The article was written in the 1990s and was extremely bullish on the investment climate ahead. It forecast returns of over 20% per annum from equity markets and referred to ‘recent trends’ which had been extremely positive and which had delivered great returns.

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By
Gavin Fineff
Financial Planner

If you are interested in finding out more please contact Melissa Oliver on 02 8908 5300 or info@sentinelwealth.com.au

Now let me say upfront that not having my own plan is ridiculous. I have been in the industry for well over 10 years, I have access to all the resources, and I am surrounded by exceptional advisers and clients.

So why haven’t I got my own house in order? My excuse is that I am your typical 30 something. I spend all that I earn, I have debt, I am enjoying life and am not worried about the future. I believe that the biggest card I have to play is time. I have decades and decades of time on my side so why should I plan for my nest egg now?

Having said this I reached a turning point only last week when the penny finally dropped and I realised how my work could help me.

For the last 7 years I have been creating cash flow scenarios for our clients and listening to the adviser and our clients discuss cash flow assumptions and implications. Although I could see how valuable the cash flow scenarios were to our clients, I was not sold on them for myself.

The other day we had our monthly team meeting at which the benefits of using the cash flow tool for our own planning came up in the discussion. I decided to be honest about my view of the cash flow modelling and consequently I told everyone that I couldn’t see the value of it for me personally. I know that I of all people should have used the tool given that I am a natural planner and love to track against my targets. However, despite this I couldn’t accept it as a viable tool because as far as I was concerned, putting in irrelevant assumptions like earning three times my current income, was a pipedream, and therefore why should I bother?

What I realized during that open discussion was that the reason I didn’t see the value was simply because I wasn’t applying realistic, achievable and relevant assumptions that I believed in.

Now that I’ve realized this, I am ready to build my own cash flow scenarios and begin to look at questions such as: what if I didn’t make any changes and kept the status quo? What would that look like in 20 years time? Or, in the event that I was disabled and unable to work, how much would I need so that I could financially support myself?

I am amazed at how quickly my view has changed. It is actually an exciting step to know how much I need to live the life I want, and more importantly, to know how much I need in a crisis.

I now see the real value of the cash flow tool. It’s all about achieving a measure of peace of mind by knowing that I am in control of my financial situation and will be well prepared if something unexpected happens.

I hope my blog helps you to decide to take action about your cash flow, regardless of what age or stage of life you are at.

To find out more please contact Melissa Oliver on (02) 8908 5300 or info@sentinelwealth.com.au

Today, I really experienced the truth of that. Seven months ago I decided it was time to take control of my health. I weighed more than I ever had in my life and quite frankly, I was very unhappy about that. Every morning I would look in the mirror and tell myself that I needed to lose weight. So finally after four years of inaction I was ready to do what was required to lose the extra kilos.

I decided that it was time to pull out my wallet and employ a personal trainer. This was a huge step for me because I couldn’t see the value of spending any money on gym memberships, let alone personal training sessions. Ironically, since my first training session, I haven’t looked back.

To date, I’ve lost eight kilos and my body fat has dropped from 28% to 11%. By taking the action to look after my well being, all the other areas of my life have also been positively impacted. This is not at all what I expected because I only saw losing weight as a cosmetic change, not a whole life change!

Apart from achieving such great results, the bonus that I didn’t expect was the relationship that I formed with my trainer. I could not have done this without him. He has been an outstanding coach. He is passionate, dedicated and committed to me achieving my goals – and he knows what he is talking about.

However, today he delivered news that caught me off guard. He has decided to follow a different career path and therefore will no longer be working as a personal trainer.

At first my jaw dropped in disbelief. Then within a few moments the reality of what he said set in and I burst into tears. All I could think about was that I might never find another trainer who would look after me so well.

He listened to me. He understood what I wanted to achieve and addressed my concerns from my point of view. Then he used all his knowledge, experience and empathy to provide me with honest, objective and sound advice. There was no doubt in my mind that he had my best interests at heart.

To me, this intangible value is priceless and I don’t regret a single dollar that I have spent for his time, expertise, training and guidance. I’ll forever be grateful for his impact on my life.

Through this experience I have realised that although the “cost” may seem high, I gained more value than I could put a price on. Employing the right coach/adviser has been the best money I have spent and I believe that being able to say this is the true measure of value.

