The 18^th president of the United States and the Commanding General of the Union Army, Ulysses S. Grant, spent the final year of his life in a desperate race to write his memoirs. Complaining of a sore throat in the summer of 1884, Grant delayed seeing a doctor until mid-autumn where it was confirmed he was suffering from throat cancer.

Grant completed his memoir on July 5, 1885, and died five days later. The book was a financial and critical success. Thanks to a 70% royalty contract offered by Mark Twain, Grant’s widow received around $450,000, a considerably large sum of money for the 1800’s.

What prompted this race against time? Grant was broke and feared leaving nothing for his wife. Surely, such a notable person would have accumulated some wealth into his seventh decade? Yes, but Grant had invested $100,000 into a brokerage run by his son and his business partner, Ferdinand Ward.

Unfortunately, Ward was a scoundrel and running a ponzi scheme through the brokerage. Happy with their initial returns, the Grants’ due diligence was sorely lacking, and when Ward told Grant Sr they were experiencing some funding difficulties, Grant borrowed another $150,000 to keep the business going. It failed regardless, setting off a financial panic which prompted bank runs and failures across New York.

As this short slice of history illustrates, bank runs aren’t new, or even rare in the US. There have been over 450 bank failures since 2008, with 2018, 2021 and 2022 the only years in recent memory not to see a bank failure in the US. Back a little further, during the savings and loans crisis of the 1980’s and 90’s, over a third of savings and loans associations went under.

Back then it was a combination of poor risk management, deregulation, and fraud. The 1980’s was characterised by high inflation and swift increases in interest rates. Many savings and loans institutions had issued a lot of longer-term fixed rate loans that ended up being lower than the cost the institutions could borrow at, and they couldn’t attract enough savings to cover shortfalls.

In the case of the Silicon Valley Bank collapse seen in recent weeks, the bank had put cash into longer term bonds at low rates which then lost value when interest rates sharply increased. When depositors came calling, there wasn’t going to be enough money to pay them out. Another risk was it served a specific industry with large deposits. The news spread fast among the tech industry that confidence was gone and money was being withdrawn, meaning the bank was terminal very quickly.

The other two banks that failed in the US, Signature and Silvergate, were both friendly to the cryptocurrency space. There have been suggestions that regulators had no problem closing the banks as a warning to other banks to keep away from cryptocurrency business. Investors can come to their own conclusions, but it may highlight how governments view cryptocurrencies.

At Credit Suisse, confidence had been low for some time. It had been hit hard by losses suffered through the collapses of Archegos Capital Management and Greensill Capital. Ongoing speculation saw many wealthy depositors pull money and deposits fell 40% last year. When its largest shareholder, the Saudi National Bank said they weren’t tipping more money in, it became a code red situation and $10 billion in deposits were pulled last week. While the Swiss National Bank was prepared to provide liquidity, regulators pushed the other notable Swiss investment bank UBS into acquiring Credit Suisse to stem further problems and restore confidence.

Confidence means a lot in banking.

Confidence also means a lot in financial markets. Things that seem unusual occurring in financial markets can prompt some concern. What should investors do in response? As always: nothing. Sometimes that’s easier said than done, but having some knowledge at hand is always useful. Here are some things to know and understand.

Rough Financial Conditions Mean Bad Returns?

Not necessarily.

One thing worth remembering is riding out a concern or crisis can mean decent returns over the long term. The issue is investors may have to take a few kicks in the teeth to get those returns. Discipline and patience are essentially a mouthguard that allows an investor to stay in the game. Not wearing a mouthguard often means an expensive lesson, sitting out the second half of the game when the returns show up.

The 1980’s are an example. They were chaotic. Inflation was high. As noted, the US was going through the savings and loans crisis. There was a recession in the early 80’s across much of the west. The S&P 500 in the US had a return of 12.45% per annum after inflation for the 1980’s. Like any other decade there were rough periods and 35% of months in the 80’s saw a negative return, but that’s quite common.

In Australia the ASX All Ords delivered a 9.39% per annum return after inflation for the 1980’s. As in the US there were rough periods, with 35% of months also in the red.

It’s important to highlight the negative months so investors are aware, but on the flip side, 65% of months were positive across the 1980’s. That’s where the growth comes from. Waiting and being there for the majority of months in a decade that are positive.

