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For so many of our investors, life seems beset by risk and uncertainty. As we write, the geopolitical environment is increasingly tense, with the eyes of the world oscillating between potential conflicts in North Korea, Syria and elsewhere. Domestically, our political scene has been characterised by internal conflicts and infighting.Neither of our parties has been able to produce stable and enduring government for more than a decade.

This same uncertainty pervades the economic and investment scene. More than a decade on from the Global Financial Crisis, uncertainty remains about how the unprecedented ‘quantitative easing’ programs will be unwound. Here in Australia, our economy continues to grow, but is not producing significant growth in real household income. Meanwhile, continued regulatory tinkering with our retirement systems, most recently in relation to Labour’s proposals around the treatment of franked dividends, is making life extremely uncertain for retirees.

In this context, it is worthwhile for us to consider some of life’s big issues through a ‘risk management’ lens.

Protecting our online activities

It used to be said that death and taxes were the two things in life that could not be avoided. We would suggest that, in recent years, the internet has become the third. Given that – for practical purposes – the internet did not exist just twenty five years ago, it is extraordinary to think that so much of our daily life is now entirely dependent on it.

For that reason, it is critical that we protect ourselves and our families in the online environment. There is nothing more heart-breaking than watching your life savings evaporate through fraud, and the internet is breeding a whole new species of fraudster. At a time when the fruits of literally years of work, savings and investment can be stolen in seconds, it is critical that all investors be especially vigilant about their financial security.

The good news is that there is a lot you can do to protect yourself against online scams. Whilst banks and financial institutions work very hard at protecting your details, your first and best defence continues to be the sound and prudent management of your online banking, payments and investment.

You can protect yourself against malicious computer viruses by keeping your anti-virus software and operating system up to date. In particular, look for updates and ‘patches’ to block-off newly discovered vulnerabilities in your system.

You can protect yourself against ‘phishing’ by being extremely careful about disclosing your personal information. In particular:

  • Never click on a link from an organisation requesting that you provide them with personal information.
  • Scrutinise the URL (internet address) behind the link. Often in phishing attempts, if you hover the cursor over the link the hackers want you to click on, it has nothing to do with the actual company they claim to be.
  • Report any phishing attempts to your financial institution.

You should also take other steps to safeguard your personal and financial information:

  • Change your passwords often.
  • Don’t use the same ID and PIN/Password for every online account you have.
  • Never disclose your login credentials to other people or organisations.
  • Do not store your ID and PIN/Password information where others could gain access to it.
  • If offered by your financial institution, take advantage of tokens, which provide a unique one-time-use password each time you access your account. This is especially important for business accounts with multiple users.
  • Set up an oral password on your bank account where this is offered.
  • Set up SMS and/or email alerts on your bank account which provides balances alerts and notifies you when withdrawals are made from your account.
  • If accessing information via a wireless network, ensure that the network is secure. Accessing sensitive information (or any website) over a non-secure network simply leaves the door open for hackers. Even if you aren’t visiting a site where you enter an ID and password, you are still leaving your computer exposed to possible threats.

Remote access scams are also on the rise, with Australians losing $2.4 million to them in 2017, according to the Australian Competition and Consumer Commission. These scams often begin with a telephone call from someone claiming to be from a telecommunications company. Victims are informed that their computer is infected with a virus and are persuaded to install remote desktop software so that ‘technicians’ can fix it. In fact, the fraudsters use their remote access to reach into victims’ bank accounts, download files and monitor key strokes. They can even activate web cameras and listen in to your conversations.

If you fear that you have been the victim of such a scam, it’s important that you get professional assistance. In many cases, simply uninstalling the software will be insufficient.

The ‘bottom line’ is that there is no point trying to hide from the internet and the security issues it raises. Indeed, provided that we are prepared to invest the time and effort to keep up to date with online security basics, the internet can be a powerful tool that will work for our benefit.

