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P E R T & A S S O C I A T E S

Flight Paths to Financial Successfor Qantas Pilots

PERT & ASSOCIATES

Level 2, 52 Davenport Street, Southport QLD 4215

Level 10, 60 Carrington Street, Sydney NSW 2000

www.pertassoc.com.au1300 730 381

Table of contents

1. EXECUTIVE SUMMARY .......................................................1

2. COMMON NEEDS AND ISSUES ...........................................3

3. QANTAS PILOTS – .............................................................5

FINANCIAL CASE STUDIES

3.1 CASE STUDY #1 –

Avoiding a Forced Financial Landing .......................5

3.2 CASE STUDY #2 –

Ensuring the Landing Gear is Secure .....................6

4. A SOLUTION TO YOUR NEEDS ..........................................7

4.1 The Chief Financial Officer (CFO) Solution ..........7

4.2 About Pert & Associates ..........................................8

1PERT & ASSOCIATES I Level 2, 52 Davenport Street, Southport QLD 4215 I www.pertassoc.com.au I 1300 730 381Level 10, 60 Carrington Street, Sydney NSW 2000

1. Executive Summary

The financial landscape for Qantas Pliotsis constantly moving due to numerouschanges to superannuation and taxationalong with an ever increasing choice ofinvestment opportunities.

Added to this complex environment isthe fact that many of the service providersQantas Pilots seek advice from i.e.accountants, lawyers, stock brokers, etcare not "problem solvers".

They do solve problems, but solvethem in isolation to the broader context.They also lack an intimate understanding,appreciation and insight to the unique andever changing challenges faced by QantasPilots.

This is why a professional wealthmanagement adviser is so vital to achievetrue financial success.

Dean, a First Officer based in Sydneycommented, “My accountant asked me to talk to the financial planner in theoffice and I felt I was simply being sold a product to reduce my tax; not solve my financial challenges.”

Constant changes to tax rates,superannuation, investments, and EBAsoffer opportunties to maximise wealth.

Qantas Pilots must be ready to takeadvantage of these opportunities with theestablishment of a disciplined strategy tomanage their strong cash flow and assetsin order to create independent wealth.

Phil a Qantas Pilot said, “For years Ididn't worry about retirement because itwas so far off and then almost overnightit wasn't that far off at all. But, I don'twant to have to budget so tightly so thatin 15 years time I’ll be well off. How canI maintain my current lifestyle and stillhave a financially secure future?”

In order to achieve the optimumoutcome, Qantas Pilots need to employ a professional wealth management adviserwho will work with them as a ChiefFinancial Officer to guide and assist themto chart a successful route to financialindependence.

By using a consultative approach aprofessional wealth management advisercan understand and articulate what eachpilot wishes to achieve.

Andrew a second officer said, “There’s a need for that: for someone who understands Qantas Pilots, ouremployment situation, the QantasSuperannuation scheme and can give usgood specific advice in line with ouremployment situation. Definitely, generaladvice is not the answer – and it’s not what I’m after or need!”

Just as each Pilot will read the “Flight Ops” journal to keep abreast oflatest changes in flying, so too will aprofessional wealth management adviserneed to be committed to continuallearning and keeping up to date with allrelevant legislation and marketplace changes.

Qantas pilots, from Second Officer through toSenior Captain, face a complex and, what canoften be, an uncertain journey as they seekstrategies to grow wealth and to protect theirlifestyles now and beyond retirement.


2. Common Needs and Issues

Time Management – the demands of thecareer and the very nature of the workplaceitself, sees many pilots focusing more ontheir work and inadvertently neglectingtheir long term financial well being andsecurity.

Aaron a Senior Captain said, “It was only after I sat down with myfinancial adviser, that I understood thatthe number of pay days that I’ll earnbefore retirement are running out fast –very fast!”

The demands of work rosters do notprovide pilots with any consistency androutine to life.

This often results in wealth managementissues not being addressed adequately andappropriately – and most importantly, in atimeframe that ensures financial objectivesand goals are achieved.

