View Magazine Edition 2

A magazine for Bank of Melbourne Private | 01 Summer 2013A magazine for Bank of Melbourne Private | 02 Summer 2013

Persons of interestPeter Carew’s highly successful law firm is all about people See page 4

Australian Cycling Executives See page 8

Protecting your online identity See page 12

2 | View | SUMMER 2013

Welcome to the second edition of View magazine. First off I’d like to share some news of a different kind. Bank of Mel-bourne Private was recently shortlisted as a finalist in the Outstanding Institution ($1m - $10m) category at the 2013 Austra-lian Private Banking and Wealth awards. These awards recognise Private Wealth providers that offer the highest levels of service and product solutions to clients. This is quite an achievement for such a young Private Bank and we would not be able to realise these achievements with-out our valued clients. I would like to offer my sincere thanks to you for being part of this journey and assure you we will con-tinue to provide you and your family with exceptional personalised service.

I would also like to take this opportunity to share with you some of the accomplish-ments of Bank of Melbourne over the past 12 months. We were pleased to end 2013 on a high note, named Regional Bank of the Year by the Australian Financial Review’s Smart Investor magazine. This award capped off a strong year of growth and success for Bank of Melbourne. More Victorians moved to Bank of Melbourne this year, we expanded our branch net-work across the state to 77 and we contin-ued to support Victoria’s businesses and local communities.

Our commitment to the long-term success of the state has resulted in many productive partnerships in support of iconic events such as the Melbourne Food and Wine Festival, the National Gallery of Victoria’s Asian Art dinner and our partner-ship with the Melbourne Cricket Ground. Also, our relationship with the Victorian Employers’ Chamber of Commerce and Industry continued to build on our mutual goals of supporting Victorian business, and we were delighted to partner with the Herald Sun to produce Agenda Victoria, an initiative involving many of the State’s most influential business leaders.

The Local Project, a partnership with the Herald Sun, provided much needed funding to local community groups and the Bank of Melbourne Neighbourhood Fund identified and invested in innova-tive ideas and organisations that deliver real benefits for the local community. We forged a new partnership with Mel-bourne’s oldest charity, Melbourne City Mission, and helped raise $300,000 to combat youth homelessness with the inaugural Sleep at the ‘G event.

We hope this issue of View offers rele-vant and insightful content on the things that matter most to you. Inside you’ll find the results of our latest High Net Worth Investment Sentiment Indicator, updates on new digital banking technologies and novel approaches to networking on two wheels. Plus, we preview the Lorne Sculp-ture Biennale and a fascinating profile of lawyer Peter Carew.

As 2013 draws to an end I’d like to once again thank you for your ongoing support and hope you have a wonderful festive season and prosperous new year. We look forward to a continued partnership with you in 2014.

If you have any questions or would like to discuss any topic in this magazine, please do not hesitate to contact your Private Banker.

Happy reading,

Jonathan Ayres Head of Bank of Melbourne Private

Jonathan Ayres Head of Bank of Melbourne Private

Welcome

SUMMER 2013 | View | 3

Contents

ViewA magazine for Bank of Melbourne Private Bank of Melbourne Level 8, 530 Collins Street Melbourne VIC 3000

Contact usPhone: 03 9274 4785 Web: bankofmelbourne.com.au/private

6 Cover Story Persons of interest

12 Security Protecting your online identity

8 Profile Riding the business cycles

4 Shore thing

10 Moving with the times

14 Investor sentiment on the rise

16 Purchasing property in SMSF

18 Investment perspective

20 Melbourne’s prestige market comeback

22 Renewed optimism for 2014

Profile

4 | View | SUMMER 20134 | View | SUMMER 2013

Profile


More than 100 of Australia’s best sculptors will display their work and compete for almost $100,000 of awards and commissions during a massive outdoor

exhibition to be held in the seaside resort of Lorne in March 2014.

The Lorne Sculpture Biennale celebrates art-ists whose sculptures reflect both contemporary ideas and the landscape surrounding Lorne.

Three high profile judges have been appoint-ed: Director of the National Gallery of Victoria Tony Ellwood, Director and CEO of the Heide Museum of Modern Art Jason Smith and Heidi Wood, renowned Australian artist based in Paris. They will also award a $75,000 commission awarded by Arts Victoria for an artwork to be permanently sited in Lorne.

The main attraction during the three-week event is the Sculpture Trail where 41 major sculp-tures will be displayed along the coastline from the Erskine River to the Lorne Pier.

Other events include Sculpturspace, where the public can watch sculptors at work, as well as workshops for children aged three to 13 years.

Biennale President Peter Lamell says it’s a great opportunity for the whole family to enjoy art and the beautiful landscape and beaches.

“There are few opportunities to see sculpture out in the open. Add to that, the fact that the Great Ocean Road is one of the tourist destina-tions in Australia, and the many activities associ-ated with the Biennale make it a fabulous family experience,” says Lamell.

Shore thing

‘it’s a great opportunity for the whole family to enjoy art and the beautiful landscape and beaches.’

Photos by Ian Macrae

Profile


Persons of interestPeter Carew’s highly successful law firm is all about people, in the way it manages its staff as much as it deals with its clients. By Steve Packer

Looking back on more than 30 years working in the difficult, emotion-charged area of family law, Peter Carew is typically plain-speaking about his motivations and methods.

“I chose this field because we constantly deal with people, and I happen to like people,” says Carew, the prin-cipal of Carew Counsel Solicitors, a leading Victorian family law firm he established in 1979.

As for family law being an emotional challenge, he says it certainly is for the clients, but not so much for the lawyers, and he draws on a horse racing allusion.

“We’re engaged to be objective, and while we have enor-mous empathy for what people are going through, they don’t come to us to be a jockey. We’re there to train them and guide them in the right direction, to get them through a difficult pe-riod of their lives in the least amount of time and in the most cost-effective way.

“You can’t go home every night for 30 years with your client’s problems on your shoulders. When you walk out the door, you shut it all down.”

Carew’s door at Carew Counsel is in the Marsh Centre, in central Melbourne’s Lonsdale Street. Unusual for a legal prac-tise, the firm’s 15 lawyers and many support staff have a ‘flat line’ management structure. Everyone from the receptionist to Carew comes to a meeting every two weeks where decisions are made collectively.

