Royal Commissions Update
To hear from Simon Madder, CEO & Managing Director – Prime Financial, on the latest recommendations regarding the Royal Commissions Report published on 6th Feb 2019, please click above.
Revised Date: 2nd May 2019
We hope you can join the Forum, discuss issues that are affecting you and your firm and to share successes with other Accounting Partners. There is a huge wealth of accumulated experience to be shared within the network.
Qualitas Senior Housing Fund
Through our growing relationship with alternative property financier Qualitas, and our investment across the client base in the list Qualitas Real Income fund, Prime and our clients are now likely to participate in one of Qualitas’ wholesale fund offerings, the Qualitas Senior Housing Fund on behalf of several sophisticated investors.
The fund is a 7-year term and plans to invest in several established retirement villages. Qualitas have partnered with a long-serving and well-regarded industry executive and see the opportunity for a 15% internal rate of return over the period, which we think is excellent given the modest gearing to be applied to the trust.
We are endeavouring to do more of these things to appeal to the sophisticated investor, and would sincerely encourage you to get in touch if you have investors in your network who would benefit from being shown these interesting opportunities.
Important Update: Franking Credits
On the 1st July 2019, If elected Labour will cease to rebate imputation credits to investors. To listen to our view on this, please click to watch the video.
The Value of Advice
You may consider Prime as an investment specialist but we also provide great strategic and holistic advice to clients that have a much bigger impact than how their investments perform. Investment performance isn’t everything as otherwise clients would just go to Australian Super. They want advice, support, coaching and someone who they trust and will work with them over the journey to achieve their goals. We believe we can provide that.
Here is a real client example of how we’re helping them.
- John & Debbie are 48 & 45 respectively and own their own Labour Hire business.
- Over the last few years the business has been going along well and they estimate it’s now worth $3million.
- They have a home valued at $3million with a mortgage of $1.3million due to recent renovations.
- They have cash of $200,000 in an offset account as well.
- They have an SMSF with $700,000 that has a commercial property (the office – $500k) and also have 2 AMP Super accounts combined $200k.
- Have $50k p.a. in extra savings going into offset account.
- Pay off mortgage
- They both want to retire when John reaches age 55.
- Have an income of $150,000 p.a. which includes an overseas holiday.
Home Loan Debt:
- Review existing home loan arrangement – Currently they’re on interest only of 4.3% – They can change to P&I and pay 3.70%. A Saving of $7,800 p.a. in interest repayments.
- Direct all of the $50k surplus cashflow to paying down mortgage.
- Combine 2 AMP accounts into one with Macquarie to save on fees and invest according to Balanced risk profile.
- Continue to maximise $25k concessional contribution but direct contributions towards Macquarie Investment Portfolio rather than cash account.
- Invest $50k rental income from office property into Macquarie Investment Portfolio.
- The investment portfolio now has $100k p.a. going into it in contributions for the next 5 years.
The Business Sale
- Pay off remaining home loan debt (estimated $1million).
- Invest the remaining $2million and combine with Super Fund in 5 years (estimated $1.3million).
- Over $7,000 p.a. in interest savings going towards home loan.
- Home loan down to $1million in 5 years time (includes P&I plus extra repayments)
- Super Fund up to $1.3million in 5 years time (includes $50k concessional + $50k rent + performance)
- $2million left over – options available Individual portfolio, max super contributions or Investment Bond > TBD in 5 years.
- Conservatively $3.3million in investable assets outside of home at 5% = $165,000 p.a. so meets their goals.
- The clients are happy, they achieve their goals and will be with us for a long time.
- The costs of the advice (1% p.a.) to them becomes immaterial as the value provided is far greater.
- We will also review their insurance and wills.
Written by Marcus Ainger – Senior Adviser with significant experience in the banking and wealth industry.
Prime SMSF Solution
We want to transform your practice.
The Prime SMSF Solution is not just annual outsourcing. You can’t compare us with a $700 annual service where you still do the majority of the work! We’re talking about a bespoke, game-changing white-label SMSF solution. Increasing complexity surrounding accounting for SMSFs means annual accounting just doesn’t cut it anymore. The introduction of Transfer Balance Account Reporting (TBAR) presents every SMSF Accountant with a new business risk.
How do you even know which clients you need to report for TBAR unless you’re processing your funds at least quarterly?
