Intergenerational Wealth Transfer Challenges

The transfer of wealth between generations is a pressing issue in Australia, with an estimated $3.5 trillion expected to be passed down from those aged 60 and over in the next 20 years. This transfer, nearly the size of the current superannuation system, presents both opportunities and challenges for older and younger Australians alike. Understanding and navigating these complexities requires open communication and strategic financial planning.

The Challenges for Australians Under 40

Australians under 40 face a multitude of financial challenges. Rising housing costs, ongoing mortgage repayments, family planning, and career progression dominate their financial landscape. These years, while marked by significant milestones such as buying a first home, having children, and advancing careers, often lack crucial conversations about future wealth distribution with ageing parents.

AMP’s recent research highlights the dynamics within families regarding intergenerational wealth. Many under 40s strive for financial independence, avoiding reliance on the “Bank of Mum and Dad,” despite concerns over housing affordability impacting their long-term wealth. Key findings include:

• 4 in 5 under 40s have not asked their parents for financial support.
• 3 in 5 have not discussed wealth transfer with their parents.
• Only 1 in 5 rely on potential inheritance for future financial security.
• Half of those surveyed anticipate needing to support their parents financially as they age.

In this economic environment, intergenerational wealth discussions are critical. Younger Australians exhibit a lack of confidence in achieving financial independence, compounded by the belief that their generation faces greater financial challenges than their parents. This sentiment is particularly strong among those under 29, with many believing that property ownership, crucial for long-term wealth and retirement security, is increasingly out of reach.

Conflicting Priorities for Older Australians

For older Australians, retirement is a time to enjoy the fruits of their labor and consider how to pass on their wealth to the next generation. However, retirees face competing financial goals: maintaining their lifestyle, preserving capital, supporting children, and planning for aged care. Many are burdened by the fear of running out of money, or “FORO,” which affects their quality of life and their willingness to discuss wealth transfer with their children.

Research shows that:

• 4 in 5 Australians aged 65 and over believe their children face tougher financial challenges now compared to their own experiences.
• 3 in 4 think it’s important to pass wealth onto their children.
• Many lack financial confidence in retirement, with 3 in 5 more concerned about having enough money than they were a decade ago.
• Close to 3 in 5 anticipate compromising their quality of life in retirement.
• Despite the desire to help, 4 in 5 are not willing to downsize their homes to provide funds for their children, and 7 in 10 are unlikely to adjust their lifestyles for wealth transfer purposes.

The Role of Financial Advice

Financial advice is pivotal in addressing the intergenerational wealth challenge. Advisers can help both older and younger Australians navigate these complex issues with tailored strategies that suit their unique circumstances.

For younger Australians, advisers can develop successful wealth creation and protection strategies, considering their entire financial situation, including intergenerational wealth dynamics. They can facilitate discussions with parents about wealth transfer and provide insights into the implications of various decisions.

For older Australians, advisers can boost financial confidence by clarifying options such as gifting assets or using home equity. This helps ensure a secure retirement while also supporting children financially. Solutions that provide income options in retirement can alleviate fears of running out of money, enabling retirees to enjoy their retirement years without compromising on their lifestyle or financial support for their children.

Crest advisers are prepared to assist you in developing the best strategy for your needs, ensuring that your financial goals are met while supporting your family across generations.

Congratulations to Jessica Deamer for her nomination in the 2023 Women in Finance Awards!

We are extremely proud to announce that Jessica Deamer has once again been selected as a finalist in the Women in Finance Awards. These awards are designed to recognise the best and brightest women operating in the financial sector. They set a benchmark for excellence across Australia, consistently acknowledging the outstanding contributions women make to the finance industry and profession year after year.

Jessica’s ongoing recognition is a testament to all the hard work she has put in, not only over the past year but throughout her entire career, consistently delivering excellence to provide the best results for Crest Financial Services’ clients. Jessica was among the nine finalists for the ‘Regional Professional’ award. This is not the first time her name has been mentioned as a distinguished woman working in the industry. In 2022, she was a finalist in the ‘Financial Planner’ category.

To celebrate Jessica’s excellent achievement, our team went to Sydney to attend the awards night. This was a fantastic opportunity to recognise Jessica’s hard work and leadership and to interact with other professionals in the sector who are working to make a difference.

