Financial Index meets international standards

Financial Index has been successful in obtaining ISO 9001 certification - the first Australian Financial Services Licensee with multi site offices to gain the International Organisation for Standardisation, meaning 'the management system to direct and control an organisation with regard to quality'. ISO 9001 is the most widely known and internationally accepted model for a quality management system, used by organisations across the globe for some highly effective quality systems.

What does this mean?

ISO represents an international consensus on good management practices for quality. The aim is to ensure that an organisation can deliver the products or services that meet the quality requirements of clients, time and time again. These agreed good practices have been distilled into a set of standardised requirements for a quality management system, no matter what the organization does, what its size, or whether it's in the private or public sector.

Why ISO 9001?

Financial Index has always strived to be the best service based organisation within the Financial Services industry.  Much has been invested in pursuing that goal for many years and we are fully aware that it shall always be a moving target with complacency having no part to play. In seeking ISO certification, we knew that it would almost be the defining event in testing our progress towards this goal.

With ISO certification, we can be certain that our systems and processes promote greater client assurance, improved processes, improved communication at all levels, greater business control, greater internal consistency and discipline. Thus marrying with our key behaviours of Communication, Consistence and Innovation.

MFR & Associates joins Financial Index

FINDEX WELCOMES ANOTHER MEMBER TO THEIR TEAM - MFR & ASSOCIATES

Having spent almost 30 years providing quality financial planning advice to their valued clients, Matt Waugh and Maureen Reynolds adopted a view that it was now time to provide a “leading edge” upgrade of their current client service proposition in a fast changing (and challenging) marketplace. To achieve this new level of excellence in providing financial advice, portfolio monitoring and ongoing service to their clients, Matt and Maureen believed they needed more quality resources. Hence their decision to join Financial Index Australia. Matt, Peter, Di, and Maureen are all pleased to now be members of the Financial Index team. They are confident that their clients will experience with them, their enthusiasm for this well chosen decision.

Investing between the flags

December 2009 Times Newsletter

FIA Welcomes Nevett Ford

Financial Index Australia (FIA) is pleased to welcome Ballarat-based financial planning practice, Nevett Ford Financial Services to the team.

As part of Nevett Ford Lawyers, Nevett Ford Financial Services have been providing legal and financial services throughout Victoria for over 150 years. In joining FIA, their journey will continue with an expanded level of service and advice now being offered to existing and future clients.

Nevett Ford’s leading Financial Advisers, John Ives and Tracey Burns, are quick to point out that Nevett Ford Financial Services have always been focused on providing financial advice “for every stage of life”. They believe that the innovative solutions provided by their new strategic alliance with FIA will further enhance their offerings to clients.

“For us to enter into an agreement with any firm, client service had to be the key priority. FIA is a growing business with a strong management team. We’re delighted to be joining them” said John.

In welcoming FIA as their new business partner, John highlighted the fact that FIA’s Proprietary Simulator Software will be of great benefit to Nevett Ford clients as they will now be able to regularly monitor and review their client’s financial position ensuring they achieve their personal financial goals.

Tracey also noted that the support of a larger, client-focused organization such as FIA, ensures that their clients will continue to receive consistent, innovative solutions. She also said that FIA's advanced administration systems will enable the Nevett Ford administration team members, Sally Ashmore, Judith Templar and Kitty van Deur, to deliver a level of ongoing customer service which is not usually available through larger corporate organization

FIA are delighted to welcome John and Tracy and look forward to supporting them in their provision of a high level of service for personal investors throughout regional Victoria.

Autumn 2010 Times Newsletter

Welcome Civic Financial Planning

June 1st 2010 marks the beginning of a joint venture between Financial Index Australia Pty Ltd, and Civic Financial Planning, Canberra's largest privately owned financial planning practice.

The successful merger has further enabled Financial Index in its continued delivery of high quality, tailored, solutions to clients in all of the major cities and regional centres across Australia, especially as the team at Civic Financial Planning are recognized as Australia's leading Commonwealth Superannuation Scheme advisers.

