16
Dec 2019

Hudson Christmas Closure

Hudson Christmas Closure

Hudson Financial Planning will be closed as of Thursday 19th December and returning for business on Thursday 2nd January 2020.

We would like to take this opportunity to thank you all for being a part of our Hudson Family, and wish you all a lovely Christmas break.

May you all have a wonderful and prosperous New Year full of health and happiness.

Read in full + comments 0 Comments

16
Dec 2019

Messages from Hudson

Messages from Hudson

Phillip McGann - Hudson General Manager/Adviser

What Have I Learned This Year?

Never write off a government that plays to the middle ground (ie the Liberal win in May)

The "weight" of money is compelling - as interest rate levels move lower, share prices eventually rise as equities become more attractive to investors.   

Last Year’s Prediction

“No (official RBA) rate rises (maybe even a cut!) but tighter bank credit / lending conditions leading to the same result if there had of been rate rises.”

RESULT - RATE CUT X3 CAME AND CREDIT WAS MUCH TIGHTER UP UNTIL A FEW MONTHS AGO

“A messy Brexit in March but no long term major catastrophes - think Y2K not 911”

RESULT -  STILL WAITING FOR BREXIT BUT (STILL) LIKELY TO NOT BE TOO MESSY  

“Share market to recover into the final stages of the current bull market.” 

BIG MOVES IN SHARES THIS PAST YEAR 

Prediction(s) for Next Year 

Continued movement up in share prices as low interest rates here to stay to prolong bull market as the only game in town.  

Trump to win again in November as democratic line-up looks ordinary. 

Final Word for 2019

All the very best for a profitable 2020.  

Keep safe and look to the future and always adhere to the old investing adage:

"The risk to return ratio you are willing to accept depends on whether you wish to eat well or sleep well"   

Ivan Fletcher - Adviser

What Have I Learned this Year?

Unstable politics, does not necessarily translate to poor share markets as the year has produced good returns for the calendar year.  This time last year we were looking at a 15% correction in share prices.  
This year, despite Trade war tensions and BREXIT meltdowns, the broader share markets (including our own) have faired well. 

Last Year’s Prediction

“For two years now the rhetoric around RBA interest rate discussions has been focused on ‘how long will it be before we get the first RBA induced rate rise’? 
Next year this rhetoric may start to include the prospect of a rate cut.  Does not mean we will necessarily have one – but the chatter on the subject is likely to increase if we do not see higher inflation numbers, especially around wages growth.”
We well and truly had the turn around with three rate cuts for the year in quick succession.  

“The other prediction is political ‘YES’.  Watch both Australia’s large political parties chirp YES to anything and everything in the hunt to secure votes (Irrespective of previous messages by current or former leaders).  I don’t expect too much to happen between now and the election as focus will be on publicity and the current government is hamstrung to achieve much before hand. Either way the country needs a clear winner in the next election. I don’t expect too much to happen between now and the election as focus will be on publicity and the current government is hamstrung to achieve much before hand. Either way the country needs a clear winner in the next election.  Well we got a clear winner, but the margin was just enough to give a majority but not too big that they can do what they please.

Prediction for Next Year
It is becoming increasingly obvious that RBA interest rate cuts are not as effective in an already low interest rate environment, so expect a different tact from our governing bodies.  That could be the buyback of Australian bonds or government boosts to Infrastructure spending or maybe some further unexpected tax cuts.  Australians have slowed down discretionary spending which is the Achilles heal of our economy at present and needs a solution.

Final Word for 2019
Beware of Complacency.  Investment returns in both shares and fixed Interest cannot continue at the rates of the last couple of years, we need to be prepared for market volatility in the shorter term.
If you require capital or income from your investments in the short term, do not be tempted to invest in higher risk markets (e.g. shares).  Low interest rates are a poor return but losses on share markets in the short term are a whole lot worse if it prevents you from following through on your plans (e.g. renovation, holiday or retirement income funding).  

Enjoy whatever precious time you have with your family and friends.  As always, but especially this time of year, if you see someone without a smile, give them one of yours. 

Michal Park - Adviser

What Have I Learned this Year?

This year has brought many lessons for me.  Managing a budget is as tricky for the governments as it is for most households – including my own.  Rate cuts are not the quick fix answer that they were in years gone by, despite the RBA giving them a red hot crack.  And markets continue to defy naysayers who are always looking to hype up the risks.

