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Cuffelinks Newsletter Edition 258

  •   15 June 2018

Two significant events last week show the fallout from the Financial Services Royal Commission will go far beyond the banks and big companies like AMP.

The closure of financial planning firm Dover Financial means at least 30,000 clients are without an adviser during the most critical few weeks of the financial year. A friend who provided services to Dover says most of the 450 advisers are quality operators who now cannot give new advice. ASIC has warned licensees to do extra checks and obtain audit reports and references before hiring ex-Dover advisers.

Prospa is the type of fintech that is supposed to prosper from tighter bank lending conditions to SMEs, but the company canned its IPO at the last minute. ASIC is demanding all lenders review their Unfair Contract Terms, and deep inside Prospa's now defunct prospectus is this:

Page 44, footnote 11 on their Annual Percentage Rate (APR): "We use a factor rate in our pricing discussions with customers because we believe the total interest dollar cost and the total payback of the loan is (sic) the most relevant to our customers ... At 31 December 2017, the weighted average APR (on a gross loan basis) of our portfolio was 41.3%." That's not a typo, it says 41.3%.

Page 123, in the Business Risks section: "Prospa may change the way it explains the cost of its financing products due to regulatory changes ... This may include being required to disclose the Annual Percentage Rate or a similar standardised rate. Such changes in Prospa's loan contracts or other documentation may have a materially adverse effect on the perception of distributors or borrowers of the cost of Prospa's products relative to other financial products which may have a material adverse effect on Prospa's business, financial condition, operating and financial performance and/or growth."
So disclosing the APR may have a materially adverse effect on the business. Indeed, it would be cheaper to borrow using a credit card. Prospa was 15 minutes away from floating with a market value of $576.3 million. Here's what the RBA says are the average advertised SME indicator rates.


This week, Graham Horrocks asks why the effective marginal tax rates for many retirees and pensioners is so high, and Rachel Lane explains what was in the Budget for aged care and the implications of changes in the Pension Loan Scheme. 

On EOFY tax actions, Gemma Dale has some final reminders worth checking, while Rachael Rofe shows how to make charitable giving more tax-effective and efficient. 

I spoke at a conference in May 2015 when the new ETF based on the NASDAQ100 (ASX:NDQ) was launched on the ASX at $10, and I said it was an easy way to invest in the big US tech companies. It's now $16.50. David Bassanese examines whether the big tech companies still have good growth potential. Another market which has performed well in recent years is Australian credit, and Damon Shinnick looks at whether it can continue to deliver. The growth of Listed Investment Companies (LICs) has been a standout feature of the investment landscape in recent years, but Andy Forster shows how their designs can differ. 

Three new reports on investing patterns show many SMSFs are happy to outsource the management of their assets to various types of managed funds rather than pick stocks. The White Paper from SuperConcepts is their Investment Patterns Report which also shows latest contribution and withdrawals behaviour of SMSF trustees, and the latest ETF Report from BetaShares is attached below.

Graham Hand, Managing Editor


Edition 258 | 15 Jun 2018 | Editorial | Newsletter



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