Investors should recognise political risk
Australian investors need to spread their wealth across different types of investment vehicles to better factor in the uncertain political outlook and its significant role in wealth creation, according to Lifeplan.
Head of Lifeplan Funds Management, Matt Walsh, warned that local investors traditionally associated political risk with foreign countries with unstable governments.
"Recent global events should remind us that every country has a degree of political risk, and Australian investors should now appreciate the impact on markets our own uncertain outlook can have," Walsh said.
"Couple this with ongoing leadership concerns in the UK, the unknown impact of Brexit, and the Trump factor in the US, and political risk is currently a major influence for Australian investors."
He pointed to superannuation, where most Australian had a large portion of their wealth, and how the politicians were tinkering with it, particularly the tax components, as one example of how political instability might directly impact investors.
Therefore, investors should consider other ways of holding assets to complement super, rather than replace it, to diversify their wealth.
He recommended four main vehicles that investors could use when holding assets, other than investing in one's own name, or that of a partner:
- Via family trusts (taxed at marginal rate) or family companies;
- Superannuation (taxed at 15 per cent, or zero per cent in pension scheme);
- Investment bonds (taxed at 30 per cent or less with the imputation system); and
- Companies (at 30 per cent tax rate).
"To reduce the impact of political risk on long-term savings, investors should ideally spread their wealth across three types of vehicle," Walsh said.
AUTHOR
Oksana Patron
Recommended for you
Clime Investment Management has faced shareholder backlash around “unsatisfactory” financial results and is enacting cost reductions to return the business to profitability by Q1 2025.
Amid a growing appetite for alternatives, investment executives have shared questions advisers should consider when selecting a private markets product compared to their listed counterparts.
Chief executive Maria Lykouras is set to exit JBWere as the bank confirms it is “evolving” its operations for high-net-worth clients.
Bennelong Funds Management chief executive John Burke has told Money Management that the firm is seeking to invest in boutiques in two specific asset classes as it identifies gaps in its product range.
