Unlocking WEALTH OPPORTUNITIES ADVISER PRESENTATION March 2017
DISCLAIMER This communication is provided by National Australia Bank Limited ABN 12 004 044 937 AFSL 230 686. This information may constitute general advice. It has been prepared without taking account of an investor s objectives, financial situation or needs and because of that an investor should, before acting on the advice, consider the appropriateness of the advice having regard to their personal objectives, financial situation and needs. The tax consequences of investing will depend on an investor s particular circumstances. We recommend that independent advice including professional tax advice be sought before acting on any information in this communication. Before making any decision about whether to acquire or continue to hold a financial product you should obtain a copy of the relevant Product Disclosure Statement (PDS) available at www.nab.com.au. Past performance is not a reliable indicator of future performance. The value of an investment may rise or fall with the changes in the market. The returns specified in this communication are reported before management fees and taxes. Any opinions expressed in this communication constitute our judgement at the time of issue and are subject to change. We believe that the information contained in this communication is correct and that any estimates, opinions, conclusions or recommendations are reasonably held or made as at the time of compilation. However, no warranty is made as to their accuracy or reliability (which may change without notice) or other information contained in this communication. This information is for adviser use only and is not intended to be distributed or used by retail clients. The case study example is hypothetical and for illustrative purposes only and should not be considered advice. The names and features do not represent any particular person or real outcomes. There is no guarantee that the performance stated will reflect actual outcomes and will vary depending on assumptions used for calculation purposes. All NAB Equity Builder loan applications are subject to approval and applicants will need to meet credit requirements. There are risks associated with gearing which may make this strategy unsuitable for some investors including that the value of your investments may rise and fall. The tax consequences of investing will depend on your particular circumstances. We recommend that you seek independent advice including professional tax advice before acting on any information in the case study. There are also risks associated with borrowing to invest. Some of these include, rising interest rates, and changes in taxation law which may have an effect on your financial position. 2
3 SUPER IS A BIG PART OF YOUR WEALTH STORY But it s not the whole story
DEMOGRAPHICS ARE CHANGING Number of People at that Age 400000 350000 300000 250000 200000 150000 100000 50000 6.8 MILLION AUSTRALIANS AGED 30-50? That s almost 30% of the overall Australian population 0 0 3 6 9 12 15 18 21 24 27 30 33 36 39 42 45 48 51 54 57 60 63 66 69 72 75 78 81 84 87 90 93 96 99 Age Source: ABS, as at 2014 4
WHERE ARE THE OPPORTUNITIES? (000) 1,400 Mean household assets, debts and net worth by age cohort, 2014 1,200 1,000 800 600 400 200 0 Net Worth Other Assets Superannuation Other Property Home Home Debt Other Property Debt Other Debt -200-400 -600 25-29 30-34 35-39 40-44 45-49 50-54 55-59 60-64 64-69 Source: Household, Income and Labour Dynamics in Australia (HILDA) Survey 2014, https://www.melbourneinstitute.com/hilda/ 'How will Australians retire? Investigating retirement income outcomes in a low-return world' An independent report prepared for National Australia Bank by the Australian Centre for Financial Studies and Monash Business School, 2016 5
WHAT S ON THEIR MIND? Too many decisions Scared of taking risks Work Goals Stress Bills Savings Time poor School fees Complicated Wealth Holidays Friends Need flexibility Too many decisions Family Super Financial freedom Home Mortgage Constant changes Commitments Busy Ageing parents Kids Divorce 6
WE CAN HELP WITH YOUR CLIENT GOALS 7
HELP YOUR CLIENTS BUILD WEALTH inside and outside of super Investment property Investment bonds Shares Managed funds GOALS USE YOUR OWN MONEY BORROW TO INVEST? 8
THE BENEFITS OF BORROWING TO INVEST Tax effective No margin calls Purpose fit investment loan In control 9
CHLOE S STORY MEET CHLOE Chloe is 25, works full time and dreams of owning a property in 10 years GOAL Buying a home in 10 years Is this enough to help her build a deposit? She earns $80,000 a year has $30,000 in bank shares She has $10,000 of spare cash-flow to invest each year 10
CHLOE BORROWS TO INVEST $30,000 Bank Shares Step 1 $30,000 Antares Dividend Builder SMA $70,000 Loan Antares Dividend Builder SMA Step 2 $100,000 Antares Dividend Builder SMA 11
CHLOE S REPAYMENTS OVER TEN YEARS $70,000 NAB Equity Builder loan Interest: 5% pa Term: 10 Years Repayments: $8,900 p.a. $3.4 $5.5 $3.1 $5.8 $2.8 $6.1 $2.5 $6.4 $2.2 $6.8 $1.8 $7.1 $1.4 $7.5 $1.1 $7.8 $0.7 $8.3 $0.2 $8.7 Amounts shown are in 000s Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 Principal repayments Interest Note: The case study example is hypothetical and for illustrative purposes only and should not be considered advice. The names and features do not represent any particular person or real outcomes. There is no guarantee that the performance stated will reflect actual outcomes and will vary depending on assumptions used for calculation purposes.
