Hope for a continuing rally of the Australian sharemarket

Transcription

1 e-newsletter November 2012 Hope for a continuing rally of the Australian sharemarket by Anna Kassianos, Senior Analyst Resources and Energy, Platypus Asset Management^ It s been another confusing few months for investors in the sharemarket. On one hand, there s been much talk about the slowdown in China and the end of the resources boom which, according to some, may spell disaster for Australia. But on the other hand, we re in the middle of perhaps the first sustainable sharemarket rally since the global financial crisis began. Indeed, the sharemarket has now traded on an upwards trajectory for over four months, and with noticeably lower levels of volatility. At Platypus, we think it is likely that the market will continue grinding higher, for a number of reasons. Perhaps most significantly, the breadth in the market during this rally as measured by the number of stocks rising compared to the number declining has been vastly superior to that experienced during the similar-sized rally that took place early in the year. Interest rates and the steps being taken by the Reserve Bank of Australia (RBA) are also key. Although the interest rate cut in October was driven largely by fear about the potential for renewed weakness in the economy, the cut itself is unambiguously bullish for the stock market. So while the slowdown in China is definitely an issue, it s probably not as bad as some doomsayers have suggested. Since joining the World Trade Organisation, China has made a number of changes aimed at achieving growth over the last 10 years. The cycle has arguably been overstretched, particularly following its stimulus (or overstimulus) in 2008, and it needs to be brought back to more Continued on page 2 Chart 1: Resources sector performance relative to ASX300 Benchmark Index ASX/300 ASX/300 Resources Source: Bloomberg. 0 04/ / / / / / /2012 INSTITUTIONAL DEALER GROUP OF THE YEAR 2012 Australian Unity Personal Financial Services Australian Unity is Money Management s Dealer Group of the Year for 2012 Page 1

2 Continued from page 1 sustainable levels. It s impossible for China (or any economy) to grow above 8 per cent forever. The reality is that China is slowing to a more sustainable growth rate of 5 to 7 per cent per annum (once policy reform changes). Crucially, its growth is not over by any means, and the growth rate is still expected to be significantly higher than almost any other country in the world. What investors should expect is a change to the drivers of China s growth. In particular, we expect China to become a more middle class growth consumption led economy than a high growth infrastructure investment led economy. Therefore, China will be susceptible to the risk and volatility that consumption led growth entails. So while China s demand for some of our natural resources, such as iron ore, may be easing off slightly, it certainly isn t the end of the world. This is because we expect to see an increase in its demand for other materials. Increasing demand for copper For example, at Platypus we have a more positive view of copper than that of steel making materials, including iron ore. This is because as China s industrialisation is moving into a more developed stage, its demand for copper (and also energy) which feed into, for example, wiring and technology needs is likely to increase. The rising global demand of copper, and ever increasing supply issues (e.g. cost of developing new deposits, rising operating costs, metallurgical processing issues and lack of new discoveries) will result in supply deficit. Linked to this expected demand versus supply deficit, we see price appreciation, and on a relative basis, we regard it as a more attractive investment opportunity. The Energy Sector Another interesting area is the energy sector. As China industrialisation matures (i.e. more people own cars, televisions etc), their demand for energy will increase considerably. However, successfully investing in this space requires a level of expertise. This is because many of the companies in this sector are small or still in start-up phase and at the early stages of drilling and resource understanding. Furthermore, the energy drilling cost is relatively more expensive than mining exploration, and can range from $5 million to $65 million per well, depending on depth and location. These companies are for the most part constrained, seeking partners or capital raisings to fund and successfully navigate the technical challenges of both exploration and development. While stock movements in the energy sector are regarded by some as unpredictable, there s no doubt oil and gas companies will be taking an even bigger role in the Australian sharemarket over the next year. The Gold Sector Gold also continues to be an attractive play for investors, and as a result there s recently been an increased level of investment in such companies. Despite recent increased demand, emerging gold companies are still trading well below their highs (a