For many, the mere thought of considering how they, or a loved one, should determine what care they may need, how it should be delivered, what it will cost and what it means for the management of their legacy, can be daunting.

APC has asked My Care Path director, Jayne Maini (formally Millennium Aged Care Services) to continue our Aged Care Series to share some valuable information in this important area of health care for older Australians.

APC has been working with Jayne and her team for many years.  We like the fact that the My Care Path team are ex-nurses who show a great deal of empathy and are completely independent.

If you, or a loved one, are seeking some more information, please contact APC to discuss our Aged Care Client Service which is specifically tailored to aged care advice and is exclusively included as part of our Private Client Service.

Aged Care Assessments & In Home Care

‘Aged Care World’ is undergoing extensive scrutiny and analysis at the moment. There is no doubt that there are flaws in the system however understanding how it all works can help Australian seniors and their families to make the best choice around care and services to look at for support.

When I talk about Aged Care I refer to any services that assist the elderly.

These services are predominantly funded by the Federal Government (Department of Human Services). Private services are also available but that will be a topic for another day.

My Aged Care is the government portal for all things related to care for Australian seniors. Any-one can contact My Aged Care to either ask a question or refer someone they are concerned about. There is a general phone number 1800 200 422 or contact can be made via the My Aged Care website.

Initially a number of questions will be asked regarding the person who needs care. These questions are designed to help determine the level care or service that is required. Lower levels of service (eg; home cleaning, gardening, shopping assistance) will be referred to the Regional Assessment Service (RAS), higher levels of service or care (personal care, medication management, more complex care supports requiring more hours of care) will be referred to the Aged Care Assessment Service (ACAS). Both of these assessment services look at each person’s individual circumstances and recommend a level of care or service that will meet the care needs. They are funded by the Government and are free to the consumer.

The Assessment

Once the referral is received by the appropriate team, contact will be made with the care recipient or their representative to book a time for the assessment. The care recipient must agree for this assessment to go ahead. Normally an assessor comes to the home to get a picture of what the current living situation is and to determine if there are any modifications that need to be made to the home (eg; shower rails in the bathroom). It is also a great way to see the person in their own environment. Currently – due to COVID 19 – assessments are being done over the phone via either a phone call, facetime or another face to face tool. We always recommend that a family member also be in attendance at the meeting. Two sets of ears are better than one. Many older people will also deny they need assistance, particularly those with some short term memory loss or cognitive impairment.

It is important to note that this assessment is not a test. It is a way of determining what services can be provided to assist people to get the most appropriate care for their needs. Many older people become very anxious about this assessment. There is no need to be concerned. The assessment is a guide to care needs. The analogy we use for the resulting approval is that is works like a passport – you may never need it however if you do want go over seas you cannot go anywhere without it. How the assessment approval is utilised is entirely up to the person. There is always a choice to access services or refuse them.

RAS (Regional Assessment Service) CHSP (Commonwealth Home Support Package)

This assessment gives eligibility to basic in home care services. Currently these services are provided by local City Council’s but the system has been reviewed and over the next 12 months this will change. Independent service providers will take over from Councils. It is expected that the CHPS will be phased out and replaced by Level 1 In Home Care Packages.

ACAS (Aged Care Assessment Service) Level 1, 2, 3 & 4 Packages

The ACAS Assessment gives approval for a broad range of services. These include In Home Care Packages, Residential Respite and Permanent Residential Aged Care.

One of the differences between the CHSP and the Levels of In Home Care Package is the funding model. With In Home Care Packages the Department of Human Services allocates funds to the package recipient. The recipient then has the choice of which provider they wish to engage and what services they would like to utilise to assist them.

The Level of package is determined by the level of supports a person requires. Lower care recipients, Level 1 & Level 2, receive approximately $8,800 and $15,500 per annum respectively to spend on care services. Level 3 & Level 4 recipients receive approximately $33,700 and $51,100 respectively per annum to spend on care services. Care recipients may need to financially contribute to the package they receive. This depends on an income assessment that is submitted to Centrelink. Not everyone will need to contribute. The package funding must be held by an accredited Home Care provider so it is important to compare providers to determine the one that can provide the best value for money and the most appropriate services.