Civic Financial Planning began in 1983 with the establishment of Civic Securities Pty Ltd. Its owners (Dianne Dash, Tom Dawes, Howard Kemp, David McKay and Bill Waller) have over 62 years of collective financial planning experience. They, and their support team, will remain with the business and continue to provide clients with comprehensive advice in areas including retirement planning, wealth creation and public service and private sector superannuation.

The team at Financial Index Australia, extends a warm welcome to the Civic Financial Planning staff and clients and we look forward to providing a high level of ongoing service.

The Civic office will remain at the same location. The address details are:
Level 1
23 Brindabella Circuit
Brindabella Business Park ACT 2609
Postal Address is
Locked Bag 3
KINGSTON ACT 2604
Phone 02 62737888
Fax 02 62737899

Please contact your financial adviser should you have any queries about this exciting new development.

Welcome OptiWealth Clients

After 23 years as a successful financial adviser, Steven Jarick of OptiWealth Solutions, has made the decision to merge his business with Financial Index Australia Pty Ltd.

From Steve’s perspective, the decision behind the merger is one of forward planning and increased client security, and he believes working with a larger organisation like FIA ensures a growing infrastructure for the clients whilst also giving them the benefits of an industry leading financial planning culture.

Steve is excited about the merger and is pleased that even after 39 years in financial services, there's always more to learn.

Alongside Steve, we welcome Lauren Gaskell from OptiWealth, who will now be providing administrative support to our Bendigo Adviser team. We look forward to continuing to serve clients, as well as introducing new opportunities.

June 2010 FIA Times Newsetter

FIA Footy Tipping Competition

Please double click on the link below for instructions on how to enter the FIA Footy Tipping Competitions.

Welcome Stephen Poucher & Associate Clients

Stephen Poucher has worked in the financial services industry since 1987 and has been recommending ethical and sustainable investments since 1992.

Having spent the last five years providing financial advice and financial planning services by utilising Securitor’s services, Stephen decided the time had come to consider the next stage of his business in a fast changing marketplace. Of prime importance was the need to ensure his clients would continue to be serviced in the manner in which they have become accustomed and to this end he has decided to join Financial Index Australia.

FIA is a hands-on national financial planning organisation that provides a high quality, personalised service to its clients. They are one of the few Australian financial planning organisations to have acquired the esteemed ISO quality certification, which is the most widely known and internationally accepted certification for quality management systems.

Stephen is pleased at the prospect of becoming part of a financial planning group that will enable me to enhance the services offered to you through a unique client service methodology and looks forward to continuing to meet the needs of his clients both now and in the future.

Stephen’s office is located in North Parramatta, and he will continue to service his client’s needs from both this location and the existing Sydney office.

The team at Financial Index Australia, extends a warm welcome to Stephen Poucher and his clients and we look forward to providing a high level of ongoing service.

Summer 2010 Times Newsletter

Autumn 2011 Times Newsletter

Winter 2011 Times Newsletter

Markets drop as fear grows about global economy

Financial Index Australia Pty Ltd
Investment Committee

Overnight, the stockmarket in the U.S. fell by around 5% which is a significant fall comparable to the worst days of the GFC in 2008/2009. We saw this happen a few times through that period before recovering strongly.

The U.S. market has been in serious retreat over the past few days (and weeks) after having risen very significantly over the last two years anticipating a sustained economic recovery. It is clearly feeling disappointed about the outcome.

With the major concerns of U.S. and European government debt seeming to be irreconcilable and any number of indicators showing the quality of the economic recovery turning more negative, has resulted in a capitulation on the stockmarkets.

The Australian stockmarket has been disappointingly tracking overseas markets probably more in sentiment than in substance. As we know, our local economy is not plagued with alarmingly high government debt or high unemployment. Unfortunately, our small market does get buffeted hard when investors start to panic sell when they see big markets take a bad turn.