The Guy Who Predicted the Last Thing

The moment there’s some market volatility or the hint of something serious afoot in the financial world, eyes quickly turn to someone who might have predicted something previously to see what their insights are.

The problem is all these people are akin to the boy who cried wolf. The wolf turned up one time, meaning they got one forecast right and they’ve continued to dine off it with further crisis predictions. Unlike the fable, no matter how many times these people cry wolf, the media still platform them and plenty of people still listen to them.

Assuming motives are pure when there is money to be made can also be a mistake. Attention doom can pay well. Giving speeches to financial institutions, industry bodies and investment conferences is often an unseen, but lucrative business. Quite often someone is trying to get headlines for whoever has them speaking that month or a product they’re launching.

Then there’s those who may have a trading position they want to pay off. The case of hedge fund manager Bill Ackman during the initial Covid outbreak illustrates this. Ackman famously phoned into CNBC, in tears, suggesting hell was coming and the USA would cease to exist. No surprise Ackman was short the market at the time and betting it would fall. Arguably, his whole goal was to incite further panic to ensure his trades paid off.

Ackman’s hedge fund made $2 billion from the market falling during the initial panic, before promptly changing his position and buying stocks again. During the Silicon Valley Bank failure Ackman appeared on social media proclaiming regional American banks were all potentially on the brink. After his Covid performance, many speculated Ackman was again playing an underhanded game to spook investors and ensure his trades paid off. His true intent will be revealed next time his hedge fund reports. Unfortunately, there’s no way of dealing with people who want to shout “FIRE!” for their own benefit.

Our suggestion to deal with such predictions is google. You can take the power back and check out someone’s record. Enter their name and various years and see what comes up. They’ll likely have a record of misses or dubious behaviour going back years.

Finally, remember the majority of market selloffs start outside the financial world. A volcano in Iceland, airplanes hitting tall buildings, a war, an earthquake, a tsunami, a nuclear reactor melts down, a pandemic. No one forecasts those.

The Crisis Vacuum

One of the strange things that occurs with a predicted crisis, potential crisis, or actual crisis, are the assumptions that are made about it. There have been a lot of doomsday scenarios made over the years and they often leap from a potential problem directly to the forecast disaster. The assumption is any potential problem will occur in a vacuum. Problems will begin, and continue to cascade, while those with any influence will remain hands off and won’t lift a finger to respond.

The actions of Central Banks and large commercial banks in the US and Switzerland in the last few weeks underline how wrong this is. Problems weren’t left to fester. Swift action was taken and those in charge will continue to ensure liquidity and support is available in the system.

A notable example of vacuum and response was Kerry O’Brien interviewing economist Steve Keen on The 7:30 Report in October 2008. Keen laid out how bad he thought things were: Australia was on the brink of disaster and the housing market was in trouble. It formed the basis for O’Brien’s interview with PM Kevin Rudd on the program the following night. O’Brien was wound up about the state of the world economy and the frightening implications for Australia, peppering Rudd on national TV with Keen’s concerns about debt levels and the housing market.

Two days later the government announced a bank wholesale funding guarantee and a deposit guarantee. The next week they announced a large stimulus package focused on pensioners, families and first home buyers. Steve Keen is often derided as a fool in real estate circles because none of his doomsday scenarios came true, but ironically, he may have played some role in ensuring the government acted swiftly to ensure his predictions didn’t come true!

Are You Covered?

Australia’s Financial Claims Scheme covers amounts up to $250,000 held in authorised deposit taking institutions (ADIs). A list of ADIs can be found here. One thing important to note is what constitutes an ADI, for example Westpac also has St.George, Bank of Melbourne and BankSA operating under its license. If someone has one million dollars split evenly between those four banks, only $250,000 would be covered because it is considered one ADI.

This would be a consideration in the event of a property or asset sale. Someone may have well above the $250,000 limit sitting in cash for a period, so knowing where that money is and isn’t covered will be important.

Non-bank lenders are another consideration. These are not ADIs and do not take deposits, but they may offer an “offset account” type product attached to a mortgage. For anyone who has a mortgage with a non-bank lender and has money sitting in one of these “offset accounts” it’s important to read the fine print regarding these products. One non-bank lender’s “offset account” is accompanied by the following disclaimer:

Please note the ‘offset’ is a sub-account of the loan and not a separate deposit account. As such, the funds in the ‘offset’ are not covered by the government guarantee for deposit accounts.

