bdhSterling Essential Finance: Opportunities in a Changing Environment

Jess:
Hello and welcome to the first edition of the Essential Finance video content series in partnership with bdhSterling focused on providing financial tips for the Australian business and ex-pat community in the UK.

I’m Jess Sullivan the member engagement and project manager at the Australia UK Chamber of Commerce. Like many, I’ve switched my life between Australia and UK for over 14 years now. I have a keen, personal interest in the development of this discussion series, particularly as an ex-pat with vested financial interests in the UK and back home in Australia.

The first of this six-part video series will provide an overview of what central finance means. Focusing on opportunities the changing economy has provided for the individual.

Our valued sponsor for this series is bdhSterling. They have been a member of Australia UK Chamber of Commerce for a number of years and our key partner in the networking market given their considerable expertise in financial planning. Award winners in their field, they have offices in London, Perth, Sydney, Melbourne and Brisbane, and are specialist in helping UK and Australian residents just like myself find financial clarity.

Today I’m joined by Simon Harvey, Group Managing Director and co-founder of bdhSterling. Simon began his career in financial services in the late 90s and spent the last 17 years working as a financial planner, both in the UK and Australia, while leading the growth of the bdhSterling group.

It’s wonderful to be able to speak with you today Simon, are you able to tell us a little bit about yourself and your role at bdhSterling?

Simon:
Thanks for having us, Jessica. As you mentioned, we’re a Financial Planning firm that specializes in helping people who have assets in both the UK and Australia. We’re very much a niche business. We are the only Chartered Financial Planning firm that has offices in both jurisdictions. We’ve got a number of dual qualified advisers who have made the switch between the two countries.

I myself, as you mentioned, spent time working in Australia, I understand the issue people face when they’re moving between the two places. It’s actually a really interesting area to advise, dealing with two different sets of legislation and how those different sets of legislation work in practice together.
You’re also helping people is such a key transition, which can be really rewarding. Also, you can actually add a lot of value, because the two systems are so complex, there’s mistakes that you’ve made, didn’t plan ahead. But there are also lots of opportunities as well, we really help our clients.

We often find our clients conflicted about where they will end up living long term. The UK and Australia, two great countries both with their own pros and cons. People often have strong links to both and so we need a carefully crafted plan that caters for retiring in either country, potentially, and keeping the options open to some degree.

Jess:
You’re not wrong about that complexity Simon, we need some guidance in this space most definitely. On the surface that may seem to be quite simple, but it certainly is an area where you do need finessed expertise.

Diving right in now, what is Essential Finance and are you able to provide an overview for us on your take on central finance.

Simon:
When we talk to people about financial planning, we sit down with them and try to determine what’s really important to them and define what their goals are.

Don’t wait until you’ve got a life-changing situation to try and put a plan in place because, it’s in those key transitions in life, people tend to make the biggest financial mistakes and erode wealth. Or they miss opportunities that can create wealth.

Having that financial roadmap in place can really help you ensure your financial journey is a smooth one. The past year has shown us that life presents us with unexpected situations and that just demonstrates why it’s so important to have a strong personal balance sheet that you’re able to fall back on, should the worst happen.

Jess:
Most definitely I think the past year has taught us many, many lessons, but that preparedness for change, those life intersections and those junctions that we come to. It’s particularly pertinent given the experience that we have had over the past year.

Further to those initial comments on Essential Finance, why is planning your finances so important in the long run?

It seems to be a real given today that we must be all financially literate. But from your perspective, and with your experience, why is it so crucial? Particularly for the UK and Australian ex-pats or repatriates?

Simon:
Bringing clarity to people’s situations and helping them to really define what is important to them, can give them an idea of what is possible. Life can be exciting, full of adventure. When we speak with clients, we find it’s important to dream big, and then realize what’s possible.

We start with dreaming big, if that doesn’t look achievable, we can always pull the plan back a bit. But having that financial planning to understand what options are open is so important.

If someone starts a financial journey, we ensure they have basic fundamental building blocks in place to secure their financial future. That might be something as simple as ensuring an emergency fund in liquid assets. Also, that they have adequate insurances in place to protect their family should something happen, or should they lose the ability to work, or suffer a critical illness. Having those fundamental building blocks in place can really give you peace of mind.

Beyond that, you’re then looking at how do you fund your future. That’s putting investments in place, putting pension in place, etc. to help to build for the future. That can all provide a tremendous amount of peace of mind. It’s obviously really important for people’s mental well-being.

When we talk to people about their goals, some people might be securing financial freedom. Not having to work if they want to, or being able to afford to have a home in the UK, and Australia. Or spend a year travelling etc. Being able to look at their finances and really analyse what’s possible.

