An impending marriage prompted this Sydney-based couple to get their finances in order. Kristen Paech reports.

As an industry, financial planners are often measured by their ability to make money for their clients. Upon seeking advice, many people believe the job of a financial planner is to outperform the investment markets – and ultimately make them rich. Anthony and Vanessa Peterson (not their real names) have a different view of the advisory world.

Having sought financial advice just prior to one of the worst sharemarket slumps in history, they are yet to see any tangible financial benefit.

But that is not to say that their planner, Matthew Walker, director of WLM Financial Services, has not added value. Anthony, 39, and Vanessa, 37, say seeking advice has helped them to put down a solid and united financial footing from which they can build their lives together.

“At the moment the financial value is yet to be realised because [Matthew] hasn’t made us squillions of dollars on the sharemarket; in fact, I’ll be asking for a rebate based on the performance of my super!” Anthony quips.

“So the value to date has been organisational for me in that it’s pulled together a whole lot of threads of things that I had felt a vague unease about not having under control in my life, and also new things that have arisen as a result of us getting married.

For me, it’s about looking at all of our circumstances and understanding where we want to go, and putting a platform in place to be able to realise those things as we go forward.”

Vanessa adds: “It’s allowed us to make more significant decisions, not necessarily take larger risk, but make larger financial decisions that I wouldn’t have been comfortable making on my own.”

The Petersons sought financial advice around 18 months ago, after moving into a serious phase of their relationship.

“We weren’t married at the time but we were starting to think about our options,” Anthony says. “I had an investment property, Vanessa had a house; I needed to update my Will; I didn’t have the right insurances, so we thought: ‘Why don’t we look at getting some financial advice which looks at the scope of both of our situations with a view to understanding it as a combined entity?’”

Having used planners aligned with dealer groups in the past, Anthony was keen to find a fee-for-service planner this time around.

He found Walker through Alan Kohler’s website, The Eureka Report.

“[Kohler] had a list of planners that were fee-for-service and therefore independent, and that’s what I was looking for,” he says.

“Frankly there’s a bit of sticker shock when you come to a planner like this and you’re paying upfront a not insubstantial amount of money for what seems like converting your insurance policies and doing another Will.

“You don’t realise the full cost benefits because you’re not paying trail commissions on investments, because we haven’t yet made them.

My view is that you want to find a planner you can have a long-term relationship with, [a planner] that isn’t going to force you into MLC products because they happen to work at a particular financial institution and won’t be taking trail on products they haven’t advised you on for the last 12 months.

It’s more expensive upfront, there’s no doubt about it, but my view is that you have a greater sense of a level of independence and that the advice you get is not beholden to one particular class or brand of product.”

The foundation of Walker’s financial plan was to bring together Anthony and Vanessa’s separate financial arrangements into a single, more effective structure.

At the time, Vanessa had a mortgage on her house in Lane Cove, on Sydney’s North Shore, and was working full-time in scientific research. Anthony was living in an apartment in Balmain, in Sydney’s inner west, renting out his previous home in Brisbane, and working full-time in the finance industry.

“Our approach in the first instance was to clear the decks, if you will; make sure everything was arranged in the most appropriate way, and then from there we had a look at the opportunities to build wealth or maintain or manage income tax effectively – the longer-term planning issues,” Walker says.

“They were quite well organised; it was more of a question of getting down to some of the finer detail that most people wouldn’t have the time or inclination to get through, so that was part of what they outsourced.”

Vanessa had some non-deductible debt against what was going to be the family home, while Anthony’s investment property was nearly mortgage-free.

“So the notion was, strategically, to sell [Anthony’s] property, release the equity, pay down the non-deductible debt and then redraw the equity out of it for other investments, whatever they may be,” Walker says.

“Part of that was having a look at the banking structures; having a look at what lending arrangements were going to be most effective both for the short term and into the longer term, how it was structured, what flexibility there was for change in [the Petersons’] situation.”

On top of that, there were the existing superannuation arrangements to consider. Early in his career, Anthony had spent 10 years as a pilot in the air force.

His superannuation was with Military Super and included both defined benefit (DB) and accumulation portions. Not all of the money could be rolled over into another super fund, so the decision was made to split Anthony’s super.

Vanessa, on the other hand, had a small amount of superannuation in UK DB pension funds, as well as her own employer staff super.

“After splitting Anthony’s super, we put it through a wrap facility – Macquarie Wrap,” Walker says. “The choice of superannuation funds also dovetailed in with insurance requirements; who offered the best type of insurance as well as the investment options and the cost, so there were a couple of elements that pulled together.”

Life and total and permanent disability (TPD) are covered through Macquarie Super Protector, but Walker chose to take out income protection through MLC to avoid a potential conflict between the Superannuation Industry Supervision (SIS) Act, and the terms of the income protection policy contract.

“Rather than take that risk, our preference is to maintain the [IP] insurance outside of superannuation,” he says. “It’s tax-deductible at an individual level as well as through the super fund, so there’s not necessarily any more tax benefit one way or the other. It’s a risk management exercise.”

Since the Petersons were considering renovating, and were open to making investments at some stage, Walker suggested they take out a line of credit – a St George Portfolio Loan – which has allowed them to set up a number of sub-accounts for different purposes, including investments, if the opportunity arose.

“Since that time we’ve been through interesting investment markets and thankfully we haven’t utilised any of those investment funds and put them in the market yet, but we may be discussing that a bit later,” Walker says.

Late last year, Anthony was made redundant, prompting a discussion with Walker around the potential impact this could have on the Petersons’ renovation plans, cashflow and investments, if investments were made.

Fortunately Anthony picked up a new job with the same company within just one week, so the contingency plans were not necessary.

Having a planner who provides a holistic advisory service has been a huge bonus in Vanessa and Anthony’s eyes, particularly with their first child due to arrive in May.

“It’s more future-looking and also a more in-depth approach to taking in every aspect of your life than I’ve experienced with financial planners before,” Vanessa says.

“We’ve had advice on things as our circumstances have changed; especially when I found out I was going to have a baby. I had questions about the level of health cover I needed, whether I need a change in my trauma [cover] if things go wrong.

I’ve never had a holistic view from someone who knew about all of my income, all of my debts, my risk appetite and took into account the insurances that I needed, particularly now. It’s not about each of us as individuals any more; it’s about us as a family.”

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