Christine Hornery

Financial planner, Christine Hornery, CFP, director of FMS Group and Association of Financial Advisers (AFA) 2012 Female Excellence in Advice Award winner, has welcomed comments made by Australian Securities and Investments Commission (ASIC) Chairman, Greg Medcraft last week that financial literacy for children is a top priority.

Commenting on a speech[1] made by Mr Medcraft to the Australian Bankers’ Association (ABA), which listed educating the next generation through the formal education system as priority one of ASIC’s 2014–17 National Financial Literacy Strategy, Ms Hornery said it has often been difficult to educate her adult clients, let alone teach them to pass on financial literacy skills to their children.

“By way of example, some people do not seem to understand that credit cards are loans on which they pay very high interest,” she said. “These people feel that the cash available on their credit cards is their own money to spend as they like. If this is any indication of the type of lessons parents are teaching their children, then we have a serious issue coming our way in terms of debt.”

Ms Hornery therefore believes more attention needs to be paid to addressing these basic issues when children are at school. “Despite many well-intentioned attempts, our school system to date does not appear to have significantly addressed the practical financial responsibilities that an individual has throughout his or her lifetime,” she said. “Financial literacy isn’t about the theory, it’s about the practical – the information children will learn that will actually give them the knowledge and resources to make astute decisions around credit cards, car loans, home loans and budgeting.”

In his speech to the ABA, Mr Medcraft said that under ASIC’s MoneySmart Teaching program, more than 10,000 teachers have received face-to-face professional development and over 40,000 copies of teaching resources have been distributed to schools nationally. Under the action plan in the 2014–17 Strategy, he said ASIC’s goal is to train a minimum of 20,000 additional teachers, with the ultimate objective of teaching financial literacy from kindergarten to Year 12, in all 10,000 Australian schools.

Ms Hornery applauded the move, saying, “We need to start teaching our children that by planning and budgeting we can live the lives we want to lead for longer. Learning how to plan for the future is an invaluable skill.”

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[1] Medcraft, G 2014, ‘The 2014–17 National Financial Literacy Strategy: A speech by Greg Medcraft, Chairman, Australian Securities and Investments Commission [to] Australian Bankers’ Association (ABA) Broadening Financial Understanding Conference’ 3 September, viewed 9 September 2014,  http://www.asic.gov.au/asic/pdflib.nsf/LookupByFileName/National-financial-literacy-strategy-speech-published-3-September-2014.pdf/$file/National-financial-literacy-strategy-speech-published-3-September-2014.pdf

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Christine Hornery

Financial planner Christine Hornery, CFP, Director of FMS Group says the new higher contributions caps for superannuation which took effect from 1 July 2014, are not high enough for people who spend prolonged periods of time out of the workforce and is calling for the introduction of a ‘catch-up’ concessional (before-tax) contributions cap to help these people accelerate their superannuation balances.

“Many women and some men leave their jobs to raise families, sometimes for a prolonged period of time and therefore may not receive superannuation guarantee contributions for many years,” she says. “Even when they return to work, they cannot have concessional contributions made to their superannuation accounts beyond the new annual $30,000 cap, or $35,000 if they are aged over 49.”

Ms Hornery says a special ‘catch-up’ concessional contributions cap, that allows people who have spent a significant period of time out of the workforce to receive concessional contributions beyond the current caps may help them build bigger superannuation account balances faster.

“If a person takes say 10 years out of the workforce, then for 10 years that person usually has no money going into their superannuation account at all,” she says. “Currently, there is no provision for these people to ‘catch up’ once they return to work. They are caught under the same concessional, and for that matter non-concessional, contribution limits as a person who has spent a lifetime in the workforce.”

Generally speaking, non-concessional contributions are contributions made from after-tax income. “People can make non-concessional contributions to their superannuation up to a new, higher cap of $180,000 per year, however, where these contributions do come from after tax income, they are not as tax effective as when they come from before tax income,” she says. “People starting from so far behind the eight ball need as much favourable tax treatment as possible – which is why they need a higher concessional contributions cap.”

Last month, Ms Hornery highlighted disturbing statistics published in the Association of Superannuation Funds of Australia (ASFA)’s March 2014 update on the level and distribution of retirement savings which reported that more than a third of all women and around 60 per cent of those aged between 65 to 69 say they have no superannuation whatsoever.