For more information please contact Melissa Oliver on 02 8908 5300 or info@sentinelwealth.com.au

The engagement was initiated by the employer as part of their commitment to mature aged employees, as approximately 40% of their workforce are over 45.

Each consultation was designed to help educate participants on possible strategies they could explore to assist them with planning their finances and preparing for retirement.

I was honoured to have the opportunity to share my knowledge and help educate this amazing group of women (and man) but it also saddened me that some of them who had spent their entire life caring for others, were in a financial position that meant they would be reliant solely on the government Age Pension in their retirement.

Currently, the maximum Age pension for an individual is $19,468 p/a and $29,354 p/a for a couple, which by most standards does not represent a luxurious lifestyle.

Reflecting on my experiences over the two days, I was reminded of the following lessons:

1. It’s never too early to start planning and managing your finances.

   Small savings over a longer period can have a huge impact on the final outcome. This is due to the compounding interest effect which Einstein claims is the 8th Wonder of the World.

   I wonder how different the story may have been if each employee had developed an integrated financial plan in their 20′s or 30′s?

2. Your beliefs determine your results.

   Most employees had received similar salaries throughout their careers yet some had accumulated enough assets to enjoy a comfortable retirement, whilst others were resigned that they could not save and would therefore have to rely on the government Age Pension.

   Everyone’s circumstances were unique but those with positive beliefs about saving and investing had managed to convert the same income into significantly greater financial wealth.

3. Regardless of marital status, you need to take responsibility for your own financial health.

   We’ve all heard the statistics about high incidences of divorce and unfortunately this was represented in the participants.

   Whether you are single, married or divorced, taking responsibility of your own financial health ensures that regardless of what life throws at you that is one area you can be in control of.

   To help identify how healthy your finances are, SentinelWealth has developed the unique WealthScan tool which is like a medical check-up for your finances.

If you or your friends would like more information on the WealthScanTM tool, please contact Melissa Oliver on (02) 8908 5300 or info@sentinelwealth.com.au.

Topics included a range of investment areas: gold bullion, Australian equities, international equities, developed and emerging markets, bonds, currency and many others. Each speaker presented compelling arguments for their point of view, and these ranged from one extreme to the other.

Australian equities are undervalued, developed markets are flush with cash and opportunity, emerging markets have to catch up with their share of GDP, etc. etc. Round and round we went with argument and counter-argument but there was very little change to people’s original positions.

A detailed discussion about how to determine the right time to invest created debate around what to use as indicators. One school of thought involved building a 10 year forecast in order to determine fair value now. The other involved using momentum as the indicator (i.e. where the money is going now).

After two days and much discussion, there were still no clear answers I couldn’t help thinking that all the discussion about the detail was being trampled by each person’s belief system around investing. It seemed to me that once the belief was in place, it was simply a case of continuing to justify it with ‘technical’ arguments. I wondered how many of those in the room were even aware of their investment beliefs.

The only thing that was agreed upon by everyone was the need for diversification. That alone confirms at least one money belief shared by all: It is impossible to really predict the markets. So the ‘king’ of diversification is in fact not dead – it is still very much alive.

To check whether your investment portfolio is DIVERSIFIED or DIWORSIFIED contact Melissa Oliver at SentinelWealth to set up a portfolio review.

Note 1: “Diversified” is a portfolio with multiple assets that all behave in a similar way.
Note 2: “Diworsified” is a portfolio of assets with relatively low correlations that creates stability and reduces volatility.

It’s a powerful story, extremely well told, with images that I am sure will always be in my mind and hopefully always help me to appreciate the important things in life.

One of these is the opening scene where a young mother, father and two young children survived by sheltering between two water tanks. It appears that the tanks protected them from the massive inferno. What struck me was that Bronwyn Sparks (the mother) actually had a smile on her face whilst Shane (her husband) was almost inconsolable.

I can’t imagine what it must be like to even be near such a fire tornado, let alone feel that you and your children are about to be incinerated alive. I wondered why Bronwyn had a smile, and why Shane in contrast was so upset. I can only surmise that Bronwyn realised that her family would survive. On the other hand, Shane may have felt that he had failed in his ultimate role as “protector”, or maybe he despaired at the thought of how he would provide in the future. I have no idea what caused him to shed tears, but whatever it was, it was deeply important to him.