Jessica started at Crest in 2015 as a junior paraplanner and, over the past eight years, has developed into an outstanding financial adviser. She provides advice across a wide range of areas and has also developed specialist skills and experience in retirement advice, self-managed super funds (SMSF), aged care, and taxation. Her professionalism and hard work have opened up opportunities at Crest in leadership roles, and she is currently training future advisers and back-office staff, as well as recruiting new employees.

Congratulations again to Jessica for this well-deserved recognition, and everyone at Crest looks forward to her continued success.

Congratulations to Jessica Deamer for her nomination in the 2022 Women in Finance Awards

We are extremely proud to announce that our very own Jessica Deamer has been nominated for the ‘Financial Adviser of the Year’ in this year’s Women in Finance Awards. The Women in Finance Awards are designed to recognise the best and brightest women in the financial sector. The Women in Finance Awards are the benchmark for excellence around Australia, and year after year recognises the outstanding contribution women make to the finance profession, propelling the industry forward.

This is certainly a fitting acknowledgement of all of the hard work Jessica has put in, not only over the last year, but throughout her entire career as she has worked to provide the best results for the clients of Crest Financial Services. Jessica started at Crest in 2015 as a junior paraplanner and over the past 7 years has developed into an outstanding financial adviser.  She provides advice across a wide range of areas and also has developed specialist skills and experience in the areas of retirement advice, self-managed super funds (SMSF), aged care, and taxation.

The directors have made a special mention that they are proud of this recent acknowledgement and recognition that Jessica has received from her peers, clients, and the industry as a whole. They are also delighted that the nomination was submitted (unprompted) by a number of her clients, which is a further testimony to her dedication, hard work and professionalism.

The awards ceremony will be held at The Star in Sydney on the 3rd of November later this year. A group from the Crest Financial Services team will be attending the function to celebrate Jessica’s achievements and hopefully heading back up the M1 with a trophy!

Congratulations again to Jessica for this recognition and everyone at Crest looks forward to her continued success.

The Influence of Social Media on Financial Advice

The rise of influencers has been astronomical and the financial space was not left behind. Financial information was readily available on many popular platforms leading to a large up-take in the younger generation. Demand quickly increased for financial and investment advice, and as a result, influencers were quick to act and provide a discussion platform for such topics. At its core this is a positive, however it does not come without issues.

Unfortunately, due to an initial lack of regulation and licensing in this area, consumers may have acted on information that was incomplete or inappropriate for their circumstances. ASIC has been monitoring the effect of financial advice given on social media and has decided to implement stronger regulation in this area to ensure consumer safety.

It is important to note that most of the information provided by influencers is very broad and may not suit your individual goals. Influencers can provide a good basis for learning and starting your financial journey, however, the value of transparent and personalised financial advice cannot be overlooked. A financial adviser personalises and tailors advice to your individual needs. A financial adviser is able to look at all aspects of your situation and financial goals, and provide a personalised financial plan. With the assistance of your financial adviser you are able to build a trusting, supportive relationship that keeps you on track with your goals and enables any concerns to be confidently overcome.

The growth of social media and influencers in this area is unlikely to slow, nor is the need for tailored financial advice. Changes to social media regulation will improve the quality of information available online, but there will always be need for financial advisers and the holistic advice they provide. As always, if you wish to begin this financial journey with one of our financial advisers, please don’t hesitate to give us a call and book an appointment on 02 4929 2552.

Two Key Changes for the 2021/22 Financial Year

Increases to Super Guarantee (SG) Contributions and Contribution Thresholds

In line with legislation, as of 01 July 2021, many positive increases were introduced in regard to superannuation contributions that are likely to have a significant impact on your retirement savings.

One of the more significant changes has been the increase to the super guarantee rate, moving from 9.50% to 10%. This increase is part of the government’s ongoing long-term plan to raise the super guarantee rate to 12% by 2025. These changes will lead to an increase in the amount of funds being contributed to your super each year by your employer, helping to further build your retirement nest egg.

In line with the above changes, the concessional contributions cap has indexed from $25,000 to $27,500. This may provide scope for some people to further increase their pre-tax contributions each year through salary sacrifice and personal deductible contributions, once again allowing you to increase your savings for retirement and reduce your tax bill.

Along with the increase to the concessional contributions cap, the non-concessional contribution cap has also indexed from $100,000 to $110,000 per annum, allowing those with the available space and funds to further increase their superannuation balance in the lead up to retirement.