“The day I walked into my first job, my employer walked out, so in many ways I’ve never had a boss,” he says. “One of the good things that came out of always working for myself is respect for people I work with. I’ve never enjoyed the idea of the ‘how to do it’ being sent down from above. People own change if they’re part of it, and they resist and avoid change if they’ve had no input into it. So we’ve been able to move with the times, but I think we’re unique that way.”

The principle extends to the entire staff going away togeth-er each year so they can sit down to create a strategic plan for the next 12 months. This year they went to Darwin for a long weekend.

“That’s about setting the direction the bus is going in. Then we hand over control to the bus driver – the office manager – who either cracks the whip or dangles the carrot to help achieve the collective goals.

“From my point of view, each month I sit down and review the accounts with the office manager and the accounts man-ager, but it takes no longer than an hour. If you plan well and stick to your plans, and adjust only when necessary – because there’s a strategic reason for doing it – you head in the right direction and maintain that direction.

“These are troubled times for a lot of businesses, but we’ve had growth of nearly 25 per cent for each of the last seven years. I’m very fortunate with the people I work with and what we’ve achieved.”


Carew Counsel Solicitors prides itself on offering services that are personalised as well as professional, and Carew offers the thought that he has experi-enced the same kind of service at Bank of Melbourne Private.

“I’ve been with the bank for about three years and really ap-preciate the personal banking,” he says. “I’m in touch about once a month and it always feels like they know me and my business. The conversations always start with ‘How’s your wife? How are the renovations?’ and I’ve had a couple of phone calls from the bank saying, ‘You have some liabilities and why don’t we fix some of those now, while it’s a good time.’ It’s a caring kind of banking.”

P eter Carew’s 30 years of experience in family law has given him some insights into relationships.

These tips are mainly for people to consider before their relationship gets to the ‘disaster plan’ stage, he says.“If they resonate with you, it’s not too late. There are things you can do to make the relationship better.”

1. Have balance in your life – eight hours work, eight hours recreation, eight hours rest. “Relationships need to be just as balanced. We need to spend time on them,” says Carew.“People often tell me they ‘grew apart’. What they are really saying is that they never made the plan to grow to-gether. “I’m lucky; I’ve learnt from other people’s mistakes. I’ve been married 31 years and intend to stay that way.”

2. If there’s a problem, admit it and get help sooner rather than later. “Often people know their marriage is in trouble, but it’s not discussed and they do nothing about it.”

3. Keep your spouse informed about what’s going on – be it good, bad or indifferent. “A common theme in relationship breakdowns is ‘I don’t know what’s been going on,’ which is really about a lack of trust. Often one person is responsible for managing the finances and the other says they’ll do the other bits and pieces. I don’t think that works.”

4. Don’t give up your career for your partner/marriage. “If I was giving anyone a tip for the longevity of a mar-riage, it would be that both parties maintain their quali-fications. Working and earning adds meaning and pur-pose to life, even if it’s part-time work. And at the end of a broken-down relationship, it’s a factor taken into account when there may be a loading for spousal maintenance.”

5. Be careful how you draft your will. “Traditionally wills used to be: ‘I’ll leave everything to my spouse, and if my spouse pre-deceases me, to my children.’ The difficulty is that there’s no tax planning attached to it.“There’s also no protection if our children have greedy spouses. Where there are inheritances in excess of $200,000 or so, there ought to be testamentary trusts-type wills drafted to protect them from greedy spouses.” 6. Throughout your marriage, keep good records from banks, the tax department, accountants, lawyers, etc. They can quickly clear up disputes and prevent rancour.

7. Never sign your spouse’s signature on a document, no matter how convenient it is. (If you have power of attorney, you use your own signature.)

8. For a second marriage or defacto relationship in particular, get a sensible, quarantining financial agree-ment that doesn’t try to do too much. We are now able to enter into Financial Agreement before, during and after a relationship. Before is like a pre-nuptial; during is like a living arrangement; and after sets out the financial arrangement at the end of the relationship. You should quarantine the ‘crown jewels’ – those items that are singularly most important to you. Many of the Financial Agreements that are challenged have tried to do too much. They set out how much per week and what the percentage division will be. A better way is to protect maybe the matrimonial home, maybe the business or a combination of investments, so they don’t form part of the assets the Family Court can seek to divide between the parties. Other Agreements are challenged because of drafting technical errors, which is why it’s vital to obtain advice from a lawyer who specialises in family law.

9. Understand the grief cycle and the ‘anger’ phase. “This tip is as much for us – lawyers – in dealing with clients,” says Carew.“When a marriage comes to an end, one person is often willing to move on, into their perceived ‘blue sky’, while the other party never saw it coming.

“For most people, the grief cycle takes two years. The first stage is nervous shock for the one who didn’t see it coming: ‘Oh, my God. It’s all my fault. Take everything.’ Then through the sadness phase, they are at least able to work and communicate reasonably well, but if you ask them how their spouse is, they go straight back to the nervous shock phase.

“This leads to the anger phase, which mostly isn’t such a bad thing. I’m not talking about people throwing bricks through windows. It’s about people rationalising: ‘It’s not just my fault. It takes two to tango.’ They often get an-noyed at how they took the blame for it.

“Then there’s the coming out phase.”Some people in the nervous shock/sadness phase will

be in litigation simply to have a form of communication with the partner who has moved on. “So it’s important for us to know where clients sit in that spectrum so we know how to deal with them.”

10. Maintain respect. The reality is that, if there are children in the relationship, you’re going to be dealing with your ex-partner at weddings, parties, christenings, funerals, etc.“It’s important that you leave respect on the table. That way you can look forward to the years to come without thinking ‘Oh, my God – he’s coming,’ or ‘I don’t have to sit on the table with her, do I?’ This can be avoided if people are sensible and pragmatic.”

10 ways to keep it together



Riding the business cycles

The wheels of business and industry need oiling, and nowhere is that taken more literally than in the activities of Australian Cycling Executives (ACE).What started out in 2010 as an informal LinkedIn

group of 20 or so riders has swelled into a power-packed pelo-ton of more than 500 members. They are all senior business leaders – mainly Melbourne and Sydney CEOs, CFOs and the like – whose creed is “Fostering healthy and sustainable business connections via a shared passion”.