Cash within superannuation is another consideration. This may be the first time you have heard this, but cash sitting in superannuation is almost not covered by the deposit guarantee. Firstly, some cash options in super funds are actually short-term money market securities and some short-term bonds, not deposits, so these are not covered at all. In the case of actual deposits, we’ll let Macquarie explain from their Super & Pension Manager II Product Disclosure document.

The Wrap Cash Hub is a deposit held with MBL by the Fund’s custodian, which forms part of your Super and Pension Manager II account. Your interest in the Wrap Cash Hub will not be directly protected by the Federal Government’s Financial Claims Scheme. You may have a pro-rata entitlement to the Fund’s aggregate cap amount of $250,000 per deposit account per authorised deposit taking Institution (ADI). However, this entitlement ranks in proportion with all other members’ Wrap Cash Hub holdings which, given the number and value of other members’ holdings, means that your pro-rata entitlement is likely to be negligible.

Essentially, a superannuation fund is a trustee and akin to one entity holding assets on behalf of many people. An entity that has an account with an authorised deposit taking institution only has $250,000 coverage with that institution. There could be billions of dollars sitting in cash at a super fund, but only $250,000 will be covered per ADI it sits with. This is the same for every superannuation fund, from an SMSF with only one member to a large industry fund with millions of members.

There is some irony here that many superannuation investors want to rush to the safety of cash during a crisis, but aren’t fully versed on whether that cash is protected or not. Regardless, it still shouldn’t be a worry.

Should This Concern You?

No.

When interest rates are increased swiftly, things can break. Assumptions made about how long cheap borrowing would go on for tends to catch up with some people. Non-bank lenders, mortgage funds and private debt may have the potential to see some trouble, and as we’ve seen with markets there will be some volatility. As an investor, or someone with cash sitting idle somewhere, it’s important to have an understanding about what is going on, what is and isn’t covered by the guarantee, but it shouldn’t concern anyone.

Could any of the big four in Australia withstand a run. No. If every depositor demanded their money in a few days any bank would be in serious trouble. Regulators do have detailed plans in place for the course of action they would take, which is common in every country, but the reality is no big banks are going to fail in Australia. If one of the big banks in Australia went down, it would require a cataclysmic event. Something that would almost guarantee life as we knew it was over. Society wouldn’t be functioning and there would be much bigger problems than money.

We’ve noted in the past that no one can plan for such dire scenarios because they are unimaginable. Life’s for living, not fretting about it turning into a disaster movie. Football’s back. There are books to be read. Gardening to be done. Dogs to be walked. Beaches and parks to be walked on. Friends and family to spend time with. The problems occurring in the banking sector will be dealt with, so put them aside and enjoy life.

_{This represents general information only. Before making any financial or investment decisions, we recommend you consult a financial planner to take into account your personal investment objectives, financial situation and individual needs}

The Wolf of Wall Street has been released in Australia and unlike most financial films it has garnered a great deal of attention.

Most of this is to do with its excess and the cartoonish nature of the film, also the fact it breaks a world record for the use of the F-word on celluloid!

Think Goodfellas, just set on Wall Street and without all the murders.

But is there anything to be learned as an investor? Plenty, but most of it is featured in the first hour before the film turns farcical.

We begin as the film’s subject, Jordan Belfort, has his introduction to stockbroking at a major Wall Street brokerage firm.

His ideals of making money for his clients and his employer are shot down by lunch time, as he’s told, “the name of the game, moving the money from the client’s pockets to your pocket”.

Not that this should be a surprise as an academic study called “Inside the Black Box of Sell-Side Financial Analysts” found over 50% of brokers rated retail clients as “not important at all” to their employer.

After the crash of 1987 Belfort was unemployed and took a job pushing penny dreadful shares to unsuspecting investors.

The sales techniques Belfort learnt on Wall Street made him a star as he convinced investors all over the country to buy unheard of companies based on concocted stories about their potential.

It’s here you get to see those shonky sales pitches that inevitably form the basis for every investment scam or scheme that was ever perpetrated.

And while they might be shonky, they can often be skillfully executed which makes them more dangerous for the unsuspecting.

Be it shares, real estate, trading currencies, computer programs or tax dodges, there’s always a wolf willing to sell their fabulous wealth making secrets.

Yet there’s only one true secret to building wealth – it doesn’t come fast or easy.