time when the gold price was much lower than now). We believe there should have been more merger and acquisitions in the sector at this stage of the cycle; however it has yet to properly kick off, and consolidation within the sector will likely continue for companies with a market capitalisation ranging between $100 million and $1 billion (i.e. within the small caps). Selective investment required Overall, the resources and energy sectors are looking interesting at the moment, though investors will need to be selective. The resources sector currently makes up one third of the Australian sharemarket, however this is dominated by BHP and RIO. Given the exposure of these companies to iron ore (and the negative outlook for this commodity), investors hoping to play the resources theme may be disappointed if they only hold these names. Chart 1 shows the historic performance of the resources sector performance relative to ASX300 Benchmark Index. The chart shows resources equities on the most part perform better than the index as a whole, but have recently sold off, and quickly bounced off at levels close to those experienced in 2008, and herein lies the opportunity. While we do believe the outlook for China s growth will be moderated (and change in composition), it s important for investors to note that the resources sectors outperformance of the broader index predates China s accelerated growth. Nor do we believe we are about to return to a 2008 like environment. At Platypus, we continue to think that resources sector trade is worthwhile, but may need to be done in a different way to the past. Outperformance will be very stock- and commodity- (energy, gold, copper) specific. Those who can successfully explore and develop successful projects and potentially be lucky enough to run steady state operations (unless they re not acquired prior to project and operational delivery) will be the stocks to be in. ^Anna Kassianos is senior analyst resources and energy, at Australian equities manager Platypus Asset Management - Pty Limited ABN AFS Licence No: , a joint venture partner of Australian Unity Investments. Page 2

3 How does our Tipping Point table currently rate Australian shares? Our Tipping Point table is the output of our forecasting methodology which helps us to assess the status of Australian shares (and other asset classes) based on the investment fundamentals of income and growth in earnings. As the table shows, the higher that prices rise then the lower returns we should expect going ahead. Similarly, the lower the price you buy at, the higher returns you should expect in the future. So we aim to recommend buying when prices offer good returns, and sell slowly when prospective returns are not so attractive. Despite the strong rally in Australian share prices over the past few months, investors remain cautious about the Australian sharemarket. But as you can see by the circle in the Tipping Point table, right, Australian shares represent very good value (at the time of writing). In the long term, buying at these prices should produce strong returns. We do not know what will happen to share prices in coming weeks or months - but we are confident that quality Australian shares bought at around these levels should show returns of around 10% per annum over the next decade. This is based on current high dividend yields and an expectation that companies will be able to grow profits by just 3.6% per annum. These are not lofty assumptions; just a reflection of the fact that when fear abounds good investment returns are never far away. Australian Shares All Ords Forecast Status Index 10 year return (p.a.) % Overpriced % Fully priced % Fully priced % Fully priced % Fully priced % Fair value % Fair value % Fair value % Cheap % Cheap % Cheap % Cheap % Cheap % Cheap % Cheap % Cheap % Cheap + No guarantee is implied as to the accuracy of the specific forecasts provided Data as at September 2012 Redundancy Case Study: Qualifying for Centrelink benefits whilst unemployed Jane, 45, has just accepted a redundancy offer. Her husband, Bill, is a home-maker who looks after the couple s two young children. Jane receives the following payments: Holiday pay (after tax) $25,000 Employer termination payment (after tax) $61,650 Preserved super $120,000 $206,650 Jane and Bill have a mortgage that still has $160,000 outstanding. They have recently received an inheritance of $120,000 that they were intending to use as a deposit on an investment property before the unexpected redundancy. Jane expects to be unemployed for a while because she has skills which suit an industry which is in a downturn. However, Jane s non-super payout of $86,650, plus the $120,000 inheritance and the $60,000 insured value of their car and home contents, means she exceeds the Newstart Allowance assets test cut-off limit for a married homeowner. Our advice to Jane might be: Park the $120,000 inheritance and $20,000 of cash in their mortgage which has a re-draw facility Put the balance of $66,650 of non-super money into a cash account Roll over the $120,000 of preserved super into a super fund with an appropriate asset allocation for the long term Value their car and home contents at $30,000 (i.e. at garage sale value) for Centrelink purposes. The couple s assessable assets for Centrelink are now only $96,650 and, if they both apply, they should qualify for NewStart benefits of $22,984 p.a. (and potentially other benefits) after an initial waiting period. Page 3