They get together for early morning rides followed by sit-down breakfasts where less breathless networking, and presentations by corporate sponsors, can take place.

Former professional triathlete Ryan O’Neill, who founded ACE in Sydney and is well on the way to mirroring that suc-cessful model in Melbourne, says membership spans Austra-lia, into Asia and certain parts of Europe – predominantly the United Kingdom.

“There are members who’ll plan their business travel to fit in with ACE events,” he says.

Members have to be approved, and there are currently about 2,500 applicants waiting to join.

“A lot of people are asking what it takes to be approved,” says O’Neill. “We need to make sure the membership is au-thentic and the people in the group are making peer-to-peer, relevant business relationships. We need to make sure we’re focusing on the key decision-makers responsible for the major strategic initiatives in their organisations.

“Those organisations are typically in the ASX 200, or maybe the 300, and some of the big internationals with a presence in Australia.”

The range of ACE members who like to don Lycra for a per-spiring pedal is remarkable. They include Bank of Melbourne Private Head Jonathan Ayres; Crown Melbourne COO Richard Longhurst; News Corp COO Peter Tonagh; SBS television CEO and MD Michael Ebeid; Transfeild Executive Director Guido Belgiorno-Nettis; Medibank Private Company Secretary Ste-phen Harris; Cash Services Australia CEO David Pegley; and Salmat Limited CEO and MD Grant Harrod.

Ryan and his staff of four are also creating a second-tier group called Australian Cycling Professionals (ACP), for medi-um to high earners who work in the corporate world.

“It’s acknowledging the fact that there are people on a ca-reer path, some of whom will move up into the ACE network-ing and contacts space,” he says.

“The focus at the moment is on making sure the ACE model is working. That its members and corporate partners are definitely getting the value they expect.”

Networking

An increasing number of Australia’s most senior executives are finding there’s nothing like a sociable bike ride for mixing business and pleasure. By Steve Packer | Photos by Simon Francis



Early risersACE’s rides are usually on Fridays, starting at 6am or slightly before. In Melbourne, they are mainly in Albert Park, where they are followed by breakfast at the Carousel Cafe. By 8.30am the networking, speeches and corporate partner presenta-tions are over and participants are heading off into the city to get on with their working day.

“Albert Park is our Melbourne home, if you like,” says O’Neill. “We are also looking at hosting events along Kew Boulevard [in Yarra Bend park] and at one of the function centres nearby.”

He says ACE’s first event in Melbourne, in February last year, was its third ever and reflected the importance of engaging the Melbourne business community.

“We’ve held six events in Melbourne so far – four last year and two this year – with two more scheduled for the remain-der of 2013. And, we are currently working hard to secure the required number of corporate partners to launch a full ConEx-Sus [short for Connect Exchange Sustain] series of 8-10 events in Melbourne in 2014. It will enable us to fully activate our Melbourne community, which is crucial to the development of the ACE model.”

C3 Business Solutions Managing Partner Conrad Bates, who has assisted introducing ACE to Melbourne riders, is an enthusiastic participant of the rides in other cities. He some-times takes his own bike on business trips or hires one if that’s not possible.

“When you’re a bit more relaxed, you’re more creative. Dis-cussions while riding have led to quite a number of business opportunities created and executed,” he says.

There’s a certain rivalry on the road, says Bates (“anyone who is senior in business is naturally competitive”) but the rides are not just for those at peak fitness.

“They’re about 30 or 40 kilometres which isn’t too onerous. They’re about an hour long, so anyone who can do exercise for an hour can go on one of these rides. It’s not hard,” Bates says.

About 60 members usually turn out for ACE’s regular break-fast rides in Sydney. They are broken up into novice, intermedi-ate and advanced groups according to experience and ability.

Sometimes they are joined by young up-and-coming stars such as Lachlan Morton or Rachel Neylan, who, as ACE am-

bassadors, offer training tips and general advice. The execu-tives get to ride with potential champions and the ambassa-dors can make connections with sponsorship in mind.

About 10-15 per cent of members are female, which is some-thing the ACE board has been discussing.

“We want to increase our female membership,” says O’Neill. “At the same time, it’s fairly representative of the number at senior level in the corporate world, which diminishes quite quickly when you consider that they also have to be bike rid-ers. But it’s definitely a focus for us and we’re quietly cheering whenever we get new female members.”

Sudden growthO’Neill founded ACE not long after retiring from elite sport in 2009.

“I was working for a consulting company that had spon-sored me,” he says. “I saw the potential in connecting people around a shared value when I realised how many of my clients were interested in and inspired by cycling.

“Within the first year it grew through a member-get-member model to the point where I said to the members, ‘Look, this is getting bigger than I can handle while I’ve got a day job. I need to look at turning it into generating revenue so I can focus on do-ing it full-time, if that’s what you want. And they said ‘Absolutely’.”

O’Neill is a passionate cyclist who rides almost every morn-ing to keep fit, including at every ACE ride.

“My message to executives who haven’t ridden for many years is ‘Don’t be intimidated. Plenty of people will be slower than you, and they don’t care because they’re still getting fit and connecting.’

“Nothing makes me happier than seeing one of those guys or girls dust off the bike they’ve had sitting in the garage, come along to an event and nervously join the social group. Every single time, they’ve pulled me aside at the end of it and said they really enjoyed it.”

To find out more about ACE, visit www.australiancyclingprofessionals.com

Steve Packer is a freelance writer.

“ The focus at the moment is on making sure the ACE model is working” RYAN O'NEILL, ACE CEO & Founder | Australian Cycling Executives (ACE) +

Australian Cycling Professionals (ACP) + Cycling Strategy Pty Ltd

Technology


Moving with the timesInnovation by innovation, banking on the move is becoming everyday practice for millions of Australians. By Christine Long

Whether or not you consider yourself an early adopter of technology, the way we use money and do our banking is rapidly changing.

Cheques are on the way out, cash is in decline, and entering a bank branch to withdraw money or check an account balance has gone the way of black-and-white television.

Even sitting at a desktop computer to do our banking, or stopping at an ATM to withdraw cash, are becoming less common.

Now we are not only doing our banking on-line; we are doing it on the move.

