9/02/2018. Building a members pension account under a TBC regime

Transcription

1 Building a members pension account under a TBC regime Jonathan Snead, Head of Portfolio Strategists, Asia Pacific, SSGA Nigel Stewart, Executive Director, Dimensional David Wanis, Portfolio Manager and Senior Analyst, Schroders Chairperson: Peter Hogan, Head of Education, SMSF Association The issuer of this document is DFA Australia Limited (AFS License No , ABN ). This material is provided for information only. No account has been taken of the objectives, financial situation, or needs of any particular person. Accordingly, to the extent this material constitutes general financial product advice, investors should, before acting on the advice, consider the appropriateness of the advice, having regard to the investor s objectives, financial situation, and needs. This is not an offer or recommendation to buy or sell securities or other financial products, nor a solicitation for deposits or other business, whether directly or indirectly. Any opinions expressed in this publication reflect our judgment at the date of publication and are subject to change. Dimensional Advisor Benchmarks Survey All information in this presentation is given in good faith. The information in this presentation is as reported to Dimensional by survey participants. Dimensional has not undertaken independent verification or confirmation of any facts reported to it set forth herein. Dimensional is under no obligation to, and does not undertake to advise the recipient of any changes to any information presented herein of which it may become aware. Dimensional does not accept any responsibility and cannot be held liable for any person s use of or reliance on the information and opinions reported herein. Issued by State Street Global Advisors, Australia Services Limited (AFSL Number , ABN ) ("SSGA, ASL"). Registered office: Level 17, 420 George Street, Sydney, NSW 2000, Australia Telephone: Web: State Street Global Advisors, Australia, Limited (AFSL Number , ABN ) ( SSGA Australia ) is the Investment Manager. This material is general information only and does not take into account your individual objectives, financial situation or needs and you should consider whether it is appropriate for you. Investing involves risk including the risk of loss of principal. There is no representation or warranty as to the current accuracy of this material, and SSGA Australia shall have no liability for decisions based on such information. "SPDR" is a trademark of Standard & Poor's Financial Services LLC ("S&P") and has been licensed for use by State Street Corporation. No financial product offered by State Street Corporation or its affiliates is sponsored, endorsed, sold or promoted by S&P or its affiliates, and S&P and its affiliates make no representation, warranty or condition regarding the advisability of buying, selling or holding units/shares in such products. The whole or any part of this work may not be reproduced, copied or transmitted or any of its contents disclosed to third parties without SSGA ASL s express written consent State Street Corporation - All Rights Reserved ANZ.RTL Expiry Date 30 April

2 Savings Asset Allocation CLIENT PORTFOLIO TBC NON TBC Q1 Objectives change over a lifecycle Volatility is good Sufficient time to recover from market falls through continued saving Volatility is bad Spending locks in losses Age Earning and Saving Approaching Retirement Active Retirement Late Retirement Source: Schroders, For illustrative purpose only. Assumes contributions of $5,000 p.a. from age 25 until retirement at age 65 at which point an income stream of $80,000 p.a. commences. Three return scenarios all with same time weighted average return of 7% p.a. over the individual s lifetime. Green line experiences drawdown at age 45 while red dotted line experiences drawdown at age 65. Both drawdowns enjoy 15% p.a. returns for subsequent 10 years to ensure time weighted returns remain 7% p.a. over the lifetime. Q2 Where are we in the business cycle? Theoretical path of a business cycle Key items Slowdown Recession Recovery Boom GDP growth Slows Bottoms Accelerates Peaks Interest Rates Falls Bottoms Rises Peaks Inflation Falls Bottoms Accelerates Peaks Employment & Wages Declines Bottoms Rises Peaks Aggregate demand Falls Pent up Rises Slows PMI, PPI, Capital Expenditure Falls Bottoms Rises Slows Sales, Profit, Earnings Revision Falls Bottoms Rises Slows Spare capacity Rises Peaks Falls Bottoms Source: SSGA. The information contained above is for illustrative purposes only. Q3 2

3 December 1965=100 March 2000 = 100 Forecast earnings correlated to yearly returns Earnings have been the primary driver of returns in the past year 4 MSCI World 12m Returns vs Forward EPS Growth (%) Dec-04 Dec-05 Dec-06 Dec-07 Dec-08 Dec-09 Dec-10 Dec-11 Dec-12 Dec-13 Dec-14 Dec-15 Dec-16 Dec-17 Forward EPS Growth (LHS) YoY Total Returns (RHS) Source: Bloomberg Finance L.P., MSCI as of 31-Dec Forward PEs are based on Bloomberg estimates. returns based on MSCI World (local currency). Past performance is not a reliable indicator of future results. returns reflect capital gains and losses, income, and the reinvestment of dividends. Q4 Growth and Income Major Asset Classes as at 31 December 2017 Asset Sector Div. Yield (%) Fwd. Earnings Yield (%) Source Asset Sector Yield (%) Source Australian Equities 4.16 (5.57 franked) 6.00 S&P/ASX 200 Australian Gov. Bonds 2.45 S&P/ASX Gov. Bond Australian High Yield Eq (7.40 franked) 6.85 MSCI Select Australia High Dividend Yield Australian Bonds 2.56 S&P/ASX Aust. Bond Global Developed Markets MSCI World ex Australia 6 Month Term Deposit 2.05 CBA for $50k to $2m 1 Global Emerging Markets MSCI Emerging Markets Cash 0.80 CBA Standard Netsaver up to $5m 1 Global High Yield S&P Global Dividend Aristocrats Australian REITs S&P/ASX 200 A-REITs Global REITS Dow Jones Global Select Real Estate Securities Source: SSGA, S&P, MSCI, CBA. dividend yields and forward earnings yields do not include any allowance for management fees 1. As at 25 January 2018 Q5 Historical periods of low real returns 1. US Equities (US$): Years Source: Schroders, GFD 2. Global Equities (A$) Global Equities Hedged Global Equities Unhedged Years 17 Years? Q6 3