Another aspect of the documentary that struck me was how their daughter Lola struggled for a while after Black Saturday. That in itself is not surprising and neither is the fact that psychologically it had a major impact. Apparently Lola blamed Bronwyn and Shane for not getting the family to safety. “Why didn’t you get us out?” she said. The pain of that comment for a parent is impossible to describe. To some extent it goes to the very heart of what it means to be a parent. Although neither Bronwyn or Shane mentioned how it felt, I have no doubt that after what they had been through, it must have been incredibly hard to deal with.

And so the relief and joy that they must have felt when a psychologist was able to work successfully with Lola to deal with this trauma would have been priceless – literally. What that psychologist did was a service not only for Lola, not only for the family, not only for their immediate community but also for the whole of society. Ironically I am sure Lola will grow up to be a wonderful human being and in some way her experience at this very young age, from both the trauma of that inferno as well as the lessons learned from a highly trained compassionate, experienced and independent professional will enhance her as a human being.

What price quality, independent advice? It can be absolutely life-changing.

To find out more SentinelWealth’s AdviserMatchTM service please contact Melissa Oliver on (02) 8908 5300 or info@sentinelwealth.com.au.

The stories creating the most fun and mischief are the ones about the captain’s behaviour. The recording of his conversation with the coast guard was the first staggering news, than he fell into the life boat and from what I understand he now says he was told to sail close to the shore to promote the company.

On a completely different note, I was talking to a friend who is the captain on an international airline. Having previously had a private pilots licence, I have a particular interest in flying and always enjoy my chats with him.

On this occasion he was telling me how on his last trip to New York, an aircraft from a fairly minor african airline had taxied onto one of the active runways whilst another aircraft was commencing take off. My response was fairly clichéd in that I immediately thought how unprofessional some of these airlines are.

To my surprise he told me that the air traffic controllers in the US often speak very fast and use jargon. On one occasion he was actually with a very experienced training captain when the air traffic controller gave an instruction speaking very fast and using jargon to the extent that the training captain didn’t understand what he was saying. His response of “negative, say again” was met by a repeated wrapped full of jargon instruction. “Negative, say again” was then met with “for the last time, (and the same instruction again)”.

This is where it got interesting. The training captain said “I will repeat ‘say again’, until I understand your instruction”. The air traffic controller than spoke more slowly and the communication was achieved.

If you were traveling somewhere, which type of captain would you like? Both are qualified, experienced, and under normal situations, quite capable. How would you really know who you have?

It’s no different when it comes to any adviser especially those whose advice and leadership could be “life threatening”. Is the adviser you use strong enough and confident enough to stand up to you if they believe it is necessary? Have you scoped out the exact role you want him or her to play, the profile in terms of personality, experience, qualifications and knowledge that you expect them to have? Are you skimping on fees forcing your adviser to cut corners?

It may be worth doing a detailed profiling and role description exercise and having an in depth discussion with adviser on some of these issues.

SentinelWealth has developed AdviserMatchTM as a tool designed to assist clients to develop detailed profiles and role descriptions, to be used for the selection of financial advisers. For further information, please contact Melissa Oliver on (02) 8908 5300.

We all know how badly they have been beaten in the test series against Australia. And as the old cliché goes, there is no shame in being beaten. The shame however is in the way the Indian team has played and in particular the way the senior players have played.

It was in this light that I noticed something that really struck me in the fourth test. Sachin Tendulkar, the idol of Indian cricket, the man who is beyond criticism, the Nelson Mandela of the cricket world, demonstrated what to me symbolised the state of the Indian cricket team.

There he was batting with one of the younger players, Gautem Gambhir, and with Peter Siddle bowling particularly well, Tendulkar played a wonderful leg glance along the ground to square leg. It was very well hit and looked like four off the bat. The Australian team (only 550 odd runs ahead!) chased it down and only a wonderful dive by Ed Cowan (I think) saved a certain four. The batsman ran two! I was surprised… it looked a certain three.

