By Leon Gettler >>

THE NEW area of investment for self-managed super funds (SMSFs) is National Disability Insurance Scheme (NDIS) accommodation.

The SMSFs are investing in purpose-built accommodation for disabled people, with the government offering massive financial incentives for their investments. And the rent is paid by the Federal Government.

“Financially, it provides a yield that you cannot find with any other type of properties in Australia at the moment – and it’s a very ethical investment as you provide a much-needed type of accommodation which, most often, extracts young people out of retirement homes or wherever they had to live in the meantime,” Yannick Ieko, founder, CEO and senior lending strategist of the SMSF Loan Experts told Talking Business.

Mr Iecko said the yields were double digit and “north of 10 percent” and – depending on the accommodation, the structure of the investment and the disability concerned – it could be as high as 15 percent. 

A 20-year agreement with the Federal Government was also backing these investments, with 90 percent of the income paid by the government, making it an enticing investment.

 

UNDERSUPPLY OF DISABILITY HOUSING

Mr Iecko said there was a dramatic undersupply of NDIS accommodation.

“If you look at it from an investment perspective, you’ve got a massive pipeline of potential tenants or participants in the NDIS scheme that have been approved for housing and financial support. There are thousands of them,” Mr Iecko said.

“Those people at the moment are living with elderly parents who are not able to care for them in a way that would be ideal. They find themselves in retirement homes.

“That’s a common scenario, where you have young people who have suffered disability who find themselves in a retirement home environment – which is pretty depressing.

“There are a lot of sad stories that this is addressing alongside those massive returns.”

He said there had been tremendous progress on the lending front over the last six to nine months as valuation experts were now understanding more about these properties.

The key for the SMSF was to invest in a property located where there was an undersupply. Then, the moment participants move in, the government payment covers the loan repayment and any costs associated with the property.

“People are using this to deleverage aggressively, using the cash flow from these properties or to re-invest aggressively, depending on what stage they’re at in the investment cycle,” he said.

 

MATCH ACCOMMODATION TO DISABILITY

Mr Iecko said the specificity around the property purchase really came down to the type of disability of the participant.

Usually, people at the extreme end of the spectrum were those suffering a mental health disability, who had their own sets of challenges to deal with, such as rage and bipolar conditions – and these came with certain protocols.

On the flip side, participants tended not to move houses very often, which means they tended to be long term tenants. And there was income from the government.

That makes it a triple-A investment, according to Mr Iecko.

The scheme is also structured to help investors deal with challenges. Some houses, for example, were built with a break room, where a participant could have an episode, and the furniture might be bolted to the floor so that it could not be thrown around and hurt someone.

The additional costs for dwellings to be built to such specifications is around $50,000. And the properties need to be certified.

Mr Iecko said this was now a growth market for self-managed super funds and interest was growing.

“The level of interest is tremendous and it’s growing month to month,” he said.

www.smsfloanexperts.com.au

www.leongettler.com

 

Hear the complete interview and catch up with other topical business news on Leon Gettler’s Talking Business podcast, released every Friday at www.acast.com/talkingbusiness

ends

By Leon Gettler >>

PRAEMIUM is changing the world of finance and it has an enormous potential market.

Praemium is a platform and ­financial-planning software provider that also conducts portfolio services. With banks retreating from wealth services in the wake of the Hayne Royal Commission, the market for Praemium is growing.

Praemium started as an off-platform service in 2001. From the earliest days, it had data feeds with all the stockbrokers in the country and, using optical character recognition software in those days, it could see what the transactions would be and construct the portfolio, what it was worth, what its unrealised capital gains were and the level of franking credits.

“That is why we are the best at corporate actions and tax and finance reporting,” Praemium CEO Michael Ohanessian told Talking Business.

“One of our greatest strategic resources is we have every corporate action on every listed company in Australia since 1985. We’ve actually configured all those corporate actions from every Australian company into our system.

“And because we service the last two international investment banks that still do wealth here, and that’s Morgan Stanley and Credit Suisse, we also do that exact same thing for about 5000 international securities, all those American companies and European companies and so on. And with a data base of all their information, all their corporate actions automatically configured into our system, so that is how we started.” 

‘UNIVERSAL’ INVESTING

Mr Ohanessian said Praemium did the reporting on 300,000 investor portfolios, including three of the four big banks.

He divided the investment landscape into Universe A and B.

Universe B was where the company would provide the information and the investor would take it to their accountant to work out what the tax was. Universe A was where companies like Praemium provided investors with the tax report that they provided for their clients.

Mr Ohanessian said working out what portfolios were worth was always a challenge, which is where Praemium has a distinct competitive advantage in the market place.

Praemium gave its clients the software to determine all the holdings and corporate actions. But for that to be correct, they needed to do the administration work to reconcile the data. That meant checking everything at all sources, from the registry to the bank.

