30 Dec 2021 Year in Review

During what has been a year full of uncertainty and low points for many of us, I believe it’s important to stay positive where we can and reflect on the highlights as we move forward into a new year. To focus on the positive, I wanted to share some of Leo Wealth’s highlights of 2021.

Leo Wealth’s 2021 Highlights:

• As a business, Leo Wealth celebrated its first birthday in July!
• Amber, our administrative assistant, started an accounting internship with MCS Partners and has already smashed through the coursework. She now only needs to finish her work experience to complete her certificate and initial training.
• Lochlan, our financial adviser, became registered with the Tax Practitioners Board, passed the FASEA exam, and became SMSF certified.
• With the help of Marketing Branding Sales, we completed our branding and established an online presence through our website and social media pages.
• We recently surpassed 100 followers on our Instagram and Facebook pages which we were really excited to see.
• We welcomed a number of new clients to our business and to our online content. This is starting to form a great base for ramping up in 2022.

We’d also like to take the chance here to thank our new and existing clients for entrusting us with their personal and financial strategies. We hope that you have a wonderful holiday this festive season, and take some time to relax and reset amongst the celebrations!

We’d also like to say a huge thank you to all our clients who have referred friends and family to our business and allowed us to become a part of their journeys as well. There honestly isn’t a better feeling than speaking with someone and hearing “Our friend highly recommended you and told us to give you a call to discuss our situation”. To us, it means we’re providing the level of service we intend to, and that you feel – as our clients – that you’re seeing the results that you want to see! 

Looking Ahead to 2022!

Some things we’re looking forward to in 2022 will be:

• Completion of a home office in Goulburn, and being able to expand our in-person service offering essentially from Canberra to Newcastle!
• Development of education material covering basic principles to more advanced concepts with real-world examples. We want to make these available to our clients and also look at offering these through free-to-attend, in-person workshops to all.
• As Amber’s obligations to her accounting role increase, we may look to create another administration position available for someone looking to make a start in the financial services sector.

Market Expectations For 2022:

Global and domestic financial markets have seen another year of strong recovery and further growth since the March 2020 Covid lows. The ASX200 has again reached new highs this year and remains above pre-Covid levels, though with some recent volatility caused by the Omicron variant. 

Australian residential property markets (for the most part) remain at an all-time high spurred on by the lack of stock available, creating an ongoing seller’s market.

While peaks and troughs are a part of a strong market, we suggest having some caution as we enter 2022. The RBA official cash rate remains at an all-time low for now, though NAB, Westpac, and CBA have recently increased their fixed home loan rates which may be an indicator of times to come.

Market predictions are always ranging, but historically we have seen share markets (with the exclusion of financials sector) be negatively impacted by rising interest rates. This is because when interest rates are low, the cost of borrowing (i.e. expansion) is cheap. When the cost of borrowing increases, company profit margins become tighter, and those which are valued on a forward multiplier of their earnings, therefore, see a loss in value. Where an actual decline in profit occurs, companies will have less to distribute via dividends and may become less appealing to potential investors as a result. Further to this point, those investors who borrow to invest will see an increase in the cost of doing so and a potential decline in investment income. 

The above is only a quick analysis of historical market reaction and performance, and is no guarantee of future outcome. But it’s important to consider how the market may react to a rise in the cash rate, and subsequently interest rates. While the RBA has previously said it is unlikely to increase official rates until 2024, continued wages growth and inflation may see this brought forward.

One of our favourite Leo Wealth client success stories for 2021:

The meaning of success is a very unique thing that looks different to everyone. 

For one of our clients, we look at what success looked like for them and share one of our most memorable client success stories of 2021. We are particularly proud of what we were able to achieve with this client as not only the client was financially rewarded, but here at Leo Wealth we feel rewarded by helping people reach their financial goals. 

Clients Financial Concern:

Justine* came to me pre-retirement in late January. She wanted to terminate her employment and retire as soon as possible, but wasn’t sure whether it was a possibility. Even though she was ready to cease employment, she felt uncomfortable with the idea of retiring as she was uncertain she had enough capital available to do so.

She also wanted to sell her home and move into a retirement village, and have an understanding of the implications of selling and buying in the current environment.

Building Client Relationship and Trust:

We discussed all her likely net assets (after new home purchase) in detail, and her likely expenses in retirement (i.e. her income needs). We then went through a retirement gap analysis exercise, discussed the likelihood of her ability to access social security, and what reasonable income could be achieved from a risk-adjusted investment portfolio.

We figured out whether the best use of her superannuation would be to establish an account-based pension or to withdraw the capital and use it personally. 

She also had a large sum to be paid out as annual and long-service leave, so we went through the timing implications of that being paid out in the current versus the next financial year.

Tailored Financial Strategy From Leo Wealth:

We established a clear plan to start utilising available cash now to initiate an investment portfolio for Justine.

We looked at the tax implications of retiring in April versus July and worked out that we would save a considerable amount by continuing to work and receiving the final payment in the new financial year. We could then utilise concessional contributions to super to reduce her taxable income for the 2022FY and therefore increase her asset pool for retirement.

We showed how investment income would progressively add funds back into a hub account. She would receive a fortnightly age pension and then receive a transfer of funds from the hub account to her everyday account to make up the difference between the pension income and her expense needs.

We would then continue to review her investments and ensure that the hub account always had enough cash to fund 6 months of transfers, in case of any market decline.

Successful Outcome:

Justine was really happy with the outcome, and just having that clearly laid out strategy and understanding of what happens next gave her an immeasurable level of comfort. She has been able to proceed exactly as we planned for, and we continue to assist Justine with her investments, and generally make sure that she remains comfortable in retirement.

After establishing our initial strategy, Justine’s home sold for a higher price than we planned for. The additional capital has also now been invested, which has meant that we have been able to reduce the overall level of risk in her portfolio to achieve the same required returns. 

Having a conservative strategy in place is advantageous. 

We made a clear and valuable plan based on a lower asset pool, which meant Justine greatly benefitted from the increase in actual assets. 

Adviser: Lochlan Stuhne-Scott 

Are You Ready for 2022?

We feel privileged to have been able to help so many of our wonderful clients create their version of success this year. 

It’s been another year of uncertainty with challenges and hurdles to jump, and it has been incredibly rewarding to be able to deliver much-needed financial security in our clients’ lives.

At Leo Wealth, we take the time to get to know you. Financial advice is not only about investing or growing your money – it’s about how you can maximise your current financial situation to provide security and financial wellbeing for your future.

If you want to achieve your version of success for 2022, we would be happy to help you on the way!

Book an appointment today!

*all client names have been altered for privacy reasons