The trigger for Wall Street came out of Europe amidst debt-related confusion. After its scheduled review, the European Central Bank (ECB) left its cash rate unchanged. With so much debt in the Eurozone (and with so many governments teetering), it is the only thing the ECB could do. The reality is that banks and bondholders are demanding higher interest rates for the higher risk. European markets were already tanking as Wall Street opened last night and the trend continued across the Atlantic.

It was a “sell everything” session including gold and silver. In response, with more people chasing the greater safety of cash, the $US, the Euro and the Pound all rallied higher. The Aust dollar has been falling in the last few days as it is more closely tied to commodity companies in the stockmarket. It has fallen from U.S$1.10 to $1.04. The only positive, if there is one, is that a fall in the value of overseas investments is offset by any corresponding fall in our dollar thereby cushioning the fall.

What now?

This time last year, Wall Street fell by 17% before the U.S. Federal Reserve Bank announced a second large stimulus package which resulted in a bull run in the stockmarket. Many believe the Fed has no choice but to do it all again.

Until there is more clarity around what is happening, markets will continue to be choppy and sometimes highly volatile as in the last 24 hours.

With a continued environment of high volatility, uncertainty, social and geopolitical turmoil, investors need to have strategies to manage this. Your portfolio with us is not exclusively in the U.S stockmarket nor even the Australian.

We remind you that sensible portfolio construction should have risk reduction strategies applied to it. These range from spreading you funds to different sectors such as cash/term deposits, fixed interest (bonds), property as well as shares. Inside these sectors further diversification is applied by blending managers for their different skills and different decision making processes as to where, when and how to buy across sectors and markets on your behalf. Beyond this there are other strategies applied to minimise risk. Theses events even offer great opportunities to buy undervalued assets because people are panic selling.

The robust nature of manager selection and fund blending within the Financial Index framework gives us confidence going forward that the panic market movement will be short term and sanity will return. Our client portfolios will not suffer anything like the full market downturn because of the significant diversification across assets and fund managers.

Fixed Interest portfolio

Higher credit rated portfolios will gain from the recent turmoil. As more investors shift toward defensive assets, yields tend to fall pushing up bond returns. Returns significantly above 6.5% are expected. Credit margins have expanded.

Australian Shares- Active portfolio

The impact on each active manager will differ. Current portfolio positioning by some managers such as Schroders and Huon (see manager specifics 100 Leaders Fund below) should provide returns above the benchmark index due to the strategies they follow. Value strategies engaged by Dimensional and Index funds will underperform in the short term.

Australian Shares- Passive portfolio

Passive strategies are expected to provide performance in line with market indices. In the current market climate, active management is preferred.

Unlisted Property

Unlisted property is unlikely to be affected at this time; particularly properties with minimal leasing or financing concerns. The property cycle has historically lagged the listed sharemarket so we don’t expect any immediate negative valuation changes based on market volatility.

International share exposure

An underweight position in overseas equities has been held leading up to this. Some managers, particularly those with long/short strategies should outperformed . Unhedged funds will benefit from the fall in the AUD overnight as mentioned above.

Emerging market

These are likely to remain counter cyclical to developed markets, with recent losses likely to be materially lower than anything in the US and Europe.

Manager specifics

100 Leaders Fund

The portfolio of the 100 Leaders Fund has been focussed on protecting the downside of the portfolio, whilst also being exposed to a bounce in markets. It has been concentrating positions at the largest most liquid end of the market. As a result it has very little market exposure today, although it continues to be invested to take advantage of cheap valuations.

Its focus is on sustainable dividend yield, low gearing and minimal exposure to global economic contagion.

Banks now look cheap as they are trading close to book value (i.e. the underlying value of their net assets) with high (~ 9% fully franked) which we believe is sustainable. Aust Banks have very little direct exposure to toxic sovereign debt.

Huon remains optimistic on the prospects of equity markets. It has managed to avoid any significant capital losses in the current market environment and is well placed to benefit from any rebound.

Schroders

Has a bias to industrials with earnings exposure to economies where a stronger economic cycle exists (i.e.Asia) or to domestic industries where cyclical debasing has already occurred, such as Pathology. This balancing act has dominated the past three years and will continue to dictate the assessment of not just future likely returns, but also risks, in the portfolio.

