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

Are LICs licked?

LICs are continuing to struggle with large discounts and frustrated investors are wondering whether it’s worth holding onto them. This explains why the next 6-12 months will be make or break for many LICs.

Retirement income expectations hit new highs

Younger Australians think they’ll need $100k a year in retirement - nearly double what current retirees spend. Expectations are rising fast, but are they realistic or just another case of lifestyle inflation?

Welcome to Firstlinks Edition 627 with weekend update

This week, I got the news that my mother has dementia. It came shortly after my father received the same diagnosis. This is a meditation on getting old and my regrets in not getting my parents’ affairs in order sooner.

  • 4 September 2025

5 charts every retiree must see…

Retirement can be daunting for Australians facing financial uncertainty. Understand your goals, longevity challenges, inflation impacts, market risks, and components of retirement income with these crucial charts.

Why super returns may be heading lower

Five mega trends point to risks of a more inflation prone and lower growth environment. This, along with rich market valuations, should constrain medium term superannuation returns to around 5% per annum.

Super crosses the retirement Rubicon

Australia's superannuation system faces a 'Rubicon' moment, a turning point where the focus is shifting from accumulation phase to retirement readiness, but unfortunately, many funds are not rising to the challenge.

Latest Updates

Investment strategies

Why I dislike dividend stocks

If you need income then buying dividend stocks makes perfect sense. But if you don’t then it makes little sense because it’s likely to limit building real wealth. Here’s what you should do instead.

Superannuation

Meg on SMSFs: Indexation of Division 296 tax isn't enough

Labor is reviewing the $3 million super tax's most contentious aspects: lack of indexation and the tax on unrealised gains. Those fighting for change shouldn’t just settle for indexation of the threshold.

Shares

Will ASX dividends rise over the next 12 months?

Market forecasts for ASX dividend yields are at a 30-year low amid fears about the economy and the capacity for banks and resource companies to pay higher dividends. This pessimism seems overdone.

Shares

Expensive market valuations may make sense

World share markets seem toppy at first glance, though digging deeper reveals important nuances. While the top 2% of stocks are pricey, they're also growing faster, and the remaining 98% are inexpensive versus history.

Fixed interest

The end of the strong US dollar cycle

The US dollar’s overvaluation, weaker fundamentals, and crowded positioning point to further downside. Diversifying into non-US equities and emerging market debt may offer opportunities for global investors.

Investment strategies

Today’s case for floating rate notes

Market volatility and uncertainty in 2025 prompt the need for a diversified portfolio. Floating Rate Notes offer stability, income, and protection against interest rate risks, making them a valuable investment option.

Strategy

Breaking down recent footy finals by the numbers

In a first, 2025 saw AFL and NRL minor premiers both go out in straight sets. AFL data suggests the pre-finals bye is weakening the stranglehold of top-4 sides more than ever before.

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.