HEWISON uARTERLY• Economic update• From the CEO’s Desk• Multiple Pension Strategy• Five Financial Tips for

Young People

• Have you checked out Hewison Live?

• Introducing Hewison Private Wealth’s Wealth Series

• Future2 Foundation 2012 Wheel Classic

What a tumultuous quarter it has been!

Looking back three months ago, global markets seemed to be gaining momentum. Greece had agreed to abide by the harsh austerity measures put in place by the Euro-zone, China was consolidating its growth and the uS was beginning to pick up steam.

Over the first five months of the year the Australian markets increased by around 9-10 percent with the ASX200 (Australian stock market) peaking at around 4,436 points in early May.

Newspaper headlines were even starting to focus on good news stories, with Australia’s unemployment level around 5.2 percent and inflation around 2 per cent. The media was focusing on when, not if, the Reserve Bank of Australia (RBA) would lower interest rates.

And then on May 6, Greece held its legislative elections and failed to elect a majority Government. This news sent markets into a tailspin with the ASX200 shedding ten percent over the next four weeks as rumors circulated that Greece would exit the Euro.

As we all know, these fears were unfounded and in mid-June Greece held another round of elections, putting in place a coalition government that has vowed to comply with the austerity agreements and remain in the European union (Eu).

During this time, the RBA slashed interest rates by 75 basis points, reducing the cash rate to 3.5 per cent. It is thought that the cash rate may be even further reduced if things in Europe do not pick up over the coming months.

While it would seem Greece has side-stepped yet another catastrophe, they are not the only struggling member of the Euro-zone. Spain has recently asked for a bail-out of 100billion Euros to prop-up its struggling banks.

Is there a solution to the Euro Debt crisis?

While there is no doubt this crisis will sort itself out eventually, there are bound to be more

hiccups along the way. It seems everyone has an opinion on what the Eurozone should do to fix the crisis. While there is certainly no silver bullet, one possible avenue that seems to be gaining momentum is for the Eu to begin issuing Eurobonds.

Eurobonds involve the Eurozone as a whole issuing debt, as opposed to the current situation where individual countries issue their own debt. The problem with individual countries, like Greece, issuing their own debt is that investors demand a high interest rate to compensate them for the risk of lending money. At the moment, investors demand interest of around 26 per cent per annum to lend money to Greece which is clearly not sustainable and is a large reason why Greece needs to obtain cheap funds elsewhere (i.e. a bailout).

Bond yields in other struggling Euro members are quite high with Spain and Italy paying around 6 per cent on their borrowings, compared to Germany, widely considered to be a safe-haven, paying only 1.3 per cent.

The thought behind the Eurobond is that Eurozone members could pool a large portion of their debt, resulting in lower interest rates for struggling countries and allowing them to meet interest payments and not default. While the Eurobond solution has many supporters, Germany in particular is vehemently opposed to the idea.

unfortunately it seems that the Eurodebt crisis will continue to dominate headlines for the foreseeable future. This will no doubt result in uncertainty and volatility in share markets around the world.

While it is impossible to predict what will happen to markets on a day to day basis, we at Hewison Private Wealth continue to take a long term view; choosing to invest in companies that have sound balance sheets and good corporate management and who pay reliable dividends to underpin the cash flow of our clients portfolio’s.

understanding the terms we use

QEconomic update

Eurozone

The collective group of countries which use the Euro as their common currency. The Eurozone came into being in 1999, and originally consisted of 11 countries. As of 2009, 16 countries were part of the Eurozone.

European UnionThe economic association of over two dozen European countries which seek to create a unified, barrier-free market for products and services throughout the continent, as well as a common currency with a unified authority over that currency. The European union was established in 1993 by the Treaty of Maastricht, and was based on the European Economic Community.

Superannuation Taxable ComponentAmounts placed into super before they attracted personal tax and taxed at 15% on arrival into super. At death, these amounts will attract tax of 16.5% before they can be paid out, unless paid to a dependent of the deceased.

Superannuation Tax Free ComponentAmounts placed into super after personal tax has been paid, resulting in no further tax payable. When these amounts are withdrawn from super, no further tax is payable.

Accumulation phaseIs the period of time that a member is amassing a superannuation investment portfolio in the anticipation of funding their retirement at some point in the future.

Financial neWs, our vieWs anD other issues

issue 40 ~ June 2012

story by simon curtain Director/Private client aDviser image by Kym mcleoD

In May we held our annual Staff Conference where our entire team goes away for a two day intensive workshop aimed at improving all aspects of the business, our client service delivery, our personal development and team building.

This latest Conference concentrated on analysing our client value proposition to clearly articulate the values that we see as being our core beliefs and separate us from the general market. From this initial workshop, we then analysed every aspect of the client experience and looked for areas where we could improve the quality of the client experience and aspects we could introduce that would enhance our service offering.