Protecting our children

We have also previously written about what investors often tell us is their biggest worry - what will happen to their children and their grand-children when they are gone. From the work of family counselling expert, Bernie Bolger, we drew eight key strategies to ensure that our children will have the resilience to meet life’s challenges when we are gone:

  1. Instead of hiding wrapping our children in cotton wool, we allow them to explore their environment. Children need to try new skills, fall a few times and make a few mistakes.
  2. Instead of ‘rescuing’ too quickly, or resolving their childhood conflicts for them, we give our children the chance to stick up for themselves. That way, we help them gain the skills needed to solve problems independently.
  3. Instead of praising too easily, we learn to appreciate the paradox that our children are both ordinary and unique. We praise for effort, not result, and thereby encourage them to sustain their motivation, performance and self-esteem.
  4. Instead of trying to be friends with our children and treat them all ‘equally’, we remember that they actually need a parent. Sometimes they need to be disappointed and frustrated by you in order to understand that conflict and boundary-setting are part of any healthy relationship. Your kids will get over the disappointment of not going to the hottest party or buying the latest gadget, but they won’t get over the effects of being spoiled.
  5. We give them permission to fail and strategies to bounce back. In particular, we share approaches that we have found useful over the years.
  6. We avoid privileging IQ over EQ. Just because giftedness is present in one aspect of a child’s life, we do not assume that it pervades all areas. Developing a child’s emotional and social intelligence is as important as focusing on their academic success, and will stand them in good stead in their future careers and relationships. We teach them about empathy by involving them in charities and volunteer work.
  7. We practice what we preach. We watch ourselves in the little ethical choices that others might notice, because our kids will notice too.
  8. We avoid giving our children money, instead of time. After all, if we’re constantly fobbing them off, our kids learn that they are last on our list and they start to devalue themselves and act out to get our attention.
There is no magic formula that will guarantee the success and safety of our children, but strategies like the above will help engender the resilience and grit to equip them to face what the future will bring.

Preserving our capital; building our retirement savings

And then there is our investment capital. Aging populations mean that government pensions will be under increasing pressure and the global funding gap for 2050 is projected to be an almost unimaginable US$400 trillion. As the chart from Visual Capitalist below shows, Australia is better placed than most other nations to deal with the aging of our population, but the risks that threaten investors’ prospects of a dignified retirement are real and pressing.

(click image to enlarge)

For over six decades, La Trobe Financial has been working with institutional and retail investors to target capital-stable, income-based returns. We have enormous conviction that the best outcomes for investors come when capital is preserved first and foremost. As Warren Buffet famously proclaimed, the first rule of investment is “never lose money”. The second rule is “never forget rule 1”.

Our retail offerings are about delivering choice to our investors. We know that one size does not fit all. Some investors prefer the diversified portfolio approach that we take in our multi-award winning 12 Month Term Account. Other prefer the choice and control that we deliver via Australia’s largest and most robust peer to peer platform.

Whatever your preferred approach, keep in mind La Trobe Financial’s own golden rules of investment:

  1. Keep it simple, silly – don’t invest in what you do not understand;
  2. Don’t put all your eggs in one basket – diversification has been described as the only free lunch in investment; and
  3. Getting rich slowly never goes out of fashion.

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La Trobe Financial Services Pty Limited ACN 006 479 527 Australian Credit Licence 392385
La Trobe Financial Asset Management Limited ACN 007 332 363 Australian Financial Services Licence 222213 Australian Credit Licence 222213 is the issuer and manager of the La Trobe Australian Credit Fund ARSN 088 178 321. It is important for you to consider the Product Disclosure Statement for the Credit Fund in deciding whether to invest, or to continue to invest, in the Credit Fund. You can read the PDS on our website or ask for a copy by telephoning us on 1800 818 818. *Returns on our investments are variable and paid monthly. Past performance is not a reliable indicator of future performance. The rates of return from the Credit Fund are not guaranteed and are determined by the future revenue of the Credit Fund and may be lower than expected. Investors risk losing some or all of their principal investment. An investment in the Credit Fund is not a bank deposit. Withdrawal rights are subject to liquidity and may be delayed or suspended. Visit our website for further information.

Copyright 2018 La Trobe Financial Services Pty Limited ACN 006 479 527. All rights reserved. No portion of this may be reproduced, copied, or in any way reused without written permission from La Trobe Financial.

This publication does not constitute financial advice and should not be relied upon as such. It is intended only to provide a summary and a general overview on matters of interest and it is not intended to be comprehensive. You should seek your own financial or other professional advice before acting or relying on any of the content.