Hang on Slack Investor … What are you saying? Oprah, the font of lifestyle guidance … has a rival! How can the Australian regulatory authority APRA match Oprah wisdom that spouts such useful advice as this …
You can either see yourself as a wave in the ocean – or you can see yourself as the ocean– Oprah Winfrey – Source
Wheras Oprah has been an inspiration to millions, Slack Investor has a different, more researched, inspiration … he has fallen in love with an Australian statutory body – APRA is the Australian Prudential Regulation Authority.
Australia’s total superannuation assets rate of return – From APRA report
Oh APRA …. I do love you … You are the Ocean … it’s the indifference that you show me … the complete lack of spin … just information …. Oooohhh! you may have let us down in the distant past (HIH collapse, 2001), but your new muscular stance on differentiating between superannuation products is appealing … it gives me hope for all statutory bodies. One of APRA’s duties is to collect information on the superannuation sector and report. They report the total superannuation assets in Australia grewto $2.7 trillion in the year to June 2018. The Self Managed Super sector has a staggering 27.7% of these funds. Slack Investor is gladly part of this self managed sector and enjoys the flexibility of an SMSF. Last years average rate of return for all super funds was almost 8%.
The chart shows some great annualized Australian super returns for the past 5 -years of 7.9%
The Productivity Commissioner and Slack Investor hero Karen Chester argues that there is a need for the Super system to look after the default member who is likely to remain disengaged.
“what workers need is not “bells and whistles” – which bring with them higher fees – but “low-cost, top performers” with a “balanced investment strategy” Karen Chester From The Guardian
APRA continues to monitor performance of Industry vs Retail Funds and the yearly percentage advantage of having Industry funds(rather than Retail) is shown above.
While we wait for the politicians to act on these matters, get engaged and consolidate your super into one fund – and it should probably be an Industry fund. If Slack Investor can’t motivate you – then perhaps Oprah can … Right On Oprah!
“If you’re sitting around waiting on somebody to save you, to fix you, to even help you, you are wasting your time because only you have the power to take responsibility to move your life forward.”Oprah Winfrey – Source
Slack Investor remains IN for US, UK and Australian index shares.
Power to the US – It might be bewildering from afar (and probably from within!) – but Wall St booms again with a 3.0% monthly rise. A small rise in the Australian Index (+0.6%), and the UK Index sinks with a -4.1% fall. All Markets are staying clear of their designated stop loss limits – So Slack Investor puts away any Index decisions for another month.
All Index pages and charts have been updated to reflect the monthly changes – (ASX Index, UK Index, US Index).
A recent bit of Beneficial Slackness
Slack Investor as long been a fan of Rudyard Kipling’s poem “If” and it is worth a read in full. But in particular the stanza
I like to think Slack Investor is in tune with the ebbs and flows of fortune – and he was on the good side of a stroke of luck this past week. In my last monthly update July 2018 I wrote of my worry with my holding of Altium (ALU) shares. I feared that the declining share price in July might indicate that there was bad news ahead at their reporting date. The upshot of the post was that I would leave this sort of stuff to the day traders and continue with the Slack plan of only making sell decisions at the end of the month.
The imposter of trumph prevailed on this occasion with a rise of ALU share price of over 30% on the day of their positive results announcement (FY18 Revenue up 26%).
With an estimated 2019 P/E ratio of 53.4, there is no doubt that the stock is relatively expensive. But, it is a growth stock with some very good tail winds. With the “internet of things” there will be more and more household appliances connected to the internet and to each another.
The current Australian household has an average of 14 connected devices under the one roof – this is expected to grow to over 30 devices by the year 2021. – from Andrew Mitchell – Livewire
Altium sells design software for printed circuit boards (PCB) which appear in all of these devices. ALU has been increasing its market share for PCB design software from 18% to 22% in this past year – and aims for 30% by 2025. These are good omens and I am happy to be an owner of ALU. To risk one more quote from “If”
Jack Bogle -Now retired at a youthful 89 – photo from The Inquirer
In fact, John “Jack” Bogle earns the embrace of the investing community. He is a “rolled gold” Slack Investor hero. Way back in 1974, Jack Bogle started Vanguard Investments. Bogle’s philosophy was that: instead of trying to beat the index and charging high costs, he would offer a low-cost alternative. High costs were typical of all other investment funds at the time – the Vanguard index fund would try to closely follow the index performance over the long run – thus achieving higher returns with lower costs than the costs associated with actively managed funds.