Failing to Plan – without strategicplanning and regular reviews, wealthcreation plans and strategies lose direction– and opportunities are often missed oroverlooked.

Understanding – Qantas Pilots have agood understanding of investments,financial issues, the economy, and wealthcreation issues as they are avid readers ofconsumer publications such as the moneyand investment sections of the AustralianFinancial Review and Sydney Morning Herald.

Money, finance and investing are oftendiscussed in the air by pilots and crew onflights where information, ideas andexperiences are exchanged.

However, this insight can result inover confidence with investments and the

implementation of wealth accumulationprograms in a haphazard anduncoordinated manner.

Overconfidence – refers to the tendencyof human beings to think we’re smarterthan we really are. Many professionalsoften assume that they can easily managetheir investments. This tendency revealsitself in the practice of market timing:trading stocks or other investment vehiclesin an attempt to outperform the market asa whole.

Numerous studies have shown thatefforts to beat the market actually have the opposite effect over the long term.Pilots face a unique type of overconfidence:that comes from enjoying a high-cashflow career that is able to fund an affluentlifestyle.

This overconfidence is probably at its height early in Pilot’s career: all thosefuture earnings seem limitless and aftermany personal and financial sacrificesrequired in the attainment of the pilotlicense, many pilots experience delayedgratification or the urge to make up forlost time by overspending. Put briefly,Pilots can fall victim to overconfidencethat this high level of cash flow will last forever.

Tony, a Senior Pilot based in Sydneysaid, “It was divorce material when I gotthat tax bill for nearly $70K. I hadinvested in film production thinking itwas tax effective – minimal risk and highreturn potential. But instead they listedme as a co financial producer and thensent me a tax bill.”

Pert & Associates conducted research into thefinancial needs and issues that concern QantasPilots. This research revealed that Qantas Pilotshave a number of common issues, challenges andaspirations.


Money for Toys – as income increasesQantas Pilots’ discretionary expenditureincreases also. Without financialresponsibility and guidance from a professional wealth managementadviser this discretionary spending seesvaluable financial resources squandered.

Part of this is caused by havingaffluent neighbours and being surroundedby other pilots with strong cash flow.

This competitiveness can lead toseeking the highest possible return and tax minimisation which as we willdemonstrate in the case studies can be a dangerous game to play.

Discipline is required to divert thiscash flow into investment and wealthcreating assets.

Risk Aversion – Academic research showsthat investors are more troubled by lossthan they are pleased with an equivalentgain. It stands to reason, then, investors,seeking to minimise loss may, in fact,reduce the opportunity for gain.

Risk aversion should be familiar toQantas pilots as they must plot the safestroute on a daily basis. This same prudencemight actually serve Qantas Pilots well inthe space of investing.

Multiple Financial Flight Paths – Researchhas also revealed that many pilots havemore than one “financial flight path”.

Pilots tend to have their financial affairsspread over a number of different andoften uncoordinated providers andsuppliers i.e.> Share Broker> Adviser for Superannuation> Estate Agent/Adviser for Property> Adviser for Insurance> Adviser for Debt/Banker> Adviser for Estate Planning/Solicitor> Taxation Adviser/Accountant

Feedback and discussions with QantasPilots reveals that these suppliers arerarely working together in a coordinatedmanner in order to deliver the optimumresult for the client.

Vincent said, “For example theinvestment guy I was using had me inmanaged funds, agri investments andmargin loans. It really was all over theplace.”

A Direct Financial Flight Path – QantasPilots would like to have a sole trustedprofessional to coordinate the otheradvisers in order that they provide themwith the best result possible i.e. someonethat can provide – a single, efficient andeffective direct flight path to financialsuccess.


3. Qantas Pilots – Financial Case Studies

Qantas Captain John has been flying withQantas for over 20 years and is based out ofMascot. John lives with his wife, Susan andtheir two children, Ian eleven years old andClaire aged nine in Bowral.