Market Intelligence Strategy Centre Global reported in June that there are now six-million users of mobile banking in Australia, accounting for almost 10 per cent of digital banking transac-tions by dollar value. Half of all internet banking log-ins in Australia are from mobile phones.

As near-field communication technology becomes more widespread, we are also increas-ingly using our phones to make payments. According to RFI Intelligence, mobile phone owners who had made payments from a mobile banking app, or while shopping online via their phone, increased from 24 to 36 per cent in the 12 months from March 2012.

The tablet is also playing its part in the switch to mobile. We might use our mobile phone at lunchtime, during our daily commute or when we’re on holiday, but tablets tend to be favoured

when we’re at home in the evening, watching television or hanging out with the family.

“We see the tablet as the lounge device, and that’s where we’re looking for a deeper banking experience and being able to do more dreaming and planning,” says Travis Tyler, Bank of Mel-bourne’s Head of Mobile Banking.

Corporate convenienceThe demand for ever-more-convenient banking options is placing digital banking innovation high on the agenda for banks worldwide. And not just for retail customers.

In a survey of 121 large regional and global banks in 45 countries, 43 per cent considered online channel development their top transac-tion banking priority for corporates in 2012.

“Corporate clients, whether they are SMEs or large multinationals, are demanding more sophis-ticated and innovative products from their bank-ing partners,” said the 2011 Misys and Finextra Research Trends in Transaction Banking survey report.

“Individuals who are used to online banking and mobile access with their retail banking accounts are now looking for many of the same services from their corporate relationships.”

As with any innovation, digital developments in banking and payments will be adopted only if they provide better ways of doing things.

BanterMob’s 2013 review of Australian mobile banking applications observed that many of

Technology


them “simply repurpose existing web content and services for mobile rather than adopting a mobile-first, customer-centric approach involving the development of mobile-specific content, products and services”.

Tyler says one of Bank of Melbourne’s ad-vantages in catering to the demand for mobile banking is that the bank was born in the digital age. “We launched through social [media]. I think it would be one of the few banks to have done that. So it’s embedded in our DNA, and so is technology and the way we interact with our customers.”

That foundation has allowed the bank to move rapidly through mobile banking milestones. Initially, with an app that could be used to locate branches and ATMs. Then it gave customers the ability to check balances; then to transact and use the self-service options to open a term deposit, or savings or transaction account, on the spot..

Some of the latest additions proving popu-lar are ‘get out of trouble’ services that permit customers to immediately report a lost or stolen card, or dispute a credit card transaction.

It’s even possible to increase a credit card limit on the go (subject to credit criteria).

“If you do have one of those moments when your card is declined, you can log in and in-crease your limit there and then, put your card back through and finish your purchase,” says Tyler.

MoneyMeter is another tool to help customers when they are shopping and buying. Your Bank of Melbourne account balance can be checked with the swipe of a finger on your iPhone rather than needing to log into the mobile banking app. Tyler says it helps avoid a situation where a card might be declined or there’s not enough money in an account to cover a purchase. Face-to-face interaction

But the future of banking is about more than just the latest technological developments. Bank of Melbourne also recognises that there are times when customers will still want the support of strong relationships with people who under-stand their financial needs.

With that in mind, it is increasing its focus on how its mobile banking options, branch network and specialist staff might interact to ensure customers have a simple and helpful banking experience overall.

“We have millions of logins a month, but how many times are we connecting our customers with the right people at the right time? So we’re looking at a much greater focus on that,” says Tyler.

“We can deliver a lot more value to the cus-tomer by connecting them to the right specialist at the right time.

“When there are highly emotional purchases, such as a mortgage, there will be components that we’ll be able to do online to inform the cus-tomer and help them make a better decision. But in terms of having that face-to-face interaction, that’s still something we can see Bank of Mel-bourne providing in a meaningful way.”

Again, technology will have a significant part to play. The bank is moving towards a future where face-to-face interaction may begin with a conver-sation via teleconferencing before moving into the branch.

“We’re moving that conversation into a cus-tomer’s home. Then, when they are ready, they can come into the branch and continue the conversation.”

Christine Long is a freelance writer.

“ As with any innovation, digital developments in banking and payments will be adopted only if they provide better ways of doing things”


There’s no denying the speed and ease of doing business on the internet or via email. Financial transactions that once required at least one, sometimes several, visits to a bank branch or retail outlet can now be completed on your com-

puter, tablet or smart phone with a few clicks.The simplicity of the process has transformed our lives for

the better, but there’s a downside. Cyber criminals are adept in using the internet to commit a range of scams on people who may think that a clever password is all they need to protect their identity.

Last year, for example, a private banker contacted a client after he noticed that two large transfer requests – worth tens of thousands of dollars – were to be directed to overseas accounts.

The client knew nothing about the transfers and realised his email account had been compromised – fraudsters had hacked the account and sent the transfer requests.

The client was grateful to have avoided a huge financial loss. Many other people haven’t been so lucky.

The rise in cybercrimeCybercrime is simply a “sexy new term for old-school criminal behaviour”, says Warren Day, Senior Executive Leader for Stakeholder Services at the Australian Securities and Invest-ments Commission (ASIC). It’s no different to cold calling scams offering dubious investments that operated since the telephone was invented, “except that now it’s on the internet”.

There are numerous cyber scams, including those that operate by creating fictitious financial products and services. Fraudsters simply produce what appears to be legitimate websites posing as brokering houses or even market provid-ers. They pass themselves off as registered traders and use Google search techniques to push their name up the list of search terms.

Cybercriminals are also adept at identity theft, using person-al information to steal money from bank and self managed superannuation accounts or to obtain credit cards, and hack-ing into email accounts.

Successful fraudsters – many of whom are based overseas – are highly experienced, and once they’ve accessed your funds, it’s virtually impossible to get the money back. By all ac-counts the trend is towards increasingly sophisticated scams since these tend to net these fraudsters the most money.

Research by the Australian Crime Commission has found that high net worth investors are most likely to be targeted by fraudsters.

Day says the profile of a cybercrime victim is typically a university educated professional male in his early-50s.

“More often than not, we’re dealing with people who are very sophisticated investors: doctors, lawyers, senior-ranking professionals, and partners of professional services firms.”

