High Level Financial Advice “North West Wealth Management builds dedicated relationships with your family and business by providing high quality, tailored

High Level Financial Advice

“North West Wealth Management builds dedicated relationships with your family and business by providing

high quality, tailored financial advice you can trust“


• Welcome and thank you – I know everyone is Busy!• Timeframes and format• Derek and Kirrily Blomfield – NSW Farmers of the Year• Please write down questions and we will answer at the end• Why do we do this?

Introduction


Why are we here? • To learn about tax effective off-farm investment strategies to build and protect your wealth

• Structuring your investments for tax effect, asset protection and estate planning

• Credit markets update and why you should treat interest like any other cost of production


The advice contained herein does not take into account any persons particular objectives, needs or financial situation. Before making a decision regarding the acquisition or disposal of a Financial Product persons should assess whether the advice is appropriate to their objectives, needs or financial situation. Persons may wish to make this assessment themselves or seek the help of an adviser. No responsibility is taken for persons acting on the information provided. Persons doing so, do so at their own risk. Before acquiring a financial product a person should obtain a Product Disclosure Statement (PDS) relating to that product and consider the contents of the PDS before making a decision about whether to acquire the product.

North West Wealth Management Pty Ltd ACN 147 575 979 ATF North West Wealth Management Unit Trust ABN 60 470 851 200 trading as North West Wealth Management Authorised Representative of Apogee Financial Planning Limited ABN 28 056 426 932 is an Australian Financial Services Licensee and has its registered office at 105-153 Miller Street North Sydney NSW 2060. A member of the National group of companies.

From time to time James Smith , members of the National group of companies, associated employees or agents may have an interest in or receive pecuniary and non pecuniary benefits from the financial products and services mentioned herein.

JAMES SMITH (BBus, DFP)

PO Box 1904 Tamworth NSW 2340P. 02 6766 9458 F. 02 6766 9435

Email [email protected] www.nwwm.com.au

mailto:[email protected]


1. Spread your portfolio risk

2. Allow for retirement of business owners

3. Allow for payout of siblings

4. Set aside funds for ‘rainy day’

Need to get money off-farm - WHY?


95%

4%

LandPlantOff-FarmOther

Asset Mix


• Superannuation is the most tax effective environment

• Invest in equities, bonds, residential or commercial property

• Gearing is allowable but under very strict criteria

• SMSF or retail

Need to get money off-farm – HOW?


• Tax effective in both accumulation and pension • Asset protection • TTR• Tax free Income & Capital Gain

Benefits of Investing in Super


• Nearly 3,000 SMSFs established every month• Now over 534,1761 SMSFs in Australia• Largest superannuation sector, holding 31% of all assets • Average assets $992,000 per fund• 8,735 LRBA’s which has quadrupled in 2 years

1. All figures are from ATO website and most current as @ 30/6/2014

SMSF Statistics


Why are SMSFs so popular?

Borrow to buy property

• Borrowing to buy propertyin SMSF can be more tax-effective than in own name

• But can also be more complex


Self Company Super

Tax Rate 25-46% 30% 15-zero%

Funds Invested

$1 million $1 million $1 million

Rate of Return

6% $60,000 6% $60,000 6% $60,000

Less Tax ($21,000) ($18,000) ($9,000)

Net funds $39,000 $42,000 $51,000

Compound 10 years @ 6%

$583,894 $628,809 $763,554

Maximum diff $180k

Tax Rate Effects


https://www.facebook.com/video.php?v=10206044286289416&pnref=story


• Start with $100,000

• Add $1,500 per month

• Earnings 7% per annum

• 20 year timeframe

• Investment will be worth $1.185 mill in 20 years

time – total contributions $460k

• If you leave it for 5 years – only worth $760k

with

contributions of $370k

Quick Example – Start Now!