They have had mixed success withinvestments ranging from residential property,domestic shares, managed funds through totax effective investments where deductionswere disallowed in the late 1980s. Susancommented, “The demand from the taxoffice put us under immense financial andemotional stress at the time”

Although John receives an income inexcess of $250,000, and Susan a qualifiedPhysiotherapist working part time earns$50,000 they seem to end up with very littleincome left over once they pay all the loans,school fees and the usual household bills.

Assets include their home valued inexcess of $1million with a home loan of less than $100,000; a variety of sharesincluding Commonwealth Bank, Coles andshares bought in a couple of floats such asTelstra and IAG.

Just over two years ago John and Susanpurchased a residential property for $400,000and borrowed $350,000. The other majorasset is John’s Qantas super. John decided tostay in Division 1 instead of moving toDivision 6. His accumulated benefit is in theregion of $900,000.

Previous advice on investments has beenon a transactional basis ranging from riskinsurance for Susan, to some managed fundsfor the children’s education.

John has discussed a number of optionswith other pilots which have included DIYsuper, managed funds and tax effectiveinvestments such as trees.

After consulting with a professionalwealth management adviser, it becameapparent that “what was important aboutmoney to John and Susan” raised a numberof questions.

> “Will we have enough” was one of the main questions they wantedanswered. Based on current income and spending would they achieve theirdesired income and capital by the timeJohn reached 55 while maintaining theircurrent lifestyle.

> “ What happens to the assets if one of us dies or cannot work full time”Most pilots have loss of licence insurancethat provides a lump sum if they willnever return to flying with Qantas, alongwith death cover through Qantas super,subject to age.

> Providing for the children’s privateeducation was another concern thatneeded to be addressed, especially if John was deemed unfit to fly.

> “Who will look after the children ifdisaster strikes” Due to the childrenbeing minors’ guardianship and effectivetrusts would need to be addressed.

By employing a professional wealthmanagement adviser, John and Susan wereable to work through solutions to successfullyaddress these issues.

This process involved coordinating anumber of other advisers including a legalprofessional handling the estate planning andan accountant covering the tax work. All ofthe advisers were project managed by theprofessional wealth management adviser.

With the help of their adviser, John andSusan now have certainty and structure toaddress those issues that were of concern to them.

There will be new challenges and issuesthat will need to be addressed – such as thechanges in super, tax and the increasingchoice of investments. But moving forwardthey know they can turn to a trustedprofessional wealth management adviser –one who will provide answers or projectmanage an appropriate professional to deliverthe result that is right for John and Susan.

3.1 CASE STUDY 1 – Avoiding a Forced Financial Landing


Tim, a First Officer with Qantas has beenflying for just over nine years and joinedQantas in late 1997. Tim is also based outof Mascot with Qantas and lives in a unitat Lane Cove in Sydney’s north shore onhis own.

Tim owns the unit which is worth$500,000 and he has a loan of $200,000owing to his bank. Other assets consist ofa motor vehicle, some cash in the bankand his superannuation.

Tim commented “Super has neverreally interested me that much especiallywhen retirement is a long way off”

Tim is a member of Division 3 wherehe pays 5% of his after tax salary into thefund. He has not really taken muchinterest in Super especially when he waspaying the surcharge.

Tim is hopeful of eventually becominga Captain but this is still some way off ashe has only been a First Officer for two years.

On a base salary of $160,000 Tim hasnever really given much thought to moneymatters as he stated “there has alwaysbeen cash in the bank which has allowedme to pursue my hobbies of sailing andgolf after paying the mortgage. I suppose I should start to look closer at myfinancial affairs”.

On his last flight from Los Angeles toSydney, QF 8, Tim was discussing somefinancial matters with the Captain. Theyboth agreed that the company is lookingto control costs and they have seen theInternational Jetstar Pilots agree topackages of around $130,000.

Tim’s Captain on the flight suggested hetalk to a professional wealth managementadviser in order to put in place strategiesto manage and increase his personal wealth.

After an initial meeting with a professionalwealth manager adviser, it was establishedthat Tim needed to address a number ofareas; some of these areas are detailed below.> Based on his current set up Tim is not

maximising his cash flow tax effectively.> None of his cash flow, apart from his

monthly mortgage repayment is goingtowards passive investment.

