Professional Planner

Where the best offshore opportunities are

Fri, 26 Feb 2010 01:42:47 +0100

The global and local sharemarkets may have retreated recently, but the global economic recovery continues to gather pace. So much so that the International Monetary Fund (IMF) recently raised its forecast for world economic growth.

The IMF predicts global growth of 3.9 per cent this year, up from the 3 per cent it forecast in October last year, and 4.3 per cent for next year.

Given this environment, what countries and sectors offer Australian investors the best opportunities offshore?

Firstly, areas that did well last year may not be the ones that will do well in the future. The recovery phase favoured cyclical and deep value stocks: those that went down the most tended to rebound the most. Given the low growth expected in much of the Western world, any company that can show decent growth will be bid up by investors.

As for regions and countries, I am finding more opportunities in emerging markets and I am also seeing opportunities in the US. While valuations in the Asia Pacific region looked relatively expensive, despite good growth prospects, I have taken advantage of recent underperformance to buy some few interesting holdings. In contrast, despite a number of recent trips there, I continue to find few opportunities in Japan.

Emerging markets posted some impressive sharemarket performances last year and some investors are wondering whether those returns can be repeated this year. It is a fact that some valuations are stretched and one needs to be very selective. However, emerging markets are part of a longer-term...

Locking in a real long-term return

Wed, 24 Feb 2010 00:32:32 +0100

The immediate threat from the global financial crisis has abated, but now investors are turning their attention to the huge amounts of government debt that have been incurred.

Around the world and in Australia, governments avoided the worst forecasts of deep recession or depression by injecting large amounts of stimulus money into the economy. This was funded by debt which will have to be repaid sometime and somehow. What will this mean for investment returns and what will be the impact on inflation?

Astute investors who have been in the game a long time know that one of the biggest threats to the long-term value of their portfolio is inflation. In recent years inflation in Australia has been benign, but a quick review of history reveals that the risk of high inflation should not be dismissed.

For investors with a long-term horizon putting some of their portfolio in assets that will retain their real (after inflation) value is a sensible idea. Inflation linked bonds are securities that provide investors with some protection against inflation.

Inflation linked bonds mitigate the risk of an inflation outbreak for an investor. Governments that are faced with a large, and difficult to service debt burden may be tempted to reduce it by allowing inflation to creep up. This will reduce the real value of the debt. They may also decide to repay the debt by printing money. This increases the money supply and in the absence of a corresponding increase in GDP generally leads to inflation.

Whilst these scenarios are...

Reviews key to stablity, says Minister; are SMSFs the way of the future?

Thu, 18 Feb 2010 00:23:18 +0100

The Henry and Cooper reviews are the keys to achieving long-term stability and confidence in the superannuation system, according to the Minister for Financial Services, Superannuation and Corporate Law, Chris Bowen.

And the head of the Cooper review into the superannuation system, Jeremy Cooper, has raised the idea that self-managed super funds (SMSFs) may ultimately be the best model for the entire superannuation system.

Speaking at the SMSF Professionals’ Association of Australia (SPAA) 2010 national conference in Melbourne, Bowen said the industry, and consumer confidence, had suffered for too long from regular, piecemeal changes and tinkering with the rules.

Bowen said he accepted the industry’s concerns about stability and certainty.

“And I think the way to get that certainty and stability is the process we are going through,” he said.

“Annual changes to superannuation rules have been the norm now, for more than a decade. Some positive, some negative. This isn’t a recent invention, annual changes to the rules applying to superannuation. And I agree with you that that’s a bad thing.

“The best way to get away from that is the process we [have] underway now: two very comprehensive, significant reviews, which will then – when the Government has considered them and settled the policy parameters – give us a stable platform with which to go forward.

“It will enable me and my successors to say at the Cabinet table whenever changes to superannuation are proposed: 'Hang on a second, we’ve been thought that, we settled that, we had the Henry review, we had the Cooper...

SPAA recommends scrapping accountants' exemption

Wed, 17 Feb 2010 01:43:07 +0100

The Self-Managed Superannuation Fund Professionals’ Association (SPAA) has recommended abolishing the accountants’ exemption from the Financial Services Reform Act (FSRA) and replacing it with a new category of restricted license.

The so-called Self-Managed Superannuation Specialist – Restricted (SSR) license category would enable its holder to advise on different types of fund – industry, retail, public sector, self-managed and retail – and be administered by the Australian Securities and Investments Commission.

The proposal to introduce the new category of license will be included in SPAA’s submission to the third phase of the Cooper review of the superannuation system.

The proposal received a guarded response from the chairman of ASIC, Tony D’Aloisio.

The chairman of SPAA, Sharyn Long, said it is clear that the accountants’ exemption had not worked.

“It’s obviously caused confusion,” Long said. “One of the big criticisms about it is that an account can advise on setting up a self-managed super fund, but they can’t advise on why you would set up a self-managed super fund in preference to one of the other options.

“The criticism of the accountant’s exemption is, how can someone give advice about a self-managed super fund when you’re not really comparing the market?

“What we’re advocating is accountants would have a restricted license arrangement, hence the SSR, and we would model that on the SSA program but it would be less onerous, or limited to the fact of giving advice on the products that are in the marketplace and why someone would establish a self-managed super fund.”

The SSR license would not...

EXCLUSIVE INTERVIEW: Jo-Anne Bloch on leaving the FPA

Fri, 12 Feb 2010 04:35:05 +0100

In an exclusive interview with Professional Planner, the outgoing chief executive officer of the Financial Planning Association of Australia (FPA), Jo-Anne Bloch, looks back on the three and a half years of her tenure.

She discusses the FPA’s successes and failures – including Storm Financial - and the association’s aims and objectives in professionalising financial planning. She sets out clearly the tasks that face her successor - and reflects on just why ist is that financial planners love to argue in public.

Minimising risks
“I was thinking about the cyclical nature of everything, and there’s a cartoon that appeared in the AFR that I thought typified the whole FP process. It’s a cartoon that says something like: “Is financial planning hunting season cyclical or seasonal?” And I think the answer was, it’s cyclical.

“We’ve had some really good runs, and we’ve had some really tough times. I honestly think that’s the way it is, because you can never be on top of every thing that’s going on out there, and you can certainly never guarantee that everyone is going to behave professionally, and that there will be no product failures, and that every time we implement another set of regulations we’ve got the problem fixed. It just isn’t going to work like that.

“So it’s about minimising risk. I think everything we’ve been doing in the first instance was to establish what a professional financial planner does, put appropriate rules and regulations around that, but work towards minimising risk.”

Re-engaging members
“Something...