While these sums look be generous there are administration fees and service charges that can be incurred resulting in a lower amount to spend. However, on average a Level 4 package should cover 15 – 17 hours of care per week averaged out over 12 months.

There are number of things to consider when choosing a Home Care provider. They are not all the same. My Care Path has a service that can assist families and their loved ones to choose the best option for their situation. Fee comparison, consistency of care and reputation re all taken into consideration when we look at options for our clients.

Explaining how the system works for each family is important. No one size fits all and My Care Path are very experienced at supporting families with their decisions. The complexity of the system raises many questions. Families are welcome to contact us if they need assistance to understand how it all applies to them.

An aged care consultant can provide the following services:

• An initial assessment of your aged care needs
• Help with referrals to My Aged Care
• Recommendations on the type of care that is suitable for you, such as home care or an aged care facility
• Provide a short list of recommended facilities and home care providers within your area
• Organise and manage tours/interviews of the short-listed facilities or home care providers
• Explain the different costs and fees, as well as negotiate fees with an aged care provider on your behalf
• Advocate for your care and help to change/move facilities if you are not satisfied with the aged care service provided

How can I contact an aged care consultant?

My Care Path contact details are as follows;

Ph; 1300 755 702

e-mail; support@mycarepath.com.au

website; www.myagedcare.com.au

Where else can I research my aged care options?

You can use an online aged care directory, such as Aged Care Online to search for aged care care providers and facilities in your area.

Aged Care Online allows you to search for facilities in your area as well the specific care you need, whether it be home care, residential care or retirement living.

What do you think is your biggest asset?

For a young person it may be your car, or perhaps your savings for a home deposit.  However there is one asset that will dwarf all other assets you have.  That is the present value of all your future income!

So what would happen if you lost it due to illness or injury?

How would you pay your rent, your car loan, your food bill etc and how can you protect against this risk?

APC Foundation Client Service is purpose built to help young people get their financial house in order.

Protecting your biggest Asset – Income Protection Insurance

If your largest financial asset is your ability to generate an income across your lifetime APC believes the protection of this asset is critical! Putting cover in place early also comes with many benefits!

So, what is income protection and what does it cover?

Income protection insurance covers you against loss of income whilst you are unable to work due to illness or injury. This can be a temporary or even a permanent period of disability. Income protection is used to help you and your family meet ongoing living expenses and debt or mortgage repayments.

It is also often called salary continuation insurance, particularly when offered inside your superannuation fund. The level of cover is set as a percentage of your income and will not normally exceed more than 80% of your usual income amount. In the event of a claim a policy is paid out to you as a monthly benefit.

Income protection insurance may be most suitable for anyone who cannot afford to be without their income.

Can you afford to have no income?

Benefits of income protection insurance

• Peace of mind that your income is securely protected
• Retain your lifestyle by replacing lost salary
• Protect your wealth by reducing or removing the need to sell assets to generate cash
• Premiums can be tax deductible
• You don’t have to ask Mum or Dad for help!

The Alternative

Without Income Protection insurance, you may need to run down savings, sell assets, and/or rely on family or Centrelink for assistance will occur. This will mean you may find it difficult to maintain your standard of living or pay for medical assistance you require.

Getting it right

As part of APC’s Foundation Client Service, a key pillar is to ensure our members have reviewed their Income Protection requirements and are adequately covered for an unforeseen catastrophe.

APC’s commission rebate policy (can be up to 30% of premiums) applies to members of the Foundation Client Service so we often find that our members out of pocket premiums are minimal as you will see from our example below;

Case Study

• Young professional – age 29 earning a salary of $90,000
• Income Protection Policy annual premium – $1000
• Less tax deduction for premiums paid – ($390)
• Less APC commission rebate – ($300)
• Net ‘out of pocket’ expense – $310 pa

As this example shows, the actual cost of the insurance is a small price to pay for the protection of your biggest asset!

If you would like to help your child protect their income ask any member of the APC Advice team and we’ll be happy to help.

APC Core + Satellite Investment Approach

For many years, APC has recommended a suite of low cost portfolios based upon academic research, which are designed to provide efficient access to investment markets together with the capacity to outperform over time.

