Family Financial Planning Analysis
Jerry and Dianne are married who have just been left $15 million by Jerry’s great aunt. By the time Jerry’s great aunt left them the fortune, they were both 25 years old and they are expecting to live to 85 but may live to 95. They do not have a kid yet but they are hoping to have two within the next five years. They do not wish to work again and wish to live in or near the City of Sydney, with a harbor view. They like to travel a lot and their plans are to travel extensively (first class) up to 8 weeks each year.
The couple wants to invest this fortune in the best way possible such that accommodation and their ongoing cash needs are secured and investing for the future life-style to which they aspire. Australia is one of the developed countries and hence it offers great opportunities for investments in its economy. One of the most promising opportunities is the real estate and the Australian business ventures. Since the couple intends to have two children in the next five years, they have to plan in advance in terms of accommodation, that is, they will now require bigger house and in some cases they will need a nanny for the kids.
Due to the fact that they do not intend to work again, it means that they require investing their money in such a manner that they will be getting daily cash outflow for daily expenses. They are still very young and it seems that the want to have a good life of partying and traveling and since their life expectancy is 85 to 95, the need a lot of cash for it to them that far. Still, the town accommodation is very expensive and living in such area means that they have to pay more. I would recommend to the couple to invest in property, shares, or bonds and business ventures.
Australia has a vast land which means that a person can be successful in the real estate business which is much promising here. The development projects where single family houses are available and also the commercial properties. The much undeveloped land mass in the rural areas of Australia give such big opportunities and they are also cheap and no red tapes since the couple is a citizen unlike where the country is hitting hard on foreigners. I would suggest to the couple to start saving for the coming children.
Australian capital market has grown extensively and has made a distinction in the world economy (Kevin Foley). It is obvious that the couple love tourism by the fact that they love traveling a lot. I would advice them to invest in the tourism industry that is booming in Australia. The couple can approach one of the commercial banks and together with what they already have to be able to build a resort in the beautiful beaches. There are many sites for this like Byron Bay Sunshine Coast, Noosa and many others (www. aussiemove. com ).
They can also invest in hotels if building resorts become costly and building of accommodation rooms for tourists especially in the northern tropical parts of Australia which has the most tourists who come to enjoy the weather. Jerrys can buy a house from the resort complexes where the companies are helping to find the tenants even when the beaches are off season. This will provide the couple with annual cash flows from the rent which they can reinvest back in the financial markets like in bonds, stocks or other financial instruments.
The financial system in Australia is so good that it makes possible and easy to exchange goods and services by using the currency as a medium for exchange (Kevin Foley). The corporate bonds market in Australia is also another venture where it is promising to go to greater heights. Many people are now switching from borrowing from banks and other non-financial banking institutions to the bonds market. This development has been hastened by the failure of the government to supply government bonds and high demand for fixed regular incomes from investments.
This is a good venture in that the bonds will be attracting fixed and constant income after every year or every month. They can use this cash for daily ongoing needs. I would advice the couple to go for corporate bonds rather than the government bonds since they have higher yields though the corporate bonds are less liquid and ore risky than the government bonds (www. expatforum. com ). For their traveling needs, the couple should invest in a good car which is more cheap and convenient as compared to hiring cars whenever they need to travel.
For now the couple does not need a car as they are still young and they have no children. The should find a good savings and credit firm where they will be saving some specific amount of cash monthly for at least three years where they will have got enough cash to buy the car. I would also advice the couple to buy a house abroad for their accommodation needs and whenever they are not around, they can let it for return of rent and still reinvesting the money (www. investmentopportunityreport. com).
Business franchising is growing very quickly and with such kind of money, the couple can start the business as with the cash as the starting capital (see the performance of business investment in the appendix). This should be done in a way that the employees should be minimal hence good management and easier operations. There is a booming business in Australia in food products and the couple can now enter in exportation industry. Much of the supermarkets in the US are importing their foodstuffs from Australia.
Australia has been known for their health consciousness and hence they provide quality products. The couple can take advantage of such a reputation and rake in a lot of cash from the export business (Bloomberg). For the couple’s old age, they should find the best retirement package and save such that they are guaranteed future cash flows in times of non-productivity. This will involve savings in insurance firms that offer better packages that gives better returns. Company shares also give better returns especially the dividends.
These dividends will provide the couple with the daily cash requirements. As to such, there is no need of having to keep cash in the bank account which does not earn high interests. The company shares are also advantageous in that in future the company can fully own it. These same shares can also act as collateral whenever the couple needs to borrow to finance their projects (Foley). In order to have enough money to invest and still remaining at the status quo, the couple should try owning a home through line of credit by applying for a mortgage (see appendix).
This will enable the couple to still enjoy the home that is mortgaged and at the same time having much money left to invest in other profitable projects that will be used to pay the mortgage. This is like diversifying the risk of owning a house since the much needed money for buying the house will be repaid over a longer period of time (www. asx. com. au ). A trust fund is also necessary in order to be able to finance education of the expected children. A trust fund will entail the payment of premiums in an insurance firm of their choice that guarantees better returns.
This is best since it assures the couple that they have security as concerning the education of their children even if they will not be in employment. There is need to invest in information by hiring a good investment consultant since the couple is still very green in financial matters. In so doing, there will be readily available information on the best way to invest; information on the best time of shedding off or sell stocks or when the best time to acquire new stocks and making higher returns is. Another business opportunity that can guarantee good return is the trading in foreign currency.
Since they have much money to invest, they can buy the Australian dollar when it is lowest and selling when it is revalued. Though a very risky adventure the returns are very high. By doing such investments, the couple will venture into international businesses where the currency exchange is involved. Since the couple want to stay near the harbor in Sydney, they can also try to invest in boats for tourists who come visiting the city. They have interest in tourism and hence they can manage well and be profitable (www.
investmentopportunityreport. com ). Lately in Sydney, mutual funds assets have risen which has placed Australia to the 4th position in the world. This has attracted much money and since research has shown that much of this market is dominated by foreigners, Jerry and Dianne should exploit the opportunity given the cash that they have now. This voluntary contribution will boom especially at the time when the government is contemplating on removing a 15% tax on once/lumpsum payment to those people who are 60 years and above.
Its has long been known that the Australian banking industry is highly and tightly regulated meaning that was impossible for a foreign countries to have their own bank in Australia meaning that Australia could not open its banks’ branches in other countries. The division in the banking industry was so much complicated such that of the two divisions of the banks in Australia gave little returns on deposits especially if one deposited his/her money in savings bank. This led to formation of so many non-bank financial institutions since these were not strictly restricted and gave higher returns on deposits.
Recently all this has changed and a wide range of services are now available. Now availability of credit has increased and hence this couple can try to put some of their monies in fixed accounts which will be earning interest and helping in daily money needs (www. australianinvestmentnetwork. com ). But there seems to be a problem since we do not know the skills that the couple have and we cannot be able to advice accordingly. We are not told about the education background of the two and hence we do not know their capabilities.
Nevertheless, I can advice the couple to invest in their education especially by taking managerial courses in order to be able to manage their portfolio properly. Another investment opportunity is the private equity funds. This is a promising venture due to the prevailing political stableness and legal environment. The initial public offers on new corporations are turning out to be better options for investments. This is being facilitated by many investments that have been set up all over Australia especially in the major cities (www. adb. org ).