Average expenses for an actively managed mutual fund run to about 2 percent annually. Investors can avoid that by using low-cost index funds – Jack Bogle
Almost single-handedly, Jack Bogle changed the landscape for individual investors. Before Vanguard, there as no real choice for someone that wanted to invest in shares but didn’t have the will (or knowledge) to invest in individual stocks through a broker. The small investor would have to hand their cash to a managed fund – who would gratefully accept an up-front fee, at least 2% yearly management fee, plus a trailing commission. The typical Vanguard retail fund charges less than 0.90% for domestic or international shares – This is a great way to start investing and avoiding the fees of retail managed funds – Empower yourself!
However, Slack Investor recommends you really get serious about owning your own future and “bite the bullet” and start your own broker account. Slack Investor uses Commsec … but if he was starting from scratch he would use a low-cost broker such as the 2018 Money Magazine winner SelfWealth – at $9.50 per trade. Using a broker, you can buy the same Index funds offered by Vanguard (as a retail managed fund) on the stock market as an Exchange Traded Fund (ETF) – at a substantially reduced rate! e.g., Vanguard ASX 300 Index ETF VAS (Management Expense Ratio 0.14%); Vanguard World Index – ExAustralia ETF VGS (Management Expense Ratio 0.18%)
Bogle argues for an approach to investing defined by simplicity and common sense. Slack Investor likes this. Bogle has eight basic rules for investors:
Select low-cost funds
Consider carefully the added costs of advice
Do not overrate past fund performance
Use past performance to determine consistency and risk
Beware of stars (as in, star mutual fund managers)
Beware of asset size
Don’t own too many funds
Buy your fund portfolio – and hold it
Percentage of “Active” Funds that under-perform the benchmark over 10 years- Data as at 31 December 2017- Source Vanguard
The Vanguard data above shows that over a 10-yr period, less than 25% of active funds outperform index funds. JL Collins points to research that over a 30-yr period, less than 1% of active funds outperform.
Bogle has more fans than just Slack Investor. An entire community of “Bogleheads” has been inspired by his approach to investing. They run a forum that dispenses (mostly US-based) investment, money issues, and retirement planning advice that gets a remarkable 4 million hits a day. Jack Bogle likes to …
“to give ordinary investors a fair shake.” – Jack Bogle
Slack Investor likes Jack Bogle’s approach and is not afraid of the Bogleman. He owns an ASX ETF Vanguard fund VAE that has management costs of 0.40% (1-yr performance 12.51%)
Slack Investor remains IN for US, UK and Australian index shares.
It has been a good start to the financial year in all followed markets. Rises in the Australian Index (+1.4%), the UK Index (+1.5%), and the US index up a remarkable 3.6%. Slack Investor is cautious – but not afraid. Bull Markets are where the investor makes money. Stop losses are the insurance that enables sleep at night.
All Index pages and charts have been updated to reflect the monthly changes – (ASX Index, UK Index, US Index).
Reporting season for end of FY 2018
Robert Hays as Ted Striker apprehensive about landing the plane in Flying High (Airplane!) gif from source – may be subject to copyright.
Despite the general market indicies doing well, July 2018 has seen some of the big Slack Portfolio achievers in the last financial year lose a bit of their froth. Although not quite as nervous as Ted Striker, Slack Investor is a “on alert” about the impending reporting season. The animated gif above is from the classic 1980 film Airplane (or Flying High) – and the full movie is most worthy of a viewing when the tension of the season becomes too great.
Australian companies are obliged to report on their earnings at least twice a year within two months of putting a line under their balance sheet. As 30 June marks the end of the financial year, the main reporting season takes place during August when most companies release their full-year results to the market. The accountants have been busy collating the figures and the management team has crunched the numbers and are ready to give updates on their company earnings and project some earnings outlooks. The CEO may offer his take on any changes to the economic environment at the shareholder meeting.