DIVIDENDS AND FRANKING CREDITS HELP CHLOE REPAY HER LOAN $100,000 Antares Dividend Builder SMA $1.9 $5 $1.9 $5 $1.9 $5 $1.9 $5 $1.9 $5 $1.9 $5 $1.9 $5 $1.9 $5 $1.9 $5 $1.9 $5 Amounts shown are in 000s Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 Dividend Yield Franking Credits Assumptions: Dividend yield of 5% p.a. and franking of 90%.
CHLOE ALSO RECEIVES A TAX BENEFIT REFUND $5,000p.a Dividend yield 90% Franked yield (Company tax of 30% already paid) $1,928 Franking credits (Income x franking level /(1-Company tax rate) $6,928p.a Grossed Up Income $6,928p.a Taxable income $3,500 Tax deductible interest from loan $3,428 33% Marginal Tax Rate $1,131 Tax payable $1,928 Franking credits $797 Tax refund Source: NAB. This is the scenario in Year 1, assuming 5% divienend income an90% franking, at a 33% marginal tax rate and a 5% interest rate on the $70K loan. 14
THE INCOME FROM CHLOE S PORTFOLIO COVERS THE BULK OF HER REPAYMENTS $5,000p.a Dividend yield $797 Tax refund $3,113p.a Chloe s contribution $8,910p.a Total loan repayment 15
AFTER TEN YEARS, CHLOE'S INVESTMENT HAS GROWN TO $135,000 $10,000 Repayment Net Share Portfolio $160,000 $9,000 $140,000 $8,000 $7,000 $120,000 $6,000 $100,000 $5,000 $80,000 $4,000 $60,000 $3,000 $2,000 $40,000 $1,000 $20,000 $- Start Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 $- 16 Source: NAB Equity Lending, NAB Asset Management. Assumptions: This is based on $100,00 Investment, and growth of 3%p.a. The income generated by the portfolio in not reinvested but goes towards funding the cost of the loan. At the end of the 10 year period, the principal and interest of the loan has been paid and the investment has grown to $135,000.
CHLOE HAS ACHIEVED HER GOAL $100,000 Chloe s initial investment $30,000 Chloe s initial contribution Fit for purpose loan 8% p.a Total return $60 per week ongoing contribution Diversification 5% p.a. Income 3% p.a.growth $135,000 $135,000 20% deposit on a $650,000 house Tax-effective Professional management 17
DEAN S STORY MEET DEAN Dean is 50, and by the time he s 60, would like to be working part time GOAL Generate an income of $25,000 p.a. in ten years time He has $75,000 to invest and because he owns his own home, he has strong cash flow 18
DEAN BORROWS TO INVEST $75,000 Cash Step 1 Step 2 $75,000 Antares Dividend Builder SMA $175,000 NAB Equity Builder NO MARGIN CALLS $250,000 Antares Dividend Builder SMA 19 Note: The case study example is hypothetical and for illustrative purposes only and should not be considered advice. The names and features do not represent any particular person or real outcomes. There is no guarantee that the performance stated will reflect actual outcomes and will vary depending on assumptions used for calculation purposes.
DEAN S REPAYMENTS OVER TEN YEARS $175,000 NAB Equity Builder loan Interest: 5% pa Term: 10 Years Repayments: $22,273 p.a. $8.4 $13.8 $7.7 $14.5 $7.0 $15.3 $6.2 $16.1 $5.4 $16.9 $4.5 $17.8 $3.6 $18.7 $2.6 $19.6 $1.6 $20.6 $0.6 $21.7 Amounts shown are in 000s Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 Principal repayments Interest Note: The case study example is hypothetical and for illustrative purposes only and should not be considered advice. The names and features do not represent any particular person or real outcomes. There is no guarantee that the performance stated will reflect actual outcomes and will vary depending on assumptions used for calculation purposes.
