Peter Switzer

Income investors have been cautioned to prepare for potential sweeping changes to franking credits, negative gearing and capital gains discounts, all of which will reduce their ability to find reliable forms of investment income.

Noted business and financial commentator Peter Switzer said the proposed changes – which will be implemented if the Australian Labor Party (ALP) wins the next Federal election – will affect the majority of investors.

“Many investors rely on income from shares their retirement,” he said yesterday. “If these changes go ahead, people who have created a retirement strategy around stocks paying fully-franked dividends will not only see their income slashed but could also see their share prices hit as investor demand decreases.”

Mr Switzer said rather than investing directly only, investors should consider adding a dedicated income fund to their portfolio.

“A collection of actively-managed funds spreads investment risk across a number of assets, which lowers volatility because the strategy adds diversification to a portfolio,” he said.

Too many investors are in income-paying stocks because the franking credits delivered nice tax refunds, but investors who prefer to select their own portfolios are advised to diversify their sources of income.

“Don’t just rely on a handful of stocks such as the banks and Telstra – there are many other companies paying dividends these days. If franking credits are removed there is also less incentive to invest domestically, so consider looking offshore for more attractive sources of income,” he said.

“There are also overseas and local funds that tap into corporate bonds and other income-paying assets which will become more appealing if Labor denies tax refunds to retirees with self-managed super funds, who are in the zero tax zone,” he said.

In addition to the changes to franking credits, the ALP has also proposed to limit negative gearing to new rental dwellings and to halve the CGT tax discount from the current 50% to 25%.

“It is important to seek tax advice to determine the impact of any changes on retirement income and anyone considering a new property investment should certainly seek advice before proceeding,” Mr Switzer said.

Income investment outlook for 2019

The outlook for income investors for 2019 was expected to be one of change.

“Investors nearing or in retirement need to better understand the changes proposed and the alternative sources of income, all without taking on too much risk,” he said.

Beside the political landscape, he says: “Investors nearing retirement, along with retirees, need to better understand the changes proposed and the alternative strategies to help maximise income – all without taking too much risk.”

“There are now more opportunities for income than ever before. It is just a matter of knowing where to find them – be it a wider network of income generating assets, both local and global.”

Even if Labor does not form government next year, the threat of their policies is a timely reason for all investors to think about being more diversified and especially those trying to build up reliable income for retirement goals.”

Mr Switzer said he was so concerned about the magnitude of these changes that he had decided to host a free event to help retirees learn more.

“This will be an opportunity for all those who are interested to share their thoughts on what income products and strategies should be considered,” he said.

The event will be first held in Melbourne on 27 November and then in Sydney on 29 November and include local and global experts to provide their thoughts along with examples on who will be impacted and how much.

Complimentary tickets are available for investors who might need help and can be obtained here.

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And that’s why I maintain that regulation won’t lift our collective reputation and our individual service to our clients unless something inside us all changes.

At the end of my Grow Your Business program on the weekends on Sky Business, I always end the show with “if nothing changes, nothing changes”. Yes, I know it is a cliché but it is the kind of provocative
advice I offer for many of us who are weighed down by complacency. And the change I believe our industry is crying out for is leadership.
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I reckon MLC’s boss, Steve Tucker, showed it when he railed against commissions years ago and put his team on percentage fees. Sure the purists can argue that flat dollar charges are purer but at least he was
prepared to question the prevailing paradigm.
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However, the leadership that is overdue in the financial planning fraternity is the one that should be practised and learnt on a daily basis in every financial planning business in the country.
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It is an irony but many of us think leadership is the preoccupation of the likes of executives of big organizations but the truth is leadership is needed when you lead a small business, a sporting team, a classroom and a family.
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But wait there’s more.
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We need leadership skills when we deal with our clients. In fact, we are in a leadership position when someone comes through the door hoping to put their financial life in order. We clearly have to be great at our product knowledge but we also have to be aware that these people, who are paying us to fix up their financial future, want us to lead them to a better position.
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So, how does someone engage with leadership?
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The first step is to admit that you have a leadership inadequacy but how do you know that? Well, if you have trouble influencing your teenage sons and daughters, your Gen Y staff or family or even your partner in a relationship, you have to be realistic that it could be your leadership that is letting you
down.
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If your conversion rate of customers is not as high as it should be, well, once again it could be your leadership that needs some work. Okay, if you can be honest with yourself that your leadership quality
could be the missing link in your life and your business then don’t delay by changing what you are currently doing.
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If you are not reading books on leadership or listening to DVDs on the subject when you are driving then you are misallocating your precious time.
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In Dubai two years ago, I MC’d a conference where the US leadership guru — John Maxwell — was speaking. He has penned a number of books that have been on the Wall Street Journal’s and New York Times best seller list and he has sold over, wait for it, 20 million books! My favourite is The 21 Irrefutable Laws of Leadership, which the great Stephen Covey, the author of The 7 Habits of Highly Effective People, said of the book: “It will change the way you live and lead.”
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To me Maxwell’s greatest advice was: “Leadership is developed daily, not in a day.” When that happens you change permanently and the influence you wan to have on your customers, your staff and your family becomes more effective. If you want a great business, Maxwell says, everything rises and falls on
leadership — everything! He argues that if you are a 5 out of 10 leader you will probably have a four out of 10 business, but never 6,7 or 8. And forget 10!
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This is my number one business tip — if you get leadership right, you will know what to do, who to recruit, where to go and who you need help from to build a great business.  For more business tips from Peter Switzer, visit www.switzer.com.au

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