Economic Update December 2016
Media Release | “Compare the Dealer Groups” sees Infocus shine
The Infocus Group has come out a clear industry leader in its support model for Advisers, based on the latest Benchmarking Study undertaken by independent consulting business Comparator, part of the CoreLogic Group.
The report, “Annual Business Performance Benchmarking Study for Financial Planning Businesses”, conducts detailed comparative analysis of the business performance of 7 banks, 6 salaried advice businesses, 11 Industry Super Funds, 10 telephone / digital advice providers and 22 dealer groups.
For Infocus, the results showed the relentless focus on helping Advisers grow revenue, increase efficiency and effectively manage risk in their business is paying dividends. Across the 26 categories identified by Comparator, the Infocus Group provided leading services for Advisers in 25; demonstrating a high quality full service Dealer Group offering for our Advisers.
Advisers licensed through one of the Infocus Group’s two AFSL holders (Infocus Financial Advice and PATRON Financial Advice) grew their revenue significantly in this period. This bucked the Dealer Group industry trend identified by Comparator, where Adviser businesses on average lost money in the last 12 months. The Infocus Group have achieved these positive results through listening carefully to Advisers and delivering continued investment in people and technology, maintaining a sharp focus on delivering on Adviser needs.
Rod Bristow, Managing Director and CEO of the Infocus Group, said “We are over the moon with these latest Comparator report results. This independently verifies what we already know – that Advisers licensed through the Infocus and Patron AFSLs are leading the industry in terms of the sustainable growth of their businesses in the face of a challenging operating environment”.
“We know the advice businesses that are working in partnership with us to grow revenue, increase efficiency and effectively manage risk will be the industry leaders in years to come. Congratulations to all of our Advisers who continue to embrace industry change and work toward delivering quality advice for Australians from all walks of life”, Bristow said.
For more information, contact Rod Bristow, Managing Director and CEO, Infocus Wealth Management, 1300 463 628 or visit www.infocus.com.au
United States (US) Election
By Ron Bewley*. Brought to you by Infocus
Just like with the ‘Brexit’ referendum, when the UK population voted on July 23rd to leave the European Union, Donald Trump came from nowhere in the polls to pip Hilary Clinton at the post and become President-elect of the United States of America. So what will a Trump administration mean for the US economy and the world? And how did the polls and commentators get it so wrong, again?
The market has already spoken. Trump was looking like a lost cause a couple of weeks before the election. Then the FBI announced it was re-opening the ‘email scandal’ concerning Clinton’s use of a private server. Wall Street fell for nine successive days making it the longest losing streak since 1980! The last 10-day losing streak was in July 1975. Over this run, Trump had been closing in on the polls which contributed to the slide – but then the gains in Trump’s perceived fortunes levelled out. A Clinton victory seemed done and dusted when the FBI concluded its findings with no further action required – so markets bounced strongly for the two days leading up to counting the votes.
But the important thing about this market slide is that it was orderly. The S&P 500 only fell 3% over this nine-day period of losses and it was only 5% off its all time high in mid-2016! The vote counts started to come in while our market was open on Wednesday 9th – and the US market was closed. After an initial solid rise at the open, our market started to tank when Trump seemed to have an outside chance. And then the Trump landslide gained momentum and our market fell from about 5,315 at noon to 5,050 at 2:30 pm (nearly 5% down) before bouncing back to close at 5,157.
At one point, the S&P 500 futures, which also trade while the cash market is closed, was down 5% around midnight New York time. At that point Carl Icahn, the legendary businessman and Trump supporter, is said to have left the Trump party and went home to take off some hedging trades! He claimed on Bloomberg TV afterwards that the fall in the futures had looked so overdone he had to take some financial advantage from it.
Prior to the elections, no leading forecaster had predicted more than a 3% to 5% fall on an unlikely Trump victory so Icahn’s move showed no special insight. The information was open to us all. When Wall Street opened at 1:30am AEDT, the market was mixed. It was up a little, then down a little at first. But the S&P 500 was then up strongly and closed up +1.1%. How can this be? A strong three-day winning streak straddled the election results!
Markets often over-react when the unexpected is thrown into the mix. It seems like it was Trump’s acceptance speech that did a lot to calm nerves and propel the markets higher. The divisive Trump from the campaign trail was not on the stage. Instead the calm, Presidential, Trump gave the speech and he started talking about a united future – one in which he will focus on infrastructure.
