RSM Australia

Fundamentals of Financial Success | Pillar 5 – Structure your wealth

During this series we've discussed some of the fears that people have in making financial plans and decisions due to media grabbing headlines and world events and why implementing the fundamentals a financial plan can set you up for success.

In previous parts of this series, we covered the first four key pillars.

These being managing your cash flow and protecting your greatest asset - you. Then we discussed how to pay down inefficient debt first and why you should engage with your Super.

The next pillar we'll discuss is the importance of asset structure when building lasting wealth.

Generally we grow wealth for two distinct reasons.

The first is to grow the value of an asset so that it can be later sold to release the investment return. The other is to generate passive (investment) income from your assets so that your money is working to earn more money for you. 

How you structure your assets will help determine your success in achieving your financial objectives.


Structure your wealth to grow

#5 - Structure your wealth to grow  

Investing outside of superannuation can sometimes be slightly more complex due to the increased flexibility and options that are available to you.

A key part of this financial pillar is having an understanding of what you are saving or investing for. The reason for this is it will help to direct the type, level of access and tax structures you may require.

For example if investing for a child’s education to commence in 12 years’ time, you may find a savings plan in the lower income earners name could be sufficient. However, if both parents are working in the 39% tax bracket then other tools like Investment Bonds, which are internally taxed at maximum of 30%, may be more optimal. However, they come with some access restrictions.

More often than not, you will have multiple investment goals.

asset_23.pngSome short-term (less than < three years), some medium term (between five to seven years) and some long-term (>greater than seven years). How you structure your investments are likely to vary to account for the time frame of investment, the flexibility you need and the risk you wish to take with your money.

Investment risk is another key part of structuring your wealth to grow. Understanding the type of investor you are and how much risk you are prepared to take with your money is important.

For example, as an aggressive investor you may choose to temper the risk you take with the money focused on short-term goals, to reduce the likelihood of loss.

For longer-term goals, however, the investments may be more growth focused, with greater exposure to investment risk. Obviously, the less risk taken with your investments will also tend to reduce the opportunity for high returns as well.

The key driver to structuring your wealth to grow is to tailor your investment portfolios and the vehicles you use to the objectives you have for them and reviewing these regularly.


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Pillar #6 - Planning Your Estates

The final fundamental pillar of a well-structured financial plan is your Estate, both... 

view part 6 here >>


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This article has been prepared by RSM Financial Services Australia Pty Ltd ABN 22 009 176 354, AFS Licence No. 238282.

As everyone's circumstances are different and this article doesn't take into account your personal situation, it is important that you consider the above in light of your financial situation, needs and objectives, and seek financial advice before implementing a strategy.

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