It’s that time of year when we get to hear an avalanche of financial predictions for the year ahead – mostly because people are on holidays, but the media still needs to fill space in the silly season.

The television stations and newspaper quote the analysts with their forecasts about what may or may not happen.

So it’s always an interesting exercise to peak in rear-view mirror and see what they said way back in December of last year.

We can start off with Hugh Giddy, senior portfolio manager at Investors Mutual, who wasn’t so giddy about 2013.

According to Mr Giddy, the sale of a 1954 painting by Mark Rothko for $75 million late in 2012 was a sign we were getting ahead of ourselves.

He feared 2013 might be a return to the bad old days, where credit markets froze and shares plunged – this based on some rich guy buying a painting that looked like a 1920’s football jumper.

Chief market analyst at City Index, Peter Esho thought it would be a decent year for mining, highlighting coal stocks for a bounce after a woeful 2012.

Hew Hope, our largest listed coal miner led the way down with a 20% decline for the year (so far) and the results from other coal companies only got worse from there.

The Australian Financial Review told us 2012 couldn’t be repeated, “posing dilemmas for investors wondering how to invest in 2013”.

Of course most investors without an investment strategy or time machine would be left wondering how to invest in 2013, 2014 and 2015 and beyond.

For the record (at the time of writing) the ASX was up around 9% this year and the Dow Jones was up around 20%.

Like every other new year, we don’t know what is in store – that’s why we should have an investment strategy tuned to our risk tolerance and a healthy emphasis on diversification.

The gurus don’t know any more than the rest of us and if they did, why would they tell us?

Everyone have a Merry Christmas!

 

There are some great checklists available to help you choose a financial adviser, especially if you have no idea where to start.  But, most focus on basic questions such as experience, professional membership and the services they offer.

While these are helpful as a starting point, they don’t get to the heart of what determines the quality of the advice and service your financial adviser provides.

I think there are a few additional questions you can ask to help ensure you get great advice and support.

Q1.   How many clients do you manage on an ongoing basis?

Why?

So you can check your adviser has time for you.

If you are one of 400 clients, your financial adviser probably has less than half a day a year to allocate to you, once weekends and the need to bring in new clients is taken into account.  Before you pay for any ongoing service, make sure you are happy with the amount of time your financial adviser is likely to have for you.  Then think about what you’re paying (and what you’re receiving) for the amount of time allocated to you.

 

Q2.   With what other businesses are you, or your company, associated?

Why?

Finding out if your financial adviser has a relationship with another financial services business can identify a possible bias towards a recommendation that will pay them additional money, and may not suit your best interests.

Currently, there is a focus on holding direct property within a self-managed superannuation fund.  Financial advisers aren’t generally authorised to recommend specific properties, but some may refer you to an associated business in which they have an interest.  This business might establish the super fund or identify appropriate properties to buy.

In many cases, this type of referral will be done transparently and there’ll be a compelling benefit to you for dealing with those parties.  But it is important for you to understand who will benefit financially from that referral and whose interests are being given priority – you need to be satisfied that any recommendation is in your best interests.

Also see Question 4 below about referral arrangements.

Q3.   Who owns the license?

Why? 

Few financial advisers have their own license and the majority act as representatives of a licensee that provides the support they need and authorises them to provide advice.  Many of these licensees are owned by financial product manufacturers, superannuation trustees, banks, insurers and fund managers.  The advice provided by their financial advisers tends to be weighted towards the products and services provided by the Licensee or companies in the same group.

So while you may still get good advice, you are far more likely to get advice involving that group’s products.  And you are less likely to be told to dispose of their products or be alerted to a better product or strategy offered by a competitor.

For example, the adviser employed by your superannuation fund is unlikely to recommend a fund other than their own.  In contrast, a non-aligned financial adviser is less likely to be influenced by association and will often have access to a wider range of options.

Ownership or association with a financial institution doesn’t necessarily mean that your advice will be bad, but you do need to recognise the conflict of interest this relationship creates.  That way you can determine whether the relationship is likely to influence the advice you receive.

If you are dealing with a financial adviser from a bank, see the comment about bonuses in Question 5 below.

Q4.   What referral arrangements do you have with other professionals and what fees are you paid for referring to these people?

Why?

You should check what your adviser is paid if they recommend strategies that involve other services they don’t provide directly.  To put it another way, have you been referred to a third party because it’s in your interest or because the adviser will financially benefit from making the referral?

