GPL Financial Group GPL Partners

January 2017

New Year (investment) resolutions


An astute way to begin a new year is to take a close look at your personal finances – including your super and non-super investment portfolios and your retirement-saving strategies – and to think about what improvements should be made.



Even if your personal finances are in reasonably good shape, there's inevitably room for improvement.

Vanguard's recently-published 2017 medium-to-long term economic and market outlook points to a more challenging investment environment and underlines the importance of beginning 2017 with an appropriately-diversified, low-cost portfolio.

Critically, Vanguard's “guarded but not bearish” outlook for portfolio returns underscores why investors should take a disciplined approach and ensure that their expectations for returns are reasonable in this low-interest, more subdued-return environment. (Investors who are overly optimistic may be tempted to take excessive risks in pursuit of returns.)

No doubt, numerous super fund members will begin 2017 thinking about how the changes to superannuation laws taking effect from next July may affect them. Depending upon their circumstances, fund members will be considering whether to make adjustments to their super strategies for the rest of 2016-17 and from the beginning of 2017-18.

Here are a few starters to think about including in your 2017 personal finance resolutions.

Consider professional advice

Early in the new year, it's worth considering how professional advice may help improve your personal finances including your investment portfolio. Much, of course, will depend on your circumstances.

A good adviser may assist, for instance, in creating a diversified portfolio for the long-term, boosting your retirement savings, preparing to move from work into retirement and making adjustments to your superannuation arrangements to reflect any change in family circumstances. The list goes on.

An extra incentive to seek advice early in 2017 is the tranche of imminent super changes – the biggest in a decade. (See next point.)

Understand impact of super changes

The approaching super changes will affect a broad range of super fund members in different stages of their lives. These may include members who want to maximise their contributions (whether years from retirement or near retirement, those who are easing into retirement with transition-to-retirement pensions and retirees, particularly if their balances are substantial).

Key changes from next July include the lowering of the concessional (before-tax) and non-concessional (after-tax) contribution caps and the placing of an indexed $1.6 million cap on the amount that can be transferred into a tax-exempt super pension account.

Further, members with more than $1.6 million in the pension phase at July 1 will have to withdraw the excess from super or roll it back to a superannuation accumulation account (with earnings subject to standard superannuation taxes). Other changes include the removal of the tax exemption on earnings of assets backing transition-to-retirement pensions.

Certain issues can arise for SMSF members including possible CGT considerations with the introduction of the $1.6 million pension cap; once again highlighting the desirability of quality specialist advice. And the super changes can have implications for estate planning – particularly for big balance members – whether in an SMSF or APRA-regulated super fund.

Get your fundamentals right

Early in 2017, it would be worth checking whether you have the fundamentals of sound financial planning/investing practices covered. These fundamentals, often discussed by Smart Investing, include: Set clear and achievable goals, create an appropriately-diversified portfolio and minimise investment costs.

Concentrate on what you can control

A smart New Year's resolution is to concentrate on investment matters over which you have control or a large degree of control. Investors are vulnerable to fretting over matters beyond their control.

Of course, much is beyond an investor's control including the emotions of other investors and how world stock markets impact on Australian share prices. Fortunately, investors who follow the principles of sound investment practice have more control over their financial futures than they may think.

Investors have the power to choose their long-term goals; to set strategic asset allocations for their portfolios, to minimise investment costs and to efficiently manage taxes. And disciplined investors can aim to keep their emotions under control by concentrating on their long-term objectives.

Stop procrastinating 

Consider beginning 2017 by resolving to tackle the common and potentially highly-damaging investor traits of inertia and procrastination.

For instance, investors are likely to pay dearly for never quite getting around to saving seriously for retirement until their final years in the workforce.

One of the most straightforward ways to begin shaking off investment inertia is to immediately step-up your salary-sacrificed contributions to a suitable level given your personal circumstances. In turn, this may motivate you to have a wider look at the adequacy of your savings.