Roughly paraphrased, Trump said “The US will again have the best railroads, roads, airports etc. We will double growth to 4% per annum. We will create many new jobs.” Importantly, he will have the House of Representatives and the Senate onside. The Republicans won both chambers. Unlike Obama, who had to fight every step of the way to pass bills, Trump should find passing his bills a lot easier.
So are there two Trumps – one to fight tough to win against a formidable opponent and another conciliatory Trump to rule?
It is unlikely he will be able to stop his off-the-cuff one liners that make some cringe but one-liners do not make bills that go before the Congress. He will no doubt assemble an administration team of great quality and it will be those people who translate Trump’s thoughts into policy documents.
There may well also be overshooting in the markets on the upside. Trump does not take office until January and it takes a long time to appropriate infrastructure funding and even longer to build it. But markets are forward looking. They won’t wait for the infrastructure to be built before investors buy stocks. And different sectors will behave differently. Many stocks in companies that are aligned in the Trump infrastructure direction rose in double digits the day after the win. Some stocks lost.
His forecast of 4% economic growth per annum looks unachievable in the long run but in the odd year? Possibly. But a good infrastructure programme could make the end of the so-called ‘new normal’, with the old normal returning to centre stage.
No doubt a Trump victory will affect The Federal Reserve’s (Fed) interest rate policy. We – and many others – were thinking that there would be a very gradual increase in US rates – possibly only three hikes over the next two years to just over 1%. But if the economy is to rip, they will have to tighten much faster to contain inflation. The question now is when will the Trump effect start to emerge? The Fed would be foolish to pre-empt the Trump effect but market rates have already moved. There was a big surge in US 10 year government bonds in one day. There will be more to come.
Before the election, a sizeable portion of the market was factoring in a possible US recession in the next few years. The official Fed forecasts for growth were between 2% and 1.8% for each of the next two to three years. While Trump’s 4% growth may not be achievable in the long run, a recession anytime soon seems to be off the table.
Is there a downside? If we focus just on economic and not other policies, some degree of protectionism in trade is likely. The problem with economic theory (or at least one of them!) is that it talks about the representative person being better off with free trade. The average person might feel fine but those further down the food chain might be a lot worse off. And, as Clinton found out (and the pro-European marketeers in the UK) the representative person doesn’t vote. In countries where voting is not compulsory, people passionate for change are prepared to queue up at the polling booths to have their say.
So why did the media and the polls get it so wrong? People interviewed on TV are not drawn from the population with any reference to the differences in opinion over the whole population. Interviewees predominately have good jobs and nice suits. There are far more people who go to work not wearing a suit than those who do. And the unemployed are probably not usually wearing suits either. It is quite likely the people who feel worse off under current governments around the world probably watch the suits being interviewed – and that might make their disenchantment all the more stronger.
The polls are carried out by statisticians. It might surprise you to find the size of the population has little effect on the accuracy of the poll – in theory. So an opinion poll looking for political views in Tasmania would have the same sample size as one in New South Wales – or, indeed, in New York!
Some of the main US polls were based on a sample of 1,282 people to give a ‘margin of error’ of 2.7%. That means that the pollsters do not claim a lead is significant when it is only one or two per cent. To halve that margin of error, statisticians know that you need to quadruple the sample size. That means four times the cost and probably a lot longer in time to get the poll completed. But this aspect of sample size choice is not the main culprit in this polling inaccuracy story.
The statistical theory on which the sample size construction is based assumes that the population is homogeneous.
That is, there are no factors determining how people vote across the different demographics. If there are differences, the statistician should ‘stratify’ the sample. That is the proportion of women in the population should be reflected in the proportion of women in that sample. While the pollsters might pay some attention to gender and age, they can’t possibly take into account all of the important factors.
There is a classic case of a telephone poll many decades ago when the prediction turned out to be really bad. Somebody pointed out after the election that the majority of potential voters for the winning party didn’t have a telephone! But, even if modern pollsters took account of many factors, that sample of 1,282 would mean there would only be a handful of people in each classification.
