Question: My SMSF has a high proportion of mainly bank hybrids. What will be the share price effect if the prices of banks come down in this environment?
Answer (By Paul Rickard): There really shouldn’t be too much impact on the prices of bank hybrid securities. Spreads might move out a touch (meaning marginally lower hybrid prices) simply because yields on bank shares will have gone up. So, to retain relative value, yields on hybrid securities need to be higher.
Overall, the impact shouldn’t be that material.
Question 2: My financial adviser has recently recommended that we transfer my SMSF administration across to the NetWealth Super Wrap platform. Based on my research online, it looks pretty good but I was wondering if you guys have any experience with this or an alternative platform and what are the fors and against?
Answer 2 (By Paul Rickard): I don’t have any personal experience of the NetWealth Platform and haven’t heard anything negative about it.
That said, I am not a huge fan of platforms – so make sure that for the fees you pay, you get some real benefit.
Unfortunately, some advisers recommend platforms because it makes their lives easier – rather than doing much for their clients.
Particular traps to watch – how easy it is to exit (costs, can you do an in-specie transfer out?), brokerage costs, corporate action costs, interest rate on any default cash account, etc.
And finally, a comment from one of our subscribers, who is a little frustrated by the local equity market:
In regards to our market, we seem to have the worst market in the world. Our market performance is pathetic. When America goes up, we go down, America goes down we go further down. I have a real feeling that our market is about to have a major drop and I am very close to selling all my portfolio with the exception of the banks and wait until late next year to reinvest.
Response (By Paul Rickard): You are right about our market – confidence evaporates very quickly. As soon as we get some stability in the dollar – the buyers will return just as quickly.
Important: This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. Consider the appropriateness of the information in regards to your circumstances.