The Prime SMSF Solutions provides:
- A daily online reporting service to your clients using Class Super with;
- Daily reconciliation and monthly queries;
- Providing you and your clients with live SMSF information and reliable data;
- So we can manage your compliance requirements for you (including TBAR)!
This is what we do that an annual outsourcer doesn’t!
Don’t take our word for it. Here’s what one of our JV Partners has to say:
We started using Prime super when our in house superannuation manager resigned and we needed to quickly find a high quality solution. We have been very impressed with the quality of Prime’s work and also their approach to SMSF compliance. The Prime team is also very responsive and personable and they feel like an extension of our own team.
Prime offer more than your standard SMSF compliance solution, they are also very technically strong and have been consistently adding value to our SMSF clients.
W R Matley
Partner, Crispin & Jeffery – Chartered Accountants
Outsourcing is so much more than just price.
It’s important to fully understand what time/costs savings you will recognise as a result of outsourcing your SMSF along in order to provide your clients with a market leading SMSF solution. So call Olivia Long on +61 455 566 426 and take the first step to transforming your SMSF solution.
An Introduction to Prime Capital
Prime Capital is the corporate advisory arm of Prime Financial Group. Formed in 2017 out of a growing demand from clients that were seeking a client centred, tailored advisory offering, Prime Capital now has coverage in Sydney, Melbourne and Brisbane.
Prime Capital brings together a team of advisors, with tier 1 experience, coming from some of Australia’s best boutique advisory firms and the Big 4. Prime Capital has a deep understanding of the Australian mid-market space and our partners are highly experienced in assisting firms capitalise investments or take that next step in their corporate development and growth.
Services Offered & Approach
Prime Capital provides a full suite of corporate advisory/finance and investment banking services including corporate development, mergers & acquisitions (M&A) transactions, capital raisings and corporate advisory. Prime Capital covers all sectors and size of transactions – including early stage technology through to large multinational enterprise transactions.Prime Capital prides itself on being uniquely able to provide services ranging from long-term corporate development roles to bespoke one off transactions. There is no ‘one-size fits all’ approach. Every engagement is unique, with Prime Capital tailoring its service to each individual client’s needs.
- Mergers & Acquisitions: Prime Capital’s advisers are extremely experienced Sell-side and Buy-side transactional advisers, having acted on deals across all sectors both for private and public companies.
- Corporate Development: Prime Capital’s corporate development clients are typically long term engagements where Prime Capital advisers work with senior executives of growing private and public companies, providing advice on acquisitions, capital structure and strategic decisions of the business. Often Prime Capital becomes a key part of the company’s management team.
- Capital Raisings: Prime Capital raises capital for businesses ranging from early stage through to mature businesses seeking to grow.
- Corporate Advisory: Given the experience of Prime Capital’s advisers, often the team is called upon to provide bespoke advice on a range of corporate matters, typically with a capital event or transaction in mind.
Building Long Standing Relationships
Here at Prime we take it very seriously when we say that we make Client Service an important cultural value.
We want to deliver consistently outstanding client experiences and it starts with all of us here at Prime being Client Centric and focused on creating a positive experience for our clients and building long standing relationships.
As part of delivering this value, we reviewed our processes, practise, policies and people.
On the people side, we wanted to let you know that we have increased our Client Services team including a dedicated member in NSW to achieve better experiences for our clients.
Alongside this change, we have also engaged an external consultant to assist us gain operational efficiencies with the implementation of an improved CRM and workflow system.
Over the coming months, I will share with you some of these operational efficiencies, but as a first step I’d like to introduce you to a few more team members that have recently joined the Prime family.
Roxanne is an administration professional. Over a period of 20 years Roxanne has amassed a diverse and solid background in all manner of administrative competencies. For the last 5 years, Roxanne has focused her career in the financial planning industry.
Will has been working in the financial services industry for over 6 years specifically in Client Services and also recently in SMSF Administration.
Will also has received Award Recognition in the past for his high quality, productive and efficient service.
Kyle also has experience in the Financial Services industry with his recent role being in a Financial Services Practice, but also has worked at Aussie Home Loan and BT Financial Group.
Kyle has also received several awards from Leadership through to being acknowledged for his tireless efforts within the John Therry community within St Vincent de Paul.
Romeo Abdo – Advisory Team
Romeo has over 15 years experience in Financial Services, supporting financial planners, businesses and clients as a Client Service Representative, General Advice Specialist, Para-planner and Financial Planning Associate.