4 Drawdown (%) 11.57% 32.29% % 25.15% 9.23% 57.43% 13.05% 10.51% 21.64% 53.62% 32.87% 12.13% 17.41% 4.77% 17.92% 27.99% 23.65% % % 10.66% % 11.99% 13.25% -3.53% 16.45% 26.84% 22.79% 24.27% 16.12% % 38.38% 9.28% % 46.94% 13.36% % -3.67% 13.76% 26.64% 21.67% 23.43% 10.28% % 36.19% 7.11% -5.55% 16.74% 24.54% % 12.87% -8.63% % 19.59% 22.98% 6.73% % 4.66% -5.63% 16.08% 21.54% 10.37% 7.05% 11.73% -9.12% 6.59% 19.48% 17.07% 16.41% 6.63% % % 14.38% 18.06% 6.97% 3.35% 11.72% % % -2.12% % 3.47% 1.69% -9.82% 14.06% 13.03% 6.93% 2.33% 8.02% % 3.23% 10.26% 16.62% 9.07% -7.18% % 2.11% 0.83% -9.94% 9.66% 2.87% 6.13% 2.14% 6.28% % 2.12% 8.92% 6.62% 6.02% -9.53% % 0.77% -1.94% % 6.58% 2.27% 2.69% 0.51% 5.24% % -0.52% 5.62% 5.74% 4.41% % % % % 3.97% -0.76% -3.81% % S&P/ASX 100 (Total Return) S&P/ASX Small Ordinaries (Total Return) S&P Australia BMI Value (AUD, gross div.) MSCI World (net div., AUD) MSCI World Small Cap (net div., AUD) MSCI World Value (net div., AUD) MSCI Emerging Markets (net div., AUD) S&P Global REIT (net div.) Bloomberg AusBond Bank Bill Bloomberg Barclays Global Aggregate Bond (hedged to AUD) Risk is not volatility but drawdown S&P/ASX ASX MSCI World ex Aus + 40 Ausbond Agg Dec-80 Dec-85 Dec-90 Dec-95 Dec-00 Dec-05 Dec-10 Dec Source: Morningstar. Performance is in AUD before fees to 31 December Past performance is not indicative of future performance. Q6 Diversification Helps Take the Guesswork out of Investing Annual returns (%): You never know which markets will outperform from year to year. By holding a globally diversified portfolio, investors are positioned to capture returns wherever they occur. Data is the annual return to 31 December Data used for each asset class is as follows: Australian Large: S&P/ASX100, Australian Small: S&P/ASX Small Ordinaries, Australian Value: S&P Australia BMI Value (gross div. AUD), Global Large: MSCI World, (net div. AUD) Global Small: MSCI World Small Cap (net div. AUD), Global Value: MSCI World Value (net div., AUD), Emerging Markets: MSCI Emerging Markets (net div. AUD), Property: S&P Global REIT (net div.), Cash: Bloomberg AusBond Bank Bill, Fixed Interest: Bloomberg Barclays Global Aggregate Bond (hedged to AUD). S&P/ASX data reproduced with the permission of S&P Services Australia. MSCI data copyright MSCI 2018, all rights reserved. Data provided by Bloomberg. Bloomberg Barclays data provided by Bloomberg. S&P/ASX data copyright 2018 S&P Dow Jones Indices LLC, a division of S&P Global. All rights reserved.. Indices are not available for direct investment. Their performance does not reflect the expenses associated with the management of an actual portfolio. Q7 Investor Feedback Survey: Measuring Advisor Value - Client Perspective How do you primarily measure the value you receive from your advisor? Progress Toward My Goals Sense of Security or Peace of Mind Investment Returns Knowledge of My Personal Financial Situation 35% 14% 23% Q7 Results from Dimensional 2017 Investor Feedback Survey. 4

5 Return Return Objective based approach smooths path of returns Traditional 60/40 approach Time Horizon Source: Schroders. Charts are for illustration purposes only Objective Based approach Time Horizon Q8 Investor Feedback Survey: Retired Client Perspective What is your client s greatest fear about their personal finances? Outliving money Significant loss Not having enough money in retirement Unforeseen expenses 16% 37% 27% 14% Results from Dimensional 2017 Investor Feedback Survey. Q9 Summary NO CONTROL Market volatility timing and individual stock picking Relying on forecasts Speculation Media noise CONTROL Holistic, strategic advice on non-investment issues Diversification asset allocation Trading costs, taxes, and implementation Education Keeping the client disciplined/stupidity prevention Process driven and enduring outcome Q9 5