“It is appalling that as a country we know this, we know it is an ongoing problem and yet we are doing nothing to address it,” she says. “We need to be putting in place initiatives to encourage women, particularly those who have spent a long time out of the workplace, to place as much as they possibly can in superannuation for retirement and, given the huge burden these people are likely to become on Centrelink when they retire if we don’t, we need to do it now.”

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Christine Hornery

Some of the most disturbing statistics in the Association of Superannuation Funds of Australia (ASFA)’s March 2014 update on the level and distribution of retirement savings, according to financial planner Christine Hornery, director of FMS Group, are that more than a third of all women and around 60 per cent of those aged between 65 to 69 reported having no superannuation.

“What these statistics tell us is that one in three women in Australia does not have a single cent in super,” Ms Hornery said. “They have no money stashed away in superannuation for retirement whatsoever.”

Ms Hornery said women need to take extra care of their financial future – and not just because typically they are likely to live longer, live longer in retirement and earn less than men but because moving forward, fewer people are likely to be able to access the age pension entitlement.  “I believe there are women retiring today who are using Centrelink to subsidise their retirement and that just may not possible for as many people in the future,” she said.

Women need to understand that the preservation age (the age at which people can withdraw money from their superannuation funds), the retirement age and the ability to access retirement benefits is likely to lift so they need to act early if they want to have sufficient funds to do what they want to do in retirement.

“The other disturbing thing is that many women are not engaged when it comes to their superannuation and, I believe, are only becoming less engaged,” she said.

The Suncorp-ASFA 2012 Super Attitudes Survey (the Survey) revealed only 19 per cent of women say they are actively involved with their superannuation. “The main reason given by women for their lack of engagement was that they didn’t know how to get more involved,” Ms Hornery said.

Although the numbers are not broken down by gender, the Survey also said one in four Australians don’t know their current balance, one in 10 don’t know who their super provider is and one in four either don’t know what fund option they are in or that they could choose. “Finding answers to these four questions is a good place to begin for women who don’t know where to start,” Ms Hornery said.

Time spent on managing other day-to-day finances was also a common reason for people not to get involved with their super, according to the Survey, with 30 per cent of Australians citing this reason.

“What this tells us is that people think there are more pressing things in their current lifestyle so they aren’t thinking about the future,” Ms Hornery said. “My suggestion is to not just think about today – start thinking about what your future is going to look like. And then get financial advice. Talk to a professional and get some advice and strategy so that you can accumulate more funds towards retirement savings. A product alone is simply not going to give that to you.”

Ms Hornery was awarded the 2012 Association of Financial Advisers (AFA) Female Excellence in Advice Award.

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Christine Hornery

Financial advisers play a vital role in helping consumers reach their financial goals, according to 2012 AFA Female Excellence in Award winner, Christine Hornery, director of FMS Group, and could be counteracting current anti-adviser sentiment by having conversations with their clients that demonstrate the value of what they do.

“During difficult periods, such as market downturns and times like now when there is a lot going on in terms of regulatory reform, there is, however unfairly, a fair bit of criticism of advisers,” Ms Hornery says. “But these difficult periods present a great opportunity to reassure clients and in so doing, demonstrate the value of what we do.

Ms Hornery said great advice is about great strategies and is actually measured by the degree to which advisers help clients meet their financial goals. “Great advice is about saying to clients, this is what we are going to do, this is how we are going to do it and this is how we are going to make changes that will help you achieve financial freedom – whatever that means to you.”

Ms Hornery says being a great adviser involves:

• Listening to clients
• Not presuming that every client’s needs are the same
• Walking in their shoes – if, as an adviser, you would not follow your own advice then neither should your client
• Educating yourself and not being afraid to tell your client that you don’t know everything
• Educating clients
• Communicating regularly
• Not being afraid to have hard conversations
• Not avoiding clients when bad news hits

“Over the years, we have seen two very important trends. The first is that the rules around investment and particularly investment in superannuation consistently change and are therefore likely to change many times over in the future,” she said. “The other is the ageing of our population – as a nation, we’re not getting any younger. These two trends mean that Australians really need financial advice. The challenge is to rise above the noise and make sure consumers understand the value of what we do. The way to start is to first ensure that our clients understand that value.”

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Christine Hornery

What many clients want from their relationship with a financial planner is financial freedom, according to 2012 AFA Female Excellence in Award winner, Christine Hornery, director of FMS Group, but that means different things to different people.

