Register For Our Mailing List

Register to receive our free weekly newsletter including editorials.

Home / 263

Cuffelinks Newsletter Edition 263

  •   20 July 2018
  •      
  •   

When Round 5 of the Financial Services Royal Commission starts on 6 August, superannuation will be the next punching bag. No doubt questionable behaviour will be uncovered on insider deals, fee disclosures and inadequate expertise. The recent Productivity Commission Report criticising the super industry will look like the entree before this main meal.   

The Commission will show the system can be improved, but let's hope it does not increase disengagement with super and undermine the need to save for a long retirement. Our super system is ranked third in the world in the Melbourne Mercer Global Pension Index, and this ASFA Media Release (yes, of course the Association of Superannuation Funds of Australia has a vested interest view) is a reminder of the system's strengths. It includes:

"An increasing number of retirees now have significant private income above the age pension, meaning they achieve a comfortable standard of living in retirement, rather than just getting by." 

As ASFA notes, the system is sustainable and superannuation will become increasingly relied upon as budget constraints limit age pensions. I was reminded of the affordability issue by this chart sent by a friend who lives in Illinois in the US. Little wonder he asked if I want to buy his farm.


Since 1987, promises on state-run pensions in Illinois have risen from US$18 billion to US$208 billion, a rise of over 1,000% when the state's revenues are up 236% and inflation only 111%. The state will not be able to meet the payments. For all its flaws and generosity in parts, Australia's predominantly direct contribution system makes it more affordable and sustainable.

Similarly this week, the International Monetary Fund warned governments to increase their savings to guard against an economic downturn, and our own Reserve Bank said high debt levels create vulnerability to economic shocks. Nobody knows when a day of reckoning will occur, and Vinay Kolhatkar writes about the deteriorating finances of governments around the world. Hamish Douglass of Magellan makes his latest global macro update in Additional Features below.

In other articles, Ben Preston gives a good illustration of why categorising investors into 'value' and 'growth' camps is not meaningful, while Graham Horrocks provides his tips for managing the $1.6 million pension Transfer Balance Cap. Donal Griffin looks inside a fascinating legal case where a carer inherited an estate against the wishes of a will and the deceased's family.

Focus on managed accounts

Managed accounts (different from managed funds) are winning market share in the advice space, but it's worth checking whether they are appropriate for you as a client. They usually involve a platform fee plus an investment management fee on top of the cost of financial advice, so understand the full cost. Three articles delve deeper into this success story: Toby Potter gives four reasons why managed accounts are growing quickly, Damien Klassen offers a list of items to check and Shannon Bernasconi shows why they are increasingly popular with financial advisers. 

Continuing our series on managing the tricky outlook for 2018/2019, UBS Asset Managementexperts explain their tactical asset allocation decisions and why it's time to think differently. 

The latest BetaShares half-yearly review of Exchange Traded Funds is also attached below, showing which asset classes are winning in this rapidly-growing segment, and we have the updated hybrid, bond and LIC reports. 

Graham Hand, Managing Editor

 

Edition 263 | 20 Jul 2018 | Editorial | Newsletter

 


 

Leave a Comment:

banner

Most viewed in recent weeks

Australian house prices close in on world record

Sydney is set to become the world’s most expensive city for housing over the next 12 months, a new report shows. Our other major cities aren’t far behind unless there are major changes to improve housing affordability.

The case for the $3 million super tax

The Government's proposed tax has copped a lot of flack though I think it's a reasonable approach to improve the long-term sustainability of superannuation and the retirement income system. Here’s why.

Tariffs are a smokescreen to Trump's real endgame

Behind market volatility and tariff threats lies a deeper strategy. Trump’s real goal isn’t trade reform but managing America's massive debts, preserving bond market confidence, and preparing for potential QE.

The super tax and the defined benefits scandal

Australia's superannuation inequities date back to poor decisions made by Parliament two decades ago. If super for the wealthy needs resetting, so too does the defined benefits schemes for our public servants.

Meg on SMSFs: Withdrawing assets ahead of the $3m super tax

The super tax has caused an almighty scuffle, but for SMSFs impacted by the proposed tax, a big question remains: what should they do now? Here are ideas for those wanting to withdraw money from their SMSF.

Getting rich vs staying rich

Strategies to get rich versus stay rich are markedly different. Here is a look at the five main ways to get rich, including through work, business, investing and luck, as well as those that preserve wealth.

Latest Updates

SMSF strategies

Meg on SMSFs: Withdrawing assets ahead of the $3m super tax

The super tax has caused an almighty scuffle, but for SMSFs impacted by the proposed tax, a big question remains: what should they do now? Here are ideas for those wanting to withdraw money from their SMSF.

Superannuation

The huge cost of super tax concessions

The current net annual cost of superannuation tax subsidies is around $40 billion, growing to more than $110 billion by 2060. These subsidies have always been bad policy, representing a waste of taxpayers' money.

Planning

How to avoid inheritance fights

Inspired by the papal conclave, this explores how families can avoid post-death drama through honest conversations, better planning, and trial runs - so there are no surprises when it really matters.

Superannuation

Super contribution splitting

Super contribution splitting allows couples to divide before-tax contributions to super between spouses, maximizing savings. It’s not for everyone, but in the right circumstances, it can be a smart strategy worth exploring.

Economy

Trump vs Powell: Who will blink first?

The US economy faces an unprecedented clash in leadership styles, but the President and Fed Chair could both take a lesson from the other. Not least because the fiscal and monetary authorities need to work together.

Gold

Credit cuts, rising risks, and the case for gold

Shares trade at steep valuations despite higher risks of a recession. Amid doubts that a 60/40 portfolio can still provide enough protection through times of market stress, gold's record shines bright.

Investment strategies

Buffett acolyte warns passive investors of mediocre future returns

While Chris Bloomstan doesn't have the track record of his hero, it's impressive nonetheless. And he's recently warned that today has uncanny resemblances to the 1990s tech bubble and US returns are likely to be disappointing.

Sponsors

Alliances

© 2025 Morningstar, Inc. All rights reserved.

Disclaimer
The data, research and opinions provided here are for information purposes; are not an offer to buy or sell a security; and are not warranted to be correct, complete or accurate. Morningstar, its affiliates, and third-party content providers are not responsible for any investment decisions, damages or losses resulting from, or related to, the data and analyses or their use. To the extent any content is general advice, it has been prepared for clients of Morningstar Australasia Pty Ltd (ABN: 95 090 665 544, AFSL: 240892), without reference to your financial objectives, situation or needs. For more information refer to our Financial Services Guide. You should consider the advice in light of these matters and if applicable, the relevant Product Disclosure Statement before making any decision to invest. Past performance does not necessarily indicate a financial product’s future performance. To obtain advice tailored to your situation, contact a professional financial adviser. Articles are current as at date of publication.
This website contains information and opinions provided by third parties. Inclusion of this information does not necessarily represent Morningstar’s positions, strategies or opinions and should not be considered an endorsement by Morningstar.