The day of this report release is usually the most momentous …
51 per cent of the two hundred and sixty major results (Last year) saw their share prices move more than 3 per cent on the day of their results. 35 per cent moved more than 5 per cent and 11 per cent moved by 10 per cent. – Marcus Padley in this report
There are strict rules on keeping this financial market sensitive information “in house” till the date that the results are announced. This way, everybody gets this information at the same time. Sounds fair … but sometimes information inadvertently leaks out and a decline in the share price is noticed before the actual reporting date … or, it might just be that after a sharp rise in price, the short term traders are just taking profits. There are a lot of possibilities – and it appears that something is going on with one of my major holdings Altium (ALU). There is a distinct decline in price since financial year 2019 started.
Daily chart Altium – from Incredible Charts
Regardless, I will leave action to the short-term traders, as at the end of July, ALU finished above my monthly stop loss ($19.16). Slack Investor has a plan and remains above the daily market murk and has an approach that has got him through so far. Let the market do what it must do – and if, at the end of the month, the stock price is below the monthly stop loss – then sell.
In Flying High (Airplane!), Ted Striker had a pretty good result. He overcame his fear of flying, landed the plane safely and won back the affections of his ex-girlfriend. Slack Investor is not aiming for this Hollywood finish but I have overcome my fear of rapid price declines – they are just part of investing in growth stocks.
I am diversified, have a plan and have stop losses for protection. (OK … slightly flushed with the exhilaration of reporting season!)
As Slack Investor is a student of the financial arts and a lover of measurement, the end of the financial year is a great time to review and see how the Slack Investments performed. The Index funds were reviewed last post. Index funds are a great way to start investing in shares – as you are spreading your risk over at least a hundred companies.
The next step, as you become more familiar with investing and can start running a critical eye over individual companies, is to invest in individual stocks.
Over 75% of Slack Investor’s share investments are in individual stocks. See Portfolio
Most of my holdings are in growth stocks. These stocks usually have a high Return on Equity (ROE>15%) – with a track record of increasing dividends. By their nature, they have a relatively high PE ratio and are usually punished in the markets during reporting season if there is any bad news affecting future earnings. This I accept.
Slack Investor Stinkers – FY 2018
From Pixabay
Each year I expect a few stinkers and dont beat myself up about them when they occur. If they breach the monthly stop loss – I usually sell at the start of the next month.
Print
-24%
A special mention for IPH. Although some investors have done well with this stock. this company has a prawn heads in the bin on a hot day type of stink for me. Slack Investor likes the idea of the company -and it seems to be making a bit of a recovery since I sold it! However, I have had difficulty trading it successfully as it would go into long periods of declining price immediately after my buys. I should have learned my lesson years ago with Slater and Gordon – Never trust Lawyers!
-22%
HSO has got caught up with a tightening on government health spending and a decline in private health care admissions.
-21%
RHC is also in the healthcare sector and has the same challenges as HSO. But, it is a well managed company and Slack Investor will look for an opportunity to get back in this stock.
Slack Investor Gold Nuggets – FY 2018
The wonderful thing about owning growth companies is that sometimes they surprise on the upside and grow faster than expected. Altium is the “Welcome Stranger” of gold nuggets.
+166% ALU makes software for the designing of integrated circuit boards that are used widely in a range of technology products. Some analysts fear that the stock is overpriced. Its PE ratio is currently an eye-watering 74 – but this is rapidly reducing with projected earnings over the next few years. I am still holding as we go into the reporting season – the optimist in me thinks that there may be more good news on future earnings. There are even rumours of a takeover by larger company. But if not, my end of month stop loss is $19.61.
+71% A2M’s brand relies on a patented process that makes milk with only the A2 protein. A2M has been the subject of a previous post, and it is true that I’m yet to be convinced of the health benefits attributed to A2 Milk – But their marketing is very good and the trend is more powerful than logic in my book! Slack Investor was stop-lossed out of this stock earlier this year, but has bought in again -and hope for good news this reporting season.
Honourable mentions for Slack Investor portfolio stocks that increased more than30% in this remarkable financial year. These nuggets include APX, CSL, MQG, NCK (no longer held), PMC, REA, SEK and WOR.