Planning with assets in a single country is hard enough. So, for those with assets in both countries, it’s even more complex. That’s where we specialize in helping people with links to the two countries. Helping them develop a plan and really make sure that their financial journey is a successful one.

Jess:
Your comment before about the short and long term, where you’ll spend your life for large chunks of time is really pertinent. I think, particularly in the context of our network and our membership base and having an eye on the market is exactly why we need services such as yours.

Simon:
We’ve seen time and time again, with our clients. Often, parents follow their children down to Australia or vice versa. You’ve got those family connections that are dragging you back to the UK, but you’ve made your home in Australia. So it’s a really difficult situation that we often see for our clients and it’s now helping them to understand what is and isn’t possible.

Jess:
Putting those really strong foundations in place, I think is really key. It’s a good place to start for anyone. But can you shed any light on the ‘where and the how’ for our network in regards to that initial phase of financial planning?

Simon:
Sure, so after we’ve defined the client’s goals, we’ll sit down with them and look at the current assets and current liabilities, but also their income and expenditure. Having positive cash flow is obviously absolutely key because that’s what enables you to start to build assets or ensuring that you’ve got positive cash flow.

For most people at the start of their journey that cash flow will be through their employment income or business income. Then we use that positive cash flow to start to accumulate assets. That might be in pension or super or other investments.

Over time, we’re looking to build assets, so that those assets themselves, provide cash flow. Eventually, clients will get to the stage where they have that financial freedom, where those assets are sufficient to then provide them with an income stream for their lifetime.

So that’s the journey we go on with clients. I think it’s important to understand wherever you are, on that journey, there’s a huge amount of value in terms of financial planning and making sure you’ve got that roadmap in place.

Jess
Certainly, it’s the long and the short term that we need to consider as well. It’s easy enough to say the next few years down the track, but also that planning for the long term is just as crucial and putting the right things in place, from the get-go, can really put you in good stead as you move forward in life and help you achieve your goals too.

You’ve given us much to think about that Simon, particularly with the economy being pretty volatile. There’s so much global uncertainty at that moment. With that in mind, what are your thoughts on the economy in the UK and Australia and how they will recover from COVID-19?

Obviously, both countries have had different experiences over this past year, but we’re keen to hear how the recovery for both regions will impact individuals in particular.

Simon:
I think I saw a number, the other day and it’s just staggering that in a year, January 2021, and the public sector borrowed 270 billion pounds in the UK. Now to put that into context, that’s 222 billion more than the 12 months prior to that. 70 billion of that went on the furlough scheme alone.

When we have the UK Budget, very recently, the story behind that Budget was debt. The highest in peacetime history. the government obviously needs to repay that debt. But first, they needed to put a Budget in place that was going to help to rebuild the economy.

It was the Budget that encouraged, the government haven’t done anything too drastic in terms of looking to raise tax revenue. But they did signal more challenging times ahead.

They’ve actually, what they’ve done is they’ve frozen tax rates for a number of years. Now, that won’t impact people immediately. But as the cost of living increases, we’re finding that more and more people than ever before will be higher rate taxpayers. Once you become a higher rate taxpayer, you find that 40% of your income will be gone in tax.
So, I think financial planning naturally becomes more interesting. People who are finding themselves becoming higher rate taxpayers for the first time. There’s some really good planning that you can do if you are living in the UK and plan to retire to Australia.

For example, if you are a higher rate taxpayer, you can make contributions to a UK pension and receive 40% tax relief on those contributions. If you transfer that pension plan to Australia for retirement, you can access the entire pension funds tax-free. That’s effectively a 66% return on that contribution because of the difference between the two tax systems.

I think it’s going to be a tough time ahead in terms of paying additional tax, but there are opportunities to mitigate that. If you get the right advice.

Jess:
Thank you very much. An optimistic picture that you paint there and one we can, have further confidence in I think, moving forward.

Finally, as we wrap up this first edition, in this video series. What’s the best way for our member network to get in touch with you and your colleagues at bdhSterling.

Simon:
We can obviously be contacted through our website or by telephone, and we offer a free initial consultation service where we will sit down and have a no-obligation chat with people. Talk through their situation, identify how we might be able to help them and anyone who has assets in the UK and Australia. Yeah, we’re very well, set up to assist.

Jess:
Magnificent thank you so much for that, Simon and we’ll be sure to include details for the website with links along with this video as well.

Thank you so much for your time today and for joining me for this discussion. I’m hoping that we can catch up again soon in person. But until then stay safe and so well and we will have the next edition of this video series coming out at the close of April.

We’ll be focusing on savings and assets, growing your wealth with your colleague, Stephen Ford. But for now, thank you very much and we’ll be in touch.

Simon:
Thanks Jessica.