Control your credit card

One of the smartest ways to begin a new year from a personal financial perspective is to become determined to keep your credit card spending and debt under tight control. In short, the less you pay in credit card interest, the more you will potentially have to finance your lifestyle and to build-up an investment portfolio.

Highly-disciplined credit cardholders pay off their entire credit card bill each month to avoid any interest and minimise the credit limit on their cards to reduce the temptation to overspend.

A New Year resolution to review your savings and investing strategies may be one of your most-rewarding moves of 2017.


Robin Bowerman
​Head of Market Strategy and Communications at Vanguard.
17 January 2017


Asset valuation crackdown imminent for SMSFs


Two SMSF auditors, including a big four firm, have revealed that they expect the ATO to home in on asset valuations imminently, ahead of the introduction of new caps on 1 July 2017.



Deloitte partner Jo Heighway believes the tax office will start looking more at asset valuations this year. 

“Asset valuations really do make a difference to how relevant the information is that trustees are getting on their fund performance,” Ms Heighway told SMSF Adviser.

“If assets are not revalued for a long period of time, they can be getting inaccurate information.”

Ms Heighway said accuracy is important as we approach 1 July when the $1.6 million transfer balance cap and the $1.6 million balance restriction for non-concessional contributions are introduced.

“That’s going to become much more important from the tax office perspective once we start looking at the new rules and the caps on pensions and those types of things,” she said.

“Valuations being current will obviously impact on those assessments. There will be a risk to undervalue and auditors will need to be really careful.”

ASF Audits partner Richard Smith echoed Ms Heighway’s sentiments.

“The ATO wants to have further discussions with industries around valuations because now you’ve got these caps of $1.6 million and obviously that’s all based on the valuation of the assets in the fund,” Mr Smith said.

“We’ve had to have all assets reported at market value for a number of years now, but obviously you’re getting to the point now where it’s got a direct impact on these caps so for the next year, and certainly for the reporting for 30 June 2017, it’s going to be incredibly important.”

Mr Smith said auditors will have to be especially vigilant when checking the accuracy of valuations this year.

“It’s going to be a very contentious issue for a number of funds to solve where your trustees or accountants say this is the valuation and asking if there is sufficient evidence to prove that that is a correct valuation,” he said.

“Again, if they want to start pensions or add contributions in from 1 July this year, then obviously they need to have a valuation of the fund, so it is pertinent for them and that’s going to be the biggest headache for us.”


Friday, 13th January 2017

‘Devastating’ property investments hitting SMSFs


Several SMSF professionals have revealed that their clients are being increasingly the target, and victims, of dodgy property schemes promising high yield and minimal risk.



In recent weeks, several professionals have spoken to SMSF Adviser, concerned that their clients are being targeted by property spruikers who are, in particular, touting the benefits of off-the-plan purchases. 

They have also expressed concern that licensed financial advisers and accountants are pushing property to their clients despite the risk posed by the investment.

Brokers, such as Thrive Investment Finance’s Samantha Bright, have seen instances of investors taking massive chances with off-the-plan properties, sometimes entering into contracts that lock them unconditionally into sales.

Verante Financial Planning’s principal and SMSF specialist Liam Shorte outlined some potentially devastating circumstances his newer clients have been faced with after visiting these “one-stop shops”.

“I have had a number of new clients, three couples, in the last 12 months that have come in with existing SMSFs. They know very little about the funds and only have one asset, which is a property, usually in regional Queensland or the Hunter Valley mining towns and small cash holdings,” Mr Shorte told SMSF Adviser.

“Most are 58-65 and had $200,-000-$250,000 in super between them. [They’ve] been told that's not enough to retire and had been looking to try and boost their savings before retirement. It seems their accountants/advisers felt a leveraged mining town property in an SMSF was the solution.

“The people coming in to me are not high-income earners or making large contributions. They now have properties where the rents are dropping. Selling is not an option in a market where many are exiting and the fund is struggling to meet the interest payments.”