Slack Investor SMSF performance – FY 2018
I have written extensively on calculating Portfolio returns. I run a few separate portfolios but only quote the SMSF annual returns as this portfolio is externally audited. All percentage earnings quoted include brokerage and portfolio costs. Both raw and franked dividends are included as income. So essentially, the percentage returns include costs but are before tax. This raw figure can then be compared with other investment returns.
In what can only be described as a high-water mark for Slack Investor’s SMSF portfolio investing prowess. (and the luck of holding ALU inside it), Portfolio return FY18 was 37.6%.
One-year high returns are welcome but Slack Investor puts more weight on multi-year performance. The past 5-yr progress of the Slack Portfolio is 23.6%, 2.6%(whoops!), 14.2%, 19.5%, and 37.6%. This gives a compounding annual 5-yr return for the Slack Investor SMSF portfolio of 18.9%. The benchmark ASX 200 Accumulation Index (Including dividends) 1-yr and 5-yr compounding annual returns are 12.7% and 9.9% , respectively.
Slack Investor readily acknowledges the luck factor in the stock selection process and realises that this FY18 as an extraordinary year for the portfolio (I expect more moderate returns!). I have found that a disciplined stop loss process, a bit of effort and research on stock selection, and following of trends on share charts (technical analysis) can yield very good results.
Over the next year I will post on how to start investing and the specific techniques that Slack Investor uses – It is not difficult … Empower Yourself!
Slack Investor remains IN for US, UK and Australian index shares.
The Australian Index (+3.0%) has had a good month. While the UK Index (-0.5%) and the US index (+0.5%) have ended the Australian Financial Year (FY) in a steady fashion.
All Index pages and charts have been updated to reflect the monthly changes – (ASX Index, UK Index, US Index).
Goodbye FY 2018
Slack Investor loves a review … and the end of the financial year is always a good time for introspection. Overall, it has been a good year to take some calculated risk and be involved in the satisfying world of investing in companies through the share market. Safe money in a bank is returning under 3% per year.
ASX 200 – Despite a mediocre performance by the Australian Banks (which make up a large porrtion of the ASX 200), You would have to say it was a good year for the Australian Index (+8.3%). If you take into account dividends, the ASX200 accumulation index increased a bumper 12.7%.
FTSE 100 – It was a bit of a struggle for the UK Index this year (+4.4%) with a lack of clarity on what Brexit will mean for the UK economy. Slack Investor left the index briefly as it plunged below a stop loss at the end of March, but rising momentum in April got me back in.
S&P 500 – The US Index was heading for a monster year with President Trump reducing taxes … and then he started talking about new trade tariffs There were also concerns about high valuations. But, overall, +11.8% is a very fine return in the current low interest environment for cash.
Financial Year Slack Investor Resolution – A recent ASIC report found that nine out of ten self-managed super funds recieve poor financial advice from their advisors … So start educating yourself in financial matters … become your own advisor!
The Productivity Commission have a plan worthy of Blackadder – Image may be subject to copyright
The Draft Report of the Productivity Commission (PC) into superannuation was discussed last post. The report identifies four main problems with Australia’s superannuation model that adversely impact the final payout. Underperformance, Multiple Accounts; High fees; and Expensive insurance. Slack Investor will look at a couple of the recommendations of the PC.
From PC Superannuation report 2016
Not all funds … is good funds!
The PC found that nearly 5 million accounts are in underperforming funds. They defined a low benchmark (BP2) which was the average performance of all MySuper accounts and the chart shows the cluster of purple retail funds at the in the poor returns of the bottom left (Plus a few laggard industry funds … Shame!)
PC Superannuation report 2016
The performance of a fund was found to be the most critical factor in determining your compulsory super payout. You could potentially save $375 000 by getting this right. The PC came up with a cunning plan to counteract the disengagement of younger members of the workforce. The Productivity Commission propose that the default super choice for when you first start work is one of the 10 best performing funds – Cunning but Brilliant!- You automatically get put into one of the historically best performing funds at a time when you are likely not that skilled in picking a fund yourself.
