Page 1

Summer Newsletter 2011

Money Works Financial Planning Pty Ltd

December 2011

A Word from Chris Firstly, I would like to wish you all a wonderful, relaxed Christmas and a joyful, flourishing 2012.

Interest Rate is ‘Cut’ The first in 31 month, but will your bank pass it on?

Inside this issue:

A Word from Chris


Is France Under Threat?


Franking Credits How do they benefit Wrap Members


Commonwealth Financial Claims Scheme



The Reserve Bank board decided to cut the cash rate by a quarter of a percent (25 basis points), bringing the rate to an 18 month low of 4.5%. If it is passed on by your bank, it would mean a saving of around $50 per month on a mortgage of $300,000. The number one question is , “will your bank pass on this drop in interest rate?” Banks are always quick to increase interest rates when the RBB increases the cash rate but...well you know what I mean. Maybe its time to talk to your bank and if they can’t or won’t help, then talk to us and we will put you in touch with mortgage brokers who are interested in helping. It is interesting to note that the Reserve Bank cut rates from a position of strength, rather than a position of weakness. This was

mainly due to inflation being under control and financial conditions being tighter than necessary. As dwelling prices continued to fall, the Australian dollar rose by $0.10 US, and a 3 year swap rates have lifted almost 50 basis points. I feel if the Reserve Bank hadn’t cut rates, businesses and consumers would have experienced more challenging conditions. I’m hoping your bank passes the cuts on and helps brighten your start to the New Year. We will be returning to work on January the 10th but as always, if you need to contact me please do so on my mobile. Information sourced from: Media Release 2011-21 Craig James, CommSec November 1,2011

View our new Website at www.moneyworkspl.

Summer Newsletter

Page 2

Is France Under Threat? France faces the prospect of losing its tripleA credit rating after Moody’s warned that the higher borrowing costs for France plus slowing economic growth could cost the country its highest-possible credit rating.

This document is intended for use by advisers and wholesale investors. Retail investors should not rely on any information in this document without first seeking advice from their financial adviser.

Recently released GDP results for France and Germany showed that the euro zone core grew modestly in the third quarter. But concerns are high that economic growth has turned negative since October when the euro zone crisis intensified. The Investors already seem to be pricing French latest economic data on Europe points to government yields as though the country a looming recession there. has lost its triple-A status. Yields on 10-year Managing European equity exposures will French bonds yesterday were 3.4%, about be vital during these testing times as 154 basis points above their German certain financials may still have large equivalents. This spread reached 200 basis exposures to these troubled regions. points on November 17, the biggest gap Despite the promise of unlimited liquidity since 1990. from the ECB, interbank lending and funding costs could cause further pain for Moody’s said that any lasting increase in banks. French borrowing costs would exacerbate What can Investors do?? France’s economic challenges with “negative credit implications”. Within equities, recessionary concerns France’s triple-A sovereign debt rating about Europe may hamper the performenables it to manage its public debt (due to ance of cyclical stocks by a greater magpeak at above 87% of GDP next year). nitude than defensive names, so it makes President Nicolas Sarkozy has introduced sense for investors to take a more defentwo rounds of budget cuts since August to sive stance during these uncertain times; try reduce the government’s deficit from especially for higher-yielding companies 5.7% of GDP this year to 4.5% next year with reliable earnings streams that are and 3% in 2013. Another worry for France is growing their dividends. that it has several large banks exposed to euro zone debts. Dominic Rossi, Fidelity’s Chief Investment Officer for Equities says that equity invesAny French downgrade would impact the tors should focus on high-quality, defenEuropean Financial Stabilisation Facility, sive companies with stable and reliable Europe’s 440 billion euro (A$600 billion) earnings streams, which pay high and bailout fund. If France loses it triple-A status, sustainable dividends. “For the last 20 it would put the bailout fund’s triple-A rating years, investors have bought equity marat risk – indebted euro zone members rely kets for capital growth, but now is the time on the rescue fund to access funding at to buy equities for income.” much lower triple-A rates and France is the He says that we are very much in a ‘twosecond-largest contributor. speed world’ in terms of economic growth as the long-term case for emerging markets remains intact. “Emerging markets will not offer near-term respite from the problems in the euro zone as equity correlations are likely to converge once again when volatility becomes heightened,” he says. “However, when you consider their superior fundamental economic ability to recover, and the likely speed at which they can recover from a crisis centred on Europe, and the fact that their issues are cyclical in nature rather than structural, then the case for investment in emerging markets is robust on a medium to long-term view.” InForm— A Global Update Fidelity Australia November 22nd 2011

