Hedge Clippings | 01 September 2023

Reputation and trust are everything!

Anyone involved in financial services - irrespective of which side of the desk they're on - is well aware of the importance of reputation and trust, particularly so as an advisor providing financial advice, or as a fund manager investing other peoples' money. Of course, that doesn't stop dodgy operators, normally driven by both their own greed, and assisted by the greed of some investors, from having a go. When it does occur, it inevitably ends up in tears for the investor, and loss of reputation (or worse) for the perpetrators, as the banks discovered during the Hayne Royal Commission.

Mayfair 101 is a prime example and one suspects that's the reason head honcho and salesman James Mawhinney is trying so desperately to salvage his reputation. For the record or the forgetful, Mayfair went down the gurgler, along with over $200 million of "sophisticated" investors' money, thanks to some slick advertising and endorsements from some who should have known better. Finally, ASIC took court action to shut the failed operation, and Mawhinney in turn has fought back, and is reportedly set to re-launch Mayfair. However, in spite of 93% of their reviews on Trust Pilot being "5 star", his reputation is forever settled. If anything, the reputation of Trust Pilot as a reliable source of information is tarnished by association as well.

Which brings us to the complete destruction (in our view) of the reputation of Qantas, along with that of CEO Alan Joyce. To be fair, the so called "National Carrier's" reputation as a five star airline took a beating some time ago, as service levels, baggage handling, flight delays, and just about every other factor, other than their safety record, went into a spin.

More recently, the obfuscation around expiring flight credits (since reversed thanks to widespread publicity including a Senate grilling for Joyce), Qantas Chairman's Lounge membership for Albo's son, and political pressure to block competition from Qatar Airways, has added to their woes. Finally, this week the ACCC finished the job by taking Qantas to court for advertising flights which had already been cancelled. Presumably, the logic behind this was either to garner even more flight credits, or to stop passengers booking elsewhere. Either way, immoral, and in the ACCC's view, illegal.

Qantas was once one of the most valuable brands in Australia, and possibly the world. Greed and a simple lack of ethics has destroyed that, and Joyce's reputation with it. Along with Albo's, and the combined Qantas boards', reputations tarnished by association.

As the ACCC's case drags through the courts, and the media, the damage will continue. Joyce meanwhile will be long gone, pockets bulging. We pity his successor, who will have to pick up the pieces.

While on the subject of handovers and successors, next Tuesday's RBA meeting will be Philip Lowe's last before handing over to his deputy Michelle Bullock. We suspect no change in direction, and that Lowe will leave - as history will show - with an excellent reputation. Some will note his misjudged "no rate rise until 2024" comment "forecast" but he seems to have traversed his "narrow path" well.

Finally, last week we included this photo of Mick Jagger and Mitch McConnell.

The week's news only confirmed what we all (possibly with the exception of Mitch himself) knew.

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Investing Essentials: How a financial adviser can help

Bennelong Funds Management

August 2023

Many of us want to save effectively, invest well, and generate sufficient funds to pay for a home, children's education, travel and, ultimately, a secure retirement. But navigating a complex financial landscape can be intimidating. Fortunately, there are professionals who can guide you.

Seeking the advice of a qualified financial adviser may add significant value over your lifetime. Here is a snapshot of some of the things an adviser can assist with.

Budgeting and managing debt

In order to invest, you need to work out where the money will come from. A financial adviser can help you manage your income more effectively by carefully identifying and monitoring your spending patterns and expenses.

They can also help you get the full picture on your debt load and work out which parts are:

• 'inefficient' debt - borrowing to buy goods, services and assets that are known to depreciate in value, or have no value once used; and
• 'efficient' debt - where you buy assets that generate assessable income and have the potential to increase in value.

Insurance: the importance of security

Adequate insurance coverage to provide you and your family financial security is crucial, particularly if you are self-employed or own a business.

A mix of suitable life insurance, income insurance, business insurance and general insurance is highly individualised. Your financial adviser's expertise in this area can save you a great deal of time and worry.

Building an investment portfolio

Only after budgeting and insurance do we get to investment. Your financial adviser will gather all of the relevant information on your personal financial circumstances, objectives and risk tolerance, and help you choose the right types of investments to fit your needs, personality, goals and time horizon.

Your adviser can help you build a diversified investment portfolio, often spread among a range of asset classes to aim for positive returns while balancing the overall level of risk. What's more, they will regularly assess the plan to ensure it continues to meet your needs, altering your investments as you reach different stages of life (for example, wealth accumulation for younger investors versus a steady income stream for retirees).

The three pillars of retirement

Your financial adviser should be an expert on Australia's 'three-pillar' retirement-funding system: compulsory superannuation, the government-funded age pension, and voluntary contributions by individuals to their super accounts.

Australia's superannuation system can seem complicated, and most people can benefit from sound technical advice from a professional - whether it's to maximise the benefits, or minimise the tax burden.

What to look for

Choosing a financial adviser is an important decision. Ideally, it will be a lifetime partnership (and even a multi-generation partnership, taking care of your family's needs). You need to establish a strong rapport: they will know all about your financial affairs, your dreams and aspirations, and even how you want your affairs managed after you die.

You therefore need to ensure the person is a trustworthy and knowledgeable professional, and someone with whom you're comfortable working with over the long term, who can regularly maintain and review your financial goals as you enter different stages of life.

There are several professional bodies who may be able to assist you in selecting a financial adviser, such as the Financial Advice Association Australia's find a planner page.

For more insights visit www.bennelongfunds.com

Disclaimer

The content contained in this article represents the opinions of the author/s. The author/s may hold either long or short positions in securities of various companies discussed in the article. This commentary in no way constitutes a solicitation of business or investment advice. It is intended solely as an avenue for the author/s to express their personal views on investing and for the entertainment of the reader.

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