4 Case study: How to safeguard your business if the unexpected happens Mary, Wayne and John are co-owners of a successful business. John contracted a serious disease and died after a number of years. He left his share of the business to his wife, Betty. Many years prior to John being diagnosed with the illness, the business had taken out $200,000 of life cover on each partner for use as Business Ownership protection. However, no Buy/Sell agreement was put in place. After John s diagnosis, he was unable to obtain more life insurance. Over the years, the business grew significantly where John s share was valued at $780,000. The partners had not reviewed the insurance policies to maintain the cover levels in line with the value of the business. This left Mary & Wayne with a $580,000 shortfall. This presented a dilemma for Mary & Wayne. They couldn t afford to buy out John s share of the business, nor could they afford to obtain a loan for that purpose. This left them with a number of unpalatable options, including: Accepting John s wife as a co-owner. The problem here is that Mary and Wayne do not get along with Betty and Betty has no skills to help in the business. So Mary & Wayne would be doing all the work and giving a third of the profits to Betty. Or Mary & Wayne could find a third party to buy the business and use that money to pay out John s wife but there aren t any obvious takers that Mary & Wayne know already. So they would have to take on a new partner who they don t know possibly leaving them vulnerable to someone they won t get on with either personally or professionally. Another option is to sell the business and pay out John s wife from the proceeds. The problem here is that, without John, the value of the business is a lot less. It is not the best time to be selling. In any case, Mary & Wayne both love the business and don t want to sell. The final option is to get Betty to agree to receive the initial $200,000 and then receive regular payments under What is business estate planning? Business estate planning is the process of arranging your business affairs now to help ensure there is no unnecessary deterioration or loss of continuity in your business should it lose you or one of the other owners or other key people through illness, injury or death. With appropriate business estate planning, there should be less risk of: A departing owner, or their spouse or estate, taking legal action over a valuation or pay out figure A departing owner s spouse or child deciding against the wishes of the continuing owners to become an a vendor terms arrangement. The problem here is that Mary & Wayne are effectively in business with Betty until she is finally paid out. This also means that the business needs to generate Betty s payment and pay it in addition to the existing costs of running the business. What happened? Mary & Wayne had numerous meetings with Betty and rather than the business folding, Betty s lawyers agreed to the following: Receive the $200,000 insurance payout as an initial payment. Receive $9,000 per month, indexed each year for inflation for the next five years. At the end of the five years, subject to a valuation of the business, the payments would continue or Mary & Wayne could pay a final lump sum. A better solution It s too late now, but Mary, Wayne & John should have put a buy/sell agreement in place from day one. They could have funded it with an insurance policy that covers death, and serious illness or disablement. Plus they could have obtained a valuation of the business from their accountant annually and adjusted the insurance sums insured accordingly. As a result, on John s death, Mary & Wayne could have paid John s wife the agreed amount and Mary & Wayne would then have owned the business outright. The insurance cover required for Death, TPD & Trauma of $780,000 for each partner would have cost each year: Mary $4,691, Wayne $3,692, John $2,996 (based on the following parameters: Mary age 44, Wayne age 42, John age 40 Business valuation: $2,340,000). That s a total of $11,379 or just 0.49% of turnover. active hands on partner of the business (rather than taking the pay out) The departing owner s spouse or family taking their legal right to claim a share of the business profits without having to work in the business A departing owner s spouse or estate selling their share of the business to a third party that may be unsatisfactory or unknown to the continuing owners The control of the business or its assets being frozen due to legal difficulties created by the departing owner, or their spouse or estate. Page 4