Paramount Wealth Management’s principal Wayne Leggett also weighed in, saying there is “no question” borrowing levels, including among retirees, are at all-time highs.

“There is a number of reasons for this – lower interest rates, more relaxed lending practices by banks towards older borrowers, interest only loans, lines of credit, one hundred per cent offset accounts, LRBAs and reverse mortgages/shared equity schemes are but a few,” Mr Leggett said.

However, he stressed that any concerns about excessive debt in particular need to be tempered by the other strategies the borrowers have in place.

“For example, given that it is not unreasonable to assume a long-term earnings rate of 7 per cent per annum from a typical ‘balanced’ superannuation portfolio, as long as home loan rates are sitting at around 4 per cent, it makes more sense to direct ‘spare’ funds to additional super contributions, rather than principal reductions on your home loan.” 


Monday, 9th January 2017

CGT confusion seeing unnecessary sell-offs


A lot of SMSF trustees are confused by the CGT transitional relief provided in the super reforms and are selling off fund assets …

 … under the misconception they will have to pay full capital gains tax from 1 July, says the SMSF Association.



SMSF Association head of technical Peter Hogan says he is still receiving feedback from SMSF trustees and those in the industry, who wrongly believe they must sell assets down or move assets out of the superannuation system if they’re in excess of the $1.6 million cap. 

Mr Hogan said there have also been instances of SMSF trustees trying to sell property assets in their SMSF.

“This wasn’t so much because they thought they had to take it out of the super fund, but the trustees were under the misconception they were going to be paying full capital gains tax from 1 July going forward if they hadn’t sold the asset before 30 June,” he told SMSF Adviser.

“There is a lack of understanding around the one capital gains tax concessions which needs to be more widely understood I think.”
Measures related to the $1.6 million cap is causing confusion with retail investors particularly, with accounting giants like PwC seeing trustees mistakenly transferring money in and out of super as a result. 


Monday, 9th January 2017

What a long-term view of the market can teach investors


The curtain coming down on another year has a way of focusing the mind on how time is passing. 



It is also the time of year when market pundits put their forecasting hats on and share their best thoughts on what is in store for us in the year ahead.

At Vanguard we take a conservative view on forecasts, preferring long-term ranges of potential returns.

You will see that the expectation is for lower economic growth and modest market returns. Restrained returns may well be the order of the day for quite some time yet, but patient, long-term investors should still expect to be rewarded on a real return basis.

Which raises a favorite issue – what do we mean by long-term? How long is long-term – one, three, five years, or does it not really get into long-term territory until after 10 years have ticked over?

Time frames matter a lot. Consider a university student graduating this year. They come back after a summer break to start their career journey in 2017. Their investment time frames will vary around major life goals – travel, property, family – but in superannuation terms they realistically have a time frame of 60 plus years to work with.

We don't know with any certainty what the world will look like in 2077, but we can have a high level of confidence it will be vastly different to today. We only need to take a trip back in time to see how much things can change.

A gap in the Australian investment research landscape has been the absence of long-term return data. In the US and UK it has been possible to access sharemarket return data going back 100 years for research purposes.

That gap has now been filled thanks to the research work of the Australian Centre for Financial Studies in Melbourne, a not-for-profit research centre that is part of the Monash Business School. The Australian equities database (AED) that has been compiled by ACFS research fellow John Fowler is the most comprehensive digital source of information for Australian shares for the period spanning 1926 to 1995.

At a time of year when it is customary to be looking forward and wondering what the year ahead will bring, the AED gives us a novel chance to take a trip back in time and gain some historical perspective of how Australian share investors have fared over the decades.