For example, traditional mortgage brokers (who don’t refund trailing commissions) often pay financial advisers who refer clients a percentage of the commission they receive.  This provides a compelling reason for the adviser to refer clients to a particular broker.

In particular, be wary if your financial adviser recommends you speak with a specific property developer.  Even if you specifically sought a referral to a property adviser, always check what your financial adviser is paid and take that into account when deciding if this is the best possible referral available.

The self-managed super fund and property packages, mentioned in Question 2 above, can pay thousands to a referring financial adviser.

 

Q5.   How are you paid?

Why?

If your adviser is paid predominantly from commission, you may get advice that is biased towards products that pay greater commission than others.  This bias can sometimes be removed if your adviser caps their commission, or rebates or reduces the commission they may receive on products such as insurance.

If your financial adviser is paid a salary, ask how any bonuses are worked out.  Also ask when bonuses are determined so you understand at which stage in the adviser’s bonus cycle you are receiving your advice.  You should also check if your adviser’s pay varies depending on which products are recommended.

 

While many financial advisers won’t be used to being asked these specific questions, make sure you choose someone who appreciates why you’re asking and who takes the time to answer each one.

Professional advisers won’t hesitate to address your questions transparently and ensure the advice they provide to you is plainly in your best interests.  If they can’t clearly and easily respond, then that might indicate they are not the best adviser for you. 

Most Australians are familiar with the need to protect assets such as their home and car with the right insurance, but what about protecting your most important asset?

Many people may see their home as their most valuable asset, but in reality the most valuable and important asset for most people is their ability to earn an income.

Consider a 30 year old earning $65,000 per year. If they lost the ability to work, they would lose over $2.2 million in future earnings. That doesn’t take into account pay increases due to promotions or inflation, which could easily double or triple this figure.

Unless you live in a very valuable home and have a very small income, it is most likely that your ability to earn an income will be your most valuable asset.

Each day many Australian workers lose their ability to earn an income. This is generally due to major illness and well as accidents. But it’s not just major incidents you need to worry about. Even just a few months or a few years can have a major financial impact on you and your family.

Protecting your income

Just as you insure your home and your car, you need to consider insuring your income. An income protection policy will replace up to 75% of your income in the event that you cannot work for a period of time. This period of time will depend on the policy options you choose, but for most Australians this period – known as the waiting period – covers thirty days.

The funds from your income protection policy can be used to continue paying your mortgage or rent, along with keeping food on the table and covering all other costs and expenses. Without insurance or any other form of income, this generally isn’t possible.

 What about sick leave or a disability pension?

Sick leave is designed to cover only short term absences from work. Many Australians will only have a few weeks of sick leave available, and even in extreme cases it is unlikely that anyone would have enough sick leave to cover the rest of their working life.

Some people may see Centrelink as their safety net, but the reality is that a disability pension will not meet the needs of most Australians. If you have a mortgage to pay and a family to support, you may find that a disability pension falls well short of your real income needs.

Worker’s compensation is another form of safety net; however this only covers incidents that are work related. If you suffer an illness or are injured away from work, you will not receive anything in the way of worker’s compensation.

 Why is income protection so important?

If you were to suffer an illness or injury that leaves you unable to work ever again, or even just for a few months or a few years, the impact on you and your family can be financially devastating. It’s also an unfortunate fact that financial problems can lead into other problems.

By having the right income protection in place you can ensure that any disruptions to your income that occur due to illness or injury will not have a major negative impact on you and your family’s way of life.

 Getting Protection 

It can be surprising how much income protection quotes vary between insurance companies. We’ve partnered with some of Australia’s leading insurance providers in order to offer our client the best value. Our expertise enables us to select the option that best suits your needs and your budget.

Economic Overview

The dominant theme in the global economy during the September quarter continued to be the prospect of the US Federal Reserve’s tapering of its stimulus program. With US economic signals still mixed, ‘The Fed’ surprised markets in September by postponing its monthly $US85 billion bond buying program.

The Fed expressed it was disappointed with the speed of improvement in the job market and downgraded its economic growth forecasts.

The Eurozone emerged from a two-year recession, yet its banking system remained weak. While in the UK, The Bank of England upgraded its growth forecasts for the rest of the year.