Our process was to divide into 4 break-out discussion groups for each session to report back and compare their views and recommendations. We then focused on the common elements of the groups to arrive at the key outcomes. The consistency and opinions were so aligned it was extraordinary.

It may seem somewhat self-serving to be talking about this, but from my point of view as founder and CEO of Hewison Private Wealth, what transpired at this Conference was quite inspirational and humbling to say the least… and I thought to myself…” if I were a client of HPW, I would like to be a fly on the wall to hear this”.

The group’s findings in respect to client values and the things we see as our core values were consistent and narrowed down to the following key elements – Honesty, Integrity, Empathy, Trust, Results / Performance and Expertise / Professionalism.

Having established a common understanding of our values, we then workshopped the entire client experience from the first telephone call, through to the ongoing service relationship. From this discussion we worked on developing a number of key initiatives that we are confident will improve your experience and satisfaction.

I am proud to work with a group of people who share a common vision of caring and commitment to the well-being of the people who place their trust in us.

From the CEO’s Desk

JoHn HeWison

For those over 55 years of age, it can be beneficial to start drawing an Account Based Pension from your superannuation fund. Major benefits include investment earnings on your pension are not taxed, and concessional tax treatment on pension payments.

In this article, we look at the benefits of maintaining a number of pensions in force at the one time.

The basis for a multiple pension strategy derives from the components of your superannuation benefit. In your fund, your benefit consists of Taxable and Tax Free components. The table below shows the tax impact of these two components when paid out of the fund:

Each member of a superannuation fund starts with their benefit in an Accumulation Account. When a pension is started, benefits are moved from the Accumulation Account to the Pension Account. Once a pension is started, additional contributions or rollovers cannot be made to that Pension Account. The Tax Fee proportion of a pension is fixed for the life of that pension at the original tax free percentage when the pension began.

If you are still working and contributing to your SMSF, and have started a pension, then a multiple pension strategy is likely to be of advantage.

Consider the following example.

Brian is 55 and has accumulated $1 million in his SMSF and plans to continue making concessional contributions to his SMSF. Brian has $550,000 Taxable Component and $450,000 Tax Free Component in his fund.

Brian starts a pension with his full Accumulation Balance of $1 million, which means 45% of his pension consists of Tax Free component. If he draws the minimum pension each year and earns 7% per annum on these funds, then his pension balance would grow to around $1.48 million in

10 years time, of which 45% would still be Tax Free component (or around $666,000).

His contributions, which are all Taxable Component, are quarantined from his pension balance as they remain in his Accumulation account.

To maximise the tax free earnings of his SMSF, Brian could start a new pension each year with the balance of his Accumulation Account. This would lead to Brian having multiple pension accounts in the fund. Apart from his initial pension, all his pensions would be entirely Taxable Component.

The alternative would be to stop his initial pension each year, and re-commence a new pension including the balance of his Accumulation account. This would water down Brian’s Tax Free component each year, reducing the long term tax effectiveness of his superannuation fund.

Once Brian finishes contributing, he could consider combining all his fully Taxable Component pensions into one, leaving him with two pensions through retirement. He would then use the Taxable component pensions for his income, and draw only the minimum from his Tax Free component pension.

story by CHris MorCoM, DireCtor/Private Client aDviser image by alexanDru armin rosu

Multiple pension strategy

Component Pension – aged 55 – 59

Pension – aged 60+ Death Benefit

Taxable Component

taxable & receive a 15% rebate on this amount

not taxable

if paid to a tax dependent – no taxif paid to a non-dependent – 15% tax plus medicare

Tax Free Component not taxable not taxable not taxable

I’m young, healthy and have a mortgage. I don’t need a financial adviser!

Sadly, we hear this from many people who think financial advisers are only for people who have money or are about to retire. But they are wrong; the best time to partner with an adviser is when you are starting out as this way you have someone guiding you throughout life, helping you make the right financial decision time and time again.

Financial Advisers don’t just tell you where to invest your money; they will advise you on a range of topics such as savings strategies, debt reduction, tax minimisation, budgeting, estate planning and insurance to name but a few.

We’ve put our top five financial tips for young people below. Have a look through them as they could help you on the path to a better financial life!

Did you know that Hewison Private Wealth offer a free service for young people looking for a financial health check? If you or someone you know could benefit from speaking with one of our advisers then please contact our office to arrange an appointment. You won’t be sorry!

Five financial tips for young people

story by siMon Curtain, DireCtor/Private Client aDviser

1. KEEP A BUDGET

this is our number one tip for young people. it’s surprising how many people live pay cheque to pay cheque. a budget will help put your finances in perspective and can identify areas where your money is being spent. a budget can be as simple as setting a savings goal and then putting aside a set amount each pay period to achieve that goal. as long as you don’t dip into your savings you know that you will reach your goal over time.