AFTER TEN YEARS, DEAN S INVESTMENT HAS GROWN TO $500,000 $25,000 $20,000 $15,000 $10,000 $5,000 $- Interest Principal End of Year Portfolio Value Year 1 1 Year 2 2 Year 3 3 Year 4 4 Year 5 5 Year 6 6 Year 7 7 Year 8 8 Year 9 9 Year 10 10 $500,000 $450,000 $400,000 $350,000 $300,000 $250,000 $200,000 $150,000 $100,000 $50,000 Source: NABAM 21
DEAN S CASHFLOW AFTER TAX $0p.a All income reinvested $1,142 Tax refund $21,131p.a Dean s contribution $22,273p.a Total loan repayment 22
DEAN HAS ACHIEVED HIS GOAL $250,000 Dean s initial investment $500,000 Size of Dean s portfolio Fit for purpose loan $25k His portfolio returns 5% p.a. Diversification 8% p.a Total return 5% p.a. Income 3% p.a. Growth 90% franked $500,000 $25k $9,642 $9,642 His franked dollar amount Tax-effective Professional management 23
MATT AND ZOE S STORY MEET MATT AND ZOE Zoe 35 is married to Matt 34 and they dream of being able to help their seven year old daughter Sophie a head start in life GOAL They want to either send her to private high school in five years time or help her with a deposit for her first home Zoe earns $130,000 p.a. and Matt earns $110,000 p.a. and they have savings of $30,000 to invest 24
MATT AND ZOE BORROW TO INVEST $30,000 Savings $70,000 NAB Equity Builder Loan Step 1 Step 2 $100,000 Investment $50,000 Australian shares fund $50,000 Global value fund 25 Note: The case study example is hypothetical and for illustrative purposes only and should not be considered advice. The names and features do not represent any particular person or real outcomes. There is no guarantee that the performance stated will reflect actual outcomes and will vary depending on assumptions used for calculation purposes.
MATT AND ZOE S REPAYMENTS OVER FIVE YEARS $70,000 NAB Equity Builder loan Interest: 5% pa Term: 5 Years Repayments: $15,850 p.a. $3.2 $12.6 $2.6 $13.2 $1.9 $13.9 $1.2 $14.6 0.4 $15.4 Amounts shown are in 000s Year 1 Year 2 Year 3 Year 4 Year 5 Principal repayments Interest Note: The case study example is hypothetical and for illustrative purposes only and should not be considered advice. The names and features do not represent any particular person or real outcomes. There is no guarantee that the performance stated will reflect actual outcomes and will vary depending on assumptions used for calculation purposes.
MATT AND ZOE S CASH FLOW AFTER TAX $0p.a All income reinvested $925 Tax refund $14,925p.a Matt and Zoe s contribution $15,850p.a Total loan repayment 27 Note: The case study example is hypothetical and for illustrative purposes only and should not be considered advice. The names and features do not represent any particular person or real outcomes. There is no guarantee that the performance stated will reflect actual outcomes and will vary depending on assumptions used for calculation purposes.
AFTER FIVE YEARS MATT AND ZOE S INVESTMENT HAS GROWN TO $187,000 $200,000 $180,000 $160,000 $140,000 $120,000 $100,000 $80,000 $60,000 $40,000 $20,000 $0 Antare's High Growth Share Fund Altrinsic Global Equities Trust 28 Note: NAB Asset Management, Morningstar. Assumptions: This is based on $100,000 investment and the income generated by the portfolio being reinvested. At the end of the 5 year period, the principal and interest of the loan has been paid and the investment has grown to $187,000. In this example, the $50,000 invested in the Altrinsic Global Equities Trust has grown to $101,000 and the $50,000 invested in the Antares High Growth Share Fund has grown to $86,000.
MATT AND ZOE HAVE ACHIEVED THEIR GOAL $100,000 Matt and Zoe s initial investment $30,000 Matt and Zoe s initial contribution Fit for purpose loan 10.70% p.a. Total return $287 $187,000 per week ongoing contribution Diversification Tax-effective $187,000 20% 75% deposit on a $950,000 house or cost of school fees Professional management 29 Note: The cost of private school fees is estimated to be $250,000 per child based on data sourced from the 2017 ASG Planning for Education Index. Indicative guide only does not take into account your personal circumstances or objectives.