Summer Newsletter

Page 3

Franking Credits: How do they benefit Wrap members? What are franking credits? Franking credits represent tax already paid on profits by companies prior to making dividend distributions to shareholders. Generally, a company distributes part of its profits to shareholders in the form of a dividend. These dividends may have franking credits attached. Members will generally receive franking credits paid to their account, which may be used as a tax offset. How does the franking credit process benefit for investors? A managed fund estimates franking credits and credits these to member accounts on a quarterly basis. By receiving estimated credits, these funds can be invested sooner, providing members with a Investment type


Listed Security

greater opportunity to increase their investment returns. At the end of the financial year estimated quarterly credits are compared to actual annual franking credit amounts. Any excess or shortfall in estimated quarterly credits are respectively debited or credited from the members account. Example: Paul, has a investment account with a balance of $100,000. The table below illustrates the estimated franking credit process across investment types, highlighting the investment income, estimated franking credit and actual franking credit amounts applied to Paul’s account:

Income received


Date income received 22/02/2011

Actual franking credit $490

Franking credit

Date of adjustment


Estimated franking credit n/a



Listed Trust








Managed Fund A








Managed Fund B














*Note: Estimated franking credits are not paid for listed securities. Actual franking credits amounts for listed securities are generally paid in the following quarterly collection once franking credits are provided. As you can see from the example above Paul was able to receive $530 in the January to July quarter as opposed to waiting for a single franking credit adjustment in October 2011. Source: Aspire Franking Credit Flyer

Commonwealth Financial Claims Scheme (FSC) Changes On September 11, 2011 it was announced there will be changes to the current Financial Claims Scheme (FSC). The FSC was introduced on the 12th of October 2008, to enable the provision of a guarantee for the deposits and wholesale funding of Australian deposit taking institutions (ADI’s). It was originally introduced to promote financial system stability in Australia, by supporting confidence and assisting authorised ADIs – banks, building societies and credit unions to continue to access funding at a time of considerable turbulence. They were also designed to ensure that Australian institutions were not placed at a disadvantage compared to their international competitors that could access similar government guarantees on their wholesale funding. The current scheme allows retail deposits under $1 million to be guaranteed by the Government for all Australian deposit taking facilities.

The new FCS changes are as follows: The Treasurer announced a new permanent cap of $250,000 per person per institution on deposits guaranteed under the Financial Claims Scheme which will take effect from 1 February 2012. All deposits will be guaranteed at the old cap of $1 million per person, per ADI until 1 February 2012. For term deposits that did not exist until after 10 September 2011, the $1 million cap will apply until 1 February 2012. The new $250,000 cap will apply from this date onwards. If you need anymore information call our office to make an appointment on (08) 8304 8088. Source: APRA Questions & Answers about the Guarantee on Deposits media release.

The information provided in this newsletter is of a general nature only and does not constitute financial advice or a recommendation. You should obtain and consider a Product Disclosure Statement (PDS) before making any decision to acquire a product. Please seek expert advice from a qualified and experienced Financial Planner or accountant or other professional, prior to making a decision on your financial situation. Detailed information on our services and fees is provided in our Financial Services Guide, which is provided prior to or at the first consultation and is also available on request.

135 FULLARTON ROAD ROSE PARK SA 5067 PO BOX 241 KENT TOWN SA 5071 PH: 08 8304 8088

If you like the work we do for you, the greatest compliment that you can give us,

FAX: 08 8431 8211 EMAIL:-

As many of our clients have their own successful small businesses, we will be advertising on behalf of our clients in each of our quarterly newsletters. If you would like us to display your business details in our next issue, please contact Vicki on (08) 8304 8088 or email

is to recommend Money Works Financial Planning Pty Ltd to your friends and family.

We’re on the web ‌ Visit We respect your privacy. Should you wish not to receive future newsletters, please contact our office.

Money Works Financial Planning Pty Ltd is a Corporate Authorised Representative of Millennium3 Financial Services Pty Ltd ABN 61094529987 AFSL 244252 Unit 7, 50 Borthwick Ave Murarrie Qld 4172

Retaining Wall Industries -

John Rowland

newsletter Summer 2011  
newsletter Summer 2011  

2011 Summer Newsletter