“That’s the admin work that our clients have to do themselves to make our software 100 percent accurate, and therefore investment grade, and 100 percent right from a tax perspective,” Mr Ohanessian said.

“Then back in 2017, we started realising maybe we could do this for some of our clients and it’s just taken off.”

REMARKABLE GROWTH CURVE

Mr Ohanessian said in the last three and a half years, Praemium had gone from one client with a few portfolios to the market today, where 15 firms are using the Praemium service, with over 6000 portfolios and covering more than $16 billion worth of assets.

“For all those firms, we are taking away all of that pain of reconciliation and making sure it’s right,” he said.

Mr Ohanessian said this was a “game-changer”.

“We think the future potential is massive because every advice business out there has this pain and it’s inefficient for them – it’s not a good use of their time and it distracts them from what they need to be working on. And we are the best at operating our own software because we know it best,” he said.

Mr Ohanessian said because Praemium started out as an off-platform business 20 years ago, it’s in the firm’s DNA.

www.praemium.com

www.leongettler.com

Hear the complete interview and catch up with other topical business news on Leon Gettler’s Talking Business podcast, released every Friday at www.acast.com/talkingbusiness

ends

By Leon Gettler >>

THE GROWTH of impact or ESG (environmental, social and governance) investing is changing markets and, while much of it has been driven by climate change, the coronavirus pandemic has thrown a new force into this trend.

Adam Rein is president and chief operating officer (COO) of CapShift, a US impact investing firm that empowers philanthropic and financial institutions, along with their clients, to mobilize capital for social and environmental change. He said impact investing is now taking two forms.

One is the broader set of public market investors putting their money into the largest companies in the world and declaring that they are not just looking at the financial forecasts but also at ESG principles, because those factors can present a long term risk for the company or simply because it’s the right thing to do.

A separate group of investors is more focused on private markets, investing in venture capital, private equity, micro-finance and small business lending and seeking to change the world by investing in small businesses. These investors are focused on specific sectors like renewable energy, affordable healthcare or education technologies.

ESG CAPTURES ALL COMPANIES

Mr Rein said the ESG market covers all public companies, focusing on issues such as how the company treats its workers and suppliers, the environmental footprint of its operations and whether the products and services do good or harm.

He said there had been some standardisation for these investors, with one type focused around carbon and climate and the second focused around workers, suppliers and products.

“That data is growing and there’s a whole eco-system of rating agencies and analysts trying to look at the largest corporations in the world,” Mr Rein told Talking Business.

He said there are two driving forces behind this movement. One is financial and the other is around ‘purpose’.

The research showed that funds and analysts that looked at non-financial factors did better at predicting which companies would generate long term returns. Examples of that included Volkswagen and its emissions scandal and Facebook and privacy sandals.

SOME FOCUS STRONGLY ON CLIMATE CHANGE

The second is captured by investors like Larry Fink, the CEO of Black Rock, the world’s largest funds management firm, who sent a blunt warning to the world’s biggest companies at the start of this year telling them that if business can’t play a role tackling climate change or coronavirus, then all economies would suffer, so investors needed to push businesses to have better practices.

Mr Rein said for the last few years, mutual funds had been at the forefront of pushing companies to report on their greenhouse gas emissions, to have sustainable palm oil use and forcing them out of sweat shops.

Now hedge funds are moving in, he said, buying companies with bad practices, replacing the board and positioning these companies with a future based not just on shareholder capitalism but on stakeholder capitalism, treating their workers and communities well.

He said one of the key issues brought up by the coronavirus was supply chains.

“A year ago, you saw a lot of companies shutting down and a lot of companies that didn’t have a lot of transparency in the health practices of their suppliers – and companies that were more proactive on protecting workers were able to stay open,” Mr Rein said.

“Companies where workers were getting sick were shutting down.

“We saw this shake out as an example of practices on how you care for your workers in the middle of a pandemic,” he said.

www.capshift.com

www.leongettler.com

Hear the complete interview and catch up with other topical business news on Leon Gettler’s Talking Business podcast, released every Friday at www.acast.com/talkingbusiness

 

ends

By Leon Gettler >>

THE COVID-19 crisis has shown businesses the importance of getting real time information and adapting their business models to keep customers on board.

Colin Hewitt, the founder and CEO of Float, a Scottish cash flow startup that opened an office in Sydney in 2019, said this had become absolutely critical.

Mr Hewitt said there were cash flow implications for businesses on government support such as JobKeeper in Australia, and similar programs overseas.

He said schemes such as JobKeeper left businesses struggling to understand needs around their staff. As companies look at the future of JobKeeper and whether it will be removed, they need to conduct scenario planning about what they could afford and what paths they need to plan for.

