However, we believe the probability of a major global systemic risk event due to Brexit is low in the short term. We believe the European Central Bank and Bank of England staready to provide sufficient liquidity to ensure their banking systems continue to function. Quantitative easing (QE) could also be redeployed in the United Kingdom (UK) or stepped up in the Eurozone to support sovereign bond markets if needed. The uncertainty and distraction created by Brexit are likely to result in reduced investment, increased savings and lower economic growth in the short term. In response, the Bank of England decided to reduce the cash rate to 0.25 per cent in early August.

It is important to distinguish between the nine nations that are members of only the EU and the 19 nations that are members of both the EU and the Eurozone. Leaving the Eurozone is more problematic than leaving the EU because there is no existing legal process to follow. There are four countries that are outside the EU but are part of the single market as members of the European Free Trade Association (Norway, Iceland, Switzerland and Lichtenstein). We believe it is 50 per cent likely that the UK will proceed to trigger Article 50 and negotiate an agreement to remain in the single market.

US interest rates may rise more than markets expectIn the US, a range of economic indicators show that the US economy continues to recover, including an improving housing sector, a likely stable federal deficit, competitive wages – despite the appreciation of the US dollar and a relatively low reliance on exports. Several transitory factors have been keeping inflation below the Fed’s two per cent target. However, as the oil price bottoms out, the US dollar stabilises and the labour market continues to tighten, wage growth and inflation pressures are likely to normalise. Consistent with previous cycles, this will require the Fed to tighten monetary policy, probably more so than the market is expecting.

The Eurozone is likely to continue benefiting from a weaker currency, a stronger US economy, lower commodity prices, and an improvement in borrowing conditions and credit flows in an environment of ultra-low interest rates.
However, the combined effects of high debt levels, labour market rigidities and unfavourable demographics are likely to present ongoing headwinds for growth. The Eurozone also remains vulnerable to major shocks, such as an escalation of geopolitical tensions with Russia, the election of Eurosceptic governments or a collapse in the Chinese yuan. Each of these scenarios could trigger a dramatic uplift in periphery Eurozone sovereign bond yields, and would heavily test the resolve and mandate of the ECB.

While we remain concerned about the short to medium-term outlook for China, we do not believe that China is about to have a financial crisis or experience a hard economic landing. China’s rapid economic growth in recent years, fuelled
by the large credit stimulus during the GFC, has been unsustainable. Although credit growth has slowed, it continues to grow at 15 per cent per annum.

Prospects for equity markets

Our base-case outlook for the next three years assumes a continued recovery in the US with modestly rising inflation, a continued slowdown in China (but not a financial crisis or hard landing) and an improvement in the economic outlook for Europe. We remain cautious about the outlook for equity markets given the recent Brexit vote, the environment of abnormally low interest rates, historically elevated price-earnings multiples, risks associated with the recapitalisation of the Italian banking system and the continued withdrawal of US monetary policy stimulus. While the Fed and other central banks believe their policies are highly stimulatory, such policies also act as a tax on the world’s savers by reducing or eliminating interest income.We continue to believe markets are mispricing the likely future path of the federal funds rate and long-term interest rates in the US. It is prudent to remain cautious in this environment.

We continue to see attractive opportunities for Australians to invest in high-quality global businesses, although pricing is less attractive than in recent years. Risks to the Australian dollar appear weighted to the downside and the Australian economy remains exposed to the continued unwinding of the commodities boom, domestic housing investment boom and household credit boom, which further weakness in China could exacerbate. Domestic economic weakness and global disinflationary forces are putting downward pressure on Australian interest rates at a time when the US economy is moving towards full employment and higher interest rates. The challenges facing the Australian
economy serve as a reminder to investors of the importance of achieving meaningful portfolio diversification to preserve capital and higher risk-adjusted returns over the investment cycle.

To discuss your investment options, speak to your financial planner at Leenane Templeton on 02 4926 2300 or email success@leenanetempleton.com.au

The post Beyond Brexit appeared first on Newcastle Financial Planners & Financial Advisors.

We’ve all heard about the “lost billions” sitting in idle superannuation funds around Australia but are you aware of what’s happening to hundreds of millions of dollars sitting in “inactive” bank accounts? Read on, you may be very surprised.

The Australian Securities & Investment Commission (ASIC) is now able to collect total balances from Australian’s bank accounts that have remained untouched for three years. Previously, this money could be collected after a seven-year period of no transactions. There is more than $630 million waiting to be claimed, most of which has already been transferred from bank accounts into the federal government’s Consolidated Revenue Fund. That should be enough to prompt action!

