Opportunity in Volatility
While uncertainty is the new normal, we see new opportunities emerging in 2024 as we expect stabilisation across inflation, interest rates and property prices.
In our first Exchange Newsletter for 2024, we asked some of our leaders to share their thoughts on the trends and opportunities ahead for you, your family and your business.
We hope you enjoy the read!
Damien Cooper (Chief Executive Officer)
Thanks to our experienced and resilient team, 2023 has been outstanding for Financial Decisions as we move, hopefully, into slightly calmer waters in 2024. We’ve expanded our wealth management and advisory team and seen growth across our tax and accounting divisions.
One area of expansion has been our family office solutions, with many clients keen to build the financial literacy of the next generation by bringing them into our trusted adviser relationships.
Older generations are thinking seriously about how they can best manage multi-generational wealth and maximise their financial legacy. We typically start with personal tax returns and superannuation strategies for their children before extending to holistic estate and tax planning. With housing at record highs, we also advise on effective strategies to help grandchildren gain a foothold in the market.
Artificial intelligence continues to dominate the news, and we are closely monitoring it as a business tool and a client investment opportunity. However, another megatrend with equally strong underlying growth potential is sustainability, with regulators in Australia and worldwide mandating net zero emissions targets backed by strict reporting. This opens investment opportunities in areas, such as biodiversity credits, underpinned by the accelerating and long-term shift towards greener solutions by consumers, businesses, shareholders and governments.
Daniel Rolley (Chief Investment Officer)
Despite navigating global and local headwinds, it’s been a pleasing year for the investment team. Our investment committee was bolstered by two new additions, with solid growth in our managed discretionary account (MDA) portfolios that leverage our team’s collective insights.
While the media focuses on the downside of rising inflation and interest rates, don’t overlook the opportunities for forward-looking clients. We expect mortgage rates and inflation to top out in 2024, creating demand for term deposit rates at multi-year highs, and high-yielding fixed-income investments are poised to recover after a few years dampened by low rates. There are also excellent buys in companies with leading positions in growth sectors like technology and health care.
Taking these underlying trends into account is not a case of ‘buying the market’ but instead curating investments that complement each other and play a specific role in portfolios to navigate uncertainty.
Blake Conde (Wealth Management)
Like the last few years, volatility has been our constant companion as the inflationary impact of COVID and rising interest rates continued to bite households in 2023. This kept our financial planning team on their toes as we balanced the position of clients on both sides of the ledger: those battling rising costs of living and mortgages, and those benefiting from higher yields on their hard-earned savings.
Financial Decisions welcomed new advisers to the team this year and continued the education pathway for this next generation. The higher requirements for graduates set down by the Federal Government after the Banking Royal Commission demands increased knowledge from those entering the industry, which will raise standards over time.
With all the hype, it’s hard to believe that ChatGPT has only just passed its first anniversary. The world’s biggest companies, from Microsoft and Apple to Google/Alphabet and Amazon, are all in on artificial intelligence (AI). We expect the benefits (and disruption) to filter down to all-sized businesses over the next 12-18 months. With over 40 national elections – and eight of the top ten most populous countries going to the polls – it will be a busy election year. Keep an eye on the role of AI in campaigning and swaying voters.
Wade Stanley (Head of Mortgages)
With so much emphasis on interest rates, let’s cover them first. In November 2023, they hit 4.35% following an unprecedented 13 rises – almost in as many months. This brings them to levels not seen since 2011/12. Our analysis suggests you should prepare for one or two more rises in early 2024 before the RBA may offer some relief from mid-late 2024 or into 2025 – only if inflation is under control.
Despite a backdrop of rate volatility, average national property prices have held firm this year with factors such as rising costs, lower building approvals and high immigration stretching supply. Recent CoreLogic data indicates steady growth in many capital cities, including Sydney, Perth, Brisbane and Adelaide. In particular, this year, Financial Decisions has enabled clients to take advantage of growth in Western Australia with opportunities to invest in properties offering both capital growth and high yields.
As we mentioned last year, the bigger picture is if you own property in growth markets over the previous three or four years, it’s likely worth significantly more. And, you’ll also be paying more to service your loan. With such big changes this year and more to come, now is the time to reassess your debt facilities.
Does your home loan offer the most competitive rates and appropriate features? Have you explored refinancing options to release equity from your primary residence to leverage it into another investment? Are you considering an investment property or downsizing?
If you need confidential advice based on your circumstances or just want a second opinion, contact us for a no-obligation consultation.
Louis Shing (Tax & Accounting)
2023 was a big year for our tax and accounting team, serving more clients than ever before. As we forecasted this time last year, we’ve seen a surge in demand for estate tax, accounting and planning services as older generations move into retirement and ponder their financial legacies.
Modelling by Australia’s Productivity Commission shows we are on the verge of the most significant wealth transfer in history, with $3.5 trillion expected to be passed down generations this decade. And it’s already started. A study by Fidelity International found that 25% of those who intend to share wealth while living have already begun to do so. To avoid conflict, maximise benefits and give you peace of mind, the best time to lock in plans is while you are fit and healthy.
As others have mentioned, technology and AI are making a real impact on our lives. It’s something we’re working on at Financial Decisions to streamline our client services and back-office operations. Did you know there are several Government incentives and rebates for businesses to adopt digital tools such as new software or even ChatGPT 4.0? There are also incentives to switch to sustainable solutions such as electric vehicles or renewable energy.
If you or your business needs advice on tax breaks, modernising older accounting, payroll and invoicing software, or automating manual bookkeeping, we’d be happy to help.
We’re Here for You
If you would like assistance with any aspect of your wealth creation, legal, tax and accounting and management strategies, please contact your adviser directly or feel free to call us on (02) 9997 4647.
We look forward to partnering with you in 2024.
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. January 2024
Contact: Financial Decisions PO Box 484 Mona Vale NSW 1660, T 02 9997 4647, F 02 9997 7407