“We’ve seen a huge surge in demand in our product from accountants and book-keepers who are needing to do this en masse for 50 to 100 of their clients, because they are all asking the same questions: what happens if the JobKeeper scheme runs to an end,” Mr Hewitt told Talking Business.

WORKING ON SCENARIOS

Scenarios include putting people back on the payroll along with depleted and uncertain sales over the next period.

Mr Hewitt said he had “never seen anything like this before in business”. 

He said COVID-19, with its differing impact across different regions and cities had created enormous cash flow implications for national businesses.

“From a cash flow point of view, we’re seeing people running different promotions in different parts,” Mr Hewitt said

He said this saw companies running schemes in which they approach customers ‘doing it hard’ in certain regions and cities and cutting special deals with them, offering their service at reduced rates to give them the chance to survive as a business.

“Those schemes will need to be rolled out differently for different locations because everyone is going through different things,” Mr Hewitt said.

“More than ever now we’re seeing the need for businesses to get their financial reporting cycle in a much faster loop from when they’re recording their sales and expenses, getting those plugged into their accounting software and getting real time cash flow reporting as soon as they can because things are changing so fast.

“Traditionally we’ve had spreadsheets which have had forecasts that are made up of maybe 12 to 24 months and you’ve had your management accounting which is sitting somewhere else,” he said

“Really we’re seeing the opportunity for those to come together so the management accounts are impacting the forecasts in real time and people can actually make faster responses.

“That opens up possibilities for businesses. Instead of having a financial report that many business owners don’t understand hit their desk a couple of months out of date, what they can now expect is, if they are using the tools now available to them, they are getting management information almost to the day and that’s then able to inform their forecasts.”

 

HELPFUL FOR GLOBAL MARKETS

Mr Hewitt said this method would be particularly helpful for businesses in global markets.

He said companies will need to assess how COVID-19 has, and will continue to, affect their businesses. Some of the issues may not be related to COVID.

“We’re not out of this yet,” Mr Hewitt said.

The uptake of digital accounting will make businesses more robust to cope with the next pandemic, he said.

“It’s now absolutely critical that businesses have that real time dashboard of what is happening in their business and using these data capture tools, the online banking, the accounting software and the reporting and forecasting software.

“This is absolutely going to help to know your tax liability, to be able to understand which clients are not paying and how much cash you’re sitting on that is receivable.

“So all that information is there to help come together and make better forecasts.” 

www.floatapp.com

www.leongettler.com

 

Hear the complete interview and catch up with other topical business news on Leon Gettler’s Talking Business podcast, released every Friday at www.acast.com/talkingbusiness

 

ends

THE Australian Prudential Regulation Authority (APRA) has warned of excessive ‘non-investment fees’ revealed in its ‘heatmaps’ that show many for-profit super funds with administration fees “in a sea of red”.

“There is a sea of red for administration fees in the for-profit sector, underlining the importance of including all fees in the Your Future, Your Super performance benchmarks,” Industry Super Australia (ISA) deputy chief executive Matthew Linden said.

“Heatmaps are already having some success in prompting trustees to drive down fees, so it is vital they are expanded to the Choice sector – which has the highest fees.”

However, he said, the Federal Government continued to ignore the regulator and has deliberately excluded administration fees from its new performance benchmark regime. 

Mr Linden said the retail superannuation sector generated much of its $10 billion annual profit “from its lucrative administration fees” and by deliberately carving them out from the performance benchmarks in the Your Future, Your Super legislation the government risked undermining the entire reform package.

He said the government must shift to the more logical net-return measurement – that tests performance based on all fees and charges – not carving out administration fees.   

APRA SNAPS AT EXCESSIVE FEES

APRA has strongly expressed how excessive administration fees can impact returns and questioned the justification for asset-based administration fees, favoured in the retail sector. It found some members with a $50,000 balance were paying more than two and a half times higher administration fees than members in other MySuper products.

ISA analysis also shows that the average worker in MySuper products with the highest administration fees will have $158,000 less than those with the lowest fees.

ISA evidence suggested APRA’s heatmaps seem to have already prompted some funds into cutting fees. The success so far underlines the importance of quickly expanding the heatmaps to cover the entire APRA regulated system, Mr Linden said.

He said it was disappointing the roll-out beyond MySuper had been further delayed and would not initially cover the whole Choice sector. The Productivity Commission found the Choice sector was the high-fee tail of the system and littered with dud products.

But the Choice sector remains stubbornly immune to transparency measures and performance testing – with no heatmap coverage, product dashboards delayed for more than seven years, and alarmingly the government admitting to having no timeframe to include 80 percent of the Choice sector in the proposed performance benchmarks.

“The worst performers must be called out and be the target of regulatory action, but there remains some kinks in the heatmap methodology that we look forward to refining with APRA as it uses the heatmaps to road test the new performance benchmark regime,” Mr Linden said.