Last Year’s Prediction

“The lack of available credit will start to bite, leading banking restrictions to ease somewhat in 2019 (that could possibly be more a hope than a prediction).

Emerging markets will be the sector to watch.”

Banking restrictions definitely tightened this calendar year before easing in the last couple of months. As Ivan notes, it will be interesting to see how the RBA tackle the need for further economic stimulus, given that rate cuts have really only fuelled another round of property price growth in NSW and Victoria.   

Emerging markets have averaged about 10% per annum for the year to November 2019 – clearly not the best performing asset class, but not the worst either.

Prediction for Next Year

Brexit and Trade issues will be resolved and markets will react positively, but there will always be some other crisis looming to cause uncertainty in markets and subsequent volatility.

Final Word for 2019

It’s been a topsy turvy year with markets hitting new highs only to fall backward highlighting how sensitive they have become after years of zero volatility.  Volatility will continue but so will new highs, in my opinion. 

Some years can be tougher than others, but there is always something to be grateful for.  

Kris Wrenn – Adviser

What Have I Learned this Year?

A fall in the share market can create a great opportunity and if you had chosen to gain exposure or increase your exposure to the Australian share market on January 1st then you would be looking at a return of over 28% (at the time of writing).

Last Year’s Prediction

“I'm very optimistic about the domestic sharemarket! It has been a terrible few months and the effects of it will quite possibly result in almost no growth for the 2018 calendar year. We saw something similar in both 2012 and 2016 following a strong previous couple of years. To see two consecutive poor years however we have to go back to the GFC, when for me there were fundamental economic reasons for a sustained downturn. I think we will look back on 2018 as being a "healthy" and necessary correction, but ultimately short-lived.”

Outcome? The correction was short-lived, and pretty much from January 1st onwards the market rose and rose, eventually hitting an all-time high and barring something catastrophic this month, resulting in what will be a cracking year for shares.

Prediction for Next Year

As of July this year the US recorded its’ longest period of economic expansion on record (going back to records from 1854) at 120 months, and it has continued to grow in the months since. So could we finally see the US sharemarket begin to falter? If the US does sneeze will the rest of the world catch the cold? I like the outlooks for a couple of other sectors that have posted ordinary returns over the last few years, including the Emerging markets sector and Australian small caps.

Final word for 2018

With the US, Australian and many other countries share markets at, or above, all-time highs, it is more important than ever for pre-retirees and retirees to make sure they have appropriate strategies and contingency plans in place with their nest eggs to weather any financial storms.

I wish all members a happy and safe Xmas and New Year and best of luck going into 2020.

Matthew Kerr – Finance Manager

What Have I Learned This Year?

That banks are still very keen to lend everyone money and now that they have a bit more clarity around their responsible lending obligations they will be doing so with more gusto.  I have also learned that just because we are at historic interest rate lows, rates won't continue to fall.

Unexpected movements in markets are no reason to divert from a long term plan.  Just because markets don't behave exactly how we think they should - in the short term - is not a reason to change long term plans.  Markets are volatile day to day but a long term plan carefully put into place can provide the longer term result that you are seeking.  Have patience!

Last Year’s Prediction

“Commonsense will somewhat prevail in the findings of the Royal Commission and banks can get back to what they do best and that is lending money to those that fit in their relative risk models.” 

More improvement in local share prices as the re-rating of the Australian market gathers pace.  Well I was right up until about 8 weeks ago!   I must have left the date range off my prediction from last year! 

Prediction(s) for Next Year 

Banks will continue to ease lending policies gradually to make life easier in some respects for borrowing money.  We can however expect more emphasis (again) to be placed on assessing borrowers living expenses.  This may be through scanning bank statements manually or electronically.

No (official RBA) rate rises (maybe even a cut!) but tighter bank credit / lending conditions leading to the same result if there had of been rate rises.  A messy Brexit in March but no long term major catastrophes - think Y2K not 911. Share market to recover into the final stages of the current bull market. 

Final Word for 2018 

Following on from the above, next year you will need to be conscious of your spending habits particularly when using the account your lending is with.  Banks will look to rely on this data more when assessing your borrowing capacity into the future.  This may mean that if you have a couple of months of higher than normal spending, it may affect your capacity to borrow money.  It may be worth establishing a separate account with another bank if, for example, you are travelling overseas OR perhaps get back into the habit of using CASH.  

Thanks to all of our valued Hudson Members.  

