John & Janes Story

De-stressing at a difficult time.

John, 55 and his wife, Jane is 52. They have two financially-independent children who are in their early twenties.

Until recently, they were both working in Port Hedland where they had moved many years ago to take advantage of the excellent job opportunities surrounding the mining boom. They were both very happy, in excellent health and looked forward to retiring together when John turned 60.

We could save the client $25,311 in fees alone in the first year.

Then things took an unexpected turn. Jane was diagnosed with a life-threatening disease. This changed all the plans the couple had made and they had to immediately focus on the short–term goal of getting her the best available medical attention.

Doctors told Jane that she needed to be in Perth for regular, ongoing treatment. So the decision was made to sell their home and belongings in Port Hedland, and move back to Perth. They also decided that with the outlook uncertain, they would drastically change their plans and retire immediately.

John was referred to The Wealth Designers by an accountant who asked us for a second opinion on the Statement of Advice he’d received from the client’s existing financial planner of 15 years. John and Jane told us their financial affairs over this time had been very simple, but they were now concerned with their lives rapidly becoming more complex that the advice in the Statement of Advice did not match their current objectives.

Our first meeting.

At our first meeting, we were only able to talk with John as his wife was undergoing treatment. We met Jane a week later and defined the couple's goals and objectives.

It was vital to have a plan which showed them how best to structure their funds to accommodate their changing circumstances and their desire to retire early

They wanted to delegate all of their current financial stress to someone they could trust

They wanted a lifestyle of choice so they could have the opportunity to make decisions quickly to do everything that was important to them - such as travelling at will to see their family and friends in the UK

They wanted to maximise tax benefits

They asked us to explore the possibility of claiming on any of their insurance policies

They wished to know how best to structure their estate should Jane's condition deteriorate

The financial position.

John worked full time for a mining company on a salary of $140,000.

Jane worked part-time as an Optometrist earning approximately $100,000 a year.

They owned approximately $1,500,000 in lifestyle assets; including their home, its contents and motor vehicles. They have approximately $1,500,000 in financial assets - made up of cash in their bank account, individually-held managed investments and several superannuation funds. The clients had minimal debt. The major concern was a tax liability of $40,000 from the sale of their property in the UK.

We identified John to be a balanced investor and Jane as a growth investor. Where joint ownerships applied, the clients agreed to use a balanced investor risk profile and wanted us to construct a portfolio where 60% was invested in growth assets and 40% in defensive assets.

We worked out they needed $90,000 a year, after tax, to fund their retirement lifestyle.

Our design for John & Jane

Our first step was to establish a Self Managed Superannuation Fund.

We compared the difference in fees for investing through a Self Managed Superannuation Fund (SMSF) or keeping the client’s retail superannuation fund Our calculations showed we could save the client $25,311 in fees alone in the first year. The ongoing fees for maintaining the SMSF were also much lower. So we decided to consolidate both John and Jane’s various superannuation funds into the one, new SMSF.

We also advised the client to make a personal, non tax-deductible contribution of $450,000 each to the SMSF. These funds were drawn from cash sitting in an account earning no interest.

The $900,000 was invested in the tax-effective structure of a superannuation fund and allowed the clients to accumulate wealth while drawing an income to fund their retirement living.

We suggested they kept $135,000 in a high-interest, online savings account to cover their tax liability. Also, John mentioned in our initial meeting that he wanted some funds put aside for his boys just in case their investment venture didn’t work out. $135,000 was the agreed amount to be put aside for this purpose.

John and Jane needed a Will and an Enduring Power of Attorney (EPOA). A Will to make sure their assets will be distributed according to their wishes; and an EPOA to empower someone they trust who can act on their behalf to make financial decisions in their absence or if they lose the capacity to make their own decisions.

We also recommended John and Jane nominated each other as their reversionary beneficiary so if one of them passed away, the pension drawings will continue to be paid to the remaining partner. We helped Jane submit a claim for the TPD cover she had in her existing superannuation funds before rolling over the balance. This allowed Jane to increase her superannuation balance and provide security for retirement.

Jane was eligible to Income Protection cover from her existing superannuation fund. Claiming this allowed her to receive an income for the next 2 years which greatly helped her cash flow.

Easing the financial load.

John and Jane were referred to us from an accountant for a second opinion on a Statement of Advice which they’d already paid a considerable amount for. So we agreed that TWD would not charge its normal fee to construct another Statement of Advice in their wealth management plan.

We discussed our various service agreements and agreed that they would become Private Clients - our most comprehensive service package. This is a strictly fee for service arrangement. The clients told us they thought it very fair that the fee was not based on the amount of funds they had and was a fixed amount based on the time and complexity of the advice.

John and Jane wanted to remove as much financial stress as possible from their life. After all, they had more important things to worry about. So they engaged TWD as their Principal Wealth Advisor and we took control of all their financial affairs.

Until Troy told us, we had no idea this sort of service was available," said John. "TWD basically took total control of our financial affairs. We both felt a huge sense of relief – and have total trust in Troy and his professional team. I think it’s one of the most valuable services the TWD team offers."