Romeo joined our Advisory team as an Associate Adviser, in which he supports our Advisory Team and also provides strategic financial advice to several clients.
The new look and feel of the Weekly Market update (WMU)
As you would have noticed we changed the look and feel of our WMU and we hope you are finding it easier to navigate through the various articles. As you can see we have also included more video content as another means to send our message. By all means, please forward these video’s onto any clients that would benefit.
We would be interested to hear your feedback. Let us know by emailing Tiffany.
INCENTIVES, FIGURES & REPORTS
Proposed R&D tax incentive changes – Latest update
- The Senate Economics Committee has released its keenly-awaited report on its inquiry into the proposed law changes to the R&D Tax Incentive
- The key finding in the report was that the Bill should not proceed until there is further consideration of the proposed R&D Tax Incentive measures
- The proposed measures included a reduction in the refundable R&D tax offset from 43.5% to 41% and an annual cap of $4m (clinical trial activities excluded)
- Following this recommendation and parliament instability leading up to the next election it is unlikely the proposed measures will be passed in their current form
Annual R&D registrations for tax year ended 30 June 2018 – Reminder
- Applications are due for lodgement with AusIndustry by 30 April 2019.
- It is important to also note this is a ‘use it or lose it’ deadline with late lodgements rarely accepted
Risk Profile Portfolio Performance Figures
As at 31 January 2019
* Annualised return(s). Portfolio Inception date 3/7/2012
Prime SMA – Model Portfolio Performance Figures
As at 31 January 2019
Global equity markets recovered much of the previous month’s selloff with the MSCI World Index rallying 7.8% in January.
Fears over slowing growth and trade wars abated somewhat in January with global risk sentiment rebounding from a poor final quarter in 2018.
The US equity market added 7.9% on the back of strong earnings and a more dovish Federal Reserve. Better than expected earnings numbers from Facebook and General Electric led to the stocks rising +27% and +34% respectively.
The USD was weaker against a basket of currencies with the AUD buying 72.7c at the end of January.
US bond yields continued their fall in line with the Federal Reserve’s more cautious tone. US 10 year Treasury yields currently yield 2.62%.
Asian equity markets followed global equity markets higher in January. Negotiations between China and the US indicated a possible resolution to the ongoing trade dispute.
The Australian equity market was stronger with the ASX200 Accumulation Index rising 3.9%.
Large caps added 2.5% while mid-caps and small caps fared better climbing 4.5% and 5.5% respectively.
Commodities were strong – Iron ore rose 18% to trade $84/tonne, a near 2-year high. Oil reversed a 3-month fall as OPEC cut production by nearly 800,000 barrels per day to stem the oversupply in the oil market. Brent rose to $61/barrel (+13%) and WTI to $54/barrel (+18%.)
Contributors to performance in January were Afterpay (APT) +28% and Magellan (MFG) +21%. APT announced underlying sales in 1H FY19 of $2.2b, up from $918m in the previous corresponding period. We await official 1H earnings numbers in February with confidence. MFG was likewise strong announcing 1H performance fees of $42m, up from $9.6m in the previous period. Meanwhile OSH and WPL both rode the oil price tailwind adding 9%.
The worst performer was Challenger (CGF) which fell 24%. CGF downgraded earnings citing market volatility, softer performance in the Life absolute return portfolio and falling performance fees. Whilst the downgrade indicates growth of 0-3%, well below the previous guidance range of 8-12%, we remain bullish on CGF. The Retirement Income Framework (RIF) is to be introduced in July 2019 and we view CGF as a major beneficiary of this.
Across the SMAs we increased our exposure to CGF in the growth SMA and added CGF to the Diversified Income SMA. The Defensive SMA reduced some of its existing holding in MXT and the International SMA reduced a portion of MGG. On a risk profile performance basis our 5-year numbers continue to perform well against their respective benchmarks.
Disclaimer: This information has been prepared by Primestock Securities Limited ABN 67 089 676 068, AFSL 239180 (‘Prime’) . Prime accepts no obligation to correct or update the information or opinions in it. This information does not take into account your objectives, financial situation or needs. Before acting on this information, you should consider whether it is appropriate to your situation. It is recommended that you obtain financial, legal and taxation advice before making any financial investment decision. Prime is bound by the Australian Privacy Principles for the handling of personal information.