The bottom line is we have no business without your continued support and we truly value the relationship.

I look forward to again assisting members to achieve their long term financial goals in 2019 and beyond.  

Read in full + comments 1 Comments

16
Dec 2019

Hudson Haha

Hudson Haha
Read in full + comments 0 Comments

29
Nov 2019

5 Ways to Benefit from Record Low Interest Rates

5 Ways to Benefit from Record Low Interest Rates

Written by Hudson Adviser Ivan Fletcher

Interest rates have never been lower, and it’s possible they might fall even further. This creates opportunities for householders and businesses, so how can you best take advantage of low interest rates?

1. Pay off your debt more quickly

By maintaining constant repayments as interest rates fall, you’ll reduce the time it takes to pay off your loan. That’s because interest will make up less of each repayment, with more going to reduce the outstanding capital. And the great thing is that to take advantage of this strategy you don’t need to do anything. Lenders usually maintain repayments after each drop in interest rates unless you instruct them otherwise. Avoid the temptation to reduce your minimum payment as interest rates fall (unless you are in cash flow crisis of course).

2. Refinance your home loan or Investment Loan

Lenders vary in the extent to which they pass on cuts in official interest rates. This is something Hudson have seen a lot more of in the last 6 to 12 months.  Depending on the target market of the finance lender at the time, we have seen some institutions pass on bigger rate cuts for home buyers whilst other lenders have provided bigger rate cuts to investors.

Fixing rates can present a viable alternative.  My caution to anybody fixing rates is that in the last 20 years, at least 90% of the time, the bank ends up the winner. For me the argument for fixing is tied more to the need for certainty or putting a maximum on your repayments (eg when household income is going to drop temporarily). 

Beware of your existing Lender’s Fixed Rate Offer -  If looking at Fixed versus variable it is very important to look across multiple banks.  Too many times we have seen Hudson members lock in a fixed rate because it was presented to be just as good as the variable rate (completely unware that there was significantly better variable rate on offer elsewhere).

So if you want the best deal in the current circumstances it is worth at least doing a rate comparison on your existing loans to see what is currently available. This is something your Hudson Adviser can help you with. If you haven’t had a Loan review in the last 3 years, chances are the great deal you were previously on is no longer the best available.  Give your Hudson adviser a call.

3. Buy a first home – or upgrade

Low interest rates create opportunities for first homebuyers to get a toehold in the property market, and for existing homeowners to upgrade to a bigger home, better location or proceed with that perfect renovation.  While lower interest rates can be a bit of a two-edged sword, as they tend to drive up property prices, most people are happier borrowing in a low rate environment rather than when rates are high.

4. Borrow to invest

While Australians love to invest in property, borrowing to invest in shares is also a viable wealth creation strategy. Often referred to as gearing, the key to successfully investing borrowed funds is that the total returns must exceed the total costs.  As the most significant cost is usually the interest on the loan, low rates make this strategy more attractive.

Take care, however. Gearing can magnify investment returns, but it can also increase your losses. It’s therefore important that you fully understand investment risk and how to minimise it.

The first step in considering such a strategy is to identify and quantify a whether you have a surplus in your monthly cash flow.  From there you can discuss the pros and cons of property versus equities with your adviser.  

5. Expand your business

The whole point of a reduction in interest rates is to stimulate the economy, and that includes encouraging business owners to invest in their enterprises. Low interest rates make it cheaper to borrow to buy equipment to increase productivity, to take on more staff, or buy out a competitor and generally expand the business.

Take advice

Some of these strategies are simple ‘no-brainers’. Others involve significant levels of risk. To take a closer look at how you can make the most of low interest rates, talk to your financial adviser.

Read in full + comments 0 Comments

29
Nov 2019

SMSF’s – Are They Right For You?

SMSF’s – Are They Right For You?

Written by Hudson Adviser Michal Park

A  recent email from a Hudson member prompted my article this week.  This particular member is in the midst of establishing an SMSF in which to purchase a commercial property that his business will rent. 

To reinforce the Productivity Commission’s report about the efficiency and competitiveness of superannuation, ASIC sent this Hudson member a fact sheet titled “SMSF’s: are they for you?” as a newly registered SMSF trustee. With 599,678 SMSF’s in Australia holding nearly $748 billion in assets as at 30 June 2019, it’s worth a fact sheet.

