Affinity Insights – Issue 22, July 2023

Welcome to our 22nd edition of Affinity Insights.

Can you believe we are officially in the second half of the year already? Although it is a busy time of year, it is also a great time to reflect on what we had set out to achieve both professionally and personally at the start of the year, and to compare it with where we are now. It is an opportunity to either reset, to make any changes if necessary, or to continue forging ahead.

We hope the second half of this year is a happy and successful time for you, whatever your goals.

We are pleased to announce that we are holding another Market Update webinar with our Investment Committee on Thursday, 3^rd August. An invitation will be emailed to you in the coming weeks.

We do hope you enjoy this issue of Affinity Insights and we welcome any feedback or suggestions for future topics.

From Rodney M. DeGabriele and Tony Vikram

In our most recent market update, we go under the hood to see what has been driving the strong performance in global equity markets so far this year, and whether that can provide any guidance for the year ahead.

You can read the full article here.

We are conducting our next Market Update on Thursday, 3^rd August via Zoom.

We will be covering the second quarter of the year and discussing the impacts of inflation on our economy.

Please follow this link to RSVP your attendance.

Westpac says it will keep investment platforms BT Panorama and Asgard in-house, abandoning a year-long sale process after bidders, including KKR, would not meet the price being demanded for the assets.

Despite the platforms boasting 7800 users and$131 billion in assets under its administration, Westpac, as recently as January, was fighting to find a bidder willing pay what it wanted for the platforms, which hold investments such as managed funds and shares on behalf of financial advisers and investors.

Westpac wanted to recoup as much as possible for an asset it has sunk north of $600 million into, but a broader dip in valuations across the sector and a dearth of other suitors for Panorama has made the platform a tough sell, The Australian Financial Review has previously reported.

KKR’s Colonial First State, AMP and Netwealth were all interested, but baulked at what they deemed too high a price, sources said. Then, in January, news emerged that Westpac has stood up an internal team to assess keeping these businesses in-house.

In a statement to investors on Wednesday, the bank said it would “conclude a competitive sales process for BT Platforms” to instead “retain and continue to invest in the business.” The company said it would develop “features to improve the adviser and investor experience, as well as ongoing simplification and improved efficiency of its operations.”

BT chief executive Matt Rady said it was a “simpler, better business” after a series of recent divestments, including the transferring of the BT Personal and Corporate Super funds to the Mercer Super Trust last March.

Westpac has also consolidated or sold assets such as its auto-loan portfolios and its Advance Asset Management boutique funds business in recent years to trim expenses.

“We are continuing to grow our broad investment propositions, including our managed accounts offering and expanding our wholesale investor fund menu,” Mr Rady said.

“We will continue to invest in features to improve the adviser and investor experience based on feedback from dealer groups and advisers, including our leadership in digital capability and managed accounts as we transform the way we deliver service.”

He said the business had already delivered improvements to its mobile app, fee structures, and distributions methods.

Reference: The Australian Financial Review – June 21, 2023. Article by Lucas Baird.

Below is an infographic which is updated monthly by the RBA, summarising macroeconomic and financial market trends in Australia.

Reference: https://www.rba.gov.au/snapshots/economy-indicators-snapshot/

Upsize your super with downsizer contributions

The downsizer contribution is aimed at helping older Australians put part or all the proceeds of the sale of their home into super to boost retirement savings.

From 1 January 2023, the eligible age reduced from 60 years old or older to 55 years old or older.

How does it work?

If you’re aged 55 or more and sell a property that has been your main residence and owned for 10 or more years, you may be able to contribute some of the proceeds to your super account¹.

May be suitable if…

You want to sell your home and use the money to boost your retirement savings.

What are the benefits?

• Be able to contribute up to $300,000 ($600,000 for couples) into super, regardless of your work status, super balance or what you’ve already contributed under the ordinary concessional and non-concessional contribution caps.
• Boost your retirement income by starting a retirement income stream.

Case Study:

Bi’nh and Sui-Lee are 77 and 70 and retired. They sell their home on 20 August 2023 after owning it for 12 years and receive $1.2 million. Neither have made a downsizer contribution in the past.

They can both make downsizer contribution of up to $300,000 each ($600,000 in total) as downsizer contributions do not have work test or total super balance limitations. The downsizer contributions won’t count towards the non-concessional contributions caps.

Important things to consider

• Downsizer contributions aren’t tax deductible.
• The contributions must be made within 90 days of settling on the property sale.
• The money will count towards your transfer balance cap if used to start a retirement income stream.
• The money will count towards your total super balance once contributed which may affect your ability to make future non-concessional contributions.
• This strategy may reduce Age Pension entitlements, because your family home is not an assessable asset when calculating any entitlement to Age Pension, however, superannuation is assessable once you’ve reached your Age Pension age.
• You should consider any costs associated with selling your home (and buying a new one if you choose to do so).
• The Downsizer contribution form must be completed and submitted to your super fund before or at the time the contribution is made.
• Other eligibility conditions apply – see the Australian Taxation Office (ATO) website for more information.

Reference: https://www.mlc.com.au/personal/retirement/recent-changes/downsizer-contributions