These portfolios invest in the traditional asset classes: cash, fixed interest, equities and listed property, and into various sub-asset classes such as emerging markets. These are the Classic portfolios and range from the most defensive, Classic 30, to the most growth oriented, Classic 100.

To re-iterate the key tenants of this investment philosophy;

• risk and return are related
• diversification is essential
• markets work (that is to say, they are efficient when it comes to interpreting information and translating this in prices)
• structure explains performance

These portfolios and the underlying investment principles they employ, have served our clients well over many years and will continue to do so for many years to come.

Challenging macro-economic times

Since the Global Financial Crisis (GFC -2008/09) or what the Americans call ‘The Great Recession’ investment markets have had to navigate an increasingly complex set of circumstances.  These are largely (but not exclusively) driven by the enhanced role of central banks around the world in attempting to ‘smooth’ asset class returns (direct property and listed shares primarily) and thereby support consumer and business confidence and the broader economy.

As a result we now find as part of our ‘new world order’, concepts such as ‘negative interest rates’ and ‘MMT or Modern Monetary Theory’ (the printing of money) have become a reality rather than a theory.  This can create added challenges for portfolio construction and management.

These are challenges that APC has responded to, via our Investment Committee process and our investment methodology has evolved as a result.

So, how has APC enhanced this investment methodology, based upon the foundation of the core investment philosophy?

Introducing the Core + Satellite Investment Approach

The objective of a ‘core and satellite’ approach is to harness the return provided by the broad market through a low cost ‘core’, and to include where appropriate, opportunities to diversify and achieve certain portfolio objectives or outcomes through selective sources. Examples of these individual portfolio objectives may be to reduce market related volatility, to enhance passive income or increase return opportunity (and risk profile).

The Classic Portfolio Suite

At the Core of this approach is one of the Classic portfolios.

From conservative through to high growth, this suite of portfolios provides a sound investment foundation.  APC reduces risk by applying significant levels of diversification at the asset class, sub-sector asset class and direct security level.  They are low cost and aim to limit unnecessary trading costs.  The Classic Portfolios are market linked which means they are not immune from market volatility risk and would be highly ‘correlated’ with broad market movement, both up and down.

Their aim is to moderately outperform the market after fees in the long run and for many the Classic portfolio will remain completely appropriate to their needs.

Satellite investments

With one of the Classic portfolios at its core, APC may now consider the addition of other investments.  These investments are viewed in bands which have varying liquidity characteristics (this relates to the ability to cash out an investment if needed) and portfolio objectives;

• Band One: Targeted Strategies

Investments of this type may provide the opportunity to target or ‘tilt’ specific market segments in much the same way as we have tilted our portfolios to small companies and ‘value’ companies for nearly 20 years.  These may include specific asset classes like Global Healthcare or sustainability focussed strategies and SRI (Socially Responsible Investing). These tend to be fully liquid, listed investments.

• Band Two: Low Correlation Strategies

Band two investments may be those with different correlation profiles to the traditional asset classes.. Correlation explains the extent that one investment’s performance behaves when compared to another investment’s performance over the same time period. The addition of a less or uncorrelated investment into a portfolio can improve diversification and lower volatility.  Examples may include private or unlisted company funds, or income strategies, which have less reliance on the listed bond market.  Investments in this band may be priced monthly and have monthly accessibility windows.

• Band Three: Opportunistic Strategies

At the outer band of potential ‘satellite; investment exposure would include investments which are opportunistic in nature.  By this. we mean either they have been able to be purchased at a below market rate or they are performing well however require further capital and expertise to accelerate growth. These types of investments include – for example – exposure to niche unlisted companies (via a professionally managed fund structure).

Investments of this type are typically priced monthly or quarterly and have no liquidity.  This can mean the investment must be held for a fixed term before investment capital becomes accessible.

Next Step

APCs investment committee regularly considers and reviews high quality investments, which may be considered for inclusion in the above bands, with this an evolutionary and ongoing process.

It is important to note that reducing diversification or access to capital through alternative or ‘satellite’ investments can increase portfolio risk and will not be appropriate for all investors.  As such, it is important to fully understand an investment’s characteristics before a decision is made to include it in your portfolio.  APC would consider various factors with you – including your individual needs and objectives – should it be an appropriate consideration for you.