If there were only seven categories of voter types (of equal proportions) such as gender, age, job, education, etc there are 128 combinations (two to the power of seven) of voting characteristics. So, in a country of over 350,000,000 people, what accuracy do you think you would get from a sample of 10 people (=1,282/128) in each cell!
And another important point concerns the secret ballot. Until the mid nineteenth century, ballots were not always secret and intimidation was often used to sway an outcome. How many times have you had to show your hand to vote at work and felt uncomfortable at stating your real point of view? The so-called ‘Chartists’ in England put a six-point plan to government to ‘clean up’ the voting process. We now have proper secrecy in expressing our political opinions both here and in the US, UK, etc.
Our experience has been that seemingly supporting Trump was a social no-no in professional circles. Many people didn’t like either candidate but discussion often seemed to be – well Clinton at least can do this and that. “You couldn’t vote for Trump, could you?” Apparently (from Bloomberg TV) there was a massive swing of 12% in what white collar, college educated voters from the polls to the booths in one survey.
But did Clinton offer the same purely economic view as Trump? Certainly not! Is Trump’s view better than Clinton’s? That depends on your politics and your circumstances – and the voters decided what they wanted in a democratic way. Will the US be better off with Trump? We can never know because we cannot run a parallel universe with a new President Clinton. Success is all about what bills are formed and which bills are passed through Congress. Just think back to the Obama administration.
It is very early days to evaluate a Trump administration as there is no clear policy document – as we would have. We don’t even know if some of his proposed ‘policies’ were purely for the theatre of it. But it would now seem that a Trump world could be good for Australia. Better growth in the US usually spills over to us and others. Isn’t it a shame we don’t have a big infrastructure program that passes through parliament to give us that injection of hope?
We plan to provide economic updates as actual policies become available.
*Ron Bewley (PhD,FASSA) – Director, Woodhall Investment Research
Important information
This information is the opinion of Infocus Securities Australia Pty Ltd ABN 47 097 797 049 AFSL and Australian Credit Licence No. 236523 trading as Infocus Financial Advice and may contain general advice that does not take into account the investment objectives, financial situation or needs of any person. Before making an investment decision, readers need to consider whether this information is appropriate to their circumstances.
Media Release | Leading Advisers Rewarded at iCON16 Annual Conference
The Infocus Group’s annual conference, iCON16, was held in Singapore last week. In addition to celebrating the successes of the leading businesses providing quality advice across the Infocus and Patron AFSLs within the Infocus Group, iCON16 also raised nearly $18,000 for Infocus’ chosen charity, Beyond Blue.
Rod Bristow, Managing Director and CEO of the Infocus Group, said “What a great conference! The iCON16 themes of change, transitioning from an industry to a profession and delivering quality advice really resonated. Our advisers have worked hard in the last few years, adjusting to these themes and continuing to deliver great outcomes for their clients. It was nice to pause, reflect and celebrate these great achievements”, Bristow said.
“It was also wonderful to see the generosity of conference attendees in supporting Beyond Blue and the amazing work they do in providing information and support to help everyone in Australia achieve their best possible mental health, whatever their age and wherever they live”.
The Outstanding Adviser Award for the Infocus AFSL was awarded to Amanda Doyle from Infocus South Perth. Receiving the Award, Amanda said “It was with great pleasure that I received the outstanding adviser award for the Infocus licensee. This past year has been a steady stream of having the honour of assisting all sorts of new clients with a vast array of needs and objectives. For the first time in many years I conducted a client survey and it was extremely rewarding and uplifting to read the responses of the individual clients and to know that I have had a positive impact on their lives and will continue to do so with frequent contact going forward.”
For the PATRON AFSL, the recipient was Kaylee Garden from Garden Financial Services. Kaylee said “I am proud to accept the Outstanding Adviser award for Patron for 2016. We are part of one of the most fast-paced industries when it comes to change. As advisers we need to accept this and move with the times but above all else the client’s best interest must come first. We are most proud of the continuing effort our team at Garden Financial Services put in to provide our clients with exceptional customer service.”
The Leading Advice Businesses across the Infocus Group were also recognized at iCON16. Chosen by the Infocus Group Senior Leadership Team, twenty of the more than one hundred business owners across the Group were recognized for operating businesses that are future-focused and growing sustainably, delivering quality advice and outstanding customer service. A full list of the Infocus Group Leading Advice Businesses is included in the release.