> Tim wants to know if he retired at 55will the Qantas super be enough tomaintain his current lifestyle.

> A full review of Tim’s wealth protectionplan is vital as his only insurancecoverage is through Div3 in QantasSuper and the loss of license throughAIPA.

> Tim has yet to establish an estate planand thought this should be addressedonce he is married and has children.

Tim said, “Why do I need a will whenI’m not married and don’t have kids?”

The professional wealth managementadviser considered all of the above and inconsultation with Tim developed a wealthmanagement plan to put in place strategiesto increase net wealth, lower tax, andreduce Tim’s home loan faster.

Over the next 12 month period, Tim,with the guidance of his professionalwealth management adviser, will put inplace strategies to boost Tim’s investmentportfolio and address gaps identified inthe estate planning and wealth protection.

By establishing and following wealthcreation strategies Tim will not be totallyreliant on super to tackle whateversurprises life throws up, be it ill health ora large family.

Tim has created a solid foundation withhis professional wealth management adviserto build an effective portfolio that will see himretire and still carry on the lifestyle he enjoys.

3.2 CASE STUDY 2 – Ensuring the Landing Gear is Secure


4. A Solution to Your Needs

Establishing the right strategy and programmeis an important step, but ultimate successdepends on how carefully each individualportfolio is monitored and managedthrough various economic climates andchanges to individual circumstances.

Pert & Associates acts as the ChiefFinancial Officer (CFO) for each QantasPilot.

As the CFO Pert & Associates willbring together the expertise of variousadvisers to achieve what is truly importantfor each pilot to ensure there is a firmflight path that addresses all needs andconcerns in relation to wealth management.

Pert & Associates keep their clientsinformed and on course with a uniquefeedback, reporting, monitoring andinteraction program that provides up to 28 contacts annually with clients.

Pert and Associate's dedication toclients ensures each individual QantasPilot ensures that they successfullyachieve their financial, wealth creation,protection and lifestyle goals.

4.1 The Chief Financial Officer (CFO) Solution

7

Client

Cashflow

AccountantTax Adviser

Solicitor EstatePlanner

Risk Adviser

Super, DIY Admin,& Actuarial

Investments

BusinessStructure Share Broker

Adviser

And

Banker DebtManagement

PERT & ASSOCIATES I Level 2, 52 Davenport Street, Southport QLD 4215 I www.pertassoc.com.au I 1300 730 381Level 10, 60 Carrington Street, Sydney NSW 2000

Pert & Associates is a boutique firm with offices on the Gold Coast and inSydney. The number of clients is limited in order to ensure a high level ofpersonalised attention and direct access to the partners’ expertise.

Clients include medical specialists, pharmasists, professionals and high networth individuals.

Pert & Associates

Level 2, 52 Davenport Street

Southport, Queensland 4215

Level 10, 60 Carrington Street

Sydney, New South Wales 2000

T: 07 5591 7900

E: [email protected]

W: www.pertassoc.com.au

Do you want to know more about the unique issues facing Qantas Pilots, or about how to achieve long-term financial success?

Pert & Associates would be happy to discuss your specific situation with you andhelp you work towards true financial independence by providing you with yourpersonal CFO.

IMPORTANT INFORMATION: This document has been prepared to provide you withgeneral information only. It is not intended to take the place of professional advice and youshould not take action on specific issues in reliance of this information. In preparing thisinformation, we did not take into account the investment objectives, financial situation orparticular needs of any particular person. Before making an investment decision, you need toconsider (with or without assistance of an adviser) whether this information is appropriate toyour needs, objectives and circumstances.

4.2 About Pert & Associates


Like to know more about the unique financial issues facing Qantas Pilots?

Or to discuss how we can help you achieve financial indepencence?

If so please contact:

Pert & Associates

Level 2 Level 1052 Davenport Street 60 Carrington StreetSouthport SydneyQLD 4215 NSW 2000

T: 1300 730 381E: [email protected]

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