PC Superannuation report 2016
… members should be placed into a default fund once and that fund would be derived from a ‘best in show’ list of high‑performing funds identified by an independent and expert panel.
I would hope that all workers retain the right to eventually move to a fund of their choice – but it is a fine first step to put new workers into one of the funds with an established good record. To Slack Investor, this panel sounds like a cushy job – If my application to be Reserve Bank governator is rejected, I would be like to be on that panel!
One Super account for life …. How Bout that!
… one third of accounts, … are unintended multiple accounts that are costing members $2.6 million a year in fees and insurance premiums.
A structural fault with our current system is that new superannuation accounts are usually created with each new job or new union award – if you are not proactive it is easy to accumulate a handful of super funds before you are 30. The inefficiency of this structure just leaks money out of your retirement accounts in a myriad of fees that profit the funds .
What to do … Now!
In the meantime, not advice, but this is what I would do. Don’t wait for the PC final report … or the politicians … Get Engaged (Part 1, Part 2) and immediately get online and check on the performance stats of your current super fund(s). If you are more than 5 years from retirement, I would be in a high growth option of your super fund. You usually do have choice!
Look at the table below assembled from data on the most excellentsite Selecting Super and compare it with your current fund performance. Those wanting a more interactive experience should try the Stockspot site. If your fund’s performance results look bad (i.e. 5-yr less than 10%; 10-yr less than 5.6%) then lose your love for that fund and move on!
In what can only be described as a blatant display of my skills to get on the “best in show” panel, I have made my own “best in show” list and ranked the growth super funds according to their 5-year performance. I have only included the funds that are open to everyone, and … in over-achieving style, have listed the top 20 … yes 20! Followers of Slack Investor will find it no surprise that Retail Funds did not perform well enough to be in the top 20.
Fund
1-year
3-year
5-year
7-year
10-year
Intrust Core Super – Growth
12.40%
9.00%
12.00%
10.00%
6.10%
VicSuper FutureSaver – Equity Growth
11.90%
8.30%
11.90%
7.10%
StatewideSuper – High Growth
11.50%
9.40%
11.70%
Cbus Industry Super – High Growth
11.60%
9.30%
11.60%
10.60%
7.00%
AustSafe Super Industry – Super Growth
13.40%
8.80%
11.60%
10.10%
6.20%
HOSTPLUS – Shares Plus
12.50%
9.50%
11.30%
10.00%
7.10%
AustralianSuper – High Growth
10.30%
8.50%
11.10%
9.90%
6.50%
LegalSuper – High Growth
10.50%
8.30%
11.10%
9.80%
6.00%
Prime Super (Prime Division) – Managed Growth
10.40%
9.50%
11.00%
9.50%
4.00%
Catholic Super – Aggressive
10.60%
8.90%
11.00%
9.90%
7.30%
Club Plus Industry Division – High Growth
13.00%
9.40%
10.80%
9.60%
5.90%
Rest Super – High Growth
9.60%
7.70%
10.80%
10.00%
7.30%
HOSTPLUS – Balanced
11.00%
8.70%
10.60%
9.70%
6.70%
CareSuper – Growth
9.90%
8.10%
10.60%
9.70%
7.20%
First State Super Employer – High Growth
10.80%
7.70%
10.60%
9.90%
7.10%
TWUSUPER – Equity Plus Option
10.30%
7.90%
10.50%
9.40%
5.90%
Energy Super – Growth
9.20%
8.10%
10.40%
9.40%
7.10%
Media Super – High Growth
9.80%
7.80%
10.40%
9.20%
6.20%
HESTA – Shares Plus
10.70%
7.70%
10.30%
9.40%
6.90%
MTAA Super – Growth
9.30%
8.20%
10.20%
8.00%
3.50%
Once you have made your choice, and opened up a fund that you are happy with (if required, contact fund and get account number first) now consolidate all accounts to your one favoured fund using My Gov ATO Portal. Let your employer know of your new choice for future contributions.
If you are 21, according to the Productivity Commission, you might have just saved yourself up to $426 000 in retirement funds. If you are 55, you could save $55 000. – Still, that’s not a bad days work!
Slack Investor remains IN for US, UK and Australian index shares.
