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Managing Superannuation Cash Flow in Good Times and Bad

Andrew Hewison
Managing Director
2 Aug 2016

Australian Financial Review journalist Jacob Greber recently wrote an article that piqued my interest. It was titled ‘Glass is still half full, but it’s a tricky brew’ and in it he outlined the Reserve Bank of Australia’s (RBA) difficult task of determining if and when to cut rates again within Australia.

The article was littered with a number of interesting facts and figures relating to global economies, most poignant in my opinion was a comment from the U.S Federal Reserve Open Market Committee saying that the ‘near-term’ risks to their economy had eased, leaving the labour market looking stronger and seeing an increase in spending by consumers.

When defining the local factors that may affect the RBA’s decision making process on rates, Greber said, “those who have built their nesteggs on what used to be a fairly modest assumption of 5 to 10 per cent annual growth, have little option but to cut spending or eat into their capital”. He indicated that it was not an appealing option, and the former would not be likely to have any effect on economic activity, however, I challenge his argument.  

Perhaps, for the average Joe, relying on retail term deposit rates and bonds to generate sufficient cash flow to fund living needs will no longer suffice and has not for some time. However, only last week I created a conservative balanced investment portfolio for a new client that generated gross cash earnings of 6.5 per cent per annum. The portfolio was made up of a very diverse asset allocation including cash and fixed interest (bonds, first secured individual mortgages and hybrids, Australian shares, commercial property, and a small exposure to international shares).

Greber’s comment made me consider two issues in particular:

  1. The majority of retirement options offered by retail and industry superannuation funds, and by many financial advisers, even during more normalized interest rate cycles, are designed to exhaust the client’s capital over their lifetime. In my view that is simply lazy management of investments. With an active and direct investment approach, a portfolio should be able to generate cash earnings of approximately gross 7 per cent, per annum plus growth, depending on the exposure to growth assets.
  1. How many self funded retirees or those approaching retirement are trying to do it themselves, and consequently missing out on valuable advice and guidance from a quality Certified Financial Planner (CFP)?

Many readers of this blog are already Hewison clients and therefore understand how Hewison Private Wealth manages portfolios, however, for those who are suffering the same fate as quoted by Jacob Greber, perhaps it’s time you contacted a Hewison Private Wealth adviser to discuss the alternatives.     

The information provided above is general information only and individuals should seek specialised advice from a qualified financial adviser. Please contact Hewison Private Wealth for more information.


Hewison Private Wealth is a Melbourne based independent financial planning firm. Our financial advisers are highly qualified wealth managers and specialise in self managed super funds (SMSF), financial planning, retirement planning advice and investment portfolio management. If you would like to speak to a financial adviser on how you can secure your financial future please contact us 03 8548 4800, email info@hewison.com.au or visit www.hewison.com.auPlease note: The advice provided above is general information only and individuals should seek specialised advice from a qualified financial advisor. The views in this blog are those of the individual and may not represent the general opinion of the firm. Please contact Hewison Private Wealth for more information.