Mitigating riskThere are a number of reasons why high net worth investors are at greater risk of cybercrime. For example, they’re more likely to invest overseas, often for tax advantages or to access investments opportunities not available in Australia. Many pri-vate bank clients also have self managed super funds (SMSF), which ASIC says are now a focus for fraudsters.

In addition, private bank clients typically have more money in their bank accounts, and they often communicate with their bankers via email, says Leanne Herrett, Executive Manager of Group Investigations at Bank of Melbourne.

Security

Protecting your online identity By Ben Power


That’s why Bank of Melbourne Private has such rigorous policies and procedures in place to respond to cyber and internet-based attacks, particularly when transferring money. Herrett says that, while this can sometimes be frustrating for clients, “the reason we do this is to safeguard our clients, their funds and personal details”.

Many experienced investors don’t even believe they’ve been conned, says Mike Holm, Operations Manager at Aus-CERT, a not-for-profit that helps organisations prevent and respond to cyber and internet-based attacks. “They’re told they’ve fallen for a scam and need to stop, but they often keep sending money,” he says.

Socially awareSocial media is another area of concern when it comes to protecting against identity fraud. Cyber criminals use social net-working sites such as Twitter, Facebook, and LinkedIn to collect personal information. That means you should be as vigilant in posting your address, telephone number, and birthday as you would in protecting your personal documents, such as birth certificates, passports and driver’s licence details.

Similarly, be wary of online forms and mailing lists and ques-tion unsolicited contact. Don’t provide too much information and think about how the information may be used. The same goes for questionnaires and mailing lists at events. Those de-tails go onto mailing lists that can be bought by scammers.

And don’t forget that phones are now computers, says Holm. “We’re starting to see phones being compromised as well.”

The only proven strategy to prevent cybercrime is ongoing vigilance, because once you’ve been stung, the damage is often irreparable.

Ben Power is a freelance writer.

“ By all accounts the trend is towards increasingly sophisticated scams”

What to do if your identity has been compromised

Bank of Melbourne Private is committed to protecting you and your accounts from any fraudulent activities. If you believe your identity has been compro-mised or used fraudulently, contact the bank or your private banker immedi-ately. We will investigate steps that will help you protect yourself in the future. For more information on identity takeover, fraud and scams visit our security page http://www.bankofmelbourne.com.au/online-services/security-centre.

1 Ensure your computer has the latest and legitimate anti-virus software installed and ensure you password protect your computer.

2 Do not use the same password – ensure you use a different password for your computer, email account and internet banking.

3 Never share passwords and ensure you change them regularly, especially for important online accounts.

4 Regularly delete emails – emails which contain personal information or attachments that are no longer required should be deleted or encrypted and archived.

5 Do not click on unknown links – if you receive an email from an unknown source do not click on links or open attachments as they may contain malicious software (malware) or ‘phishing’ viruses. Be vigilant of known sources asking for your account or personal details.

6 Secure personal documents – ensure all personal documents are stored in a secure place.

7 Shred personal documents – use a shredder to destroy any documents which contain your personal information.

8 Set up a secondary email account for online shopping and mailing lists and keep it separate from online financial and business activities so it can be changed without disrupting important communications.

9 Always keep a record of personal information you have provided, and to whom.

10For online purchases, only use companies that abide by a clear privacy policy.

11 When making online payments only provide your details through a secure https web address as this confirms the secure nature of data transmission.

11 steps to help protect against cyber criminals

Security


Investor sentiment on the rise

If the results from the July-September Investor Sentiment Indicator are any guide, Australia’s high net

worth individuals are more optimistic than they’ve been in years about their investment opportunities. But which investment opportunities do they like the most?


Profile

Profile


Each quarter, Bank of Melbourne Private and CoreData Research Australia conducts a survey of the attitudes, behaviours, needs

and perspectives of high net worth Australians.The Investor Sentiment Indicator gives you an

idea of what this group are thinking about their investment opportunities. In particular, the survey gauges:

• Expectations regarding the performance of the investment market

• Perceptions of their current financial situation

• Future investment intentions.

In the September quarter (Q3), the overall Senti-ment Indicator rose by 11.3 points to +18.3 – the high-est level recorded since the global financial crisis.

What caused the lift in sentiment?According to Jonathan Ayres, Head of Bank of Melbourne Private, a number of events during the quarter contributed to the dramatic improvement in sentiment.

“Here in Australia we had our equity market hitting a five-year high, our property prices rising, and we had the removal of political uncertainty after an election,” Ayres says.

“Combine that with some of the things happen-ing overseas, such as the US Federal Reserve’s pulling back on its tapering decision and the ongoing economic strength in China, and it was a positive quarter on a number of fronts.”

What are the key indicators saying?The Sentiment Indicator comprises five key drivers: market prediction, household financial security, investment satisfaction, new investment product purchase intention and intention to invest new money into existing investments.

While there were improvements across all key drivers this quarter (see chart below), there is still an overall negative sentiment when it comes to purchasing new investment products and invest-ing new money in existing products.

“Much of the improvement to the overall score is coming from increased satisfaction in existing investments and household financial security – which has no doubt been helped by rising proper-ty prices,” Ayres says.

“But the negative sentiment when it comes to new investment suggests that people are re-

maining cautious, and they’re happy to maintain their current course of investment for the moment.”

This caution is reflected in how people surveyed described themselves. For example, in the Q2 sur-vey, 38.8% of respondents described themselves as risk takers. But in the Q3 survey that percentage dropped to only 21.6%.

On the flip side, the number of people who described themselves as conservative investors increased from 20.7% in Q2 to 32.1% in Q3.

“It’s interesting that more people are seeing themselves as conservative investors now, despite the improved sentiment,” says Ayres. “I think it shows that most people are cautiously optimistic rather than bullish.”

Where are the best opportunities?The new financial year rally of the ASX has seen shares return to favour among high net worth in-dividuals, with the Equities Sentiment Index jump-ing from -15.4 points to +17.0 points – the second highest level in the past two years.

The majority of those surveyed expect the good run of shares to continue in Q4, with 51.9% assum-ing that Australian share performance will improve in the next quarter. Similar positive sentiment sur-rounds the housing market, with 62.4% believing residential property will perform better.