This could be a true story

Your elderly, and very wealthy, Aunt Mary has accumulated a vast fortune that is scattered throughout many bank accounts. She relies on one account to cover her living costs but doesn’t touch the others, believing they are safely accumulating interest and are best left that way. She moved into a retirement village a few years ago and forgot to tell each bank of her new address. 

Mary decides she wants to share her wealth before she dies, so she digs out all of her bank books and heads off to each bank to see how much she has available to divvy up between her numerous progeny.

You can imagine her horror when the teller at the first bank advises Mary that the account is no longer active with that bank and therefore they have no record of any balance. Even though the teller gently explains what has occurred and how to reclaim her money, Mary is devastated. She receives the same astounding news at all four banks she visits. In shock, she believes that she has lost most of her life savings.

How would you feel if this happened to you or an elderly relative? It would be very upsetting – but there is a happy ending.

It is still your money

This money still belongs to its rightful owner. Although it’s now held in the Consolidated Revenue Fund, a simple process will release all of the funds, plus interest!

Here’s how it’s done:

1. Visit www.moneysmart.gov.au and search for “claim money from bank account”;
2. Follow the instructions on the page starting with a simple search;
3. If a search shows money is being held in your name proceed through the three steps explained on that page.

Any money reclaimed is paid back with interest. And even better, the interest is not taxable.

Prevention is better than the cure

So that you don’t have to go through this whole process to reclaim your own money, review your bank accounts. If you have too many, consolidate them into one or two manageable accounts and make sure each bank holds your current contact details. 

Just one transaction every two years will deem your accounts active. And don’t forget to share this with your elderly relatives.

Sources:
NFP:
ASIC’s MoneySmart website www.moneysmart.gov.au
ASIC website www.asic.gov.au Changes to the Commonwealth unclaimed money laws
ASIC Unclaimed money report – bank accounts: www.asic.gov.au/asic/asic.nsf/byheadline/Unclaimed+money+bank+account+list? (accessed January 2014)
Business Insider Australia “ASIC Has Collected More Than $400 Million From Inactive Bank Accounts This Year: Report” Liz Tay (October 2013)

Call (02) 4926 2300 or email us. 
If you wish to discuss reclaiming your money and how you can go about it, please call the team at Leenane Templeton.

The post Reclaiming your money from the government appeared first on Newcastle Financial Planners & Financial Advisors.

Basically, you can do whatever you like with your money while you’re alive. But what control do you have over your assets when you die? It’s an interesting thought that most people don’t like to dote on, however with more wealth being created through superannuation funds, it’s a thought that will require action at some stage – and the sooner the better.

It has been estimated that members of the baby boomer generation will pass about $600 billion to their children or grandchildren over the coming decades. This wealth will in some cases come in the form of family businesses moving to the next generation. In others, it might be more passive investments, such as shares, property and cash. 

Each of us might only have control over a small piece of this inheritance bonanza. Nonetheless, how much thought have you given to what it will mean to your beneficiaries and how they'll remember you? 

Preparing your legacy

The billionaire US investing guru, Warren Buffett, has some pretty clear views on the legacy he wishes to leave to his children. He has been quoted as saying that he wants to leave them enough money so that they will think they can do anything with their lives, but not so much that they can afford to do nothing.

The first step of course is to determine what assets you have that might form part of your financial legacy. Shares, property, superannuation and life insurance can be treated very differently under estate laws, so it's crucial to have this checked by your trusted advisers.

Next, you might want to think about the opportunities and values you want to leave to your beneficiaries. Do you want to "rule from the grave", or let them make their own decisions about how they tackle life's challenges?

Perhaps other bequests — to charities, for instance — will be your way of reflecting both personal gratitude and your preferred value system.

Who can help?

On the practical side, there are various professionals to help you to create your personal legacy. For example, enlisting a solicitor to draft your will and related documents is crucial. And we can advise you on superannuation and investment matters.

It might be a good idea to take time out to reflect on these important issues. Don’t wait until you’re sick or old to plan your legacy. Start now and plan to have the time of your life so you’ll have something memorable to leave behind!

Sources:
Musgrave, R. "Values based advice: How to create a living legacy", Australian Journal of Financial Planning (Volume 3, Number 1, 2008)
www.familymoneyvalues.com “What does family legacy mean to you?”

Call (02) 4926 2300 or email us. 
To discuss your financial future and that of your legacy, please do not hesitate to contact the team at Leenane Templeton. 

The post A legacy isn’t just about money appeared first on Newcastle Financial Planners & Financial Advisors.