Here’s a really simple savings plan that anyone should be able to follow and end up with $1378 more socked away by the end of the year. It starts with saving just $1 the first week.

http://www.lifehacker.com.au/2013/12/take-the-52-week-money-challenge-and-easily-save-about-1400/


Assumes $5k per annum on 1/1 each year with all income reinvested. Compares age 25 with age 35

https://www.fidelity.com/retirement-planning/invest-early-prioritize

High Level Financial Advice Slide 16

Term Deposits can appear attractive in the short term (Income Return on Investment of $100,000 in December 1979)

High Level Financial Advice Slide 17

…but not so over the long term


Income & Capital Return on Investment of $100,000 in December 1979: Industrial Shares vs Term Deposits



Annual returns of Australian shares1900 - 2012

• Refer to the appendix for notes on the data


Long term wealth accumulation by investing in industrial shares - Return on Investment of $100,000

December 1979 - 2012 (Income and dividends reinvested)

• Refer to the appendix for notes on the data


37%

30%

1%

4%

17%

11%

The importance of DiversificationDomestic Equities International Equities Property International Fixed Interest

Australian Fixed interest Alternatives Cash




Investment Demand Fuelled by Foreign Buyers – 43% of new loans int only!



The advice contained herein does not take into account any persons particular objectives, needs or financial situation. Before making a decision regarding the acquisition or disposal of a Financial Product persons should assess whether the advice is appropriate to their objectives, needs or financial situation. Persons may wish to make this assessment themselves or seek the help of an adviser. No responsibility is taken for persons acting on the information provided. Persons doing so, do so at their own risk. Before acquiring a financial product a person should obtain a Product Disclosure Statement (PDS) relating to that product and consider the contents of the PDS before making a decision about whether to acquire the product.

North West Wealth Management Pty Ltd ACN 147 575 979 ATF North West Wealth Management Unit Trust ABN 60 470 851 200 trading as North West Wealth Management Authorised Representative of Apogee Financial Planning Limited ABN 28 056 426 932 is an Australian Financial Services Licensee and has its registered office at 105-153 Miller Street North Sydney NSW 2060. A member of the National group of companies.

From time to time James Smith , members of the National group of companies, associated employees or agents may have an interest in or receive pecuniary and non pecuniary benefits from the financial products and services mentioned herein.

JAMES SMITH (BBus, DFP)

PO Box 1904 Tamworth NSW 2340P. 02 6766 9458 F. 02 6766 9435

Email [email protected] www.nwwm.com.au

mailto:[email protected]

“North West Agrifinance believes that regional farms, families and businesses need specialised financial structures and clear business planning to achieve their goals. Our experienced team ensures our valued clients have choice, flexibility and transparency by delivering proactive finance solutions.”

0

10000

20000

30000

40000

50000

60000

70000

1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Rura

l Len

ding

(000

's)Rural Lending In Australia

All banks

Pastoral and other finance

Other government

Life insurance companies

Total Debt

Source - APRA/RBA

• Not going in to rates in detail today. • Everyone quotes rates and fees differently• Key is total cost of funds – eg Toyota, banks• Usually base cost of funds plus customer

margin• Liquidity margin - 12 basis points to over 100

but now falling back again.

Interest Rates

What is the key risk to your business? Climate, interest rates, liquidity??



• No real changes officially• LVR up to 70% against rural non-specialised • Int cover and debt servicing ratios• Ability to pay back principal now important• Good business no problems ... Poor business not

getting done now.• Crop and inventory funding much scarcer

Underwriting Standards

• Information required – relevant, accurate, up to date and ongoing.

• Management ability more important than ever• Equity and security nice, cash flow is KING• Lenders using industry information to benchmark

What the Lender Wants

• Many different options• Key is to match facility with usage and

term• Too many overdrafts that are term in

nature• Fixed v’s variable• Interest only v’s P&I• Equipment, inventory, stock

Debt Structuring

• Finance is a cost of production• Total cost is the key – 1% margin at one lender

is not the same as another. • Effective interest comparison• Have your information together and organised• Get the lender to come on farm (assuming it is

in shape!)

