News

The crack down on the big banks.

After all the tough talk and threats of action, the Government has delivered a package of reforms.  The first point is that the reforms are excellent.  For example, removing exit fees is an obvious one.  Simpler and clearer documents will be very helpful.

The problem is that the reforms were meant to increase competition so that the big Banks would not increase interest rates in excess of, and independent from, the RBA. 

The reality is that it is unlikely that the reforms will have any impact at all on interest rates.  The response of the sharemarket was interesting. The share price of Big Banks went up and the price of the smaller ones fell in response to the Government announcement.  If the changes were meant to do as intended the opposite should have occurred. 

Two of the Big four Banks had already removed exit fees and the others would have followed anyway.  Some of the other changes actually help the Big Banks by reducing their costs and give them an advantage over the smaller banks.

2010 is a below average year for investment performance

After the much needed recovery year of strong returns in 2009, this year has been disappointing.

Considering that most investors have a significant portion of their funds in Australian shares, the low returns for this asset class will drag down the overall portfolio returns.  The good news is that at DMG we do use other asset classes that have significantly outperformed Australian Shares this year.

The table below indicates the returns for the 12 months ended 30 November 2010.

Keys points from the above table are;

• Australian Small companies and Overseas property have provided excellent diversification benefits against Australian large companies and Australian property.
• Even International shares have outperformed Australian large companies.

Again a well constructed and well diversified portfolio will add value over an approach of stock picking and market timing. 

Although it is not overly comforting, this year has had some characteristics that are common to the 2nd year of a recovery cycle.  Volatility is prominent because of fears of a double dip recession and a resumption of the recent problems. This competes with periods of good news.

2011 – What can we expect?

The outlook is continuing to improve at a slow pace with a number of risks still present.  Shares in general represent good value on the basis that the economic recovery continues.  This requires the US to create jobs and Emerging Markets to maintain their strong growth rates.

The risks are well documented; slow growth in the US, with high unemployment, excessive debt at Country, Company and consumer level in the US and much of Europe. Also a slowdown in China would be disturbing for the markets.

Overall shares here and globally should have a better year in 2011.  Emerging markets still appear to offer good value as well.  Cash and term Deposits, although providing higher rates than in recent years, are at a similar level to the dividends from fully franked shares, without the opportunity for growth.

Expect China to keep developing

In 2010 China accounted for half the increase in the number of cars sold globally and yet today only 7% of the Chinese population own a private motor vehicle.

Ben Lancaster adds to DMG awards

Following recent success at the Telstra Business Awards, DMG Financial Planning adviser Ben Lancaster was named runner up in his category at the Financial Planning Association (FPA) Value of Advice Awards.

The FPA Value of Advice Awards publicly acknowledge those FPA members who demonstrate ‘best practice’ financial advice for their clients, while also promoting the professionalism of FPA practitioner members. The awards which commenced in 2005 were created to promote and define the value of professional advice.

‘Value of Advice’ includes excellence in the process of engaging and listening to clients, identifying their needs, and helping them uncover their life goals. It also involves analysing client’s circumstances, providing and implementing a financial plan to help clients achieve their goals.

The prestigious national awards are judged by a panel of distinguished national industry experts. Entrants were required to demonstrate how the recommendations and outcomes of their financial advice have added financial value to a real life client in one of four categories; Wealth accumulation and protection, Pre-retirement planning, Post-retirement planning and Management or Pro bono.

Every valid submission is judged individually by at least 3 members of the judging panel. The finalists are selected on the basis that they meet a benchmark score as a minimum base and are the top three scoring entries nationally in the category. The top scoring finalist in each category was awarded at the special awards presentation held at the 2010 FPA National Conference in Queensland on 25 November 2010.

This is an outstanding achievement for Ben and a testament to the level of excellence and comprehensive advice the DMG advisers offer our clients. We are extremely proud of Ben and he is a fantastic asset to our firm.

Office Closure

We are closed over Christmas from 5:30pm Thursday 23 December 2010 and reopen on Tuesday 4 January 2011.

We wish you a Merry Christmas and look forward to seeing you in the New Year.