China appeared to be emerging from its slowdown, with improvements in retail, industrial output and exports. India, however, found its currency at record lows as inflation soared and growth hit a 10-year low.

Australia grew at an annual pace of around 2.5% and unemployment rose to a 4-year high of 5.8%. Mining investment showed signs of peaking, consumer spending remained soft, yet interest rate cuts were beginning to be felt in the housing sector.

 

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Market Overview

The benefits of international diversification were highlighted in the September quarter with divergent performances by Australian, developed and emerging equity markets.

Having lagged the world in the previous quarter, Australia recorded its best quarterly performance in four years. The gain of over 10% doubled that of developed markets broadly and tripled the return from emerging markets.

The Australian market also took encouragement from early indications of a lift in domestic demand as the RBA’s rate cuts and lower Australian dollar fed through. This news boosted sectors linked to the economic cycle, like consumer discretionary and industrials. In contrast, the less defensive mood left sectors like healthcare, utilities and REITs lagging.

In Europe, the easing of Eurozone concerns helped fuel strong equity gains by Spain and Italy, while over in the US the market hit record highs after the Federal Reserve decided not to taper its bond buying program.

Emerging markets again slipped behind their developed counterparts, this reflected the ongoing belief of reduced capital flows if the Federal Reserve had tapered its bond buying. There were divergences though; while India and Indonesia underperformed, Korea and Russia had solid gains.

Gold continued its volatile run, racing to an almost yearly high in late August, before erasing virtually all of those gains as it plunged during September.

In fixed interest, term and credit premiums narrowed, again as a result of the Fed’s change on tapering. Longer dated bonds outperformed shorter dated, while corporate debt beat government debt.

The randomness of returns chart remained random. Once again it reveals no discernible pattern over the previous three years of quarterly returns, showing there’s no better choice than diversification. After a poor June quarter Australian small companies pulled themselves off the canvas this quarter to lead the pack, followed by the Australian large cap sector. Global equities showed more modest returns after a strong June quarter, while Global REITs (the only negative asset class this quarter) finally slipped into the red with a 2.12% loss after seven consecutive quarters of growth.

 

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Investment Strategy Recognised

We’ve long strived to find the best investment options available. This means ignoring fads and focussing on rigorous research. Currently, much of the investment strategy we implement comes with the benefit of consistent historical data and decades of academic backing.

So it gave us great pleasure recently to see one of the pioneers of that academic research, Eugene Fama, awarded the 2013 Nobel Prize in Economic Sciences. Fama’s research is the reason we emphasise the futility of picking stocks and making predictions. It’s also the reason we encourage investment discipline over guessing what the market will do next.

“Fama’s research at the end of the 1960s and the beginning of the 1970s showed how incredibly difficult it is to beat the market, and how incredibly difficult it is to predict how share prices will develop in a day’s or a week’s time,” said Peter Englund, professor in banking at the Stockholm School of Economics and secretary of the committee that awards the Nobel Prize in Economic Sciences. “That shows that there is no point for the common person to get involved in share analysis. It’s much better to invest in a broadly composed portfolio of shares.”

 

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The Australian University of Property Spruiking

We’ve previously warned property spruikers are back and unregulated as ever, so we thought it was time to find out how qualified those property ‘advisers’ actually are with a little quiz:

1. To become a property investment adviser, what educational qualifications are required?

• Diploma in Financial Services
• Diploma in Real Estate
• Bachelor of Business

Answer: none of the above.

You can advise someone on buying a million dollar property, yet you are not obligated to have any educational qualifications.

2. The compulsory continuing professional development requirements for a property investment adviser are:

• Attendance at the national conference (15 hours)
• Equivalent of 20 hours which can include attendance at seminars, conferences, guest speaking
• Equivalent of 30 hours which must include attendance at the national conference.

Answer: none of the above.

Why would you have to do any ongoing training or development to keep up your skills if there was no minimum training or education requirements when you first started in the job?

3. The licensing requirements to become a property investment adviser include:

• Police check
• Minimum entry educational qualifications
• Endorsement from two current property investment advisers
• All of the above

Answer: none of the above.

You would think that someone who is advising you on making one of the biggest decisions in your life would be obligated to be licensed. Well, you thought wrong.

4. The regulatory body that oversees the property investment advice industry is:

• Real Estate Institute of Australia
• The  Financial Advisers Commission
• Australian Securities and Investments Commission (ASIC)
• A and C

Answer: none of the above.