If you had had invested $100 in the Australian sharemarket back in 1926 today it would be worth $562,000 – an average annual return of 10.01 per cent. Naturally, inflation erodes the real value of those returns and when adjusted for inflation the average annual return drops to 5.6 per cent. At a time when forecast returns are lower than many investors are accustomed to it is interesting to look back at returns for shares over the decades. What is obvious is that investors have enjoyed something of a golden age since the dawn of 1970s through to 2006. The decade from 1976 to 1986 was the star performer – delivering investors 24.5 per cent in nominal terms and a stunning 14.4 per cent in real terms after inflation is adjusted for.

But when you look further back into the 1930s through to the 1960s you see long periods when returns are subdued with the decade 1946-56 having a negative return in real terms. So the concept of long-term returns being relatively low for quite long periods of time is not something new or novel. It is just that investors over the past 30 years have not experienced it.

The value of long-run data that resources like the AED provides is that long-term trends are more discernible. One thing that emerges from the initial analysis is that while returns have been relatively low since the global financial crisis market, volatility has moved higher. So a lower return world with higher levels of market risk is the reality facing investors as we turn the page over to a new year. The headlines for the New Year forecasting season will naturally focus on return expectations rather than the less exciting idea of managing risks within a portfolio. Which is why taking a longer term perspective and maintaining a balanced, well diversified portfolio is one New Year resolution that will pass the test of time.


Robin Bowerman
15 December 2016

Your New Year reading: beyond John Grisham


Behavioural economist and psychologist Daniel Kahneman has begun 2017 by retaining his place near the top of The New York Times best-seller list, wedged among the latest John Grisham legal thriller, The Whistler, and the psychological thriller The girl on the train by Paula Hawkins.



Kahneman's book Thinking, fast and slow is a consistent long-term performer – high on the list of best-selling non-fiction paperbacks for 116 weeks, currently ranking fifth.

Further, The undoing project by Michael Lewis – number five of the combined print and e-book bestsellers – tells the story behind the pioneering studies of Kahneman and fellow psychologist Amos Tversky into the psychology of economic or financial decision-making. Lewis' book is a newcomer to the bestseller list, having featured for three weeks.

The fact that the subject of behavioural economics can become a near chart-topping best seller underlines the increasingly widespread recognition that our behavioural traits can play a crucial role in our investment success – or failure. Expect to read much more about behavioural economics in 2017.

A new year provides, of course, a prompt to read and think about how to improve our personal finances including our investment portfolios.

The best publications in this genre tend to provide pointers about how to accumulate wealth slowly and progressively through an understanding of the fundamental principles of sound saving and investment practices. These are the opposite of the relentless and potentially wealth-destroying, get-rich-quick offerings.

Here are a few books to consider adding to your 2017 reading list:

  • Thinking, fast and slow by Daniel Kahneman: A winner of the Nobel Prize for economics, Kahneman points to the many flaws in financial decision-making – including overconfidence and excessive loss aversion (inhibiting appropriate risk-taking and encouraging a short-term focus) – that can have costly consequences for an investor. His views underline the benefits of having an appropriately-diversified portfolio while avoiding the potential traps of market-timing, stock-picking and making emotionally-charged investment decisions. “Much of the discussion in this book is about the biases of intuition,” he writes.
  • The only investment guide you'll ever need by Andrew Tobias: While his fellow personal finance authors are unlikely to agree with his book's title, Tobias's veteran work – it has been in publication for 40 years – has plenty to offer investors. His over-arching message is to take a common-sense approach to looking after your investments and other personal finances. For instance, only buy investments you can understand, stay away from investments that seem too good to be true, and don't carry credit card debt. It's good basic stuff worth repeating again and again.
  • The behaviour gap – Simple ways to stop doing dumb things with money by Carl Richards: This is an entertaining, easy-to-read guide by a financial planner turned personal finance columnist to keeping our negative behavioural traits under control when saving, investing and spending. His tips include: adopt strategies to avoid buying shares at high prices and selling low, don't spend money on things that don't really matter, identify your real financial goals and simplify your financial life.
  • The millionaire next door by Thomas Stanley and William Danko: Long-term research by late academics Stanley and Danko suggests that “prodigious accumulators of wealth” are typically content to progressively build their wealth while being inconspicuous in their spending. In other words, these wealth accumulators are not in a hurry to make their money by taking excessive risks or in a hurry to spend their money.
  • A random walk down Wall Street: The time-tested strategy for successful investing by Burton Malkiel: The basic theme behind this classic is Malkiel's argument that investors – individuals and professionals – cannot not expect to consistently outperform the market. Given that belief, Malkiel, a Princeton University economics professor, is a firm believer in investing in market-tracking index funds (including ETFs), dollar-cost averaging (regularly investing set amounts), appropriate portfolio diversification, periodic portfolio rebalancing, low-cost investing and how investors should understand the risks of irrational behaviour.
  • The little book of commonsense investing by Jack Bogle: As Bogle writes, “successful investing is all about common-sense”. Don't try to pick the best time to buy and sell stocks – consistent success with market-timing is rarely achieved; diversify to minimise risks (and spread opportunities); recognise the value of compounding, long-term returns; and keep investment costs as low as possible. “The more the managers and brokers take, the less investors make,” Vanguard's founder emphasises.