If you wish to discuss this in relation to your own portfolio please feel free to make contact with any member of the APC Advice team.

What A 12 Months – Tickets Please ….

So you’ve paid your money and you hand over your tickets before taking your seat on the ‘investor rollercoaster’.

Pre Covid-19

From July 2019 up until late February 2020, all seemed fun with things looking relatively ‘rosy’ as we rode the investor rollercoaster to all time highs (around 7500 on the All Ordinaries here in Australia and around 29500 on the Dow Jones in the USA).

This period saw strong gains across much of the global share markets – company earnings were healthy, central banks were reducing interest rates, discussions on the final Brexit details were moving forward and there was an easing in the USA / China trade war all helping to push fears of a recession to the background.  The biggest thing, looking forward, was whether President Trump might win another term.

It seems like an age ago now but here in Australia, we battled intense and devastating bushfires and floods (what a country) and the share market still pushed ahead.

There was a thought though tickling the back of investor’s minds that maybe the rollercoaster was just nearing the peak of the initial climb with company share prices potentially a little ‘top heavy’ and that some sort of drop was possible.

Well those musings were correct but not for the reasons thought … hello Covid-19.

Free fall (hands in the air)!

Post Covid-19

News of some sort of Covid outbreak in China started in January but it wasn’t until late February that the world really started to fathom the monumental impact that Covid-19 would have for the globe as cases in Europe, Australia, USA and emerging markets swiftly increased.

This fear then led to share markets quickly falling in late February by around 35%, commodity prices fell too and the US dollar strengthened (the Australian dollar hit a low of US$0.55) as investors factored in ‘worse case’ scenarios.

It was only around 4 weeks after the Covid-19 news hit the airwaves, in late March, that the All Ordinaries hit a (then) low of around 4400 here in Australia and the Dow Jones hit around 18600.  There was no way to know then that this was a turning point as the investor rollercoaster headed back up again on the back of monumental Government stimulus and dreams of a vaccine.

And Now

Since that late March point, the markets have rallied to a point now where the All Ordinaries is now around 6250 and the Dow Jones is around 26700 – still 17% and 9% respectively below the Pre-Covid highs but over a 40% jump from the March depths.  The Australian dollar is around US$0.70 (a 27% increase from the bottom) and commodity prices have firmed (especially iron ore as China’s demand has rebounded and South America (Australia’s largest iron ore export competitor) is in the grips of seemingly ever-increasing Covid-19 numbers).

A Slightly Longer Term View

So, despite this wild ride of recent times, the financial year just ended saw global shares return around 5.2% in Australian dollar terms thanks largely to the tech and healthcare heavy USA share market.  Australian shares were down 7.7% for the financial year.  With the Reserve Bank of Australia (RBA) anchoring cash rates at 0.25%, returns here were hard to find but bonds provided reasonable returns as plunging yields saw capital gains in this space.  Listed property was hit with double-digit losses resulting from a slump in economic activity pushing up vacancies and depressed rents in retail and office properties.

Source: Thomson Reuters, AMP Capital

This last period has again reinforced key investment principles being (i) diversification is key and (ii) timing the market is hard (nigh, impossible).  We might also throw in (iii) beware the crowd mentally (especially at times of heightened emotions) as Warren Buffet has been quoted as saying, “be greedy when others are fearful and fearful when others are greedy”.

So What’s Coming

Covid-19 will continue to be the biggest influence on investment markets for the foreseeable future with the number of cases continuing to grow (both here in Australia and especially overseas).  The obvious threat to economic activity is clear with some estimating that even this current 6 week lock-down in Melbourne will reduce Australia’s GDP by 1% this quarter alone.  Some businesses, many even, will not survive and unemployment will remain high with property prices likely to fall.

But there is increasing optimism for a vaccine and global governments remain committed to providing fiscal stimulus in a low interest rate environment.

The US Presidential Elections in November may provide a positive push to the investment markets if President Trump secures a second term (especially in the USA) but a question mark remains over USA / China tensions and what may be said or done by President Trump if it becomes obvious that he will lose (which betting agencies currently suggest is a real possibility).

This all leads to heightened uncertainty and increased investment volatility so, the investment rollercoaster rolls on (“please remain seated and hold on”).

