Financial Decisions - Northern Beaches Sydney Expert Brod Brennan

business

Surf Local Services

Mercedes Sydney - G Brothers - Mercedes Benz Sydney

State Government

Mike Baird, Manly MP, raises concerns over Australia's current foreign policy in regard to asylum seekers, confronting the issue from a different perspective. Bite

Mike Baird
Keneally
Small Biz
Thumbs
Down

Web Designer Northern Beaches, Web Design Sydney, SEO (search engine optimization), Graphic Design, Internet Experts, Sydney

Screen Printing Sydney

Print Hutt
Sydney Silk Screen Printing

Financial Decisions Sydney
Brod Brennan

It’s a tight money market, and the latest news of a downturn has cast a pallor over world finance, but with the right help and a steady hand, investors can still profit.

Brod Brennan heads up Financial Decisions Sydney, a Northern Beaches firm specialising in Mortgages, Insurance, Wealth Management and Financial Planning.

Our Manly: With grim forecasts out of America and a global slowdown, lingering skepticism of complex financial instruments, how can reluctant investors be coaxed back into the fray?

Brod Brennan: We’re not suggesting our clients rush back into the market. You’re dead right; there is way too much volatility in the market. Sentiments are still pretty negative. We’re keeping our clients money, and new money, in cash. We’re teaching our clients to be prudent and to just hang in there.

O M: Describe the lending climate in Australia and how it relates to the global apparatus.

B B: Australia has four main banks that provide most of the funding to local companies. But we’ve got about 70 foreign banks that also lend money in syndications. Spreading the risk around between those syndicates is how banks like to work these days. These foreign banks have been lending money happily to big Australian corporations over the last 20 years. Now, because of the recession, the UK and American banks have had bailouts, and there is a lot of pressure on them to pull back from overseas investments and concentrate on stimulating mortgages in their home country and re-open their credit market. Local banks are under a lot of pressure because these foreign banks are closing up shop and going home.

O M: Where do people get money, then?

B B: That’s the big question, isn’t it? Smart, big companies with debt that matures in 2009, rather than waiting for it to mature, when money will be even more scarce, are actually refinancing now and pushing maturity out to 2010, 2011 to avoid 2009. No one wants debt to mature in 2009. Bad idea. The big banks are out there raising major capital, to stuff their Christmas stockings, and they’re doing that by discounting their shares. They offer local and institutional shareholders 10% discounts and that has been very successful. Banks here have been pretty stable. Their prices are still off 30%, don’t get me wrong.

O M: What are they doing with that capital, stuffing it under their mattresses? When will it be available?

B B: There has been some consolidation, bigger banks buying regional banks. When it comes time for these syndicates to rollover, the foreign banks are going to pull out and the Australian banks will have the opportunity to pick up clients lost in previous lending rounds. Big banks will be selective and cherry pick strong clients and support them. It will be tough going for struggling businesses. Money will be scarce.

O M: Advice to your small business owner clients?

B B: We’re telling them to batten down their hatches, cut cost wherever they can, potentially lay off staff and look at all ways to manage their business more closely. And organize refinancing now. Don’t wait till later.

O M: Switching gears, you have advice for businesses to prepare for the untimely passing or possible incapacitation due to illness of an owner or partner. Tell me about succession planning.

B B: A lot of business owners are not well equipped or prepared for what would happen if the principle of the business was to die. Typical businesses have two partners and if one of us was to die, we’ve got life insurance on each other. And we have what is called a buy/sell agreement which states that if one of us should die, the insurance company pays into a trust monies that equal 50 percent of the value of the business, and that the trust will pay out to our respective spouses the value of that business but only on condition that the spouse hands over the shares to the other owner.

This ensures that the business is not laden down with a huge amount of debt at an inappropriate time that they might not be able to fund, and that you don’t inherit your partner’s spouse, or child as your business partner, which could be ugly. Plus, the cost of the insurance is a tax deductible business expense.

O M: Business owners are so focused on their day to day operations, making money, a lot of future planning is left unattended.

B B: You’re dead right. I’d say 5-10% of Australian companies, if that, have proper succession plans and adequate insurance.

O M: Philanthropy is important to Financial Decisions. Why is giving back to the community, both globally and locally, important?

B B: I am on the board of the charity World Youth International that sends overseas 18-30 year old Australian volunteers who fundraise for themselves for projects for the poor in Nepal, Kenya, Cambodia and Peru. Financial Decisions Sydney sponsors a child and we give our time and effort in supporting the charity. I help them on the finance side by managing their portfolio of investments.

The “X” and “Y” Generation are very focused on giving back. Volunteering around the world is a global phenomenon. They’re prepared to give their time and give back. And they expect their employers to have that corporate responsibility as well. Social responsibility is one of our agenda items.

O M: Speaking of this younger generation, explain the concept of “cradle to grave” in relation to financial planning.

B B: Financial Decisions Sydney offer a diversity of products including mortgages, which is one of the first products a young couple is going to use. They don’t have children, so life insurance is not yet quite so important, and they don’t have any superannuation. By buying a house they are taking up probably the largest debt of their lives. If we can work with younger investors early, we can help them structure the right kind of debt. It’s quite hard to raise the 20% down payment they’ll need to buy a house, so we work with young people to save up that deposit, then we roll that investment into the first home they buy, and we organize the debt facility- the mortgage. Typically they then might have some children, in which case life insurance becomes more important. Then we move them forward ten years, try and pay down the mortgage and prepare them for retirement.