2022 – Predictably unpredictable
While 2022 has, predictably, been yet another unpredictable year, we hope there have been more ups than downs for you, your family and your business.
In this edition of our Exchange Newsletter we asked some of our senior leaders to reflect on the year that was and look forward to what’s ahead.
We hope you enjoy the read!
Damien Cooper (Chief Executive Officer)
Cautiously optimistic
As my team and our clients have navigated another rollercoaster year, it’s been an eventful year at Financial Decisions too. It was exciting to officially welcome accounting and legal firm Cohen & Krass into the Financial Decisions family.
This acquisition fulfilled our long-held ambition to offer one-stop financial planning, accounting and legal services all under one roof. With these triple disciplines, combined with our mortgage and insurance services, we now offer an end-to-end family office solution from tax and financial advice, through to estate planning and navigating disputes.
While we predict another volatile six months ahead, we are cautiously optimistic that the sun will come out again in the latter half of 2023 as the impact of interest rate rises, inflation, supply chain disruptions and global uncertainty begin to settle.
Our role as expert advisers is to position our clients with a strong foundation and sensibly balanced portfolio so that you are in a position to move quickly to take advantage of the up cycle when it inevitably returns.
Daniel Rolley (Chief Investment Officer)
Preparing for the cycle to turn
From an investment perspective, 2022 has been the reverse of 2021 in many ways. Last year saw massive economic stimulus thrown at households and communities to get through the pandemic, fuelling strong gains on the finance and property markets.
This year, a combination of stimulus withdrawal, global unrest and rising inflation and interest rates has seen a fall in asset prices, with many diversified portfolios down 5-10% overall.
With interest rates still rising and yet to fully bite, many homeowners rolling off fixed rates and businesses facing higher input costs, we expect to see the brakes being applied to spending and demand over the next six months, before an improvement later in 2023.
The big question will be what the sharemarket does. We feel the downturn is already largely priced in, so we’re advising a balanced position that is optimistic without being aggressive so that you can enjoy the upside and be ready to move when things start to improve. The pent up demand for travel, restaurants and entertainment after two years of restrictions is another unknown that could also buoy the market despite the headwinds.
We’re working with clients – particularly younger investors who came in at the top of the cycle – to find a balanced position that is appropriate for their objectives, risk profile and personal circumstances to position them to benefit as things pick up. Having a longer-term perspective is important in times like these.
Wade Stanley (Head of Mortgages)
Reassess your position in changing times
Mortgage holders have benefited from low interest rates and rising property prices for several years now, but the party is slowing down. Rate rises are set to continue with many economists predicting cash rates heading towards 3.6 to 3.8% next year, and many households will come off fixed rates in 2023 which will jump up mortgage repayments and tighten wallets.
While property prices have softened this year in many markets, don’t forget that is off the back of strong growth over the last few years, and national average forecasts are for 3-5% growth in property prices nationally next year. So, it is always important to ignore the media hype, look at the data and listen to the leading economists’ reports when assessing investment decisions.
For example, if you’ve owned a property over the last three years it’s likely that you are sitting on an asset that is worth 15-30% more than what it was, depending on your area. If so, you may want to consider your refinancing options to release equity from your primary residence to leverage it into an investment property or other investment to maximise returns.
The right moves will depend on your circumstances, but we recommend a holistic re-assessment of your loan facilities at least every two years – especially in fast-changing times – to ensure you have competitive rates and features that match your needs. We can help restructure or refinance your loan to get the best outcome based on your goals.
Tony Cohen (Tax & Accounting)
Personal and business advice under one roof
Having come through fires, floods, a pandemic and a new government, change has been the constant theme of 2022. With the integration of accounting and legal firm Cohen & Krass into Financial Decisions this year, we’ve had changes of our own.
Following a smooth transition, we are even better equipped to help guide you through building your business and wealth. Now that we offer a full suite of accounting, tax, financial planning and legal services, we can help families and business owners at every stage of their wealth building, succession and estate planning.
One issue we’re seeing more of is the need for legacy planning. Australia’s Productivity Commission published their first official study of intergenerational wealth transfer in Australia and it makes for interesting reading. The scale of the numbers may surprise you.
Driven by record property prices and superannuation returns, inheritances and gifts to younger generations are forecast to exceed $224 billion per year by 2050, creating a $3.5 trillion windfall on the way primarily for adult children. So whether you need help with estate planning or transferring a business to the next generation we can make sure you cover all the bases.
Another challenge looming is the pending changes to industrial relation laws. If you have a small or medium business, we can help you understand these new laws when they come into play so you know your rights and responsibilities, and limit risk and confusion.
Our team is also planning educational sessions next year for clients around issues like cash flow management, asset protection, tax, strategic planning and financial reporting to help grow your business and profits in 2023 and beyond.
Warren Krass (Head of Legal)
Build and protect your family legacy
As my colleagues have noted, it’s been a year of increasing change and complexity. Our business Cohen & Krass, joined Financial Decisions earlier in the year and it’s happily been a smooth transition and a good cultural fit.
Both firms have always taken a long-term approach to legal advice with client partnerships that span multiple generations and family members. Many of our clients become friends and friends become clients.
Something we’re passionate about is helping families navigate estate planning and inheritances. With complex properties or business interests, it’s never cut and dried. To avoid complications, it’s important to plan carefully for the long-term transition, management succession and future distribution of these assets.
It is ultimately a financial, accounting and legal puzzle, however at the heart of intergenerational wealth transfer are complex family dynamics, personal relationships, sentimentality and strong emotions. While the intention is to create a meaningful legacy and set up your family for a prosperous future, painful conflict and chaos can arise when dealing with money and human relationships.
Our primary goal is to facilitate a harmonious and positive solution that avoids conflict, but we can also represent your interests if any legal issues do arise. No matter what the question or issue, Financial Decisions can help support families through the journey today and through the years ahead.
Merry Christmas and a Happy New Year to all
From the Financial Decisions team, we thank you for your loyal support and wish you a safe and happy festive season.
Please note that the team will be having a break and away from the office from midday on Friday 23 December until Monday 9 January.
We look forward to partnering with you in 2023.
Disclaimer: This publication has been compiled by Financial Decisions (AFSL/ACL Number 341678). Past performance is not a reliable indicator of future performance. While every effort has been taken to ensure that the assumptions on which the outlooks given in this publication are based on reasonable data, the outlooks may be based on incorrect assumptions or may not take into account known or unknown risk and uncertainties. Material contained in this publication is an overview or summary only and it should not be considered a comprehensive statement on any matter nor relied upon as such. The information and any advice in this publication do not take into account your personal objectives, financial situation or needs. Therefore you should consider its appropriateness having regard to these factors before acting on it. While the information contained in this publication is based on information obtained from sources believed to be reliable, it has not been independently verified. To the maximum extent permitted by law: (a) no guarantee, representation or warranty is given that any information or advice in this publication is complete, accurate, up-to-date or fit for any purpose; and (b) Financial Decisions nor its employees are in any way liable to you (including for negligence) in respect of any reliance upon such information or advice. December 2022
Contact: Financial Decisions PO Box 484 Mona Vale NSW 1660, T 02 9997 4647, F 02 9997 7407