Save more and retire sooner!

‘Cash is King’ is an oft used term and in the context of a wealth creation strategy no truer words have been spoken.  You can have all the objectives you like but if you don’t have the free cash flow to achieve them they will remain objectives only and never a reality.

So, the journey to helping a client achieve their important personal goals will almost always start with their cash flow.  This case study deals with this most important component of any wealth creation strategy.

Please feel free to share it with someone you care about if you think they may benefit from reading about how improving free cash flow can help them!

What is the objective?

Generally, APC would want to increase ‘free cash flow’ or a client’s savings capacity.  If we can do this then we can propose a strategy to use this free cash flow to generate capital growth and income generation and help them achieve their goals sooner.

Pay yourself first

The most powerful concept for improving ‘free cash flow’ is the idea of paying yourself first which works like this;

1. Understand your NET income AFTER TAX
2. Detail your expenses, broken down by the following categories;
   1. Not Negotiable Expenses – must pay expenses
   2. Nice to Have spending – doing things that bring a smile to your face
   3. Luxurious spending – absolute indulgence!
3. Subtract 2 from 1 and you have your savings capacity or free cash flow

Now, when you know the answer to step 3, this figure is the amount you ‘pay yourself first’ by committing it to a savings or wealth creation strategy before you do anything else.  This is a powerful yet simple strategy which can make a material difference.

The Clients – Professional couple with three pre-teen children

After providing our online budget tool, an initial analysis of their cash flow yielded the following information;

Whilst positive this free cash flow was not enough to achieve the personal goals of our clients.  So the following activities were undertaken;

Review of their debt repayments

Many people actually have mortgages and loans that are not market competitive.  Banks do not automatically re-set all variable loans to the current market rate.  They change your existing loan rate by whatever margin is being increased or decreased.  So if person A started a loan at 5% and person B started it a year later at 4% and the bank decreases their loan book by say 0.25% then person A’s rate goes to 4.75% and person B’s rate to 3.75%.  Person A doesn’t automatically get B’s market competitive rate!

In this case study, the clients have two loans, a home mortgage and an investment property loan, both on principal and interest (P&I) repayments which together are $83,712 per annum. APC recommended re-writing the loans and using a mixture of fixed and variable loan structures and achieved a significant reduction of their annual repayments to $61,932.  This generated an increase in free cash flow of $21,240 per annum.

If you have friends or family members who have a mortgage or investment loan, APC has an appraisal service to check if the rates they have are market competitive.  In addition we can also provide some guidance with regard to the structure of their loan(s) – fixed versus variable.  This appraisal is at no charge and is exclusively part of your Private Client Service.

If you are interested just ask any member of the APC advice team.

Other Expenses

In addition to creating free cash flow from lowering the servicing cost of their debt, we also reviewed their general expenditure and highlighted some areas that they could, together, consider if further areas of savings could be found.

After reviewing this together they found an additional $15,060 of savings by re-calibrating expenditure and placing a higher priority on the achievement of their longer term goals over some of the shorter term spending decisions they had been making.

In total, once the exercise was complete a total of $36,300 of extra free cash flow was generated or just over $3,000 per month!  To put this another way, for this couple it was like receiving a $74,000 pay rise!

Now, with a new free cash flow of $73,950 the strategy has the oxygen it needs and the clients can see a path way to achieving the goals that are personally important to them and their family.

Give yourself a pay rise!

If you would like a fresh review of your overall cash flow to see if you can increase free cash flow and give yourself a pay rise, please feel free to make contact with any member of the APC advice team

We’ll be happy to help!

Luke and Amy welcome Theo into the world!

 Welcome Theodore Phillip Price to the APC Family. Born at a healthy 3.63Kg at 4:14AM on the 4^th of May, Theo is thriving in his new world. Although much sleep deprived, Amy and Luke are thoroughly enjoying their new journey as parents!

Calypso receives a promotion

Congratulations to Calypso who has been officially promoted to Para Planning Team Leader effective from July 1^st.  Over the past four years Calypso, who joined APC in September of 2016, has been a member of the para planning team under the leadership of Luke.   It became apparent early that Calypso is a detail person who willingly takes on challenges and, like all of the APC team, is very client focused!

