated Australians.

The results point to the rise of 'Generation Sensible' or 'Gen S' - a demographic of 17-29 year-old university students that is both conservative and traditional, as well as being fiercely family-orientated.

Overall, it seems that the younger generation has changed priorities. Having been spooked by the GFC, they now want financial security - 94 per cent are saving to buy property rather than pursuing the party lifestyle, with only 5 per cent of their income spent on socialising.

 

Author: Property Week

Unlock your wealth - free workshop

Friday, November 16, 2012
Tomorrow a group of us financial 'so called' gurus are running an all day wealth workshop.  Tickets were $249, now reduced to $39 and I can get 50 people in for free.  Link is To Learn more click here
http://www.unlockyourwealth.com.au/?repxa=cOml5wFoG0+W1WtC5DDIiA==
If any of you want to come - please contact me directly rather than book on the site. Or turn up to Ainsle Football club 8.45am tomorrow.
Really beneficial day if you are free tomorrow.

Property Investment Articles

Monday, March 07, 2011

This article describes the ninth strategy of nine property investment strategies.


Download the full report at www.wfscanberra.com.au

Strategy 9 – Guaranteed Leasebacks

Pros

A genuine guaranteed leaseback is a rare thing. If you can find one it can be an outstanding way of ensuring your ‘sleep-at-night’ factor. The biggest fears in property investing are; “What if I can’t find a tenant?” and “What if my tenant doesn’t pay their rent?”

A genuine guaranteed leaseback can take both of these fears away as the guarantor pays you your rent regardless of whether the property is tenanted or whether the tenant is paying the rent.

You can therefore rest easy knowing that your rent will be coming in to cover your mortgage, each and every month.

Cons

Well… don’t get me started on this one or I will go on for pages! In a nutshell:

There have been many fly-by-night companies predominantly based in Queensland who flew around the country hosting free property information sessions and drawing innocent investors in through mass telemarketing and promises of free holidays for their attendance. Then the holiday turned out to be a property tour, free of course, as long as they viewed the properties whilst they were there. The organizers then convinced the innocent investors to purchase the properties through ‘rental guarantees’ that sounded too good to be true.

And yes, they were too good to be true.

In some cases, the company went into liquidation straight after completing the final sales. Of course, this meant that the guarantee wasn’t worth the paper it was written on. Alternatively, the cost of the guarantee to the company was simply embedded in an inflated price for the property. At the expiration of the guarantee the investor found that they

could not rent their property for anywhere near as much as was predicted. Further, there was never any real tenant in their property. The company had simply used the inflated profits to pay the rent to the investor for the promised period.

Worse still, there were now hundreds of vacant properties in the area all on the market for rent at the same time. And to add insult to injury, investors who couldn’t afford to keep the property now that the rent was substantially less than predicted, tried to sell their property only to find that it was worth considerably less than what they had paid in the first place.

Solution
             
Once again, do your due diligence:
•       Ensure the properties are not over-inflated to compensate for the rental guarantee.  For example, are you able to buy the property on the open market, or from the developer for the same price without the rental guarantee?

•       Ask the guarantor, “What’s the catch?” There must be something in it for the guarantor or they wouldn’t do it. Ask them, “How do you make your money?”
•       Check www.allhomes.com.au or www.realestate.com.au  and ensure the predicted rental is in line with the current market rental.
•       Check that the company offering the guarantee has been in business for a considerable length of time.
•       Check the company has a sound reputation. ‘Google’ the company name and you will reveal any ‘dirt’ or dissatisfied customers.
•       Ensure the rental management fee is in line with industry norms – around 7–8% depending on the state.
•       Ensure you can withdraw from the leaseback any time you want to in case your circumstances change and you want to sell the property or move into it.
•       Most of all Get professional advice

Download the full report at www.wfscanberra.com.au

Property Investment Articles

Monday, March 07, 2011

This article describes the eight strategy of nine property investment strategies.


Download the full report at www.wfscanberra.com.au

Strategy 8 – House and land packages

Pros 

Delayed settlement gives you time to get your finances in order and even buy more property than you could afford to in your current situation.

Stamp duty savings as you pay stamp duty on the land component only.
In a moving market, an investor can make a gain on the investment simply by holding it in the period between agreeing to purchase and when construction is complete.

Some investors use this opportunity to buy several ‘off the plan’ developments with a view to selling off some before settlement to pay for the remainder.

Cons

Units are subject to the possibility of oversupply in the period between agreeing to purchase and when construction is completed. (avoid this con by sticking to house and land packages, townhouses or unit developments with lower number of units)

You have no control over another 10 apartments blocks going up around yours.

Can become a nightmare if the developer goes into administration before the project is complete.  (avoid this con by ensuring the developer is fully insured).

Low valuations of the final development may lead to additional funds being necessary to complete.  (Avoid this con by obtaining professional advice as to your financial position if this occurred)

Solution

“The good news is that a lot of the cons can be extinguished by undertaking the due diligence and research. You need to ensure that the developer has a sound track record of choosing houses in the right location, choosing builders that have stable and profitable track records, and choosing house and land packages instead of units. Land is much more governed by the rules of demand and supply because it is scarce. The closer to a CBD the scarcer it is.”

You also need a really good mortgage broker. House and land contracts and the process itself is fraught with complications and technicalities. You need a broker who is experienced in financing for such developments. See later – how to select a mortgage broker.

Download the full report at www.wfscanberra.com.au

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