Almost 83% of Australians insure their cars, but only 31% protect their incomes – are you prepared?

Income Protection Insurance provides a regular earnings replacement if you suffer an illness or injury and are temporarily unable to work. This will help you maintain you and your family’s lifestyle until you are able to return to work.

Without income protection insurance, John Kilpatrick would have struggled with financial insecurity at one of the most difficult times in his life. Read about his story here.

For further information regarding Income Protection Insurance or any other Personal Insurance advice, please contact the team at Cotter Financial Services on PH: 07 3333 2610

The information provided is general in nature and does not take into account your particular investment objectives, financial situation or insurance needs; we therefore recommend you seek advice tailored to your individual circumstances before making any specific decisions.

Cotter Financial Services and its advisers are Authorised Representatives of Fortnum Private Wealth Pty Ltd ABN 54 139 889 535 AFSL 357306 Australia Credit Licence No 357306 trading as Fortnum Financial Advisers.

According to Ryan Dobbrick from Cotter Financial Services, the costs associated with aged care should be factored in to your overall financial plan, regardless of your age today. “Your financial adviser is well positioned to consider your entire financial life now and in the future. We can offer guidance around managing investments and savings in an effort to accommodate the potential costs associated with your aged care – or that of a family member – whatever form of aged care you want to take” Ryan Dobbrick said.

It is estimated that one third of all men and half of all women, aged 65 or over, will move into permanent residential care[1] but Mr Dobbrick fears some may be ill-prepared for how that transition may impact upon their financial wellbeing.

Mr Dobbrick said failure to plan for the costs that could be incurred for aged care, had the potential to not only erode retirement savings but in some instances impact upon, or significantly alter, estate plans or provisions for spouses or relatives who continue to reside in the family home.

“Seeking professional advice may significantly smooth the financial path from independent living to permanent care,” Mr Dobbrick said.

The team at Cotter Financial Services are equipped to compassionately assist seniors, or those holding their Power of Attorney, to navigate the Government’s recent changes to the means testing payment system for aged care accommodation, which now assesses both income and assets.

Further, Ryan and the team at Cotter Financial Services are also well placed to translate the nuances of the Government’s more flexible accommodation payment methods and to help you determine whether a refundable lump sum payment, a periodic payment, or a combination of both, may suit your specific set of circumstances.

However, caring for our aging population is not the sole responsibility of Aged Care facilities. By 2050, it is estimated that about 3.5million Australians will require aged care services, with about 80% of these services delivered in the home.[2]

Part of this care giving may fall to the ‘sandwich generation’ sometimes referred to as baby boomers caring for their aging parents and their adult children.[3]

“Juggling multi-generational financial demands can be challenging for the ‘sandwich generation’. In my role, I help my clients who are in this situation to navigate what can be complex terrain in order to protect their financial position now and into the future,” Mr Dobbrick said.

Together with family members, medical physicians, accountants and legal practitioners, your financial adviser provides specialist knowledge that aims to help facilitate a compassionate and financially sustainable transition to aged care whether that care takes place inside or outside the family home.

For further information regarding Aged Care strategies contact Cotter Financial Services on 07 3333 2610.

Ryan Dobbrick is a financial adviser at Cotter Financial Services and its advisers are Authorised Representatives of Fortnum Private Wealth Pty Ltd ABN 54 139 889 535 AFSL 357306 Australia Credit Licence No 357306 trading as Fortnum Financial Advisers.

This information is of general nature only and neither represents nor is intended to be personal advice on any particular matter. Cotter Financial Services strongly suggests that no person should act specifically on the basis of the information in this document, but should obtain appropriate professional advice based on their own personal circumstances.

[1] http://www.aph.gov.au/binaries/senate/committee/fapa_ctte/aged_care/report/c02.pdf

[2] http://www.agedcareguide.com.au/news/2014/03/20/improving-the-delivery-of-home-care-in-australia/ (citing the Productivity Commission 2011 report, Caring for Older Australians)

[3] http://www.smh.com.au/national/the-sandwich-generation-20120727-22zj2.html

• The past financial year saw a third year in a row of solid returns for diversified investors.
• While returns are likely to slow over the year ahead, they should still be reasonable as share valuations are okay, the global economy is continuing to grow and the uneven and constrained nature of that growth is keeping inflation low and monetary conditions easy.

Introduction

Despite the usual turmoil along the way and ending on a weak note with Greek and Chinese-related turmoil, 2014-15 provided another year of solid returns for investors who were prepared to move beyond cash. Most asset classes had reasonable returns resulting in average superannuation funds returning 9.9%, their third financial year in a row of returns around 10% or more.

Source: Thomson Reuters, AMP Capital

There’s been plenty to worry about as usual, but..

As always, the worry list over the last 12 months was long with:

• Concerns about the end of the US Fed’s quantitative easing and approaching Fed rate hikes, which has seen bond yields drift higher since their lows earlier this year.
• Geopolitical scares regarding Ukraine, the so-called IS and related terror threat and the West Africa Ebola outbreak.
• Deflation fears associated with the collapse in oil prices.
• Another soft start to the year for US/global growth.
• Recurring worries about China & recently its share market.
• A renewed soft patch in European economic growth late last year and the return of Greek-related contagion risk this year.
• Ongoing concerns about Australia post the mining boom.

But these concerns have been partly offset by a combination of:

• A delay in rate hikes in the US and further monetary easing globally – notably in Europe, Japan and China.
• Assurances that rate hikes in the US will be dependent on further improvement in economic growth and gradual.
• Further rate cuts and an ongoing slide in the $A helping drive a pick-up in non-mining economic activity in Australia.
• Progress towards another bailout package for Greece and Chinese Government support for its share market.