In a nutshell, the fact sheet is designed to highlight the downside to SMSF’s, identifying eight “red flags”, the first being those with low fund balances. ASIC research suggests that SMSF’s with balances below $500,000 produce lower returns on average (after expenses and tax) when compared to industry and retail super funds.  In the past, the rule of thumb was that one required a balance of between $200,000 and $300,000 to make an SMSF feasible, but now it looks like the magic number is closer to $500,000.

All eight red flags, as identified in REP 575, are as follows:

  1. The client has a low superannuation balance and would have a limited ability to make future contributions
  2. The client wants a simply superannuation solution
  3. The client wants to delegate all of the running of the SMSF to a paid advice-provider
  4. The client wants to delegate all of the investment decision making to someone else
  5. The client does not have a lot of time to devote to managing their financial affairs
  6. The client has little experience making investment decisions
  7. The client, or suggested trustee, is an undischarged bankrupt or has been convicted of an offence involving dishonesty (because undischarged bankrupts and persons convicted of an offence involving dishonesty are prohibited from acting as a trustee)
  8. The client has a low level of financial literacy

Below is a chart directly from the ASIC fact sheet, illustrating the poor returns from SMSF’s with balances under $500,000:

I’ve compared these figures above the below Chant West table which shows the annual financial year performance of the median growth fund over the financial years:

So the question I ask myself is this: even with balances in excess of $500,000, is the significant time, costs, risk and obligations associated with establishing and running a SMSF really worth it?  The returns are not all that different to a “garden variety” complying super fund, as illustrated above.

So, unless you are like my Hudson member with a specific purpose to establish an SMSF, or you want more control over your investment strategy (requiring skill, care and diligence), perhaps a SMSF is not right for you.

The complete fact sheet can be found here:

SMSF Factsheet

Read in full + comments 1 Comments

Do you have a
'Dear Adviser' question?

Ask a question
Get in touch with Hudson and one of our advisers may be able to answer your question.

Ask our advisers now

Issues by month/year

May-2017-(C)

June-2017-(C)

June-2016-(C)

Insurance

February-2017-(C)

February-2016-(C)

December-2017-(C)

August-2016-(C)

2019-12-20

2019-11-29

2019-10-25

2019-09-27

2019-08-30

2019-07-31

2019-06-28

2019-05-31

2019-04-30

2019-03-29

2019-03-01

2019-02-01

2018-12-21

2018-11-30

2018-10-26

2018-09-28

2018-08-31

2018-07-27

2018-06-29

2018-05-25

2018-04-27

2018-03-30

2018-02-23

2018-01-26

2017-12-15

2017-11-24

2017-10-27

2017-09-29

2017-08-25

2017-07-28

2017-06-30

2017-05-26

2017-04-28

2017-03-31

2017-02-24

2017-02-16

2017-01-27

2016-12-16

2016-11-30

2016-11-18

2016-11-11

2016-11-04

2016-10-28

2016-10-21

2016-10-14

2016-10-07

2016-09-30

2016-09-23

2016-09-16

2016-09-09

2016-09-02

2016-08-26

2016-08-19

2016-08-12

2016-08-05

2016-07-29

2016-07-22

2016-07-15

2016-07-08

2016-07-01

2016-06-24

2016-06-17

2016-06-10

2016-06-03

2016-05-27

2016-05-20

2016-05-13

2016-05-06

2016-04-29

2016-04-22

2016-04-15

2016-04-08

2016-04-01

2016-03-25

2016-03-18

2016-03-11

2016-03-04

2016-02-26

2016-02-19

2016-02-12

2016-02-05

2016-01-29

2015-12-04

2015-11-27

2015-11-20

2015-11-13

2015-11-06

2015-10-30

2015-10-16

2015-10-09

2015-10-02

2015-09-25

2015-09-18

2015-09-11

2015-09-04

2015-08-28

2015-08-21

2015-08-14

2015-08-07

2015-07-31

2015-07-24

2015-07-17

2015-07-10

2015-07-03

2015-06-26

2015-06-19

2015-06-12

2015-06-05

2015-06-02

2015-05-29

2015-05-22

2015-05-15

2015-05-08

2015-05-01

2015-04-17

2015-04-10

2015-04-03

2015-03-27

2015-03-20

2015-03-13

2015-03-06

2015-02-27

2015-02-20

2015-02-13

2015-01-30

Topics


Search all issues

Enjoy reading the Hudson Report?

Let us know your views on our news.

Contact Hudson Online