These books reinforce critical messages for investors. These include: get your investment basics right (including your goals and portfolio asset allocation), periodically rebalance your portfolio, don't try to time the market, minimise investment costs, and beware of the risks of trying to pick winning stocks and fund managers.

And a foremost consideration of most of these authors is that investors should be aware of the dangers of trusting their gut feelings by allowing their emotions to dictate investment decisions.

Finally, save regularly – enjoying the rewards of long-time compounding – and keep your spending under control. Conspicuous consumption should not be taken as a sign of wealth – quite often it means the opposite.


Robin Bowerman
​Head of Market Strategy and Communications at Vanguard.
18 January 2017


Areas of key focus for SMSFs in 2017.


As the new legislative changes to superannuation are rolled out, national law firm Gadens has flagged what key areas professionals will need to act on, with time already “running out” on certain items.



While there was major regulatory and legislative change across the board in superannuation during 2016, there are some key areas of focus that practitioners should be homing in on, according to partner at Gadens, Kathleen Conroy.

Contributions, in particular, was a major area of reform. Professionals are largely well-versed with the changes, but Ms Conroy noted some specific points professionals should keep in mind.

She said contributions must be received by the fund before 1 July 2017 to count as contributions for the 2016-17 year, including:

  • Changes to the law on contributions may mean that clients need to change their salary sacrificing arrangements;
  • Transitional arrangements will apply if someone has utilised the bring-forward rule and the three-year period applicable to them for this bring forward continues past 30 June 2016;
  • Clients will not be able to rely on the catch-up contribution regime indefinitely. If they have not used any unused concessional contributions after a period of five years, the ability to carry those contributions forward is lost; and
  • Time is running out if clients need to tip money into their fund to meet contractual obligations, including, for example, under any limited recourse borrowing arrangement.

The $1.6 million cap is also an ongoing area of confusion and frustration. Ms Conroy emphasised this is an area in need of serious attention.

“For the 2017-18 financial year, $1.6 million is the maximum amount that can be transferred into the retirement phase of superannuation i.e. that phase where you do not pay tax on the earnings. This amount will be indexed annually,” she said.

“Balances in excess of the cap will need to be removed to an accumulation account or out of superannuation savings and will attract an excess transfer balance tax. If you do not pay the excess transfer balance by the due date for payment, you will be liable to pay interest on that amount, calculated by reference to each day that the amount, and any interest, remains unpaid.

“Transitional arrangements apply to those who breach the cap by less than $100,000 as at 1 July 2017, but if in this category, you will have a maximum of six months from 1 July 2017 to bring the transfer balance in the retirement phase of your superannuation to the relevant figure or less.”


Thursday, 19 January 2017