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Getting to a higher level of financial literacy in Australia

The practical benefits of improving financial literacy.

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This month marks the 20th anniversary since the United States’ government under former President George W. Bush passed legislation officially proclaiming April as Financial Literacy Month.

Financial Literacy Month is quite a big deal in the U.S. Every April, all U.S. state governments, schools, and a wide range of organisations and companies, undertake various initiatives aimed at improving financial literacy, including educational workshops, financial events, and broader marketing activities.

The aim is not just to highlight to Americans the importance of being financially literate, but to give some practical guidance on how people of all ages can improve both their financial knowledge and economic wellbeing.

Australia is not at the same level in terms of having a national, co-ordinated approach to developing financial capabilities across the population.

Government-funded strategies have been limited to date. Private financial education programs are being run in some primary and secondary schools to help students learn about the basics of finance and money. But these programs are not part of the standard school curriculum.

Low literacy levels

The 2020 Household, Income and Labour Dynamics in Australia (HILDA) study, funded by the federal government, found after a survey of around 17,000 Australians that while income and wealth levels here are rising, financial literacy is low in different segments of the population.

The HILDA study included five financial literacy questions covering numeracy, inflation, portfolio diversification, risk versus returns, and money illusion (purchasing power).

Those in older age categories tended to achieve higher scores, although there were large differences in financial literacy scores across demographic groups and between individuals based on their level of education. Not surprisingly, it was lowest among young people aged between 15 and 24.

So, what are the practical benefits of having a good level of financial literary?

At the most basic level, it can help people to better manage their money. But even simple lessons, such as understanding how compounding works and the significant wealth benefits it can deliver over the long term, can have profound outcomes.

Investor levels still surging

It is evident that levels of financial literacy are not necessarily deterring individuals from investing.

According to the Australian Securities Exchange (ASX) Investor Study 2023, 10.2 million Australians were making investments outside of their family home and superannuation on the ASX when it conducted its research in November 2022.

Of those surveyed, around 20 per cent said they had only begun investing since the end of 2020. One-third said their first investment had been individual shares on the ASX, and for 14 per cent their first investment had been into an exchange traded fund (ETF).

Yet, having a higher level of financial literacy can potentially go a long way in guiding people on key principles such as the importance of setting financial goals and minimising costs, the roles of asset allocation and diversification, and the benefits of having a long-term, disciplined investment approach.

At a younger age, learning basic skills such as budgeting and saving can help a person to take their first investment steps, whether that’s saving up a deposit for a house or investing on the share market.

People in their 30s and 40s tend to be focused on securing and expanding their wealth, sometimes increasing their investment exposure to higher-risk assets.

Older age groups – especially those in their 50s nearing retirement or in their 60s who have already retired – can look to tilt their investments towards income-producing assets.

An ongoing process

In reality, building up financial literacy and knowledge at an individual level should be an ongoing process to prepare for different life stages.

These days, many people are learning the basics and building up their knowledge by reading financial books and listening to podcasts.

But one also should not overlook the important role of professional financial advisers in the financial literacy process, to receive considered advice at key life moments.

Many Australians probably recognise the benefits of receiving financial advice, but do not take the actual step of engaging an adviser.

That is a shame, because advice can go a long way to helping people plan well ahead so they can achieve a financially successful retirement.

Typically, an adviser can guide people in a wide range of areas including saving and budgeting, superannuation contributions, investment strategies, debt management, insurance coverage, and estate planning.

There is no doubt that more can be done on a broad co-ordinated level to improve financial literacy across Australia.

At the same time, there are also obvious steps that people can take themselves to improve their knowledge, and that can readily be accomplished with help from a professional adviser. 

 

 

 

By Balaji Gopal, Head of Client Experience, Vanguard
April 24
vanguard.com.au

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Anjan Das

Anjan Das

Founder / CEO

Anjan Das

Anjan Das is a financial advisor with more than 33 years of service. He specializes in helping clients plan for the future and achieves their goals, whether it’s saving for retirement or buying a home.

CU Financial Planning is a boutique firm that offers financial planning assistance to clients all around Australia from its location in Sydney’s central business district. Anjan Das has over 33 years of experience in the financial services industry, including 17 years as a financial planner. He holds postgraduate degrees.

Mr. Das began his career in financial planning at a credit union, where he has since been offering full service to a chosen clientele. He is a member of the Financial Planning Association, a Certified Financial Planner, a Fellow of the FlNSlA, and a Senior Assessor / Marker for Post Graduate programs offered by FINSIA / KAPLAN Higher Education.

When his former employer, a Credit Union, decided to unload the Financial Planning business in November 2006, Mr. Das founded the Sydney CBD-based professional advice service CU Financial Planning in February 2009.
Mr. Das created a credit union business strategy where the needs of the customer came first and would provide customers with a better value proposition and more individualized service.