5 Interest rates we are currently negotiating The tables below indicate the type of interest rates we are currently negotiating on behalf of our clients, as well as the monthly repayments for those loans. Home Loan rates as at 1 November 2012* Rates From Monthly repayments for 30 year loans (unless fixed term) for loan amounts of: $300,000 $500,000 $1,000,000 Basic Variable Rate 5.63% $1,727 $2,879 $5,759 Offset Home Loans 5.63% $1,727 $2,879 $5,759 Line of Credit 5.69% $1,739 $2,898 $5,797 Professional Packages 5.63% $1,727 $2,879 $5,759 1 Year Fixed Rate 5.12% $1,632 $2,720 $5,441 2 Years Fixed Rate 5.12% $1,632 $2,720 $5,441 3 Years Fixed Rate 5.22% $1,651 $2,751 $5,503 4 Years Fixed Rate 5.59% $1,720 $2,867 $5,734 5 Years Fixed Rate 5.50% $1,703 $2,838 $5,677 Commercial Loan rates 1 November 2012* Rates From Notes Motor Vehicle Finance 7.14% This rate for finance over $60,000 Equipment Finance 7.14% This rate for finance over $100,000 New Business Investment 7.4% Subject to credit assessment Commercial Property Finance 6.99% Subject to credit assessment Agri Business Finance 6.99% Subject to credit assessment *Please note, these rates do not include any fees and charges payable by the borrower. Comparison rates for individual products are available on request. Whilst these rates are the lowest rates in each category, the product and lender may not necessarily be available for you or be suitable for your needs. A full analysis of your needs is required before suggesting a suitable loan product. Are you paying the lowest rate you can for your home or car loan? Or your commercial loan? Our five-step loan process If you are buying a home or car, or borrowing for your business, or if the interest rate on your current loan is too high, we invite you to have your loan position health checked by us. All you have to do is give our mortgage broker the details about your financial objectives and loan position - we ll then analyse loans from the banks and other leading lenders to find you the most suitable loan we can. We ll call you with the result no later than five business days after you call us. It s quick, it s easy and it won t cost you a cent. Page We help you work out how much you can borrow... and which type of loan is right for you We search the major lenders to find you the best rate we can We use our buying power to reduce interest rates even more We do all the paperwork for you You save on your new loan repayments every month and our service hasn t cost you anything

6 How to save a small fortune on your home loan Buying a home is the biggest purchase most of us make in our lives. So big, in fact, that most of us have to borrow some or all of the money to buy our home. The benefit of borrowing is that we can stop wasting money on rent, and we can start enjoying our home straight away. The downside is that the interest bill over the life of the loan can be substantial. For example, if someone were to borrow say $300,000 over 30 years with an average interest rate of, say, 6.0% p.a., they would pay interest of $347,514 over those 30 years, as shown in Table 1 below. They would pay more in interest than the amount they borrowed. It s similar for bigger loans. If someone borrowed say $750,000 over 30 years with an average interest rate of 6.0% p.a., they would pay interest of $868,786 over those 30 years. It makes sense, then, to do everything we can to reduce our home loan interest bill. Strategies you can use to pay less interest and pay off your home loan sooner include: Find the cheapest loan you can Making sure you have the lowest interest rate possible is a highly effective way to save on interest repayments. But make sure you also take into account the fees charged by the lender because they can make a seemingly cheap loan expensive. Our home loan consultants can help you find a loan which has a competitive interest rate and fees. Don t take a loan with bells & whistles you ll never use Usually you ll pay for those extras with a higher interest rate or with additional fees. Be careful of honeymoon rates Sometimes these cheap rates are just a lure to lock you in, and once the honeymoon period is over they are followed by higher-than-normal interest rates or by excessive fees. Make extra repayments Any extra repayments you can make will reduce the amount of interest you pay. A good strategy can be to try to make your repayments fortnightly rather than monthly i.e. you divide the monthly repayment by two and then repay that amount each fortnight. Because there are 26 fortnights a year but only 12 months you end up paying the equivalent of an extra month s repayment each year. Use an offset account The key here is to arrange to have your salary paid into your offset account. This is counted by the lender as a temporary repayment and therefore reduces your interest bill. In the meantime, you use your credit card for your living expenses, and you pay that off at the end of the month by withdrawing money from your offset account. Try to avoid Lenders Mortgage Insurance Some lenders aren t as strict on their criteria in