Which will outperform the other? 44.4% be-lieve the Australian share market will outperform residential property in the coming quarter, com-

pared to 31.3% who believe property will outper-form shares.

Among the other asset classes, high net worth individuals are more likely to believe that interna-tional equities and property trusts will perform with greater buoyancy in the next quarter, while they typically assume that the bond market and cash will perform at less attractive levels.

Ayres says a diversified approach remains key for investors looking to increase their exposure to growth assets during the next 12 months.

“While investor sentiment may be improving, management of downside risk remains a key strategy for our clients, and anyone looking to add some risk to their portfolio should do so in consul-tation with their Private Banker.”

-10

-5

0

5

10

Q3 13Q2 13

-20

-10

0

10

20

Q3 12 Q4 12Q2 12

Investor Market Prediction — Better or Worse

0

3

6

9

12

Q3 13Q2 13

Household Financial Security

Existing InvestmentSatisfaction

Purchase New Investment Products

Invest New Money inExisting Investments

High Net Worth Investor Sentiment Indicator

Q1 13 Q2 13 Q3 13

-10

-5

0

5

10

Q3 13Q2 13-10

-5

0

5

10

Q3 13Q2 13-10

-5

0

5

10

Q3 13Q2 13

SMSF


Purchasing Property in SMSF using a Limited Recourse Borrowing Arrangement.

W ith Self Managed Superannuation Funds becoming more and more attractive with Australians, we are now

seeing a tendency for Trustees who are purchas-ing either residential or commercial properties using borrowed funds to help facilitate this. There are limitations though on what assets can be purchased and Financial Advice should be sought to ensure the risks involved are understood, as well as the legal requirements in relation to the acquisition of certain types of property that meet the superannuation law requirements. Under a Limited Recourse Borrowing arrangement: • The asset must be held in trust for the superan-

nuation fund (Fund). The trustee of the trust will have legal ownership of the asset with the trust-ee of the Fund having beneficial entitlement to the asset. The Fund will be entitled to all income and capital growth from the asset. Once the loan is paid out, the legal ownership of the asset can pass to the Fund.

• At the end of the term, the loan will be repaid by:

1. Selling the underlying asset or

2. Making additional contributions over the term of the loan into superannuation and using these funds to repay the loan at maturity or

3. The trustee of the Fund making incremental payments over the term of the loan using surplus income of the Fund and contributions made to the Fund to reduce the principal of the debt. Any residual amount of the debt at the end of

the term can be repaid by redeeming other assets within the Fund or making additional contributions.

• By borrowing to invest, your Fund could benefit from the following:

– Gearing into growth assets can increase the SMSF’s returns over the longer term, in comparison to investing saved funds only. However, this also increases the level of associated risks.

– Provided the borrowed money is used to purchase an asset that is used to produce assessable income, your Fund should be able to claim a tax deduction on the allowable interest expense.

– The Fund may benefit from taxation benefits associated with superannuation. Tax up to 15% will be payable on income and capital gains earned within the Fund, while no tax will be payable on income and capital gains when the Fund is in pension phase.

• Using limited recourse loans will allow the Fund to:

1. Borrow to invest within your SMSF to purchase your desired properties that meet legislative conditions.

2. Limit the potential loss to instalments already paid or the asset the loan is held against as the lender cannot make a claim against the other assets of the Fund.

Jason A Ryan CFP, Dip FP Senior Financial Planner

Bank of Melbourne

SMSF


• Property Purchase in SMSF

• It is imperative that there are sufficient inflows via contributions and rental payments to cover loan repayments, insurance premiums and other relevant costs.

• Gearing is a complex and long term strategy that requires regular review. Part of the review is to consider the Fund’s financial position and the appropriateness of the gearing strategy at least annually.

• Having adequate amounts of insurance is crucial to ensure in the event of death or a serious illness or injury of a member, the Fund will be in a position to pay any death or disablement benefits without having to sell down illiquid or growth assets at inopportune times. Insurance over the asset itself is also important, eg in the event of property damage. It is a legal requirement that trustees of SMSFs consider insurance needs for members of the fund.

• The investment will be held in trust until the loan is paid in full, at which time it will be transferred to the Fund.

• The loan must be limited in recourse and be used to purchase an asset. The superannuation fund will have a beneficial interest in the asset. The asset purchased must be an asset which:

– The Fund would not be prohibited from acquiring (as stipulate in the Trust Deed).

– Would not be considered an in-house asset if it were purchased directly by the Fund

– The Fund maintains the right to acquire the legal ownership of after all the instalments have been paid.

• When considering how you will repay the loan it is critical that you consider the superannuation contribution limits.

• The Fund assets cannot be used as security for the borrowings. Where the lender requires a party (such as a member of the SMSF) to act as guarantor for the limited recourse loan, that party will be liable for any loan repayments should the superannuation fund fail to make an instalment and hence default under the loan arrangement. In order to meet the requirements of the Superannuation Legislation you will also need to waive any right you have as guarantor to indemnity from the borrower (i.e. the superannuation fund). This means you will not be able to recover any amount from the superannuation fund that you become liable for in your capacity as guarantor. These amounts may also be considered as contributions to the fund and assessed against members’ contribution caps.

• Lending criteria will vary depending on the property type (commercial or residential) and Trustee as to whether they are individual or corporate.

• There are costs associated in considering a strategy like this and it’s important to seek advice to understand not only the legal requirement and risk, but also to ensure your current SMSF is allowed under its trust deed to borrow.

Loan Repayments

Limited Recourse Loan

Legal Owner

Investment Income from Asset

Beneficial Owner

SMSF

TRUST

LENDER

ASSET

LimitedRecourseSecurity

Jason Ryan has over 23 years experience in the Financial Services industry. Jason joined Bank of Melbourne two years ago.Jason is a Certified Financial Planner and a member of the Financial Planning Asso-ciation of Australia. He specialises in estate planning, philanthropy, asset and lifestyle protection, SMSF and strategic planning.His philosophy centres around empow-ering his clients to make informed deci-sions and translating his clients financial strategies into action to further drive his clients financial success. Jason also has a firm belief that connecting his clients with teams of specialists at the right time is just as important as the advice he provides.

