Case studies: creating finance
Gill and Desmond, a married couple in their early thirties with two young children, were referred to Pinnacle by existing clients, seeking help with what appeared to be a desperate financial situation.
Their joint family income was not significant, yet they had ended up, after implementing a professionally recommended borrowing and finance plan, with a total debt level in excess of one million dollars.
A combination of poor initial financial consultancy, lack of pro-active Advisor review, and system deficiencies within the margin lender, saw the couple’s investment capital quickly eroded. As assets were sold under margin call, they had no time (or professional cue) to take remedial action.
The couple had received very little in the way of ongoing advice from their former Advisor, whose unsuccessful gearing strategy had been implemented. They had lodged a complaint with the federal Financial Ombudsman Service (FOS) against the Advisor and his Licenser (AFSL), but were not making progress with settling their claim.
Actions taken by Pinnacle
- Accepted an appointment from the clients to negotiate an outcome on their behalf
- Conducted a full finance review, reconstructing the whole story from when the clients first met the former Advisor through to their introduction to Pinnacle
- Prepared a strong compensation claim against the Licensee on behalf of the couple
- Dealt with all correspondence, negotiations and the eventual settlement process with the Licenser
As a result of Pinnacle’s intervention, Gill and Desmond achieved a full financial return of capital, plus an effective 6% positive income return, despite the negative impact of the GFC (which was well underway at this time). The couple’s existing security – the family home – was preserved, and they were not subject to any financial interruption. Pinnacle’s expert witness, day-to-day handling of the matter and negotiation with the Licensee relieved the couple of significant emotional and financial stress and enabled them to achieve a positive outcome, which, arguably, may not have happened without Pinnacle’s involvement.
Emily, 55 years of age and mother to three young adult children, lost her husband, Quentin, to a sudden illness. Along with dealing with this tragic loss, Emily was tasked with sorting out Quentin’s Estate finance, including the winding up of his professional practice.
The challenge was multi-factorial. The sale of the practice from the Estate became complicated during the settlement period in the transition to the new owners. Emily then discovered that there were a number of outstanding taxation items to be attended to, including overdue business returns, two trust structures to account for, outstanding items related to the finance of their self managed super fund, life insurance holdings to be identified, and proceeds to claim.
Quentin had always handled the family’s business and accounting affairs, while Emily had focused on her demanding role in the public sector and managing the family home.
Emily approached Pinnacle needing to understand the actual state of her financial affairs. Over the course of a number of meetings, Pinnacle put together a series of proposals that identified short, medium and longer term finance goals and projects for her to pursue.
Actions taken by Pinnacle
- Identified all of the assets for each entity and placed them into their correct and separate holding structures
- Identified all debts/liabilities
- Located all life insurance policies (super and non-super), lodged and managed claims totalling $560,000
- Assessed and helped manage cash flows to meet all personal finance and business needs
- Extinguished debts and outstanding business expenses with proceeds from insurance claims (around $150,000)
- Established a working account with a substantial cash buffer to meet day-to-day lifestyle expenses
- Set aside monies to meet expected payments to the ATO, around $80k- $100k
- Wound up the self managed super fund and established a new personal finance wholesale super fund, depositing all new employer contributions into this fund
Emily’s business skills, intellect and life experiences enabled an early identification of priorities, and for her to make decisions quickly in the best interests herself and her family. Pinnacle helped make sense of her financial situation at an emotionally difficult time, helped her wind up her husband’s affairs and to rationalise her resulting finances.
After taking some time off to attend to many of the Estate management matters, she decided to find different employment to better support herself and the two of her daughters (twins) who were still living at home.
As a result of engaging Pinnacle, Emily is now debt-free and has a new role in public life, the family home has been secured and is free from any debt or encumbrances, the twins have successfully graduated from year twelve and are now attending university, a new insurance program is in place with appropriate levels of protection over Emily’s life, income and health, her Estate plans have been completely reviewed, updated and implemented by a skilled professional, a new wholesale super fund has been established, consolidating a number of smaller super holdings into one account and generating substantial savings in administration costs, Emily has taken a family holiday overseas with her three daughters, part of which included a reunion with her husband’s family in Canada. Mission accomplished!
Rose, a sprightly 70 year-old, found to her dismay, that despite still working part-time and living in her home debt-free, her income was not covering her expenses. She had begun drawing down on her capital, which was naturally of concern to her. Rose’s gross income of $33,000, made up of part Age-Pension ($8,650), part salary and part investment earnings, was complemented by two superannuation funds, both still in the accumulation phase. Rose was paying tax on her income from work and her $87,000 investment. She had seen another Financial Advisor a couple of years previously and was referred to Pinnacle by her brother-in-law (a long-standing Pinnacle client).
Actions taken by Pinnacle
- Consolidated Rose’s super funds into a new fund and made a non-concessional contribution of $53,000 from her investment assets
- Retained $34,000 in short-term term deposits and a daily finance/bill-paying account
- Strategised to keep a small amount in the accumulation phrase within super so Rose could continue to receive her employer contributions
- With the remaining super monies (including the new contribution) a super pension account was established from within the new super fund
Rose’s relationship with Pinnacle has resulted in, not only a reversal of the troubling trend towards eroding her capital, but an increase in her cashflow of more than $11,450 p.a. She is now generating in excess of $45,700 p.a. – her Centrelink assessable income was $26,506 p.a. and is now $14,524 p.a., which means her pension has increased from $8,340 to $14,331p.a. Rose’s super pension account now holds in excess of $270,000, of which she is drawing the minimum pension, amounting to over $10,100p.a. She is also saving over $860p.a. in fees on her super, having moved from the previous retail financial product to a wholesale product. Thanks to Pinnacle, Rose has decided she will retire next year with the confidence of knowing she can easily meet her lifestyle costs and face the future with a greater sense of financial security.