LETS IMPLEMENT THIS New NAB Equity Builder Loan with existing MLC Wrap & MLC Navigator account STEP 1 STEP 2 STEP 3 STEP 4 STEP 5 Complete the following forms: 1. NAB Equity Builder application form 2. NAB Equity Builder loan request form Run a Detailed Portfolio Valuation report for your client via N-Link to identify existing MLC Wrap investments to be used as loan security (client s deposit) Post the following documentation to NAB Equity Lending: 1. NAB Equity Builder application form 2. Evidence of income 3. NAB Equity Builder loan request form 4. Detailed Portfolio Valuation report Address: NAB Equity Lending Level 5, 500 Bourke et Melbourne VIC 3000 The NAB Equity Lending team will review your loan application and provide approval subject to standard credit requirements On approval, a welcome letter and client login details to the NAB Equity Lending secure website will be posted to the client. The NAB Equity lending secure website allows you and your client to keep track of the investments and loan. Please note: If you re a new adviser to NAB Equity Lending, you ll receive adviser login details by post. STEP 6 STEP 7 STEP 8 STEP 9 Transfer client s existing investments and/or cash to NAB Equity Lending The NAB Equity Builder loan is set up including the principal and interest repayment schedule Following the assessment of the new investment request your client s total investment amount will be credited to their MLC Wrap or MLC Navigator account. You can then allocate your client s investments. 30 Please Note: The total time taken for new investments to be processed, will be driven by the time involved to manage the client s equity contribution, and the MLC Wrap and MLC Navigator processing time for new investments. All loans are subject to NAB credit approval, and all investments are subject to NAB LVR assessment. This process is a summary only, and more information may be required to approve the loan, and process the investment. For further information please see the NAB Equity Builder how to operate your facility guide at www.nabmarginlending.com.au/adviser/forms-and-resources
LETS IMPLEMENT THIS New NAB Equity Builder Loan with new MLC Wrap & MLC Navigator account STEP 1 STEP 2 STEP 3 STEP 4 STEP 5 Complete the following forms: 1. NAB Equity Builder application form 2. NAB Equity Builder loan request form Open an MLC Wrap or MLC Navigator IDPS account. Post the following documentation to NAB Equity Lending: 1. NAB Equity Builder application form 2. Evidence of income 3. NAB Equity Builder loan request form 4. Detailed Portfolio Valuation report Address: NAB Equity Lending Level 5, 500 Bourke et Melbourne VIC 3000 The NAB Equity Lending team will review your loan application and provide approval subject to standard credit requirements On approval, a welcome letter and client login details to the NAB Equity Lending secure website will be posted to the client. The NAB Equity lending secure website allows you and your client to keep track of the investments and loan. Please note: If you re a new adviser to NAB Equity Lending, you ll receive adviser login details by post. STEP 6 STEP 7 STEP 8 STEP 9 Transfer client s existing investments and/or cash to NAB Equity Lending The NAB Equity Builder loan is set up including the principal and interest repayment schedule Following the assessment of the new investment request your client s total investment amount will be credited to their MLC Wrap account You can then allocate your client s investments. 31 Please Note: The total time taken for new investments to be processed, will be driven by the time involved to manage the client s equity contribution, and the MLC Wrap and MLC Navigator processing time for new investments. All loans are subject to NAB credit approval, and all investments are subject to NAB LVR assessment. This process is a summary only, and more information may be required to approve the loan, and process the investment. For further information please see the NAB Equity Builder how to operate your facility guide at www.nabmarginlending.com.au/adviser/forms-and-resources
FAQS ABOUT THIS STRATEGY Why wouldn t I use my home loan? What about margin calls? Is now a good time to invest? 32
HELPING YOU WITH YOUR CLIENT CONVERSATIONS Client brochure Conversation starters Client case studies Client video Client seminar in a box Client case studies Kids a headstart House deposit Super supplement Short animated video Client need Client solution Seminar Invitation Thank you letter Thank you email Event guide Feedback form 33
EXPLORE THE OPPORTUNITIES IN YOUR BUSINESS Data on client segmentation Product specialist Client seminar Review model portfolios Helping hand to implement strategy 34
ADVISER JOURNEY 1 Insight discussion 2 Follow-up Client 4 presentation First 6 application Client video Case studies Conversation starters Objection handling Client brochure Adviser toolkit Email templates Adviser testimonial video Client presentation Seminar in a box Email templates Equity lending process map on MLC Wrap and MLC Navigator platform Email templates Adviser presentation Joint 3 appointment Portfolio 5 Solution Client 7 solution Email templates Adviser presentation Thank you email 35