Welcome to the 2018 Spring Edition of the BFG Report
The Power of An Attorney
A power of attorney is a legal document that allows you to nominate someone you trust to make financial decisions on your behalf if you are unable to do so.
A popular misconception is that a person’s partner can make financial decisions for them and manage their assets. However, unless a formal power of attorney has been granted, these decisions may revert to a government agency instead. Having a power of attorney in place means you can nominate the person you want to make the decisions – it protects your interests.
Depending on state and territory laws, as well as your circumstances, a power of attorney can operate in different ways:
A general power of attorney allows someone to make financial and property decisions on your behalf for a limited time only, for example, if you are overseas for an extended amount of time.
An enduring power of attorney is the most common form and allows you to nominate someone you trust to make legal and financial decisions on your behalf if you, for instance, have an accident, fall ill or lose capacity. The benefit of an enduring power of attorney is that unlike an ordinary power of attorney, it will continue to operate even if you lose full legal capacity.
An enduring power of attorney is an extremely powerful legal document, so it’s not only vital to ensure you have one in place, but it’s also critical that you appoint the right person or persons for the job.
Your attorney can step into your shoes and enter into contracts, operate your bank accounts and pay your bills for you. They even have the ability to sell your house or incur debt on your behalf.
It is a position that carries great responsibility and your attorney(s) should always act in your best interests. You can imagine the possible problems and difficulties that can ensue if your appointed attorneys don’t get along or can’t agree on important decisions that need to be made. If you can foresee conflicting issues arising amongst your attorneys, or if there is no one that you can absolutely trust, appointing a reputable, professional trustee company may be a good option.
What happens if you don’t have an Enduring Power of Attorney?
If you do not get around to putting an enduring power of attorney in place and suffer an illness or loss of mental capacity, an application would need to be made to the relevant Administrative Tribunal in your state or territory for a financial administrator to be appointed to act on your behalf.
If the relevant Administrative Tribunal feels there are no appropriate family members or friends who can be appointed, they would usually appoint the Public Trustee to manage your financial affairs.
Source: Australian Executor Trustees
Investment Market Review – Quarter Ended 30 June 2018
Asset Class – Australian Shares
1 year is 13.2% p.a.
5 year is 10.0% p.a.
10 year is 6.3% p.a.
The S&P/ASX 300 Accumulation Index outperformed most global markets in the June quarter. The index was up 8.4% driven by strength in energy and health care stocks. The increase in energy shares was a by-product of continued strength in oil prices that translates into higher profits. Health care strength was led by an earnings upgrade from CSL as well as the exposure of much of this sector to overseas markets which means the depreciation of the Australian dollar increases earnings. The depreciation of the Australian dollar means that by translating foreign currency back into AUD these companies benefit from extra profits because each foreign dollar of profits is worth more.
Asset Class – Listed Property Trusts
1 year is 13.2% p.a.
5 year is 12.2% p.a.
10 year is 6.1% p.a.
The Australian real estate investment trust (A-REIT) sector generated a strong return of 9.8% for the June quarter with the stalling of bond yields providing a tailwind for the sector. A-REITs are viewed as a proxy for bonds, which means falling bond yields, in this case because of trade war concerns, can result in poor performance for this asset class. However, valuations heading into the June quarter were pushed to extremes with the sector being re-rated as investor sentiment turned to the attractive yields on offer. Also, some rebalancing amongst investors following the exit of index heavyweight Westfield following its acquisition by European property giant Unibail-Rodamco boosted the sector. Movements in bond yields deserve watching for the ongoing prospects of this sector.
Asset Class – International Shares
1 year is 15.4% p.a.
5 year is 14.7% p.a.
10 year is 9.0% p.a.
International share markets had a strong quarter with the MSCI World Index, in Australian dollar terms, recording a gain of 5.8% for the June quarter. The strength can be attributed to improving corporate earnings, economic fundamentals and forward-looking indicators, such as purchasing manager indices. Specifically, the synchronicity of these factors has faded in recent months, led by weakness in China and Europe while the US goes from strength to strength. Given that US shares still dominate international indices, their ongoing strength helped the international index finish the quarter higher. Chinese shares, by contrast, look to be entering another bear market as they are weighed down by a combination of US trade war concerns and tightening credit conditions with the People’s Bank of China looking to rein in excessive leverage within the Chinese economy.
Asset Class – Fixed Interest
1 year is 3.1% p.a.
5 year is 4.4% p.a.
10 year is 6.1% p.a.
The Australian three-year bond yield was 1 basis points (bps) higher at 2.06% and the ten-year rose by 3bps to 2.63%. The US yield curve rose with the three-year bond yield increasing 24bps to 2.62% and the ten-year by 12bps to 2.86%. Yields rose initially in the quarter, driven by strong US economic data and a surge in commodity prices that stoked inflation concerns. These factors were swamped, however, by a bleaker view on global growth as a result of trade concerns as the tensions between the US and China escalated and spilled over to affect other nations including the EU, Canada and Mexico. This added to investor appetite for safe-haven assets, keeping bond yields lower over the quarter with the US 10-year briefly moving above the 3% level before retreating. However, US yields still finished the quarter higher overall. In addition, the latest forecasts by the Federal Reserve pointed to an acceleration in the pace of interest rate increases and now there is a further increase predicted for later this year.
Asset Class – Cash
1 year is 1.8% p.a.
5 year is 2.2% p.a.
10 year is 3.3% p.a.
The RBA left the cash rate unchanged at a historical low of 1.50% in the June quarter.The RBA maintained their concern over low wage growth and high levels of household debt.
High Yielding Internet Savings Accounts
Financial Institution and Interest Rate
RaboDirect Bank – Rate 3.05% p.a.
Citi Online Saver – Rate 3.05% p.a.
Rams Saver – Rate 3.00% p.a.
St George – Maxi Saver – Rate 2.85% p.a.
ME Bank Online Saver- Rate 2.85% p.a.
ING Savings Maximiser – Rate 2.80% p.a.
Rates are subject to conditions and change.
Rates are correct as at 23/08/2018.