The end result has been an environment of continued but uneven and constrained economic growth with periodic deflationary shocks (low oil prices, Greece fears, the cautious consumer, etc) serving to keep monetary conditions easy (interest rates low) and investors cautious. Despite periodic corrections (eg Australian shares had top to bottom corrections of 9% last September and through April/June), such an environment of continuing growth and easy monetary conditions against a backdrop of reasonable valuations has been good for investment returns.


Key lessons for investors

The past year provides several lessons for investors, notably:

• Turn down the noise – the advent of social media has seen the noise around investing, in particular the constant talk of one problem after another, ramped up. But it’s essential to turn it down if you want to be a successful investor.
• Inflation remains missing in action – thanks to a combination of constrained global growth, excess capacity and commodity prices in a secular downtrend thanks to rising supply, the world is deflation prone. This means a continuation of low interest rates and the “search for yield”.
• Diversification and active asset allocation are critical – another year of under performance by Australian shares provides a reminder of the importance of diversifying globally and the uneven/choppy return environment provides a reminder of the importance of asset allocation.

What about the macro investment outlook?

It is hard to see the outlook for investment markets differing radically from what we have seen over the last few years:

• Global growth is likely to remain uneven and constrained at around 3-3.5%. While the messy global growth outlook is often seen as a negative, it’s really a good thing. Sure, we don’t want to see a collapse back into recession but the best way to guarantee that would be to see a synchronised surge in economic growth bringing on inflation and interest rate concerns. So let’s hope global growth remains constrained!

Source: Bloomberg, AMP Capital

• Inflation is likely to remain low, thanks to the constrained global recovery leaving spare capacity in place and the secular downtrend in commodity prices.
• Commodity prices are likely to remain in a downtrend in response to rising supply.
• Growth in Australia is likely to remain sub-par at around 2.5% as the mining boom continues to unwind, offset by improving non-mining activity. Bad for mining and WA but good for home building, retailing, tourism, higher education, manufacturing, farmers and Australia’s eastern states. Some improvement in growth in prospect for 2016.
• Global monetary conditions are likely to remain easy. While the Fed is likely to raise interest rates starting later this year, it will likely be gradual but monetary conditions are likely to continue easing elsewhere. Quantitative easing in Europe and Japan is likely to continue well into next year and maybe beyond while Chinese benchmark interest rates are likely to fall below 4%. Another RBA rate cut is 50/50 and rate hikes are unlikely before 2017.
• Expect a further rise in the value of the $US, albeit at a more constrained pace, with the $A falling into the $US0.60s over the next 12 months.

The return outlook

The bottom line is that the world remains in a sort of messy sweet spot for investors. Growth is not flash but okay, inflation is low and monetary conditions overall are set to remain easy. For the main asset classes, this has the following implications:

• Cash and term deposit returns to remain poor. In Australia it’s likely to be 2% or less over the year ahead and bank term deposit rates are pushing down to around 2%. Investors need to decide what they really want: if capital stability is more important than a decent stable income flow, then stick with cash. If not, then consider the alternatives.

Source: RBA; AMP Capital

• Low sovereign bond yields of around 3% or less indicate that the return potential from bonds is low. A move to higher bond yields will mean even lower bond returns. However, unless global growth/inflation rises significantly then any rise in bond yields is likely to be very gradual.
• Corporate debt should continue to provide okay returns. A drift higher in bond yields is a mild drag but with continued modest global growth the risk of default should remain low.
• Hybrid growth assets like real estate investment trusts and listed infrastructure should benefit from the ongoing “search for yield” and modest economic growth driving higher rents. But think 8-9% pa returns rather than double digit.
• Unlisted commercial property is also likely to benefit from the “search for yield” and modest growth in rents, with returns around 8-9%. But it’s perhaps less vulnerable to short-term swings in bond yields.
• Residential property returns are likely to be mixed with many cities seeing zero capital growth and Sydney slowing to around 8% per annum. Very low rental yields are not good.
• The bull market in shares likely has further to go as: shares are not unambiguously overvalued and are mostly cheap if allowance is made for low bond yields; they are not over loved by investors with various surveys suggesting an ongoing degree of caution; uneven and below-trend growth is extending the economic cycle; and monetary conditions are likely to remain easy for some time. However, volatility is likely to remain with history telling us that the first Fed rate hike can cause corrections (8-9% in both 1994 and 2004).

Source: Bloomberg, AMP Capital

• Within shares, we favour global over Australian shares (unless it’s income you are after) and European and Chinese/Asian shares over US shares.
• Finally, the continuing downtrend in the $A enhances the case for global shares (unhedged) over Australian shares.

Things to keep an eye on

The key things to keep an eye on over the year ahead are:

• Global business conditions PMIs – these point to constrained growth but a sharp rise or fall could cause problems.
• When/if the Fed starts to raise rates later this year – with US wages growth being a guide to timing and aggressiveness.
• The spread of Italian and Spanish bond yields to German yields – a good guide to whether the Eurozone crisis is continuing to fade.
• Chinese economic growth readings.
• Whether Australian non-mining activity keeps improving.

Concluding comments

Investment returns are likely to slow from the double-digit average of the last few years. And the September quarter is historically a rough one for shares with a likely Fed hike still ahead. But looking beyond near-term uncertainties, the mix of reasonable share valuations, continued albeit constrained global growth, easy monetary conditions and a lack of investor euphoria suggest returns are likely to remain reasonable.

Credit Original Article Source, Disclaimers and Author Profile: http://www.ampcapital.com.au/article-detail?alias=/olivers-insights/july/the-investment-outlook-%E2%80%93-can-the-good-returns-cont