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Driving Profit From Debt – The Tides are Turning in 2007. Are you advising your clients’ on their biggest asset? Someone is! Steve Crawford MLC Alliances - Victoria. The Great Aussie Dream – What Happened in 2006?. Driving Profit From Debt The Tides are Turning in 2007. - PowerPoint PPT Presentation
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1
Driving Profit From Debt – The Tides are Turning in 2007
Are you advising your clients’ on their biggest asset? Someone is!
Steve CrawfordMLC Alliances - Victoria
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The Great Aussie Dream – What Happened in 2006?
-6%
-4%
-2%
0%
2%
4%
6%
8%
10%
12%
Change in medianhouse price
Increase in medianfamily income
Change in home loanaffordability
Increase in the numberof loans created
3
Driving Profit From DebtThe Tides are Turning in 2007
The Tides Are Turning – By 2008……..
Opportunities in 2007 – Strategies for the Pre Retiree
Opportunities in 2007 – Strategies for the Accumulator
4
Driving Profit From DebtThe Tides are Turning in 2007
The Tides Are Turning – By 2008……..
Opportunities in 2007 – Strategies for the Pre Retiree
Opportunities in 2007 – Strategies for the Accumulator
5
The Tides Are Turning - By 2008……
ANZ14.1% Westpac
15.6%
NAB16.3%
St George9.0%
CBA21.6%
Others23.4%
6
The Tides Are Turning - By 2008……
0
10
20
30
40
50
60
2003 2004 2005 2006 20070
500
1000
1500
2000
2500
$mil per week
Referrals per week?
7
-40%
-30%
-20%
-10%
0%
10%
20%
30%
40%
2003 2004 2005 2006 2007
Investments Insurance
The Tides Are Turning - By 2008……
?
8
The Tides Are Turning - By 2008……
13%
22%
31%
45%
2000 2002 2004 2006
Market Share growth of Brokers
Concentration of Broker Aggregators
Other (10%)
Top 10 Aggregators
(90%)
9
Driving Profit From DebtThe Tides are Turning in 2007
The Tides Are Turning – By 2008……..
Opportunities in 2007 – Strategies for the Pre Retiree
Opportunities in 2007 – Strategies for the Accumulator
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Accelerate your salary sacrifice strategy by converting your loan into an interest only facility.
Strategies for 2007 – Pre Retirees
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Accelerate your salary sacrifice strategy by converting your loan into an interest only facility.
Strategies for 2007 – Pre Retirees
Unit trust and super invested in Australian shares
Investment return is 8.5% p.a. (split 3% income and 5.5% growth)
Franking level on income is 75%
Interest on instalment margin loan is 8.25% p.a.
10 year comparison
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Strategies for 2007 – Pre Retirees
$0
$50,000
$100,000
$150,000
$200,000
Super -Undeducted
Salary Sacrifice Geared to 50% Loan then UnitTrust
After Super Changes
After Super Changes, using IO Strategy
$35,643
$54,335 $37,25
1$37,39
6
13
Strategies for 2007 – Pre Retirees
$0
$50,000
$100,000
$150,000
$200,000
Super -Undeducted
Salary Sacrifice Geared to 50% Loan then UnitTrust
After Super Changes
After Super Changes, using IO Strategy
$35,643
$54,335 $37,25
1$37,39
6
$50,113
$48,949
$35,643
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Strategies for 2007 – Pre Retirees
$0
$50,000
$100,000
$150,000
$200,000
Super -Undeducted
Salary Sacrifice Geared to 50% Loan then UnitTrust
After Super Changes
After Super Changes, using IO Strategy
$186,061
16
Driving Profit From DebtThe Tides are Turning in 2007
The Tides Are Turning – By 2008……..
Opportunities in 2007 – Strategies for the Pre Retiree
Opportunities in 2007 – Strategies for the Accumulator
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Maximise your future investment and cash-flow options by better structuring your owner occupied home loan.
Strategies for 2007 – Accumulators
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Strategies for 2007 – Accumulators
Home Loan
Year 1
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Strategies for 2007 – Accumulators
Home Loan
Year 8
Actual loan is reduced
20
Strategies for 2007 – Accumulators
Home Loan
Year 8
Actual loan is reduced
Redrawn for purchase
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Strategies for 2007 – Accumulators
Investment
Loan
Year 8
Actual loan is reduced
Redrawn for purchase
Only partially deductible
22
Strategies for 2007 – Accumulators
Home Loan
Year 1
23
Strategies for 2007 – Accumulators
Home Loan
Year 8
Actual loan is not reduced
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Strategies for 2007 – Accumulators
Investment
Loan
Year 8
Actual loan is not reduced
Purchase done with cash
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Strategies for 2007 – Accumulators
Investment
Loan
Year 8
Actual loan is not reduced
Purchase done with cash
Original loan fully deductible
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Solution – NAB / MLC Customised Solutions
Take advantage the transitional cap by investing the sale of your property sooner.
Tailored Solutions
Credit Approved
Short Term Finance
Working with Financial Planners
NAB Business Bank
Adviser Business Lending
Portfolio Package
MLC Mortgage Solutions
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Provide a simple, non-underwritten insurance cover designed specifically to cover your customers home loan responsibilities.
Strategies for 2007 – Accumulators – Debt Protection
Introducing MLC EasyCover
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Under-Insurance – A significant problem
Generation X’ers make up a large portion of the “At Risk Population”
70% of 33 – 44 year olds with a household income greater than $100K have a Home Loan, but only 29% have life insurance*1
60% of Australian families with dependants will run out of money within 12 months if the main breadwinner dies*2
*1 – Roy Morgan Research, FAMIS database Dec 05*2 – IFSA Research by Rice Walker Actuaries & TNS Australia 2005 *4 - IFSA report Cost of Under-insurance 2005
30
Critical Illness*
Death*
Involuntary Unemployment*
Illness* / Accidental Injury*
MLC Easy Cover – Solution to Debt Protection
Automatic Acceptance*
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Client Retention – Keeping Them on the Books
05
101520253035404550
1 2 3 4
Probability %
Financial services held
Source: National Customer Convergence in Retail Financial Services (Insurance Study)
50%
10%5.5%
1%
Meeting more customer needs reduces the probability of customer defection.
32
Conclusion – Will Your Business Expand in 2007…..?
The Tides are Turning in 2007 – Will you be affected?
Opportunities Do Exist – Take advantage of this in 2007
Practical Implementation – Effective Solutions
The Portfolio Package The NAB Business Bank MLC Mortgage Solutions Easy Cover