Getting the Best Deal – Talk to Us!

• Be positive but not arrogant• Once again, ensure your limits are adequate –

add 10% to costs and take 10% off income.• Get help if you are not comfortable with the

process • NOW is a great time for all good businesses to

renegotiate with their lender.

Getting the Best Deal (Cont’d)

• Doing this every day• Know what all the banks are doing and

pricing• Avoid the pitfalls• Value for money• Especially in a more challenging credit

environment• Independent view

Benefits of Professional Advice

Client Joe FarmerPrincipal Amount 1,000,000$ Term Debt FacilityOverall Term 15 years

LOAN TYPE Variable Rate

LENDER Wheat Bank Sorghum Bank Canola Bank Chickpea Bank Mungbean BankProduct TERM FACILITY TERM FACILITY TERM FACILITY TERM FACILITY TERM FACILITY

Repayment ConditionsInterest Only calculated

and charged quarterlyInterest Only calculated



and charged quarterly

Interest Only calculated and

charged quarterly

Quoted Interest Rate6.67% 6.55% 6.29% 8.04% 6.95%

Interest Rate BasisNominal Rate Nominal Rate Nominal Rate Nominal Rate Nominal Rate

Annual Administration Fees (as %) 0.05% 0.00% 0.00% 0.09% 0.05%Nominal Rate plus Fees 6.72% 6.55% 6.29% 8.13% 7.00%ERI (after admin costs) 6.93% 6.75% 6.47% 8.44% 7.23%Establishment Costs (% of amount financed) 0.20% 0.05% 0.50% 0.00% 0.50%Annual Cost of Estab Costs 0.01% 0.00% 0.03% 0.00% 0.03%Exact Effective Interest Rate After Costs 6.94% 6.75% 6.51% 8.44% 7.26%Variability Of Interest Rate Variable Variable Variable Variable VariablePrincipal Repayments Interest Only Interest Only Interest only Interest only Interest only Establishment Fee ($) 2,000.00$ 500.00$ 5,000.00$ -$ 5,000.00$ Annual Administration Fees ($) 500.00$ -$ -$ 900.00$ 500.00$ Other Upfront Fees ($) - valuation/solicitor -$ -$ -$ Payments per Annum 12.00 12.00 12.00 12.00 12.00 ERIC as Total $ Interest and Fees 69,442.22$ 67,535.92$ 65,078.75$ 84,388.14$ 72,623.41$

Client Name - Joe FarmerWheat Bank Sorghum Bank Canola Bank Chickpea Bank Mungbean Bank

Total Eff ective Interest & Fees 69,442.22$ 67,535.92$ 65,078.75$ 84,388.14$ 72,623.41$ Diff erence to Best ($4,363.47) ($2,457.17) $0.00 ($19,309.39) ($7,544.67)

$-$10,000.00 $20,000.00 $30,000.00 $40,000.00 $50,000.00 $60,000.00 $70,000.00 $80,000.00 $90,000.00

Wheat Bank Sorghum Bank

Canola Bank Chickpea Bank

Mungbean Bank

Total Funding Costs Comparison

EYCI vs AUDUSD

http://www.australiandebtclock.com.au/

4th September 2014




• Strong businesses can demand a great deal, but need a professional approach. Now is a great time to examine your finances.

• Get the structure right ... facility types, limits, interest timing, hedging.

• Look at your total funding cost, not base rate in isolation. Everyone quotes differently.

• Cash flow is king, security is secondary.

Take Home Messages – North West Agrifinance

• Any questions?• Feedback sheets please! Testimonial also appreciated• Thanks to Gowrie RFS and Progress • Thanks to Derek and Kirrily• BBQ and drinks available for small donation• More info and copy of presentation at

www.northwestfinance.com.au

Final Thoughts / Questions?

Documents

High Level Financial Advice “North West Wealth Management builds dedicated relationships with your family and business by providing high quality, tailored