Scott Francis had an article published in the Courier Mail today.  The article outlined the importance of thinking about your next car purchase as it will have an impact on your future financial worth.  To read the ideas put forward by Scott please have a look at the article published on the Courier Mail's website.  Please click here.

Regards,

Scott Keefer

If you are tuned in to the movement of financial markets you will be well aware of the volatility being experienced in recent weeks.  Over the past three weeks the ASX200 has fallen just on 10%.  A lot of this fall has been attributed to problems in the sub-prime mortgage market in the USA.  Scott Francis has published an article with the Eureka Report that outlines the background to the problems in this market any flow on effects likely to be experienced in Australia.  Well worth a read. Click here.

In all the doom and gloom reporting there are a few positive glimmers especially in terms of fixed interest securities and exchange rates.  The recent raise in official interest rates will flow on to Australian fixed income securities and it appears that overseas returns may also move northward as investors move from sharemarkets into more defensive treasury bonds.  It has been reported that this movement is one of the factors leading to the fall in the Australian exchange rate over recent weeks.  This fall will have improved outcomes for those with unhedged international investments, in Australian dollar terms.

Still nothing like the 10% falls in Australia.

Regards,

Scott Keefer

Scott and I are excited to announce a new development for our website.  We are keen to deliver our commentary on the financial world using media that is accessible and user-friendly to anyone who chooses to take interest in what we have to say.  Today has seen the launch of the next stage in this process - the publication of audio podcasts on our webpage.

Every Monday we will endeavour to publish an audio 'podcast' entitled 'Monday's Money Minute' providing a 2 to 4 minute commentary on current financial issues.  The very first podcast looks at the current market volatility and the affect of the sub-prime mortgage collapse. Click here to be connected to the podcast.

If you have any suggestions on topics that could be considered for these podcasts please drop us a line at: scottk@acleardirection.com.au .

Regards,

Scott Keefer

A timely reminder was delivered this week by research house Investment Trends.  Their research found that only 7% of Australians changed their superannuation accounts this year.  Some reporting of this finding has suggested that Australians are not focused on their superannuation investments and not being proactive in trying to find the very best in superannuation fund returns.  This is even after the recent barrage of advertisements and news about he superannuation system from the government as well as the Industry Super industry.

In some ways I can understand the reasons behind this finding.  When talking to family and friends, the topic turns to the investment world with discussions about shares, property, margin and investment loans and the current media topics tending to take centre stage.  Superannuation is generally not a high priority.  I guess this is partially based on a historical perspective where superannuants found themselves in defined benefit type schemes where they basically knew what their superannuation would be worth on retirement and investment returns were not important.  As these defined benefit style schemes disappear I imagine that the focus on investment returns within super will become more acute.

I also guess that another aspect to the story is that superannuation is not seen as a direct part of the investment portfolio held by investors.  Employers pay money into a fund and you can not access the money until 55.  The younger you are, the easier it is to forget about your superannuation fund being a part of your investment story.

In a strategic planning sense, there are also good reasons not to be chopping and changing your investments and investment managers in superannuation based on the search for better returns.  Research has shown that this 'active' style approach to investing actually leads to a worse investment outcome because of transaction costs and investors 'not being in their seats' when investment markets turn.

However, there are also some very good reasons to be at least considering changing your superannuation fund.  As with all investments these factors are the fees or costs of investing and the investment approach undertaken.

APRA have recently released the 10 year returns for the industry up to 30 June 2006.  The data showed that public sector super funds have beaten the field over the past 10 years, followed by corporate and industry funds with retail funds bring up the rear.  No surprises that retail funds tend to be the higher cost funds in the field.

As you read further through our website you will find that we also believe that having an investment philosophy based on the best available academic research is also essential.

If you are not sure whether your superannuation fund has reasonable costs or is using the very best research to develop investment portfolios, I encourage you to take a look at your fund in more detail.

Regards,

Scott Keefer

My learned colleague was invited to present at the Australian Investor's Association Annual Conference last Sunday.  Scott presented a 4 hour presentation on investing for novices with approximately 80 participants in attendance.

During the course of the presentation, Scott sought feedback from participants as to how confident they felt engaging with the Financial Services Industry with the results showing:

• 1% were extremely confident
• 25%confident
• 13% neither confident nor cautious
• 40% cautious
• 21% extremely cautious

These statistics alone provide an interesting insight into the industry but some more insightful points were provided through the written feedback as to why participants were cautious.  The themes were fairly consistent:

• They had received poor advice from financial planners in the past
• They were concerned with education / training of financial planners
• They were concerned with financial planning businesses being owned by large institutions
• They had concerns with trailing commissions on products offered by advisers
• They were concerned with the high level of fees charged by some advisers

Of the small percentage in the confident end of the spectrum, their responses also contained similar trends:

• They had confidence in the advice given to them
• They sought out advisers they could trust
• They had undertaken self-education
• They questioned the advice they were given

Scott and I think that the responses gave us, and those who seek our advice, some important reminders:

• It is important to seek financial advice that is independent, not influenced from ownership by large institutions, or by commissions for "selling" certain products
• Finding a financial adviser that you trust is important
• The financial advice process should involve sound education for planners but also for the clients that seek their advice
• Trusting your financial adviser is crucial
• Fees matter

We are confident that we provide a service where all of these aspects can be found and met.  If you are seeking a financial adviser you can be sure is looking out for your best interests please get in contact!!