Profile


Investment perspectiveIf there was any doubt of the inter-connected world of global finance, then recent market activity has surely put that to rest. Even the hint of tapering of quantitative easing in the US has triggered a series of shifts in credit and equity markets around the world. By George Toubia

Global markets incorporate forward discounting so the exact timing of US quantitative easing (QE) taper start is less relevant and the markets’

readiness for the inevitable QE moderation is necessary. Markets have already priced some QE moderation without any action from the Fed. We consider that to be more important than when the Fed actually starts moderating their uncon-ventional easing. US long-end yields are today at circa 1% higher than what they were earlier in the year, global emerging market (EM) bond prices are still 5 full points below their May levels, outflows from multi-year one-way destinations (such as Asia and Emerging Markets broadly) have already surpassed $US 40 billion and vola-tilities in global equity markets have somewhat normalised from the 10% level they were stub-bornly compressing towards. All without actual QE moderation. All this is beneficial for market stability as QE addiction needs to be tempered.

QE taper discussions readily demonstrated which markets had been driven too far on the back of huge flows of cheap money which had largely originated in the US. Economic manage-ment credibility of the US was damaged hugely by the government shutdown and the danger-ous dealing surrounding the debt ceiling.

Pain has been encountered where liquidity flows have exposed crowdedness: using that to your advantage has never been as powerful.

Crowdedness occurs when demand for an asset is such that its valuation is driven outside of nor-mal fair valuation ranges. It is most visible when the inevitable rush to the exit occurs and price rapidly reverses direction.

The most vulnerable markets are those of global market local bonds, global high yield markets followed by safe haven instruments like gold and the Swiss Franc. To highlight the extreme, the price of Brazils’ sovereign 10-year bond succumbed from 125 to 95 dollars in the space of two months. The chart below highlights the eruptive absolute increase of 2% and 4% in the overall yield of the Brazilian and Indonesian 10 year sovereign respectively, while the broader maturity bond index experienced a 1.5% increase

George Toubia BT Private Wealth

Chief Investment Director

Nov-10 May-11 Nov-11 May-12 Nov-12 May-13 Nov-13

JP Morgan Emerging Markets Bond Index Global SpreadBrazil Government – US$10 Year BondIndonesia Government – US$10 Year Bond

2.0

3.0

4.0

5.0

6.0

7.0


in yield to maturity. We expect these wider yield levels (although lower from extremes in July) to become the norm. In addition, we do not believe such current valuations adequately compensate investors on a relative basis.

High Yield Markets Selective mindsetOne of the flow-on effects of risk repricing that we are anticipating is the moderation in the pace of high yield issuance and the increasingly selective nature of capital markets in absorbing issuance. This is part of the differentiation back-bone we expect to start building over time: while credit-worthy companies will continue to borrow at favourable terms, credit-vulnerable balance sheets will now start to face a trickier debt-financ-ing climate with tougher terms.

Corporates with sub-optimal capital structures will have to time their financing needs much more opportunistically from now on. For credit investors, the need to stay extremely selective remains as credit spreads are very tight and

The most vulnerable markets are those of global market local bonds, global high yield markets followed by safe haven instruments like gold and the Swiss Franc.

primary markets start to become very selective in who to rescue.

Adjusting to an inevitable rise in long term yields should be welcomed not feared.In the process, adjusting to a more permanent state of higher volatility, focusing on the im-portance of downside risk management, resist compromising a high investment hurdle and employing differentiated thinking to take advan-tage of misunderstood and overlooked value are some of the requisite tools to navigate this environment ahead of us.

Profile


Melbourne’s prestige market comebackAfter a prolonged period in the wilderness, Melbourne’s prestige property market is well and truly on the comeback trail. By Dr Andrew Wilson, Senior Economist, Australian Property Monitors and domain.com.au.

After a prolonged period in the wilderness, Melbourne’s prestige property market is well and truly on the comeback trail.

A key component of this is the generation of new money buyers and the related prosperity effect on the economy. As

such, price movements in prestige markets tend to be more volatile than in lower-priced markets.

New money buyers typically build their wealth capacity in the stockmar-ket, making it a reliable indicator of the health and performance of prestige property markets and the associated prosperity.

Australia’s capital city prestige markets tend to move in tandem reflecting the underlying influence of generalised national prosperity as reinforced by the impact of stockmarket activity.

It’s no secret that, in line with an underperforming stock market, these properties have been in the doldrums in recent years. And Melbourne top end property is no exception.

BrightonMalvern Middle Park

CanterburyToorak

$2,432,500

$1,957,500

$1,635,000 $1,575,002$1,507,500

Property

Property


There are a number of ways that prestige property market performance and activity levels can be effectively measured. One measure is to examine the price performance of the top ten percent of suburbs by median house price.

The median house price of the top ten percent of suburbs in Melbourne over the September quarter was $1,205,000. This was a rise of 12 per-cent over the previous quarter and an increase of 15 percent over the year. Although median prices in the prestige market have grown strong-ly over the past year, they remain three percent below the previous price peak of $1,250,000 recorded in March 2010.

Coincidentally, the stock market, although currently 20 percent below its previous All Ords peak recorded in 2007, has also improved by 15 percent over the past year.

Another way to measure the performance of prestige property is by the number of suburbs with a median house price above $1 million. Melbourne reported 26 $1 million plus median suburbs over the six months ending in Septem-ber. This compares to 21 over the previous six months and 20 over the same period last year. At its peak over the six months ending Septem-ber 2010, Melbourne recorded 34 suburbs with median house prices above $1 million.

Keeping track of recent sales and accessing price data through sites such as domain.com.au and apm.com.au is the best way to get an idea about how areas are performing and where the activity is happening.

It’s no surprise that most of Melbourne’s prestige suburbs are located in the leafy inner east, inner city and bayside south suburbs. The top five suburbs by median house price over the six months to September were Toorak at $2,432,500, Canterbury at $1,957,500, Middle Park at $1,635,000, Malvern at $1,575,002 and Brighton at $1,507,500.

Of these price leaders, Brighton recorded the most number of sales above $2 million over the six months ending September with 51, followed by Toorak with 41, Canterbury 22, Malvern 16 and Middle Park with six.