In July of 2019 it was decided to transition Calypso over a twelve month period into her new role. Luke, who commenced his transition to the APC advice team in July of 2018 has now completed this and we congratulate Luke also as he takes on a permanent position as an APC Adviser.  Luke has been a valued member of our team since November 2012!

Just as APC strives to help our clients achieve their important personal goals, we also pride ourselves in helping bright young professionals achieve their professional and personal objectives as well.  We welcome and celebrate Calypso’s and Luke’s success!

APC’s new website

You may have noticed that our website has had a facelift.  After approximately ten years without any change of significance we thought it was time for a fresh look.  We would encourage you to take a look and let us know what you think.  Importantly, your Client Portal is in a familiar place at the top right hand corner of our home page.

https://australianprivatecapital.com.au/

APC’s Values

Since our establishment in 1988, APC has always had a ‘Client First’ philosophy.  As our business has grown we have adopted other guiding principles and recently we came together as a team to formalise the following six values which epitomise Australian Private Capital:

1. Placing our client’s interests always ahead of our own
2. Being honest with our clients and ourselves while operating with integrity
3. Always being willing to help our fellow team members
4. Supporting diversity in our team
5. Having an inclusive approach
6. As we prosper we give back to society

APC’s Partners

APC has long held the view that where we can we should take the opportunity to be a good corporate citizen.  This behaviour lead to our Value #6 – As we prosper we give back to society.  In the early days, as we replaced computer equipment every three years, we donated this equipment to indigenous communities.

However over the years we have developed a more formal approach to APC’s Partnership Program and it is now an important feature of our strategy.  Please take the time to review our program and our partners on our website;

https://australianprivatecapital.com.au/apcs-value-and-partners/

APC’s 2020 Annual Client briefing

It will be of no surprise to you that this year’s briefing, held annually at the NGV, is not possible due to the ongoing COVID-19 health crisis.  APC is currently considering how we may provide you an Economic Briefing, Market and Portfolio update and some NGV content for your enjoyment and we will share this with you over the coming month or so.

NGV’s virtual conversation – Destiny Deacon

On a similar topic, as part of the NGV Corporate Sponsor program, APC was able to provide our clients access to the virtual conversation on the work of Destiny Deacon.  We have received a great deal of positive feedback form you on this and hope to be able to do so again when the NGV release more virtual content exclusively for their corporate sponsors.

Every two years, Australian Private Capital surveys our clients to measure how you think of our service.  APC uses an external consultant (Business Health) to conduct the survey so that it is completely at arm’s length from APC.  The survey is anonymous which ensures the integrity of the results as our clients can express their views honestly.  Business Health tell us that only the better advice firms actually take the time to do this survey.

It is with great pride for our entire team that this year’s survey provided our best ever overall score of 4.75 out 5.00!

APC Values

In large part this result is a measurement of APC being true to our values. These guiding principles provide us with a framework by which all decisions within APC are made.  Whilst our overarching goal is to delight our clients with exceptional service, our firm’s objective of helping all our clients achieve Clarity, Control and Confidence in relation to their financial strategy is achievable by our commitment to live up the following values.

1. Placing our client’s interests always ahead of our own
2. Being honest with our clients and ourselves while operating with integrity
3. Always being willing to help our fellow team members
4. Supporting diversity in our team
5. Having an inclusive approach
6. As we prosper we give back to society

So, to the survey results.

This graph, provided by Business Health, has the most recent result (2020) at the left with each bar moving right reflecting scores of previous survey years.  The trend of the graph shows a steady improvement over time.

Business Health say “Our (Business Health) benchmark average score is 4.23. Your (APC) average score across all categories was 4.75 which puts you at the very top of the of the businesses in our national benchmarking group”.

The graph below measures various Key Performance Indicators (KPIs) of the survey.

Business Health say “your clients scored you most highly for Standard of Support Staff and Business Relationship (which both achieved an average score of 4.85)”.

This score is a wonderful affirmation that APC is delivering on our desire to develop personal relationships with our clients and provide them with excellent service.  It makes a particular comment about how our clients feel about the service that Petra, Calypso, Blake and Loan are providing and we commend them all on a great achievement!