The Australian Index (+0.5%) has been a bit of a laggard with the banks still generating bad news and signs of the Australian property market starting to slow. The UK Index (+2.3%) and the US index (+2.2%) have continued to have solid growth.
The good news on the Australian Index (ASX 200) is the opportunity for Slack Investor to crinch up his stop loss from 5629 to 5724. A small movement upwards, but I always like doing this as it means that the Index has now set a new “higher low” The explanation for this technical stuff can be found here. A new “low” (or minimum) has been established at 5724 and this is my new stop loss on the monthly chart
Monthly chart for the ASX 200 – From Incredible Charts
All Index pages and charts have been updated to reflect the monthly changes – (ASX Index, UK Index, US Index).
Productivity Commission gives the Super Industry a bit of a “Ginger Up”
I have been a fan of Australia’s Productivity Commission (PC) ever since I read their 2010 report into the sorry state of Gambling in Australia. The report is full of thought provoking and shameful material like- Australia is the world leader in number of poker (slot) machines per capita and Australia leads the world in gambling losses per person – but I digress…
The “Ginger Up” refers to an ancient horse racing practice that I wont elaborate on here – but it does make me squirm! The PC have just delivered their draft report on the state of Superannuation in Australia. God bless them .. they have put in “black and white” the rorts that exist in Australia’s good but not great superannuation system – and they have created a new Slack Investor hero.
The lead author in the report is the Productivity Commission deputy chair Karen Chester who has delighted Slack Investor with the following refreshing quote. Ms Chester’s attitude was like a snowball in the face after the my last depressing post on the mostly self interested world of banks and financial advisers.
Karen Chester – Photo from Quentin Jones
“the only thing I care about is member outcomes” from source
The Productivity Commission identifies two structural problems with Australia’s super model. The unintended creation of multiple accounts and the entrenched underperformance of some of the super funds that are allocated to the employee.
From Productivity Commission Superannuation report.
“Members are really lost in the weeds of product proliferation with 40,000 products. They’re bamboozled by poor disclosure and … poor advice.” Karen Chester from source
I am hoping that Ms Chester will get the final report out with haste. Slack Investor loves the smell of the draft report. The Federal Government would do well to take up her recommendations. The info graphic above puts some real world figures on what might happen if the PC recommended changes to Australia’s superannuation model are adopted.
It is a promising sign that the current Finance minister seems to recognize the problem.
“Super has become worse than a honey pot; it’s a trough.” – Financial Services Minister Kelly O’Dwyer source
Slack investor will look at the “trough” and PC draft recommendations in the next post. There are things you can do right now to protect your super.
The incomparable David Rowe has a daily habit of drawing great cartoons. This image describes the current situation with the excrement covered big 4 Australian bank pigs dragging the Australian Treasurer and the Minister for Revenue and Financial Services along for the ride in front of the Royal Commission.
ASIC found that in 75% of the advice files reviewed the advisers did not demonstrate compliance with the duty to act in the best interests of their clients. Further, 10% of the advice reviewed was likely to leave the customer in a significantly worse financial position.
Lets get this straight … I rock up to to a financial planner and I only have a 1 in 4 chance to get some advice in my best interests …. and, I have a one in ten chance of ending up in a significantly worse situation … What is going on !!!! – these are the people who many depend upon for sound financial advice.
The sad case of Sam Henderson
Sam Henderson outside the Royal Commission from news.com.au
Slack Investor writes about Sam only because he is still gobsmacked with the evidence presented to the Royal Commission on 24/04/18.
A bit of background … Sam Henderson is the very public and enthusiastic face of Henderson Maxwell, a financial advice and accounting firm. Sam has been everywhere in the Australian financial media for the past few years with his own weekly TV show and newspaper columns. Slack Investor admits to being a great fan of Sam’s podcasts Sky News “Your Money Your Call” presented weekly on Thursdays. In these podcasts Sam, and others, dispense generally good advice about retirement issues and superannuation.
I have found their program to be extremely informative. They have talked a lot about Self Managed Super Funds (SMSF’s), retirement strategies and taxation – Advice that Slack Investor has found very helpful.