The outlook for Melbourne’s prestige market remains bright as prices continue to recover to their previous peaks. Much, however, will de-pend as usual on the performance of the econo-my, particularly the share market which remains one of the keys to future prices growth at the top end of town.

Although economic factors unsurprisingly remain paramount to a sustained revival in the prestige property market, confidence is also as usual a key ingredient.

Confidence in Melbourne’s housing market is clearly on the rise with a resurgent spring market continuing to record levels of buyer and seller activity not reported since the boom conditions of 2009 and 2010.

Auction clearance rate data for Melbourne’s leafy inner suburban housing markets reinforce increased buyer activity in prestige property. The inner east recorded a strong rate of 78.9 percent

over September, the inner south 71.6 percent and the inner city 71.5 percent, all ahead of the overall Melbourne rate of 71.4 percent.

Top-end property in Melbourne’s inner sub-urbs is set to continue to be a beneficiary of solid to strong market conditions through the remain-der of 2013 and into 2014.

For more information and data on the Mel-bourne property market visit apm.com.au

2005 2006

$1 million median plus suburbs

2007 2008 2009 2010 2011 2012 2013

1

5 4 4

14

18 18

11

19

28

34

29

2321 20 21

26

2005 2006

Melbourne Prestige

2007 2008 2009 2010 2011 2012 2013

All Ords

$600,000 0

1000

2000

3000

4000

5000

6000

7000

$700,000

$800,000

$900,000

$1,000,000

$1,100,000

$1,200,000

$1,300,000


Renewed optimism for 2014Though the trading environment remains challenging, post-election optimism has fuelled a sharp spike in business confidence as we look towards a new year. By Steven Wojtkiw

Business confidence


Business confidence


Steven Wojtkiw Chief Economist

VECCI

T he election of a new federal govern-ment coincided with a dramatic rise in business confidence in the September

quarter, with widespread expectations of stron-ger economic conditions over the year ahead despite ongoing tough trading conditions.

The VECCI-Bank of Melbourne Survey of Busi-ness Trends and Prospects revealed that confi-dence in the outlook for the Australian economy strengthened considerably in the quarter, with 40 per cent of respondents expecting stronger conditions in the national economy over the next 12 months. This is a considerable rise given that only 19 per cent of respondents held this view in the previous quarter. The latest survey showed that just 16 per cent of respondents expect further weakness nationally and that con-fidence in the Victorian economy has also im-proved markedly; 32 per cent of respondents ex-pect stronger conditions ahead for the state.

Significantly, this re-newed optimism stands in stark contrast with the current experience of Victorian businesses, which reported another difficult trading quarter in September. Sales were down, selling prices continued to fall and declines in profitability remained widespread. The level of overtime declined, while employment was flat. With the exception of the education, health and com-munity services sector, business performance was weaker across all surveyed sectors, with the building and construction industry experiencing a particularly challenging period.

While renewed longer-term confidence has emerged in the post-election period, it has not yet been sufficient to support further business investment. Survey respondents reported con-tinued declines in investment in both plant and equipment and buildings and structures. Expec-tations for the December quarter, however, are that selling prices, exports and profitability will begin to recover; should this recovery materialise

and continue into early 2014 we may see an investment pick-up in the second half of 2014. At present, there still appears to be excess capacity in many businesses, with 50 per cent of survey respondents reporting that they are not operat-ing at a satisfactory level of capacity.

In stark contrast with recent surveys, regional respondents were particularly optimistic about prospects for both the national and state econ-omies over the year ahead. They also experi-enced stronger sales, exports and selling prices than their metropolitan counterparts in the September quarter.

The positive shift in business sentiment is encouraging, despite the challenging conditions. It is clear that the indecision, policy inconsisten-

cy and uncertainty that marked the previous parliamentary period had a major effect on the confidence of Victorian businesses.

In order to build up the confidence and capacity of the private sector there are five national business priorities: a stronger

economy, raising productivity and competitive-ness, accessing global markets, better function-ing institutions and of course, support for small business. The government are looking to play a huge part in this with delivering its pro-business pre-election commitments, including:

• reducing red tape and cutting the size of government

• restoring the budget to a surplus position over the medium term

• abolishing the carbon tax

• delivering funding for key infrastructure projects, such as the East West Link and Great Ocean Road upgrade.

Steven Wojtkiw

“ The positive shift in business sentiment is encouraging”

Profile


Disclaimer:The views expressed in this publication are those of the authors alone. They should not be otherwise attributed. This publication has been compiled by Bank of Melbourne. Bank of Melbourne Private provides specialised services to customers of Bank of Melbourne. Bank of Melbourne – A Division of Westpac Banking Corporation ABN 33 007 457 141 AFSL and ACL 233714.

The information and any advice in this publication is general in nature and does not take into account your personal objectives, financial situation or needs and so you should consider its appropriateness having regard to these factors before acting on it.

It is important that your personal circumstances are taken into account before making any financial decision and as such, you should seek detailed and specific advice from a suitably qualified adviser before acting on any information or advice in this publication. The information contained herein does not constitute an offer to acquire a financial product. Your individual situation may differ and you should seek independent professional tax advice in relation to your circumstances.

Material contained in this publication is an overview or summary only and it should not be considered a comprehensive statement on any matter nor relied upon as such.

Any taxation position described in this publication is general and incidental to the financial advice. You should consult a registered tax agent for specific tax advice on your circumstances.

While the information contained in this publication is based on information obtained from sources believed to be reliable, it has not been independently verified. To the maximum extent permitted by law:

(a) no guarantee, representation or warranty is given that any information or advice in this publication is complete, accurate, up-to-date or fit for any purpose; and (b) neither Bank of Melbourne nor any member of the Westpac group of companies are in any way liable to you (including for negligence) in respect of any reliance upon such information or advice.

Any outlooks given in this publication may be based on incorrect assumptions or may not take into account known or unknown risks and uncertainties. Past performance is not a reliable indicator of future performance.

This document has been prepared for use only by advisers and clients of Bank of Melbourne Private. While the information contained in this document has been prepared with all reasonable care no responsibility or liability is accepted for any errors or omissions or misstatement however caused. All forecasts and estimates are based on certain assumptions which may change. If those assumptions change, our forecasts and estimates may also change. BOM20321 11/13

14614-0913rr

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