determining who has to buy this insurance. Consolidate your loans If you have a number of loans with different interest rates you could benefit by consolidating them all into your home loan. The key here is to maintain the original combined repayments so you pay down the loan as fast as you can. Table 1: What is the total interest bill on your home loan? Amount 6.0% p.a. over 30 years Monthly repayments Total repayments over 30 years Interest component $100,000 $599 $215,838 $115,838 $300,000 $1,798 $647,514 $347,514 $500,000 $2,997 $1,079,190 $579,190 $750,000 $4,496 $1,618,786 $868,786 $1,000,000 $5,995 $2,158,381 $1,158,381 How much can you invest in super by 30 June 2013 Here are the superannuation contribution caps which apply for the 2012/13 financial year. Contributions which qualify for a tax deduction These are known as concessional contributions and the limit is $25,000 for this year. Generally you can only qualify for a tax deduction if you are self-employed or you are employed and make the contribution through salary sacrifice. The $25,000 limit includes any Super Guarantee your employer pays on your behalf. contribute $450,000 in one financial year, but you would not be allowed to make non-concessional contributions in the following two financial years. The Government co-contribution If you are working, and make a non-concessional contribution to super, and earn up to $46,920 this year, you are eligible for a super co-contribution from the Government of up to $500. Spouse contributions Contributions which do not qualify for a tax deduction If your partner s income is less than $13,800, you could You could also invest up to $150,000 p.a. in super as a qualify for a tax offset of up to $540 on the first $3,000 you non-concessional contribution (i.e. you do not receive a contribute to superannuation for them from your after-tax tax deduction on this contribution). If you are under age income. This tax offset decreases as your partner s income 65, you can bring forward up to two years of nonconcessional contributions. This means you could Page increases above $10,800. 6

7 Retiring from full-time work? Can you qualify for Centrelink benefits? If you are leaving full-time employment, and are over age 55, you might be able to qualify for Newstart Allowance even if it appears your assets exceed the cut-off limit. Here s a case study to show why. Case study Couple with $550,000 Jan & Don are aged 60 and own their home, and are about to leave their jobs. They require an income of $55,000 p.a. (indexed) for the rest of their lives, and they have the following monies: Superannuation $500,000 Cash & term deposits $50,000 $550,000 In addition, their car and home contents are valued at $20,000. So, all up, their assessable assets for Centrelink purposes are $570,000. With no planning: Jan & Don could take the no planning route by withdrawing the superannuation money and investing it into term deposits. This would result in their assets being fully assessed by Centrelink and they will therefore not qualify for any Centrelink benefits in their early retirement years. Further, their savings will not generate their required income, so they will have to top-up their investment income with cash withdrawals ($23,500 in Year One). Given an earning rate of 6% p.a. for term deposits and 3% for cash, and income indexation of 3% p.a., the couple would run out of money just 22 years after they retire. This is a little too close for comfort, as their life expectancies are 22 years for Don and 26 for Jan, as shown in Chart 1. With Australian Unity: We would suggest Jan & Don invest their super into a number of carefully chosen superannuation-based investment funds to gain genuine diversification benefits, and that the couple retain their $50,000 in cash to top up their income as required. Centrelink would not count the couple s $500,000 in the super funds as an asset, and the couple would therefore qualify for full Newstart Allowance. We would also recommend an asset allocation which should reliably achieve fairly smooth returns for their super funds with a long term average of 6.8% p.a. As a result, the couple could expect their income in Year One to be made up as follows (after the Centrelink waiting period): Newstart Allowance $22,984 Cash income $1,500 Cash drawdown $30,516 Less: Tax NIL $55,000 On turning Age Pension age, we would recommend new financial strategies to help the couple qualify for a part pension and to ensure their tax effective retirement continues. As a result, we would expect Jan & Don s retirement savings to last until they are 97 years of age well past their life expectancies, as shown in Chart 1.* Chart 1: Jan & Don add 15 years to the life expectancy of their retirement savings* $500,000 With Australian Unity Savings $250,000 No Planning $515,409 $ Age Don Jan * Assumptions Jan & Don s superannuation is 100% Taxable component. Term deposits earn 6%, cash 3%. With No Planning: They withdraw super, and invest in term deposits ($500,000) and cash ($50,000). With AU: They roll over their superannuation until Age Pension age. At Age Pension age, they commence Account Based Pensions. Superannuation is assumed to earn 6.8%, ABPs 8% p.a. Centrelink rates and thresholds are current as at 1 November 2012 and are indexed by 3% p.a. Tax rates are current as at 2012/13. Page 7