2. PAY DEBT AS A PRIORITY

many young people have a large mortgage in place. There is no financial incentive in having a large mortgage so pay it down as quickly as possible. this will result in paying less interest to the bank which means more money in your pocket!

3. START SAVING FOR RETIREMENT NOW!

retirement may be many decades away but the sooner you start saving for it, the better off you will be. starting early allows you to

earn interest on your savings and then, over time, earn interest on your interest! this phenomenon is known as ‘compound interest’ and was quoted by albert einstein as being the eighth wonder of the world.

in our opinion, superannuation is the best place to save for your retirement. sure you may not be able to access your superannuation until you are 65 but the benefit of a low tax environment coupled with compounding earnings should equate to a larger retirement balance!

4. MAKE SURE YOU HAVE ADEQUATE INSURANCE IN PLACE

you’re young, healthy and indestructible, why would you need insurance? nobody thinks it will happen to them but the sad fact is many young people experience some form of health issue over their lifetime. having adequate insurance in place means that you don’t need to worry about the financial burden of paying the mortgage, or putting food on the table if you are sick or injured. it is even more important to consider insurance cover when

you have a family as what would happen to your family if the bread-winner was suddenly unable to work due to illness or injury? the beauty of obtaining insurance cover at a young age is that the premiums are generally cheaper and it can be easier to get cover.

5. MINIMISE TAX

Nobody likes to pay tax. A financial adviser can partner with your accountant to help put some tax strategies in place. Did you know that sacrificing a portion of your salary to superannuation can save you tax? or that you might be able to reduce your tax burden by taking out health insurance or leasing a car? tax is a complex area and you really do need professional advice to maximise your benefits.

Glenn Fairbairn

DIRECTOR AND PRIVATE CLIENT ADVISER

a) Where were you born? Melbourne

b) Where did you go to school? Nazareth College

c) What do you do for fun? Go to the footy & spend time with family

d) What is your favourite book? Open - Andre Agassi

e) What is your favourite music? Everything

f) What is your favourite food? Asian

g) What is your favourite movie? Bourne Identity Series

h) How long have you been at Hewisons? 10 years

i) Where did you work previously? Godfrey Pembroke

j) Who/what do you admire most? Warren Buffet

k) Who are 4 people in the world you would most like to invite for dinner? 1. Warren Buffet 2. Eddie McGuire 3. Will Ferrell 4. Barack Obama

l) What are your hobbies? Gym, AFL & Travel

m) What is it you enjoy most about your role at Hewisons? Helping clients achieve and realise their dreams

The information contained in this publication is general in nature and not intended as personal advice. Please obtain advice from

your financial planner before acting upon this information.

Nathan Lear is Engaged!Hewison’s Director and Private Client Adviser Nathan Lear recently announced his engagement to Laura. Nathan proposed on the 7th of April at the Park Hyatt following a lovely dinner. Nathan and Laura are currently busy preparing for their wedding which will be in May 2013. We wish them both all the best.

From September 15 - 23 this year, Hewison Private Wealth Director Chris Morcom will be on his bicycle for charity. He is taking part in the Future2 Foundation’s 2012 Wheel Classic…a 1200+ km ride from Sydney to Melbourne. This year’s route will take riders from Sydney to Melbourne via Canberra, Jindabyne, Corryong, Wangaratta, and Bendigo.

The Wheel Classic is a major annual fundraising event for the Future2 Foundation. The Foundation supports the financially under-privileged, seeking to give them a second chance and hope for a better future. In the last four years, Future2 has granted more than $200,000 to grassroots projects helping disadvantaged young Australians.

Chris is aiming to raise $10,000, and is nearly half way to his mark. If you would like to make a donation, please visit http://future2fundraising.org.au/chris_morcom, or contact him on chris@hewison.com.au for a pledge form. More information about the Future2 Foundation can be found at http://www.future2foundation.org.au/

Future2 Foundation 2012 Wheel Classic

Q A Here’s a minute of

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Level 4, 102 Albert Road, South Melbourne VIC 3205P (03) 9682 1900 | F (03) 9682 5999

info@hewison.com.au | www.hewison.com.au

On June 5, we launched the first of an ongoing series of Wealth Forums. The topic of this evening was ‘Young Wealth’ and attracted around 50 attendees. These evenings are short and sharp and will be hosted every 6-8 weeks at our South Melbourne offices. We are partnering each evening with an external voice to provide some added value to attendees. Our first event was partnered by Lola Berry, a well-known nutritionist. Look out for the regular invites via email.

Introducing Hewison Private Wealth’s Wealth Series