You would hope that a large and powerful organisation such as Australian Securities and Investment Commission (ASIC) would be keeping an eye on investment advisers who are involved in some of the most important and expensive life decisions people will make. Unfortunately this is not the case. “Why?” I hear you ask.

The simple answer is real property is not considered a “financial product” under the Corporations Act. Anyone can give advice on real property and is not obligated to abide by the Corporations Act nor do they come under the scrutiny of ASIC.

Source: theconversation.com/au

 

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She’ll be right, mate!

Finally, an interesting comparison of central bankers and possibly cultures. As debate again began to rage over the prospect of low interest rates fuelling a property bubble in Australia, the RBA’s Head of Financial Stability, Luci Ellis said the following:

“I think there are a lot of people, the minute housing prices start to pick up they say, ‘Oh my goodness, we’ll all be rooned.’ The minute housing prices start to pick up they imagine it’s a bubble.”

In contrast, the German Central Bank sounded a note of caution in its monthly report after an 8.25% rise in German property prices over the past three years, saying:

“Housing prices in German cities have been rising so strongly since 2010 that a possible overvaluation cannot be ruled out.”

And to give the statements a little context, according to The Economist:

Australian property prices, 46% overvalued against rents and 24% overvalued against incomes.

German property prices, 15% under-priced against rents and 18% under-priced against incomes.

The reason we think young adults could benefit from financial advice at the best (worst) of times…

When you’ve helped people with their money over a long period of time you tend to notice when financial trends emerge.

While most are insignificant, some are interesting enough to have you asking colleagues if they’re witnessing similar things.

Lately it seems the Bank of Mum and Dad is assessing a few more loan applications than usual.

The economy is very different depending on which part of Australia you’re in, so these applications certainly aren’t all hard luck stories.

Merely the good income being earned has found an equally good spending and debt appetite to swallow it – the apple fell a long way from the frugal tree.

So what do you do, as the Bank of Mum and Dad, when you’re confronted with a loan request from one of your adult children?

Weigh up your own financial position first – if it has any material impact on your financial position and requires a significant action like liquidating assets or taking on loans yourself, I’d forget it.

Weighing up the circumstances surrounding the loan are important, you need to be able to get to the bottom of the financial situation your adult child is in.

If they’re not in a financial mess, a small amount to cover an unforseen circumstance or take a career opportunity may be a low risk proposition provided there’s a plan to repay.

If they’re coming to you because their existing bank has decided they’re already overleveraged then you’ve got a big red flag.

A bank not lending suggests they see any extra debt as a high risk situation, it marks you as the lender of last resort and that’s a dangerous situation to be in.

If you know your adult child shouldn’t be struggling financially, but they are, declining may be the best option.

It may force them to actually evaluate their financial position and see the need for a budget overhaul – something that won’t come about by giving them another loan.

Book a free consultation with an experienced financial planner who can assist you in getting back on track now!

07 31692570 or
admin@truefinancial.com.au

You probably know a few women who you would call “shopaholics“.

These are the women who always let a great sale, or a shiny set of new shoes get the best of them. Sometimes they spend more money than they should and probably have a stack of credit cards that they struggle to keep up with back home.

Living in a culture that looks up to glitzy celebrities and values consumerism, it is easy to fall into the trap that our worth as men directly correlates with our ability to purchase shiny things.

Moreover, we all have a competitive nature that drives us to want to one-up our peers, whether it is with the newest technology, the shiniest car or only drinking top shelf liquor at the bar. Does this hit close to home?
Be aware that it is very possible for men to become addicted to spending money, and this happens when they get a rush from buying something new. Some men get into the habit of buying new items regularly, and they get an endorphin rush each time that a new item is purchased. After getting this endorphin rush enough times it can be possible to become addicted. This is when things become dangerous and destructive, and it’s the type of situation you want to avoid getting yourself into in the first place. Below are a few tactics you can employ to safeguard yourself from unnecessarily emptying your wallet.

Stop Spending Money Indiscriminately

If you think you could be an emotional spender you should try to stop yourself from buying something the next time you are at a store. As soon as you are about to buy, sit back a minute and think about if it is something that you really need. Just thinking about it for a second is often enough to make you second guess your expense. If a simple break isn’t enough, you should go home without the item and take some time to think about it. It’s easier to avoid an emotional expenditure after you are away from it, and you may later realize that buying this item would have been a complete waste of money.

