Dear ,

The market is volatile, cash is expensive and the housing market is stagnant: have your clients ever needed you more? It’s time for you to be strategic, find the opportunities and demonstrate the value that financial planners can add.

Catching the falling knife:  A game for the well advised
Few people have the courage to buy as the market is falling, even though the Advising community know it is an opportunity to find bargains and make better than average returns. Of course investors need to tread carefully but isn’t this the reason your clients came to you in the first place? 

An example that demonstrates the value of good advice we’ve learned of over in recent weeks is a managed fund that lost around 25% in three months. Many of the funds direct clients redeemed immediately.  Clients invested via financial planners took their planners advice and held their position or even purchased more units. The financial advisers had reviewed the underlying stocks and had the capacity to understand the true value of the portfolio. When the fund bounced back by 6% in one month the financial planner clients, particularly those that had bought units at the bottom, were obviously pleased they’d listened to their Adviser.

Advice and 30 June
Coming into 30 June, Advisers are addressing the seasonal need to provide advice that harnesses clients broader cash capacity.  At this time of the year the thinking is extended to effective management of deductible and non deductible debt, and opportunities for sensible leverage strategies.

Most clients will be paying a percentage of their earnings to the ATO this year, money better spent on building wealth.  And for relevant clients a call from their Adviser with a plan would no doubt be most welcome.  The below case study considers tax effective investment combined with a leveraged investment portfolio.

Case Study:                                    
Bill earns $200,000 per year and pays around $72,600 in tax. He has a mortgage of $500,000 with 25 year term and variable interest rate currently at 8.75%. The interest payable per annum is on the loan is $43,750. Bill does not earn a tax deduction on this amount.
 
This year Bill purchases 10 units of TFS Sandalwood, he receives 100% tax deduction on the establishment fee of $110,000 (plus GST) and registers for GST. Bill saves $48,150 in tax and uses this to pay off of his home loan thus reducing his overall non-deductable debt. The non deductible interest on his home loan has also reduced to $39,537.

In 15 years Bill’s TFS investment potential return is expected to be $920,000** from the sale of his sandalwood trees which he can use to pay off his mortgage 10 years earlier than the original 25 year term. He will also have surplus finds to renovate, upgrade or use for further investment.

** Projection based on broad assumptions set out in the PDS and these are indicative only.

This example does not take into consideration any other client taxation issues.

Anyone wanting to invest in TFS sandalwood should refer to the product disclosure statement.

 Anissa Cavallo - Managing Director

AIL 2008 Release – Stage 2 of the 2007 AIL Almond Orchard Project

As we reported back in March, this Project is open and there is a limited offer of only 4,000 Allotments for sale.  The project has a strong 4 star rating from independent research house Australian Agribusiness Group (“AAG”).  2008 is the last year of Product Rulings for the non-forestry agribusiness managed investment schemes so this will be your last chance to diversify your client’s tax effective portfolio and participate in what economists are predicting will be the new boom sector – Agriculture!

Rising economic wealth has created demand for more nutritious and luxury foods worldwide and Almonds are a highly sought after food source in all cultures.  They are prized for their nutritional value, taste and versatility and demand for them is steadily increasing well ahead of the supply chain. (Click HERE to read more)

Thanks to the collapse of brokers Opus Prime and Lift Capital, what was considered a relatively conventional investment strategy has now become the bete noir of financial planning. Yet this is somewhat odd when you consider a few widely held investment truths: first, long term sharemarket returns are generally higher than the cost of debt capital; second, the use of conservative loan-to-value ratios (LVR) against blue chip shares rarely results in margin calls; and third, even self managed super funds are now permitted by the financial regulator to gear their investment portfolios.

So how did the investors with Opus, Lift, Tricom, et al, get it so wrong? (Click HERE to read more)

BREAKING NEWS

Leading research house Van Eyk have now become the 4th researcher to rate the TFS Sandalwood Project 2008 as a recommended agribusiness investment.

For information on managed funds or tax effective agribusiness solutions please call you BDM Direct Adviser.