Register For Our Mailing List

Register to receive our free weekly newsletter including editorials.

Home / 258

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


 


 

Leave a Comment:

banner

Most viewed in recent weeks

Australian house prices close in on world record

Sydney is set to become the world’s most expensive city for housing over the next 12 months, a new report shows. Our other major cities aren’t far behind unless there are major changes to improve housing affordability.

The case for the $3 million super tax

The Government's proposed tax has copped a lot of flack though I think it's a reasonable approach to improve the long-term sustainability of superannuation and the retirement income system. Here’s why.

Tariffs are a smokescreen to Trump's real endgame

Behind market volatility and tariff threats lies a deeper strategy. Trump’s real goal isn’t trade reform but managing America's massive debts, preserving bond market confidence, and preparing for potential QE.

The super tax and the defined benefits scandal

Australia's superannuation inequities date back to poor decisions made by Parliament two decades ago. If super for the wealthy needs resetting, so too does the defined benefits schemes for our public servants.

Meg on SMSFs: Withdrawing assets ahead of the $3m super tax

The super tax has caused an almighty scuffle, but for SMSFs impacted by the proposed tax, a big question remains: what should they do now? Here are ideas for those wanting to withdraw money from their SMSF.

Getting rich vs staying rich

Strategies to get rich versus stay rich are markedly different. Here is a look at the five main ways to get rich, including through work, business, investing and luck, as well as those that preserve wealth.

Latest Updates

SMSF strategies

Meg on SMSFs: Withdrawing assets ahead of the $3m super tax

The super tax has caused an almighty scuffle, but for SMSFs impacted by the proposed tax, a big question remains: what should they do now? Here are ideas for those wanting to withdraw money from their SMSF.

Superannuation

The huge cost of super tax concessions

The current net annual cost of superannuation tax subsidies is around $40 billion, growing to more than $110 billion by 2060. These subsidies have always been bad policy, representing a waste of taxpayers' money.

Planning

How to avoid inheritance fights

Inspired by the papal conclave, this explores how families can avoid post-death drama through honest conversations, better planning, and trial runs - so there are no surprises when it really matters.

Superannuation

Super contribution splitting

Super contribution splitting allows couples to divide before-tax contributions to super between spouses, maximizing savings. It’s not for everyone, but in the right circumstances, it can be a smart strategy worth exploring.

Economy

Trump vs Powell: Who will blink first?

The US economy faces an unprecedented clash in leadership styles, but the President and Fed Chair could both take a lesson from the other. Not least because the fiscal and monetary authorities need to work together.

Gold

Credit cuts, rising risks, and the case for gold

Shares trade at steep valuations despite higher risks of a recession. Amid doubts that a 60/40 portfolio can still provide enough protection through times of market stress, gold's record shines bright.

Investment strategies

Buffett acolyte warns passive investors of mediocre future returns

While Chris Bloomstan doesn't have the track record of his hero, it's impressive nonetheless. And he's recently warned that today has uncanny resemblances to the 1990s tech bubble and US returns are likely to be disappointing.

Sponsors

Alliances

© 2025 Morningstar, Inc. All rights reserved.

Disclaimer
The data, research and opinions provided here are for information purposes; are not an offer to buy or sell a security; and are not warranted to be correct, complete or accurate. Morningstar, its affiliates, and third-party content providers are not responsible for any investment decisions, damages or losses resulting from, or related to, the data and analyses or their use. To the extent any content is general advice, it has been prepared for clients of Morningstar Australasia Pty Ltd (ABN: 95 090 665 544, AFSL: 240892), without reference to your financial objectives, situation or needs. For more information refer to our Financial Services Guide. You should consider the advice in light of these matters and if applicable, the relevant Product Disclosure Statement before making any decision to invest. Past performance does not necessarily indicate a financial product’s future performance. To obtain advice tailored to your situation, contact a professional financial adviser. Articles are current as at date of publication.
This website contains information and opinions provided by third parties. Inclusion of this information does not necessarily represent Morningstar’s positions, strategies or opinions and should not be considered an endorsement by Morningstar.