However, Sam has fallen foul of the Royal Commission. Henderson Maxwell charged $4950 up front to give advice to a client that would have been to her detriment – to the value of at least $500 000. It appears that Sam’s firm has acted in their own self interest rather than the clients. Specifically, Mr Henderson urged his client to establish a SMSF and remove her super investments from a generous public sector deferred benefit fund to invest in Henderson Maxwell products, which would have earned him ongoing fees.
Although, through this public shaming, Sam has carried a lot of the heat for the widespread malpractice by the banks and financial planners. This case represents the huge problem with the financial industry in Australia and the reason why Slack Investor has educated himself in the dark art of finance rather than rely on a financial advisor to dictate strategy for him.
One of the most galling things about this case is that Henderson Maxwell is considered to be one of the leading firms for giving financial advice. They are the winner of the 2016 Australian Association of Financial Advisers (AFA) award for practice of the year. The AFA advertise their advisers as “Trusted, Knowledgeable, Reputable, Respected”
Slack Investor admits to being a flawed human – but he would hope that he would act ethically even as the financial system drapes its lucrative reward tentacles tantalizingly in front of him. In the case before the Commission, Sam Henderson responded to financial incentive.
“Show me the incentives and I will show you the outcome” –
Charlie is vice- Chairman of Berkshire Hathaway and dispenser of financial common sense – another Slack Investor Official Hero
This sums things up. At the moment most financial advisors are given incentives to sell their own products – there is no incentive to represent the best interests of their clients. The regulator ASIC has done a review of the quality of financial advice that had been provided to SMSF’s, and found that
90% of cases had failed to be in clients’ best interests.
It is hoped that the Royal Commission will accelerate change. The Financial Review reported that four years ago the head of the Financial Planning Association (FPA) called on financial planners to unite and push for the separation of product from advice. In the meantime, the vertically integrated financial planning money machine with its fees and trailing commissions has kept on rolling on …
The Hayne Train should address these issues before finally pulling up to the station – While we are waiting, if you really need a financial planner, only use a truly independent advisor registered with IFAAA – No affiliations with product, no commissions and no asset fees . There will be an upfront fee for the advisor’s service – but this fee should be small in comparison to the ongoing costs associated with the lifetime tenure of an affiliated advisor.
Slack Investor remains IN for US, UK and Australian index shares.
After all the doom in March, the Australian Index (+3.9%) has had a great April. The UK Index (+3.4% since our buy IN in the middle of the month) has also bounced back. The US index (+0.3%) has been steady – but Slack Investor is still on high alert – considering high company valuations in the US at the moment.
All Index pages and charts have been updated to reflect the monthly changes – (ASX Index, UK Index, US Index).
Slack Investor is always looking for a new hero and it just might be the Honourable Kenneth Madison Hayne AC QC.
The driver of the Hayne Train and new Slack Investor Hero Hon. Kenneth Hayne. – from source
The driver of the Hayne Train is in charge of the new Royal Commission into Australian Financial Services. Commissioner Hayne is very ably assisted by a crack team of lawyers. Kenneth Hayne seems appalled by some of the practices in banking and the financial industry that his commission is exposing. Slack Investor also has a very poor opinion of the bulk of the financial advice industry and is heartened by recent goings on at the Royal Commission. Perhaps the state of financial advice in Australia is best summed up by the seemingly toothless industry watchdog ASIC (Australian Securities & Investments Commission) in a report in January 2018.
ASIC found that in 75% of the advice files reviewed – the advisers did not demonstrate compliance with the duty to act in the best interests of their clients – from ASIC Report 18-019MR 24 January 2018
Wow! … this is a real scandal! Our Australian government regulator that has oversight for financial services and consumer credit has found that three out of four people who go to see a financial advisor receive advice that is not in their best interests!!!
The ASIC report received relatively little press on its release in January and it has taken Kenneth Hayne’s team to forensically go through some astoundingly bad practices of banks and financial advisors for this issue to finally gain some traction with our government, press, and the Australian public – Things have to change!
Power to you Kenneth – you Slack Investor Official Hero (Calling it Early!) … keep exposing and I will present some more of your most excellent initial findings in the next post.