As the television replays focussed on the dive, I noticed in the background the incredibly sloppy running by the batsmen. Tendulkar hardly made an effort in the first run, let alone the second and they eventually ambled through for a very comfortable two. Any cricket lover would know that the batsman should run hard between the wickets, especially the first run. But here was the world greatest batsman demonstrating to one of the upcoming stars and the rest of the team, that he had forgotten the basics. In cricket like any other sport, when the results are not going your way, you at least do the basics well. These are the things within your control.

It is no wonder that the Indian team has played the way it has on this tour. I am the first to accept that they have caught the Australian team on the rise. The Australian quick bowlers have bowled unbelievably. Much has gone the Aussie’s way and it is completely understandable for the Indian team to feel overwhelmed and out of control. But it is exactly in these conditions that the basics must be done well. Control the controllables.

So what if anything has this to do with finance?

Well at the moment there seems to be a lot of uncertainty and panic about the European crisis. The press is full of the ‘imminent’ collapse of Europe and a number of people are panicking and moving their assets to cash. Battening down the hatches for the coming disaster. At the same time however most often these same people haven’t done their basics very well.

They worry about not having enough cash flow in the future, but continue to waste cash flow now. The only way to control cash flow now is to at least track it in some detail. Know where you are spending your money and what you are paying for everything. Do you have your estate planning sorted out? Another controllable. Will your dependents have sufficient financial resources in the event of your death or disability? Another controllable. Is your debt under control? What rates and costs are you paying for your debt and banking? Another controllable. Are all your important documents copied and indexed? Are the copies stored outside your home? Do you know how much is enough for you to live the life you wish to live? Have you worked out what your required return is so that you don’t take more risk than you absolutely need to take?

All these issues are controllables and many people are focussing on the uncontrollables and making rash decisions. As a minimum it would be important to do a full scan of your entire wealth management so that you clearly understand where you are and what you can easily change. Control the controllables and don’t worry about the uncontrollables. 90% of things that people worry about never happen.

SentinelWealth has built a specific tool to scan a family’s entire wealth management, scoring every element and identifying possible implications and areas of concern. For more information on WealthScanTM please contact Melissa Oliver on (02) 8908 5300.

Only five days later an article in the Financial Review commented that the week had been “the best week on the share market in 3 years”. The market had risen by 5.2%.

Nobody knows what the share markets are going to do at any particular time. There is even research to show that share markets are not directly related to economic criteria, as logical as that would be.

The current extreme volatility plays havoc with investor emotions. For those who are still accumulating assets the question is whether to simply phase in regardless of price, stay out completely or try to time purchases to maximise returns. For those closer to retirement but with an expected investment life of at least 20 years, it’s even more of an emotional roller-coaster.

Why is it such an emotional roller-coaster and how can it be avoided? This is really the big issue.

Investor emotions arise from ‘fear’ and ‘greed’. Fear of not having enough, of running out, of losing status. Greed is the symptom, not the cause. (More of that in another blog).
How to avoid fear?

Identify the risks, come up with a plan to mitigate those risks as much as possible and have a fall-back position in case all else fails. Then evaluate the possible scenarios and test the approach adopted against each to ensure that no matter what happens there’ll be enough. Then write it all down into an Investment Policy Statement. It’s actually quite simple.

To find out more about drafting an Investment Policy Statement please contact Melissa Oliver at SentinelWealth on (02) 8908 5300 or info@sentinelwealth.com.au.

Murdoch’s defence was that in such a big organisation as New International, it is unrealistic to expect the person at the top to know everything that is going on.

The interesting issue for me was that apparently News International was “outperforming” its competitors in the “scoops” it was getting. (We now know the sources of the “scoops” but that is not my point). The point here is that News International was outperforming its competitors by significant margins and apparently nobody (not even the CEO) was asking how.

Bernie Madoff, during the height of his apparent outperformance also had very few questions asked of him. Even highly reputable, highly astute and highly experienced investors were content to accept the apparent truth that Bernie was just superior.

The lesson for all investors is that where one investment or manager is significantly outperforming the benchmark or peer group, surely just as many questions need to be asked. Understanding the “why” is always more important than simply knowing the “what”. Temporary underperformance is acceptable if there’s a good reason. The old adage “if something is too good to be true, it probably is” is apparently not that easy to apply for the beneficiaries of superior performance.

Justin Hooper
Managing Director & Financial Strategist