He said APRA was right to flag pursuing action against funds that had not lifted their performance from last year’s heatmap release – “chronic underperformance should be stamped out no matter where it is found”.

www.industrysuper.com

www.apra.gov.au

ends

THE Australian Small Business and Family Enterprise Ombudsman Kate Carnell has welcomed media reports that  the Federal Treasury is considering a revenue-contingent business loan scheme, saying it would provide a lifeline to small businesses recovering from the COVID crisis.

Ms Carnell, who has been calling on the Federal Government to introduce a revenue-contingent loan scheme since April last year, said the program would provide otherwise viable small businesses with the cash flow they need to survive the next 12 months, particularly as JobKeeper is phased out.

“Access to credit will be critical to keeping small businesses afloat as various government support measures are withdrawn, rent relief ends and those overheads start to pile up,” Ms Carnell said.

“We know that many small businesses haven’t been able to fully recover from the COVID crisis so this targeted support measure could mean the difference between life and death for them.” 

Under the Ombudsman’s proposal, the revenue-contingent loan program for small businesses would operate similarly to HECS, requiring borrowers to repay when their turnover reaches a designated level.

The loan would be Federal Government-funded and capped at a percentage of the small business’ annual revenue. Applicants would need to satisfy a viability test conducted by an accredited adviser to be eligible.

“Sudden lockdowns and border closures have hit small businesses hard in recent weeks – it’s no wonder they are reluctant to take on additional bank debt when conditions can deteriorate without warning,” Ms Carnell said.

“Even in the best of times, small businesses have struggled to secure finance. Taking into account the enormous challenges that they are now facing, the impact of insufficient working capital could be devastating for the small business owner and staff, not to mention the broader economy.

“The latest ASIC data shows external administrator appointments were up 23 percent in December 2020 and economists are predicting the number of businesses entering voluntary administration to rise steeply this year.

“A revenue contingent loan scheme would give small businesses the confidence they need to seek funding, so they can survive and employ again.”

www.asbfeo.gov.au

ends

BUSINESS growth platform, Moneytech Limited, has launched a new online small business loan facility specifically designed for the micro SME market.

Moneytech’s new facility provides micro SMEs with a low doc revolving line of credit between $50,000 and $250,000, with approvals and access to funds within 24 to 48 hours.

Moneytech chief executive officer, Nick McGrath said the facility was designed to support the ongoing funding needs of businesses with revenue above $700,000 per annum, and is believed to be the first of its kind to be offered by a non-bank lender in Australia.

Mr McGrath said the firm’s new offering addresses the need for genuine working capital solutions to help micro SMEs navigate the complex operating environment. 

“We saw a gap in the market for solutions that catered to the specific needs and challenges of the micro SME segment,” Mr McGrath said. “Moneytech’s revolving line of credit has the flexibility to be used for whatever the business needs – paying for stock, bills, subcontractors, or paying down existing financing facilities.

“We’re pleased to see our new business facility gain traction among our referral partners and SME customers. Based on some initial testing with select Moneytech partners, we’ve already received positive feedback, with over 40 applications now approved.”

Mr McGrath said the new facility is complemented by a end-to-end digital experience for brokers and direct customers accessed via Moneytech’s online funding portal, the Moneytech Exchange.

“We have worked hard to ensure brokers and SME customers can enjoy a truly unique digital experience without needing to print a single piece of paper. From initial application, to signing official loan documents powered by DocuSign. It is a quick and easy digital process,” he said.

MEETING CHALLENGING TIMES

When completing credit analysis for the new facility, Mr McGrath said approval decisions would be based on pre-and post-COVID trading conditions.

“We recognise how important it is to keep cash flowing to businesses when they need it most,” he said. “To assist those businesses who have experienced significant disruption to their operations, our new facility analyses before and after-pandemic sales and revenue before arriving at an appropriate decision for each and every customer.”

While some traditional financiers have started scaling back finance to COVID-affected businesses, Mr McGrath said for many non-bank lenders, such as Moneytech, it had been business as usual in an unusual time.

“We’ve continued lending to new customers, and supported our existing customers with the additional funding they need to help them through this period.”

The new facility forms part of the broader Moneytech growth proposition for SMEs which also includes trade, debtor, equipment and term loan finance solutions for mid-sized businesses. 

“As our customers grow and their funding needs evolve over time, we have the capability and expertise to service them fully,” Mr McGrath said.

“Through this new offering, we’re also pleased to expand our working relationship with mortgage brokers. For those who are small business owners themselves, our solution offers mortgage brokers an opportunity to further diversify their income stream into business lending. “

www.moneytech.com.au

ends

Contact Us

 

PO Box 2144
MANSFIELD QLD 4122