A new world for Income Protection Insurance

Due to significant Income Protection claim losses across the insurance industry in recent years, the Australian Prudential Regulation Authority (APRA) have introduced some changes to help maintain the sustainability of the life insurance industry long-term. These changes came into effect on 1st October 2021 and apply to clients seeking new cover.

The key changes include:

• The maximum amount of your income you are able to insure will reduce from 75% to 70%. Some contracts offer additional levels of cover through supplementary options, however, these options are limited to short-term periods only. ie. a 90 % wage replacement for six months.
• Income to be calculated on last 12 months income only, compared to some current policies offering highest 12 months income in the last 2 or 3 years.
• Long benefit periods, such as ‘to age 65’, are to be managed to maintain a motivation to return to work. This may include changing from ‘Own Occupation’ to ‘Any Occupation’ definition after 2 years on claim.

The above changes highlight the importance of reviewing your financial arrangements regularly with the help of a knowledgeable professional. There are many more legislative changes both recently introduced, and in the pipeline, so get in touch today to book an appointment with one of our financial advisers.

Reduction in Allocated Pension Drawdowns have been Extended!

For example, a person aged 65-74 must withdraw 5% of their allocated pension balance throughout a financial year. Given the reduction, the new minimum withdrawal amount is 2.5% of the balance.

As always, if you have any questions or want to know how this relates to your personal situation, please do not hesitate to contact the Crest team on 02 4929 2552.

Financial Goal Setting

Think for a moment about…

What is Financial Goal Setting

We all have financial dreams we wish to achieve during our lifetime. Whether it is buying a car, going on that dream holiday, or saving for retirement. But where should you begin?

Identifying what your financial goals are and determining whether they are short or long term, is an important step in transforming a dream into a more substantial target. In doing this, you will have a better understanding of what you want to put your hard earned money towards and reduce unnecessary spending.

“A goal without a plan is just a wish.” – Antione de Saint-Exupéry

When you have identified your financial goals, you need to determine a plan of action. Financial planning is a helpful tool regardless of the stage of life you are in, because it takes into account your current financial situation. Speaking with a professional financial planner, can assist you in developing a personalised plan that helps determine the best strategies for you to achieve your financial goals.

How Should I approach Financial Goal Setting?

• Create a Budget
  You need to establish what your current financial situation is in regard to the money you spend versus your income. A great method to do this is by using a budget. It is a tool that allows you to clearly see where your money is going by tracking your spending.

• Set Your Goal!
  Goals can be made for the short term like buying a car, or long term like saving for retirement.

• Talk with a Professional
  We recommend working with a financial adviser to help you form the best plan to achieve your financial goals and dreams.

Call Crest Financial Services to book an appointment with an adviser to discuss your financial goals.

Five Things You Need to Know for 2020 Financial Year

1. Insurance In Super

New laws effective 1st July 2019, could impact insurance held in your super. Now super funds are required to cancel insurance cover held in ‘inactive’ super accounts, unless the member has confirmed they would like to keep it.

Super accounts are deemed ‘inactive’ when no contributions or rollovers have been made within 16 months. To do so, members can make contributions or roll amounts from another super fund into their account.

Members affected by the change who want to retain their insurance, should consider acting before the cover in cancelled.

2. Catch-up Super Contributions

Super fund members who made concessional contributions of less than the annual cap of $25,000 in the 2018/19 financial year, may be able to contribute more than the cap amount in 2019/20 and subsequent years. Making ‘catch-up’ concessional contributions could appeal to people who have broken work patterns, can’t afford to contribute in a particular year or receive a windfall.

Concessional contributions include all employer contributions (super guarantee and salary sacrifice), personal contributions claimed as a tax deduction and certain other amounts.

3. Superannuation Work Test Exemption

Recent retirees with lower super balances have more time to make additional super contributions. From 1 July 2019, people aged 65 to 74 with a total super balance below $300,000 (as of 30 June of prior financial year) no longer need to meet the ‘work test’ in the 12 months after they retire. If eligible, this is a once in a lifetime exemption, however, additional voluntary super contributions can be made without having to meet the work test –defined as gainful employment for at least 40 hours in 30 consecutive days during the financial year.

4. Work Bonus Extension

Recently, significant changes have been made to the ‘Work Bonus’ that could benefit people eligible for the Age or Service Pension and are still working. Since 1 July 2019, the maximum income that can be earned from employment without impacting benefits increased from $250 to $300 per fortnight. This is also now available to people who are self-employed.