Here are some client comments from the survey;

• The small business approach enables the team to interact face to face with each client every six months which inspires confidence that APC has the interests of each client at the forefront.

• There are two main strengths: the first is the knowledge and data-driven advice related to my personal circumstances; and the second is the APC culture of being very client-focussed so that one really does feel like an individual rather than just a cipher

• APC opted for independence and rejected commissions for the recommendation of products long before this was mandated. This is key to me

• A professional caring group who go the extra mile to meet our needs

• Independent advisor free of conflicts and commission driven sales incentives brought us to APC. Great staff and service have kept us there

• Made to feel inclusive and respected, despite being one of the less wealthy clients of the company

• I have never felt that they didn’t have my best interests at heart.

• I am very happy with the level of service and advice I receive from APC. I feel valued and respected by the staff who are friendly and professional.

What is APC’s KAIZEN?

KAIZEN is the Japanese word for ‘improvement’ and even though our survey this year resulted in our best ever score, our lowest rated score from your perspective, was our ‘Range of Financial Services’.  So in the coming month or so we will be back in touch with you to better understand where we can improve in this area.

Our clients are great referrers!

Over many years, APC has grown almost exclusively from our clients referring family and friends to us.  It is the greatest accolade a client can bestow on APC and in this survey 96% of you said you are willing to do so!

APC has recently launched our new website and we have enhanced our Financial Health Check survey.  As the name suggests, this is a survey that provides the opportunity for someone to self-assess on key aspects of their financial health.  The survey takes about 10 minutes and at the conclusion the person receives a report which outlines their areas of strength and also their areas where improvement is required.

There is no charge for the report and it is a great way you can help a friend or family member start the journey to potentially achieving a greater degree of financial health.

https://australianprivatecapital.com.au/financial-health-check/

Finally, thank you for being our client.  It is a privilege APC has never taken for granted as we strive to deliver the best outcome for you, always.

Warm regards,

The APC Team.

Please click on the link below to download the Standard Classic Portfolio Performance (Classic 30 to Classic 100) as at December 31st 2020.

2020_DEC_CP_Performance

Please click on the link below to download the Specialist Classic Portfolio Performance (Classic 50 Income Fund, Classic Thematic 70 Portfolio and the Classic Ex Pat Australian Share portfolio) as at December 31st 2020.

2020_DEC_CP_Performance – Specialist

Please click on the link below to download the APC Satellite Investment Strategy Performance (Targeted, Low Correlation and Opportunistic) as at December 31st 2020.

2020_DEC_CP_Performance – Satellite

Time investments made early can bring great financial rewards down the track.

Most of us recognise the benefit of being financially organised and the great reward that can come about when this starts early.  This is – in part – because of the value of time when it comes to investing and the so-called ‘magic of compounding’.  Getting started early can also create a great sense of accomplishment, setting up a foundation for a confident and active approach to money management as a young adult. 

Many of our clients have shared with us that if they had started the journey with APC earlier, they would have felt in a stronger position today.  They wanted to make sure their children benefited from this realisation.  This led to the establishment of APC’s Foundation Client Service designed to assist the children of our clients in the beginnings of their own financial journey.

While their needs and goals may differ from Mum and Dad’s, there are a number of financial ducks that can be lined up which can put one on a great footing.  If the New Year inspires some motivation to get started, here are some items which may be worth considering if getting financially sorted is part of this year’s resolution.  

The benefit of time

While a hunt for higher returns almost certainly requires acceptance of a higher level of risk, time is a force to be reckoned with.  The importance of making a conscious choice about superannuation investments is a decision that can make a marked difference to the investment value and trajectory over time.  In practical terms, this might be the difference between choosing a ‘balanced’ investment option rather than a ‘high growth’ option.  The longer you have to invest, the greater the impact – and 1 or 2 per cent higher average return per annum might make a greater difference than you think. Looking at the effect of an early savings strategy, the chart below is a simple illustration of the amount of monthly saving required for one to save $1m at age 65.  It might have many of us wishing we could turn back the clock!

(source: https://www.businessinsider.com.au/amazing-power-of-compound-interest-2014-7)

Income protection insurance

Most of us tend not to think about the possible health issues that can unfortunately happen, especially when relatively young, fit and healthy. But if you had a machine at home that spat out the equivalent of your income every year, you probably would insure it – right?