Get an Accountability Partner

Many times simply knowing that you have a problem is not enough to help you avoid it. Instead, you need to bring other people into the equation who can provide support to fix the problem.

Take some time and find a person to talk to that will help you be accountable or the money that you spend. This could be a spouse, a relative, or a friend. This person will be someone that you call before you make any purchases. If you feel bad about calling them, you most likely should not purchase the item in question. If you are not sure, they will be able to help you determine if you are making a good spending decision or not.

Many guys avoid spending the money because they don’t want to tell their accountability partner about it. Others change their minds about making the purchase after speaking with their partner about it for a few minutes. Just having someone there to talk to can be a huge help.

Spending money is not the only thing you have to talk about with this partner. Discuss moments when you are suffering from stress or depression as well. If you are an emotional spender, your spending habits are tied into your emotions. This means that when you aren’t feeling good, you may try to compensate by spending money.

Budget Large Purchases & Implement Patience

Too many men make emotionally-based decisions when purchasing items like homes or vehicles, and as a result, end up spending much more than they needed to. Impatience and lack of planning are common reasons why houses end up being seized and cars make their owners perpetually broke. For men who are emotional spenders, it would be a great idea to develop some sort of budget before you even arrive at the dealership or talking to a realtor. This will automatically help you figure out a number that you can, and are willing, to spend on a new vehicle. You can use Auto Credit Express’ loan calculator to determine the right monthly car payment that will fit your budget, and the Bank Rate home budget calculator will help you to account for all those erroneous fees that add up when purchasing a home. Additionally, don’t be afraid to negotiate, and always shop around for the best deal rather than accept the first number that you’re presented with.

Give Yourself a Little Leeway

Many men will stop indulging when they realize they are emotionally addicted to shopping. This leads to frustration and, in many instances, binge spending. To avoid buying expensive items impulsively, you should give yourself a small spending budget that you can use for whatever you want. Put away five or ten percent of your earnings to spend at the store and you shouldn’t have any more impulse buys that go over budget.

Emotional spending is a serious problem for many men, but that doesn’t mean that it has to rule your life. Consider your spending habits. If you think you have a problem, do something about it. There are plenty of steps you can take to get away from your unnecessary spending, and you just might realize that you are happier without it.

Keeping your emotions in check can be a difficult thing to do but with some practice you can become a master of your emotions.  One useful method to stay on track and achieve your goals is to consult with a financial adviser that can help tailoring a budget that suits your needs and wants, as well as making the most of your financial resources for both immediate and long-term enjoyment.

Book an appointment with our certified financial planner John Duncan today by ringing us on 07 3169 2570 or send an email to admin@truefinancial.com.au and we will get in contact with you today.

Hindsight is a wonderful thing, especially if you’re the one learning from someone else’s experiences.

And when it comes to retirement, being able to learn from the experiences of others is particularly valuable.

HSBC has released their ‘The Future of Retirement’ report, which surveys the experiences of retirees and the expectations of those still working across fifteen countries.

The report’s findings have been described as ‘dire’ and ‘bleak’, yet those terms can often be interchanged with ‘realistic’ and there’s plenty of realism for those planning ahead.

Key points show that nearly 40% of retirees believe they haven’t prepared adequately for retirement and 54% of those people only realised it just before retiring.

For those still in the workforce, 55% aren’t saving at all for retirement.

While 47% of those say they can’t save because of day-to-day living expenses, other respondents’ reasons show a lot of ambivalence.

23% have ‘never really thought about it’ and 17% suggest ‘retirement is too far away’ to save.

And the result of ‘not thinking about it’ or ‘realising you haven’t prepared adequately’ won’t necessarily be offset by lower living expenses in retirement.

That’s a dangerous assumption, with 52% of retirees seeing no reduction in their living expenses at the same time 41% of retirees see their income reduce by more than half.

So what’s to be learned?

From those retired, the best piece of financial advice they ever received was ‘start saving at an early age’, closely followed by, ‘don’t spend what you don’t have’.

Further, there was a definite correlation between getting professional advice and having higher levels of retirement savings.

Those who didn’t do any retirement planning had an average of $112,668 in savings, those who didn’t use an adviser had an average of $252,818 and those who used an adviser had an average of $520,778.

Whether you take advice or not, this report shows retirement is never too far away to plan for.