Kapstream

Kapstream (a noted bond and fixed interest manager) believe there have been a couple of key improvements to the global financial world that should prevent another 2008 crisis. Firstly, we are less likely to have a systemic banking failure in the US as bad debt has been written off by the too-big-to-fail banks and fair amounts of capital have been raised. Secondly, there is a significantly lower amount of leverage being employed in the system, including the leverage used by hedge funds. This isn’t to say new risks haven’t arisen, they certainly have, such as a systemic European banking crisis, but we have been preparing for both this crisis and the future opportunities that should arise out of the crisis.

Over the past few months Kapstream have continued to reduce portfolio risks and built both cash reserves our overall liquidity position in order to withstand such bouts of volatility, changes in interest rates and corporate spread widening.

This will allow the fund to better take advantage of opportunities in coming weeks and months. We see government bonds continuing to rally in the short-term but feel that holding longer dated bonds is not attractive. We expect to find exceptional opportunities in higher-yielding / higher-rated assets with limited risk, as the flight-to-quality story unfolds.

Pengana

Despite positive developments in the US and European debt crises, persistently poor economic news has led to plummeting equity markets and a "flight to safety". Consequently bond yields have rallied despite the sovereign debt issues that persist in many developed markets. The fund believes that that the long term course of G7 yields is upwards but that bond yields may remain low until there is evidence of more stable economic growth. The portfolio remains underweight to treasuries and has a low duration portfolio of assets relative to its benchmark.

The portfolio contains some corporate debt (global investment grade corporate debt and US bank loans), but we have intentionally avoided poorer quality corporate debt that has rallied significantly since 2008. The portfolios corporate exposure is highly diversified and concentrated in the high quality debt of the largest companies. Bank loans have relatively lower credit ratings but move more independently of broad debt markets due to their unique characteristics, but may be affected if the US economy slows and falls into a further recession. However this is not our expected scenario: we anticipate continued slow growth with periods of high volatility, as we are experiencing now.

The portfolio also contains emerging market debt but it is important to recognise that the recent market moves are a reaction to the poor economic performance and debt issues facing developed economies, not emerging. Emerging markets face other issues, such as growing inflation, but they should be less affected by recent developments, the main risk being a sell down due to investors simply moving to “less risky” assets, such as developed government debt.

Approximately one third of the portfolio is invested with relative value managers that hedge the directionality of their investments. They are therefore more insulated from moves in yields and changes in investors’ risk appetite. We look to these managers to generate consistent returns through all market periods and they have demonstrated their resilience through challenging periods in the past.

Overall, we would expect through this period that the portfolio will under perform the benchmark however returns in an absolute sense should remain solid. Over the past few years we have been through a number of volatile periods on the path to economic recovery and expect that this may not be the last one.

We trust the above commentary has been helpful in giving you an overview of what is happening in the markets and what Financial Index’s view is relative to that. We will continue to keep you informed.

If you have further concerns please have no hesitation in calling your adviser for specifics around your portfolio.

FAQs on Market Volatility

Q: What’s happened in the markets?

We’ve seen a lot of volatility in financial markets in recent weeks because of a number of factors:

The speed of global economic recovery has been sluggish.
Global policymakers in the US and Europe have been slow to make decisions to restore confidence in their markets.
Concerns about the ongoing debt situation in Europe.
The US government has been slow to increase the debt ceiling, and the ratings agency Standard & Poor’s downgraded the credit rating of the US last weekend.
The extreme swings of the past few days in global share markets were a result of all these factors building up, not just one single event.

Q: What does this mean for Australia and Global investments?

Global investments, mostly shares, have fallen sharply as investor confidence continues to fall. Until there is some level of certainty in the markets, shares will continue to be volatile. This uncertainty will also flow into other parts of the economy, affecting consumer confidence, housing prices and jobs growth.