When the unplanned occurs, parent’s often step in to help their children if they are not covered or simply need financial assistance – which can in turn impact their own retirement plan.

You can typically cover up to 75 per cent of your income with payments until you are aged 65 (if an illness/injury means you cannot work). Getting the cover locked down in your early 30s – or before – can be a good idea.  It often means you have yet to experience major health issues that the insurance company might otherwise specifically exclude or attach an additional cost to cover. 

Health insurance premium loading

Lifetime Health Cover is a government initiative, which was introduced with the aim of encouraging younger people to get and maintain hospital cover.  In summary, an extra cost applies to hospital cover unless you have it in place by the July 1 following your 31st birthday – 2 per cent for every year over 30.

So, one could end up paying, for example, a 20% loading by age 40 and so on – up to a cap. If there is no other impediment to taking action on health cover, these provisions make it worth getting the ball rolling.  

Automation

The act of automation simply makes for an intelligent approach to money management.  It is just as much about making it all easier as it is about consistent action – which can be the key (see chart above!)   We probably don’t need to tell most young people that technology is their friend. When it comes to saving, investing and budgeting there has been fantastic innovation with a myriad of online tools and apps available. When it comes to ‘paying yourself first’, making it automatic can be most effective at reaching important goals and staying on track.

In our E-News article of November 2018 entitled ‘Do Industry super fund investors know what they’re investing in?’, we highlighted the dubious practice by many Industry Super funds of mis-characterising the ‘Defensive’ and ‘Growth’ characteristics of the assets held within their portfolios.

The widespread practice of calling a Growth asset Defensive seeks to lower the perceived risk associated with a portfolio while enhancing the overall return.  This allows funds that do this to ‘game’ the league tables of returns for use as a slick marketing tool.

In our article we highlighted the Hostplus Balanced fund (among others) as being the most impacted by such a practice.  Whilst Hostplus market this fund as ‘Balanced’ it is in fact a ‘High Growth’ fund.

The banking and superannuation regulator APRA (Australian Prudential Regulatory Authority) recently (though quite belatedly in APC’s opinion) exposed Industry Super for exactly this practice and held out Hostplus as the most egregious.

APRA’s ‘Heatmap’ assessed Hotplus’ flagship Balanced MySuper product as having a staggering 93% allocation to Growth assets!  As our article in November 2018 suggested it is very doubtful indeed that many of the investors in such a product would have truly understood the risk profile of the investment.   

It is clear that for anybody to assess superannuation (or any investment for that matter) they cannot just look at returns in isolation. Given APRA still have not provided a strict guideline on what a Defensive and Growth asset actually is, funds will continue to apply inconsistent and often misleading characterisations of their own.

In our E-News article of February 2019 entitled “Industry Super Funds – illiquid asset valuations called into question”, we highlighted the conflicted arrangement of how Industry Super funds value their own unlisted assets.  APRA has now also called into question how these assets are characterised by Industry Super.  These assets are almost always Direct Property.

Industry Super’s argument seems to be that if a property is owned by a listed entity (for example a Real Estate Investment Trust – REIT- listed on a stock exchange) then it should be characterised largely as ‘Growth’ whereas if it is owned by an unlisted entity (for example the ISPT – Industry Super Fund Property Trust) then it should be largely considered a Defensive asset.  However the asset itself, in both cases a direct property, would be identical.

It simply does not make sense for the characteristic of an asset to be determined by how it is owned and not by the asset itself.  Yet this is the central defence by Industry Super of how it makes these asset characterisation decisions.

As we demonstrated in our E-News article of November 2018 entitled ‘Do Industry super fund investors know what they’re investing in?’, when correctly characterised, the Hostplus fund does not outperform.  APRA’s ‘Heatmap’ showed infact that the Hostplus MySuper product underperformed APRA’s own ‘simple reference portfolio’. APC continues to be of the view that until such time that APRA and ASIC (Australian Securities and Investment Commission) publish a set of guidelines that all industry participants MUST adhere to, the issue of asset mis-characterisation and therefore a lack of consumer protection will continue to be a problem.