8 What is life insurance? illness and has usually less than 12 months to live. A recent survey by Rice Walker Actuaries found that only 4 out of every 100 Australians have adequate life insurance. And that 60% of families would be in financial distress just one year after the breadwinner died.* As a rough guide, the ready reckoner below will help you calculate how much life insurance you and your spouse need. ADD to that: Repayment of debts/mortgage $ Cost of children s education $ SUBTRACT: Value of your existing investments (super etc) $ Approx. level of life cover you require = $ SUBTRACT: AMOUNT OF TOP-UP LIFE COVER YOU REQUIRE = $ This table is for illustrative purposes only. You should seek advice from a financial planner to ascertain your specific insurance needs. This illustration does not take into account inflation or indexation on earnings. begins to pay you) and the benefit period (how long the policy will pay you if you are unable to work). of work when workers compensation generally doesn t apply.^ Some people have basic income protection insurance through their employer. But this insurance generally pays a benefit for a maximum period of only two years and is a basic type of cover. This means if you are unable to return to work after two years you may not have a source of income. In some instances it may be appropriate to take an additional policy with a benefit period up to age 65. Visit our Client Education Centre If you would like to find out more about financial and investment issues, please feel free to visit our Client Education Centre at You ll find lots of information on a wide range of topics, including the following: Term life insurance pays a lump sum on the death of the insured, or if the life insured is diagnosed with a terminal How much term life insurance do you need? Fact Sheet What is Personal Risk Insurance? Personal risk insurances provide a financial benefit in the event of you suffering a serious injury or illness, or death. They include term life insurance, total & permanent disablement insurance, income protection insurance, and trauma insurance. What is income protection insurance? This insurance is designed to replace your income if you are unable to work due to sickness or injury. It provides a monthly payment of usually up to 75% of your pre-tax income. You can generally choose the waiting period (this is how long you must be unable to work before the insurance Calculators T Superannuation T Transition to retirement T Life Insurance Day to day living expenses $ per year Multiply by x 20 = $ Importantly, the premiums for income protection insurance are usually tax deductible. The cost of this insurance varies based on the waiting period, the benefit period, your income and occupation. Most people will earn a fortune between now and when they retire. And yet many people fail to insure their most important asset their ability to earn an income. This is despite statistics which show that: of becoming disabled for more than 3 months before reaching age 65.** How much income protection do you need? As a general rule of thumb, you and your spouse should insure the maximum of 75% of your pre-tax income, up to age 65. The waiting period can be extended until after your sick leave and long service leave etc will be exhausted. Special Reports Free Fact Sheets T What is the best way to save money on your home loan? T What is an Account Based Pension? T What is Business Estate Planning? T What is negative gearing? T What is a Self Managed Super Fund? T What is the rule on borrowing to invest in Self Managed Super? T What is Investment Risk? T What is the cut-off limit for Centrelink benefits? T What is the Transition to Retirement rule? T What is Estate Planning? T What is a Diversified Portfolio? T What is the best way to manage your finances after accepting a redundancy offer? T What is the benefit of investing in shares? T What are some of the key financial issues on entering a Retirement Village? T What is Personal Risk Insurance? T What are the key financial issues upon entering an Aged Care Facility? T What is the best way to save for retirement? T What is the value of our advice? T What is our approach to asset allocation? T What is our investment philosophy? Free Webinars T What is Business Estate Planning? T What is Personal Risk Insurance? T What is the Transition to Retirement rule? T What is the best way to save for retirement? T What is Investment Gearing? T What is the best way to save money on your home loan? T What are the key principles of investing? T There s a new one posted every month. Investment Update Webinar T We have the September 2012 Investment Update webinar posted here. You ll also find the following on our website: Free Financial Health Checks T Free Financial Health Check T Free Risk Insurance Health Check T Free Superannuation Health Check T Free Home Loan Health Check T Financial Health Check for Women T Risk Insurance Questionnaire T Employers: Is your Company Superannuation Fund pulling its weight? T Does your business need an estate plan? Free Information Brochures T An Introduction to our Financial Advice Service T An Introduction to our Personal & Business Estate Planning Service T An Introduction to our Mortgage & Finance Broking Service Page 8