Regards,

Scott Keefer

An interesting article published in today's Sydney Morning Herald has claimed that the super industry is lagging in key areas.  It quotes a study conducted by one of the big 4 accounting firms, Deloitte, and highlights that 40% of corporate funds that were surveyed did not provide any form of post-retirement products and over half said they did not have transition to retirement pensions.

This means that if you had assets invested in one of those corporate funds, once you reach the lead up to retirement and want to access a transition to retirement strategy you would be forced into changing to another service provider.  This may entail the creation of a capital gains event and lead to a reduction in the final benefits you could expect to receive.  Not to mention the hassle of changing providers and having to get used to a new way of doing things.  It may also mean that the investments you have become comfortable with are not available in the same form as in your superannuation fund.

We believe this is a significant issue for investors and are very pleased that the superannuation product we recommend allows a simple and seamless transition from superannuation mode to pension mode.

If you would like more information please get in contact via our contact page or fill in the Request for Feedback form to the right.

Regards,

Scott Keefer

An article in today's Australian runs with comments from MLC boss Steve Tucker showing his support for fee-based financial advice rather than commission based advice.  The article also points out the contrary argument that is promoted by AMP, that commissions reduce the cost of accessing financial advice.

We are definitely in Mr Tucker's corner on this one.  We believe that commission based advisers have extra incentives to recommend particular investment products that may not be in the "best" interests of their clients.  Whereas up front fee advice is clear and transparent and allows the advisers to seek the very best advice for their clients.

In terms of costs, commissions are still a cost of investing, however they are "hidden" from view.  As Mr Tucker points out, up front fees can be stopped while continuing to invest in a product.  Commissions are based on the product and continue to be paid until the investor ceases investing in that product.

We can see some of the argument proposed by AMP that up front fees can be a disincentive for smaller investors to seek professional advice.  That is why we use a very reasonable asset based fee as our basis for charging up front fees to our clients.  To get more details on our approach take a look at our web page - Portfolio Plus Service - Fees Policy.

Final comment - if you are not sure whether the investment products you have been advised to use give commission payments back to your adviser we encourage you to check this out and seek professional advice as to whether you could be doing better.

Regards,

Scott Keefer

Jim Parker, the Regional Director of Dimensional Funds Advisors Australia, posts a regular commentary on the DFA website.  The latest edition highlights the success of an American waitress, Mary Sue Williams, in a stock picking competition run by CNBC.  She is in line to win the million dollar first prize ahead of 375,000 contestants.  She has never bought or sold a real stock in her life.  The secret of her success: "Part of it was luck ... a lot of it was gut feeling, some eenie-meenie-minie-moe, and common sense."  Mary has beaten thousands of financial professionals who have the benefit of high quality university degrees and complex software.

This is more anecdotal evidence that successful stock picking is more about chance rather than experience or expertise.  This is part of the story behind the thinking that we use in building our investment portfolios, also based on academic research, that suggests you can not regularly beat the market and it is better to hold an index style approach to investing.  For more details on this philosophy take a look at our webpage - Building Portfolios.

For more details of Mary's story take a look at the BusinessWeek article.

Good on ya Mary.

Regards,

Scott Keefer

In my previous career as a teacher, I was very happy to have access to an industry super fund.  The fees were low and performance on a par with commercial funds.  A recent report compiled by SuperRatings confirms my satisfaction with industry funds.  The report suggests that industry funds (on average) could provide $115,000 more in retirement dollars (measured in today's dollars) to members compared to retail master trusts.  (based on a 40 year working life)  This is not to be sneezed at.

We have clients who continue to use industry funds especially if this gives them access to low cost insurance products that they require.  However we think investors can do better with a more sophisticated approach that tailors a super fund to the exact needs of the client without hitting them with high fees.  However theories and strategies are just that unless they are backed up with actual results for the investors.  Following are the historical results to 31st May 2007 of our investment philosophy in action.  The results take into account fees and are based on a $50,000 portfolio.

# SuperRatings' SR50 Balanced Index? is the median of the 50 largest balanced investment options with exposure to growth style assets of between 60% and 76%. Over 80% of Australians in our major super funds are invested in their fund's default investment option which in most cases is the balanced investment option.

These results suggest our approach is worth consideration.  Please check out our "Building Portfolios" webpage for more details.

Regards,

Scott Keefer