For more information, contact Rod Bristow, Managing Director and CEO, Infocus Wealth Management, 1300 463 628 or visit www.infocus.com.au
A full list of the iCON16 Adviser Award winners is as follows (with image attached below):
Outstanding Adviser Awards
Award | Criteria | Awarded to
PATRON AFSL |
Awarded to
Infocus AFSL |
Outstanding Adviser Award | Adviser that delivers high quality advice and exceptional client service | Kaylee Garden
Gardens Financial Services |
Amanda Doyle
Infocus South Perth |
Outstanding Team Member Award | Team Member who provides outstanding support to ensure their advisers continue to succeed | Karen Benchrif
D W McNeice & A R McNeice |
Sam Young
SLG Financial Services |
Dealer Group Award | Adviser who is recognised as leading their business in the transition to a profession | Harry Garden
Garden Financial Services |
Rob Hutchison
WA Wealth Managers |
Excellence in Business (Growth) Award | Growth in overall business revenue while maintaining quality advice | Shivi Malik
Provida Finance |
Adam Woodhouse
Infocus Cape York |
Excellence in Business (New Business) Award | Growth in new business while maintaining quality advice | Scott Malcolm
Money Mechanics |
Neil McCoist
Infocus Brisbane (Brendale) |
Excellence in Service Award | Consistently high standards of client service, measured by client feedback | Stephen White
Lombard Private Wealth |
Jamie Panelli and Ayesha Brine
Infocus Norwood |
Excellence in Professional Standards (less than 2 years with the AFSL) award | Delivery of high quality advice | Reg Sheridan
Sheridan and Associates |
Emma Brooke
GTC Financial Services |
Excellence in Professional Standards (more than 2 years with the AFSL) award | Delivery of high quality advice | Herbert Tomaschett
Equity Resource Financial Planning |
Gavin Rogers
Infocus Mackay |
Rising Star Award | Best new adviser to the group | Daniel Corbett
Full Financial Advice / King of the Mountain Financial Advice |
Tom Graham
SLG Financial Services |
Infocus Group Leading Advice Businesses 2016/2017
Leading Advice Business | Business Owner |
Patron AFSL | |
Chan & Naylor Australia Financial Planning | David Hasib |
2M Financial Group | Jon Francis and Geoff Maunsell |
Garden Financial Services | Harry Garden |
Planning for Success | Sean Prosser |
MLS Financial | Michael Schembri |
Paul Larby Financial Services | Paul Larby |
Elevate Finance | Matthew Skehan |
Nest Egg Financial Planning | Andrew Brown |
Infocus AFSL | |
Infocus Adelaide (Norwood) | Jamie Panelli and Ayesha Brine |
Infocus Perth (South Perth) | Amanda Doyle |
Infocus Brisbane (Queen Street) | David Bentley |
Infocus Sydney CBD | Jeff Braysich and Bill Savellis |
Infocus Perth (Nedlands) | Geoff Bird and Martin Harkness |
Business and Wealth Partners | Rod Baker |
Prosperity Partners | Danielle Jones-Ballard |
Pennywise Investments | Jeff Glossop |
Infocus Sydney (St Leonards) | Jane Ridder |
Infocus Brisbane (Capalaba) | Peter Hansen |
Infocus Brisbane (North Lakes) | Colin Kehoe |
WA Wealth Managers | Rob and Dayle Hutchison |
Economic Update November 2016
The Big PictureLast month we reported that Australian economic growth surprised with a more than solid +3.3% for the year. This month we can add that United Kingdom (UK) growth came in above expectations at +2.3% for the year – in spite of prior concerns about the negative impact of Brexit. United States (US) growth rounded off the month with a much better than expected +2.9% while the European Union (EU) delivered a more modest, but most welcome surprise on the upside, +1.6%.
China came in again at +6.7% growth but the partial indicators of Retail Sales and Industrial Output backed-up the story. Other indicators were even stronger.
ChinaChina continues to pump out strong statistics on its economy. Of course some just say the numbers are fudged but there is increasing support from a number of independent sources to suggest China is even stronger than the official figures suggest!
EuropeThe UK has not imploded after the Brexit vote. We never thought it would. Sensible discussions are taking place about the best way to exit – and not if they should exit. It is nice to see a mature political debate.