Mr. Das has 36 years of experience in the financial services industry, 20 of those as a senior financial planner who offers thorough counsel. Mr. Das is a Post Graduate Financial Planner certified by FINSIA and a former Post Graduate assessor for students vying for Kaplan Professional Financial Planning certifications. Mr. Das has also been accepted as a Senior Fellow of FINSIA and has earned the Certified Financial Planner accreditation from FPA, Australia. Anjan specializes in helping clients with investments, SMSFs, personal risk insurance, and superannuation.

John Menezes

John Menezes

Mortgage Broker / Financial Planner

John Menezes

John Menezes is a highly qualified and passionate financial professional with a diverse background and a deep commitment to helping Australians achieve financial freedom and wellbeing.

He is a Chartered Accountant from India and a CPA Australia member. John also holds multiple industry-recognized qualifications, including:

  • Diploma in Finance and Mortgage Broking Management
  • Diploma in Financial Planning
  • Self-Managed Superannuation Fund Adviser (Personal Advice) qualification
  • Certificate IV in Property Services
  • Class 1 Real Estate Licence

With nearly 20 years of experience as a Financial Controller for multinational companies across India and Australia, John developed a strong foundation in corporate finance. However, his true passion lies in educating and empowering individuals to take control of their financial futures.

In 2013, John transitioned into Mortgage Broking, driven by a desire to help everyday Australians secure their dream homes and build investment property portfolios. Over time, he identified a critical gap in his clients’ financial journeys—many were burdened with large mortgages and young families, yet lacked adequate protection and long-term financial planning.

This realization led John to expand into Financial Planning in 2019, enabling him to offer holistic advice on:

  • Personal Insurance (Life, TPD, Income Protection, Trauma)
  • Superannuation strategies
  • Wealth creation and investment planning

Today, John provides a comprehensive, one-stop financial solution, combining mortgage broking, financial planning, and property services to support his clients at every stage of their financial journey.

Retirement Planning

At CU Financial Planning, Retirement Planning is about helping people achieve the life style goals and objectives that are important to them. Retirement means different things to different people. For some it is becoming a grey nomad and travelling Australia, for others it’s endless days sitting on the back porch. Maybe it’s the opportunity to reduce the golf handicap or perhaps try a whole new career as an unpaid volunteer.

Money in our view should not be an objective in itself, so our job is to help clients make wise choices with the wealth they have accumulated so they can maximise the life style afforded them by a lifetime’s hard work.

When making decisions as to the strategies and structures we recommend, the types of income streams appropriate, and the mix of investments, we are always mindful of what impact these decisions will have on our clients. As part of our retirement planning service, we focus heavily on clients achieving their lifestyle objectives rather than focusing solely on taxation savings or leaving a large legacy.

Topics we expect to discuss with you about your retirement include:

  • Minimising tax
  • Maximising Centrelink benefits
  • Estate planning wishes and minimising beneficiary tax
  • Structuring of income streams
  • Income needs in the short and long term in retirement
  • Potentially funding Aged Care
  • How long your capital will last or how much of a legacy you wish to leave to your children

Many of our clients also appreciate the interest we take in their estate planning. We provide estate planning advice and visit our clients’ legal advisors with them to ensure they and their families get the best outcome from this important area.

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Superannuation & SMSF's

Superannuation

Superannuation, including SMSF’s (self-managed superannuation funds) is a complex area and the rules are forever changing. Almost all Australian’s have a superannuation account due to legislative requirements however few understand all the opportunities that a well-managed superannuation account can bring.

For those approaching age 60, superannuation strategies can often save a savvy investor thousands of dollars of tax without impacting on their available cash flow. Even for those who are younger, strategies such as co-contributions, spouse contributions, personal deductible contributions and salary sacrifice to name but a few, can significantly improve one’s wealth if regularly taken advantage of.

At CU Financial Planning we have access to some of the lowest cost products available in the market and we are often able to save our clients significant amounts of fees.

Self-Managed Superannuation Funds (SMSF’s)

Self-Managed Superannuation Funds (SMSF’s) are growing in popularity and we regularly assist clients to decide if this is an appropriate investment vehicle for them. We can assist in setting up self-managed superannuation funds, investment advice and management and structuring the SMSF in either accumulation or pension phases.

We also have significant expertise in the structuring of personal insurance within superannuation accounts including self managed super funds. Protecting against things going wrong is an important aspect of a well made plan, and Life insurance, TPD, Trauma and Income Protection can help minimise this risk.

Caution should be taken with superannuation investing and more particularly with contributions as it easy to incur unnecessary tax and there are now many traps for the unwary. For more information about superannuation and the services that we provide, please contact us.