The Australian share market is not immune to these macro (global) issues and is expected to be volatile in the short term as we react to US and European markets rather than stock specific issues.

However the Australian market is somewhat more insulated from the global issues because:

Our market is more reliant on emerging markets, which are less affected by current global market falls.
The large amount of investment in the resources sector is likely to continue, providing a solid base for earnings for next year for many companies.

Q: How is this different to what happened with the GFC?

The Global Financial Crisis (GFC) in 2008/2009 resulted in a global recession that was driven by a liquidity crisis across a significant number of global financial institutions. The situation of the past week is partially due to how investors are feeling rather than directly related to problems in the financial system or the economy. Panic amongst investors can cause extreme levels of market movements, like what happened in the US and Australia over the past week.

Q: Will this volatility continue?

We expect that financial market volatility could continue for some time due to the general lack of confidence among investors, combined with worries about the health of the global economy. But Australia is in a relatively strong financial position compared to the rest of the world. We have:

Low levels of debt
A stable employment market
A strong regulatory and governance framework
Sound financial institutions

Some other positives for Australia are:

Australia doesn’t have a huge government debt burden compared to the US.
Australia is also able to use monetary policy to cut interest rates if necessary.
Stock market fundamentals for the market are still strong.

Q: What strategy should I take?

Keeping calm is key. Talk to your financial planner if you’re concerned about whether your investments are still appropriate to meet both your short-term and long-term investment and lifestyle goals. And remember, you will realise a loss only if you sell now.

Focus on your long-term investment horizon. Despite global downturns in markets over the past 100 years, history shows that if you had invested for any 10-year period over the last 50 years, you’d always have made a profit – on average, of around 12% per year.

Financial market volatility is not a new phenomenon. It’s important for investors – especially during times like this – to take a deep breath, step back and look at where the value is.

Markets move up and down but there is value represented in the marketplace currently.

Australian companies are still paying high dividends to investors. Income investors should focus on this.

History says there will always be a bounce back. And, the long-term direction of the share market has always been up.

If you have any questions or concerns please contact your Financial Index Financial Adviser.

This information was prepared by Financial Index Australia Pty Ltd ABN 90 094 287 037 AFSL 240559 and is current as at August 2011. This information does not take into account your personal objectives, financial situation or needs and so you should consider its appropriateness having regard to these factors before acting on it.

Behavioural Finance

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Spring 2011 Times Newsletter

(1.74 mb download)

Active Management vs Passive Management

(1,268 KB download)

FIA Sponsorships and Donations

Financial Index Australia proudly makes philanthropic donations to charitable causes throughout the year. This year, the following donations/sponsorships have been made:

Jelly Baby Month for the Juvenile Diabetes Research Foundation (JDRF). JDRF is the world's largest charitable supporter of Type 1 diabetes research and is committed to improving the lives of the Type 1 diabetes community. JDRF Australia plays a key role in advising and influencing health policy direction accross all levels of government and building community awaremeness of Type 1 diabetes.

The National Breast Cancer Foundation (NBCF). The NBCF is the leading community-funded national organisation in Australia, supporting and promoting research for the prevention and cure of breast cancer. Research programs funded by the NBCF cover every aspect of breast cancer, from increasing understanding of genetics to improving ways to support women and their families.

The Ballarat Cancer Research Centre (BCRC). The BCRC is Australia's only regionally-based cancer research organisation and is well on its way to becoming a world leader in the field. The BCRC investigates the potential for tailored cancer treatments and also studies and cancer-like disease called Langerhans Cell Histiocytosis (LCH), with the goal of identifying the cause and improving options for patient research.

The Prostate Cancer Foundation of Australia (PCFA). The PCFA is the peak national body for prostate cancer in Australia. The PCFA is dedicated to investing in world leading prostate cancer research; raising awareness amongst Government bodies, health professionals, and the Australian community; and supporting men and their families affected by prostate cancer.

If you would like more information or to make a donation to any of the above charities feel free to ask our staff when you next visit one of our offices.

Summer 2011/2012 Times Newsletter

(5.16 MB download)