5. Deeming Rate Changes

‘Deeming rates’ are used to assess income from certain investments for various security benefits reduced on 1 July. Some may now receive higher payments like the Age Pension, Disability Support Pension or Carer Payment, if their entitlement is determined by the income test. Deeming rates that are lower could help some qualify for other income tested benefits such as the Commonwealth Seniors Health Card.

Need Help?

The Crest Financial Services team can assess whether any of these matters affect your circumstances and make suitable adjustments to your financial plans. If you would like to learn more about Superannuation, click here to get you started.

Are you a Superhero?

When it comes to being a superhero, most people do not consider themselves invincible.

However, when it comes to protecting yourself and loved ones against sickness, accidents and death, a lot of Australians adopt the ‘she’ll be right’ attitude. This explains why Australians are one of the most under insured nations in the developed the world.

Unfortunately, the reality is that we don’t have to look very far to see the terrible emotional and financial impact that sickness and death can have on the lives of our friends, family and loved ones.

So it is important that when taking on any additional debt, such as buying a house or re-financing a home loan, that you conduct a ‘reality check’ to determine the potential risks and how best to protect against them.

A simple starting point is to ask yourself:

How long would my family be able to keep our home (i.e. keep making the monthly repayments):

• If I (or my partner) died tomorrow?
• If I had to stop work due to health issues or an accident?

If the answer means the house would have to be sold at some point, then an immediate analysis of your Life insurance requirements should be completed.

Personal insurances, such as Life insurance, Income Protection, Trauma and Total and Permanent Disability policies, normally form a key part of protecting your situation. These can be tailored to ensure that debts and cost of living expenses can continue to be met, no matter what life throws at you.

It is true that the above events may entitle you to some Work Cover, Centrelink Disability Support Pension or the ability to access part of your super. However, in our experience these benefits (on their own), are usually not enough to save the family home from being sold.

At Crest Financial Services, as part of our financial planning process, we assist clients to put in place appropriate personal insurances and advise on how to best structure these to minimise cost and impact on your daily cash flow.

Become a real superhero for your family, and get advice on how to best protect them.

Manage Your Finances with Budgeting

With the start of another financial year, it’s the perfect time to start thinking about your finances. The Crest team believe that everyone can benefit from tracking their finances. To help you with this, we have a free budgeting tool to get you started. If you need further assistance with your budget, talk to us and we will be happy to help you.

What is a budget?

A budget can seem daunting but it isn’t about restrictions. It’s about helping you get the most out of your money and achieve your goals. A budget helps you view how much you earn and how much you spend. You can personalise your budget to suit your specifics or preferences. Using the Crest Budgeting Tool, we provide you with options to get started.

Why have a budget?

To achieve goals, it is essential to know how much you earn and how much of this you spend. The idea is that the money spent isn’t greater than the amount earned. These are four benefits of using a budgeting tool:

1. Limit/Avoid Overspending – Without a budget, it can be difficult to know if we are overspending our hard earned money. Looking at expenses and what we actually spend money on, can give clarity on how much of that can be put aside for bills or goals like a holiday.
2. Save Money and Avoid the Worry – If you don’t have a budget, you are more likely to save less. Keeping track can help save money to live comfortably now and even for future financial freedom.
3. Puts you in Control – Using a budgeting tool like the one Crest provides, gives a clear picture of where your money is going. You can prioritize spending and prepare for the future. This is especially important for understanding that you need to put aside money for retirement and for when emergencies happen.
4. Achieve Goals – If you are overspending or are just thinking about bills, it can be hard to remember to put some money aside for those goals you have in mind. Track your expenses and earnings so you can put some of this aside to achieve your goals.

How do I budget?

Crest believes you should focus on a few key ideas when it comes to budgeting.

• Don’t spend more than you earn
• Include your goals so you can put a portion towards these
• Make sure it isn’t too strict otherwise you will find it harder to stick with
• Remember to reward yourself
• Keep a buffer in case unexpected events happen – don’t panic be calm and rework the best way to manage them.

Remember, a budget can be flexible to suit your changing circumstances. If you would like to download our free Budgeting Tool it is available here.

If you would like assistance or to discuss your budget, please do not hesitate to contact the Crest team.