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Investment Advice

After helping our clients get the right strategies and structures in place we put significant emphasis on investment advice and ensuring the portfolio is tailored to the individuals needs.

We commence with a risk profile and that drives the broad asset allocation of the portfolio. We aim to produce a portfolio on the efficiency frontier maximising the possible return relative to the risks that is appropriate for our client to take. Preserving capital is always our priority. Considerations are the clients tolerance to risk, time frame and the willingness to accept volatility.

Through our investment process we consider our clients goals and aim to help them achieve their aspirations in the medium and long term. As part of our investment advice, we focus on minimising costs of investing, finding the best funds to achieve tax effective portfolios, minimise risk at a number of levels and continuously review the results.

We recognise we are in a world that is changing rapidly and a client’s portfolio like their lives never stand still. As a result, our investment advice is tailored to those who want a pro-active approach to managing their assets.

Our Investment Philosophy

  • Preservation of capital is our number one priority.
  • Investment returns are more predictable over lengthier periods of time.
  • Investments go up and down, to achieve higher returns it is essential to accept volatility.
  • There is a direct relationship between risk and return.
  • Investment and administration expenses reduce returns and we endeavor to minimise costs wherever possible.
  • Investment diversification reduces risk.
  • Liquidity of investments should never be ignored.
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High Net Worth Services

We understand that high net worth families, businesses and individuals need advice that caters to their specific needs. We can help with speciailsed services in the following:

Structuring of entities (including companies, trusts, SMSFs)

We provide comprehensive financial advice for individuals, families, and their associated entities (companies, trusts and self-managed superannuation funds). Our team offers guidance on financial strategies that align with your overall family wealth management goals after considering taxation, risk management and intergenerational wealth transfer needs.

Wealth management and Investment services

Our core service is developing personalized investment strategies and managing diversified portfolios. We work closely with you to understand your financial goals, risk tolerance, and time horizons to create and implement tailored family wealth management plans. We have competency in direct equities, exchange traded funds (ETFs), money market accounts, (separately) managed accounts (SMAs) and partner with some of the world’s leading managed fund offers domiciled in Australia, the US and Europe.

Family tax planning and compliance

We offer strategic financial advice that takes into account tax implications. We can help you understand how different investment decisions and financial strategies might impact your tax situation, and work alongside your tax professionals to implement tax-efficient financial plans. Our advice aims to optimise your financial position while ensuring you're well-prepared for your tax obligations.

Estate planning and intergenerational wealth transfer

Our comprehensive financial planning services include strategies for effective estate planning and smooth intergenerational wealth transfer. We help you develop a robust financial framework to support your legacy goals, ensuring your wealth continues to benefit future generations. Our team assists in creating financial strategies that align with your estate planning objectives, including analysing the long-term implications of different wealth transfer scenarios. We also provide guidance on structuring your investments and assets to facilitate efficient wealth transition, helping to preserve your family's financial legacy for years to come and ensure the wealth remains in the family.

Business Succession Planning

This protects and prepares shareholders, trustees and their families from unexpected events such as injury or death of their business partners. This includes advance planning for events that might cause the business to need winding up through to immediate issues upon retirement of a partner such as equity transfer and taxation management.

Specific areas we work on with our clients’ accountants and lawyers include:

  • Funding Buy/Sell (Critical Events) Agreements
  • Structuring funding for tax efficiency
  • Capital gains tax management after sale of business or critical event
  • Key Person Protection

Philanthropy

We can help you integrate charitable giving into your overall financial plan. This includes advice on structured giving strategies, the financial aspects of setting up charitable trusts, and aligning your philanthropic goals with your overall wealth management strategy.

Family Governance and Education

We facilitate a collaborative approach to managing your family's wealth, with an investment committee structure. This service is designed to involve family members in key financial decisions and portfolio management processes. We provide a framework for regular family financial meetings, where we present investment performance, discuss market trends, and explore new opportunities. This approach not only ensures transparency but also helps educate and prepare the next generation for responsible wealth management. By fostering open communication and shared decision-making, we help align your family's financial strategies with your collective values and long-term objectives.

Lifestyle and concierge services

We understand that managing complex financial affairs can be time-consuming and challenging. Our comprehensive financial planning services are designed to simplify your financial life, allowing you to focus on what matters most to you. We act as your primary point of contact for all financial matters, coordinating with other professionals such as accountants and lawyers to ensure seamless management of your wealth. Our team provides regular consolidated reporting, proactive advice on financial opportunities and risks, and timely reminders for important financial deadlines. By centralising your financial management, we help minimise the complexities and administrative burden, providing you with peace of mind and more time to enjoy your lifestyle.

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