“For some people, financial freedom might be about accumulating a certain dollar amount but for others it might simply be feeling they can keep their heads above water and move forward,” she said. “What some people may not realise is that they don’t need to have a lot of money to start on the journey to financial freedom – just a desire to structure what they already have to achieve the best possible outcomes.”

Ms Hornery said that financial planners can help people get to where they want to be by implementing strategies that meet their individual needs. “I believe a good planner will listen to their clients and really understand that not all client needs are the same,” she said. “They will metaphorically walk a mile in their client’s shoes and will also really believe in the advice they are giving. The litmus test for me personally is if I would not be prepared to follow my own advice, if I was in my client’s position, I shouldn’t expect my client to.”

Ms Hornery said she also believes great financial planners not only educate themselves but also their clients. “They communicate regularly and are not afraid to have the hard conversations with a client when necessary. When markets fall, for example, we should be calling our clients more often, not avoiding them.”

The secret to building a business that can service many clients well, according to Ms Hornery, lies in creating a structure that empowers financial planners to deliver great advice.

“In the not-too-distant past, being a good planner did not necessarily mean you had to be skilled at running a business, but I think going forward, we have to be,” she said. “We still have considerable challenges ahead and if we are to lift the number of people currently seeking advice and help them enjoy financial freedom – whatever that means to them – I believe we are going to have to look for ways to improve our business model. This means implementing innovative processes, practices, technology and perhaps most importantly, people.”

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Christine Hornery

Women’s spending habits and the fact that they outlive their men means they need a separate retirement income stream between $12,000 and $20,000 a year more than their male partners, according to Christine Hornery, director of FMS Group.

“The truth is, women need more money than men but often earn less and therefore save less for retirement,” Ms Hornery says. “For women to have independence in retirement and feel a sense of worth and equality, they must contribute more to superannuation and have their own retirement income stream.”

Ms Hornery says hair and beauty costs alone push up a woman’s cost of living.

“Men can get away with spending $25 every five weeks on a hair cut; women often spend $150,” she says. “Men usually won’t start wearing make-up and using skin creams in retirement; women won’t stop using them. The needs of women are different to men and financial strategies don’t often reflect this, especially if the male has implemented the strategy to suit his own income stream needs.”

This means women must not only contribute more to their superannuation funds, they should also have financial strategies that are separate to traditional income stream and superannuation savings.

“Women have to become educated about their own financial situation, not just piggyback onto their partner’s knowledge of finances,” Ms Hornery says. “I sit in front of women every day who can’t afford to retire with the lifestyle they are used to living. Women must see the importance of being educated financially, even if they are in a relationship and start developing a plan so they can live the life they want to live now and be financially free in retirement.

Ms Hornery is the winner of the 2012 Association of Financial Advisers (AFA) Female Excellence in Advice Award.

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Christine Hornery

Many Australian women appear to have a mistaken belief that they must sacrifice quality of life today in order to have a satisfactory standard of living in retirement, according to financial planner, Christine Hornery of FMS Group.

“There is a lot of noise about the fact that women don’t have enough superannuation and I certainly see that almost every single day,” said Ms Hornery, who won the AFA’s 2012 Female Excellence in Advice Award. “In fact, I am so disheartened by the number of women I see who do not have enough money to enjoy an even modest lifestyle in retirement that I’m now on a personal mission to help women take control of their own financial future before it’s too late.”

Ms Hornery argues that women can have anything they want and everything they need, but they have to strategically plan for it a long time before retirement.

“Women are not prepared to sacrifice things like saving for a home, starting a family, going on holidays in order to have a comfortable living in retirement and neither they should,” she said. “But what many don’t realise is that if they have a plan, they don’t have to sacrifice anything. They can live the life they want to now and at every stage of the life cycle. As women, we plan for special events in our lives – our weddings, our children’s education – but we don’t plan for the biggest event of all: our lives.”

Ms Hornery also said women must take responsibility for their own financial future and stop thinking of their partners as a stopgap. “Many women are still tying their futures to the men in their lives and don’t consider what might happen if, for whatever reason, those men one day disappear.”

When it comes to their financial future, Ms Hornery says women are typically doing one of three things:

• Nothing
• Something – but are taking only informal advice or none at all
• Engaging with a financial product adviser but not engaging a financial planner who can help them at a strategic advice level

“Even if women are doing something, as opposed to doing nothing, it is highly likely they could be doing it better with the help of a financial planner who can look at their situation from a strategic level,” she said.

Ms Hornery is the winner of the 2012 Association of Financial Advisers (AFA) Female Excellence in Advice Award.

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