9 Funding your estate plan When it comes to estate planning, the big question is: Would your family be able to maintain their lifestyle if you no longer earned an income? If your answer is no, you need to consider transferring that financial risk to life insurance companies. They have a range of insurances which can help you fund your estate plan and give you enormous peace of mind all for a fraction of the sum insured each year. To help ensure your estate plan is properly funded, we employ our disciplined insurance portfolio construction process. We start by assessing your current situation if the unexpected happened today, what would be the shortfall in your estate? In other words, how much money would be required for you and/or your family to replace your income and pay for other expenses? We then develop strategies to help you transfer that risk to insurance companies, and identify which types of insurances you require. We also help you qualify for tax deductions on the annual premiums where possible. Next, we research the major, reputable insurance companies to find the insurances which provide you with the right level of protection, including the terms and conditions which best suit you and your family. Of those insurances which best meet your needs, we obtain quotes to ensure we recommend the most cost-effective insurance for you. The next step is for you to determine if that cost is affordable. If it s not, you might choose to reduce the cost by reducing the amount insured in other words, assuming some of the financial risk yourself. Once you have made that decision, we finalise your risk transference plan, and arrange the purchase of the recommended insurances on your behalf. Insurance can help your family maintain their lifestyle if life doesn t go to plan Personal insurances worth considering include: Term life insurance - pays a lump sum on the death of the insured. Income protection insurance - replaces your income if you are unable to work due to sickness or injury. It provides a monthly payment of usually up to 75% of your pre-tax income. Trauma insurance - pays you a lump sum on the diagnosis of a specified non-pre-existing illness or injury, generally including heart attack, stroke, cancer, and paraplegia. Total & permanent disablement insurance - pays a lump sum if you are totally incapacitated because of sickness or injury and unable to work. Does one of your friends or colleagues need prudent financial advice? Your adviser will be happy to assist your friends and colleagues who need advice on: Wealth creation Retirement planning Redundancy planning Investments Superannuation Self managed superannuation Personal estate planning Business estate planning Personal risk insurance Business risk insurance Home loans Commercial loans Investment loans Equipment finance Car finance If you no longer wish to receive Money Insights please send an Unsubscribe to the person who sent it to you. Contact us: You can contact us by calling your Australian Unity financial adviser or mortgage broker, or you can call Advisory Services on , or write to us at Level 8, 114 Albert Road, South Melbourne Vic 3205, or us at advisoryservices@australianunity.com.au Disclaimer: Unless otherwise indicated, the information in this newsletter is provided by Australian Unity Personal Financial Services Limited ABN AFSL & Australian Credit Licence No This information has been prepared without taking into account the investment objectives, financial situation, tax position or particular needs of any individual person. Because of this you should, before acting on it, consider its appropriateness, having regard to your objectives, financial situation and needs. You should obtain a copy of the Product Disclosure Statement before making any decisions about any product. Reasonable care has been taken to ensure that information in this newsletter is derived from sources believed to be accurate, and that examples are fair and reasonable. However, it should not be considered a comprehensive statement on any matter nor relied upon as such and Australian Unity Personal Financial Services Limited does not guarantee the accuracy or completeness of the information. Any taxation or legal position described is a general statement and should only be used as a guide. It does not constitute tax or legal advice and is based on current laws and their interpretation. We recommended that you speak with an Australian Unity Adviser to review your individual situation. This document produced in November Copyright 2012 Page 9