Australian personal investment portfolio profiles reveal a sjgnificant lack of diversification and a fondness for shares

“This is indeed the wealthiest retired generation ever in Australian history…. Self-funded or partly self-funded retirees appear to enjoy a significantly higher standard of living than those who rely on the Aged Pension”  [Australian Centre for Australian Studies, August 2016]

According to the Australian Stock Exchange in 2017 there were over 11 million investors across the country.

Given the many words being written on the subject of share dividend imputation and franking credits here is a broad breakdown of the investment types these people hold.

Sources of income during retirement

In 2016–17, there were 3.6 million persons, aged 45 years and over, who reported that they were retired from the labour force. This group comprised 1.7 million men and 1.9 million women. Just over half of all retired persons were aged 70 years and over (56% of retired men and 52% of retired women).

Approx. 49% of male and 45% of female retirees stated main source of income was 'government pension/allowance'. In total this represents an est. 1.6 million individuals retired from the labour force.

Approx. 33% of male and 17% of female retirees stated their main source of income was 'superannuation/annuity/allocated pension' (37% of females state ‘partners income’ as main source of income). In total this represents an est. 884,000 individuals retired from the labour force.

Est. 30% of all retirees appeared to be eligible to claim a government part-pension.

Australian retirees (60 years and older) investment portfolio profile:

68% hold cash

58% hold shares

26% hold investment property

18% hold other on-exchange investments.

Retirees on average expect an 8 per cent return on investment.

Australian all adult (18 years of age & older) investment portfolio profile:

60% hold investments

Up to est. 42% hold investment property

31% hold shares

Up to 25% hold other on-exchange investments, including derivatives

10% hold family trusts

15% hold self-managed super funds (SMSFs), with the majority held by individuals over 45 years of age

Est. 44% of SMSFs contain shares and over 50% hold cash.

Adult investors on average expect an 8.2 to 9.2 per cent return on investment.

Only est. 5% of investors borrow money in order to invest.

Overall less than half (46%) of all investment portfolios are diversified to lessen financial risk.

Currently, most investors in Australia are self-directed, choosing to conduct their own research.

[See https://www.asx.com.au/documents/resources/2017-asx-investor-study.pdf
& http://www.abs.gov.au/ausstats/abs@.nsf/mf/6238.0]

Excess Franking Credits derived from Share Dividends

The average annual cash refund for unused franking credits is thought to be in the vicinity of $5,000 per shareholder, while the average unused credits cashback payment for people in the top 1% of self-managed super funds is an est. $83,000 a year.

Social media opinion

A terrific example of the irrational, ill-considered investment "strategy" that the imputation tax rort encourages. People invest on the basis of the rort with no consideration of underlying corporate fundamentals https://t.co/6mswyubE0E

— Stephen Koukoulas (@TheKouk) March 15, 2018

Tim Lyons at Revielle 

Case studies mentioned in mainstream media

Case Study 1

via @GraemeEtt

It has been pointed out that with income from other sources being $130,000, "Jean" would have income producing assets possibly valued at est. $3.2 million. She appears to own her own home.

Case Study 2 - Stjepan has retired with what appears to be a self-managed super fund. As his fund is in the pension phase he pays $0 tax. He and his wife have a combined annual income of $89,000 and own shares valued at $200,000. He states that he will lose "several thousand dollars a year" if he no longer receives cash back for excess franking credits.
Stepan owns his own home plus a holiday unit.
If this couple's combined income is $89,000 then they would possibly have income producing assets valued at around $1.7 million.

Case Study 3 - "Peter" has a self-managed super fund. As his fund is in pension phase he pays $0 tax. Peter has an income of $60,000 a year. Dividends from his share portfolio see him receiving franking credit cashback payments of over est. $8,000 per annum which he lodges in his SMSF account to grow his balance.
His income producing assets are possibly valued at est. $1.2 million.

Case Study 4 - Margaret and her husband have a self-managed super fund. As their fund is in the pension phase they pay $0 tax. The SMSF appears to solely invest is shares - 85% of which are Telstra and big bank shares. 
Currently National Australia Bank shares are worth in the vicinity of $29.51 with an annual dividend yield of 6.71%, Westpac shares are worth in the vicinity of $29.52 with an annual dividend yield of 6.37%, Commonwealth Bank shares are worth in the vicinity of $75.34 with an annual dividend yield of 5.71% and, Telstra shares are worth in the vicinity of $3.35 with an annual dividend yield of 6.8%.
No income is stated but what is asserted is that the abolition of payment for excess franking credits will see their annual income reduced by 30%.
Margaret and her husband own their own waterfront residence in Sydney.

The bottom line is that investors who structured their portfolios to take maximum advantage of excess franking credit cash payments do not appear to have considered the relatively short history of this cash payment scheme or the possibility that a political push might occur to eliminate the 'value' of unused franking credits - given that current owners of these credits who had no tax liability were claiming refunds for tax they had never paid in the first place.

Is the Liberal Party finally leaving the Metgasco building?

Metgasco Limited website 10 June 2013:

Richard Shields - External Relations Manager

Richard has extensive knowledge and experience in politics, having worked for almost 20 years in senior government, party related and private sector roles. He understands the challenges and complexities of the legislative and regulatory processes of government, in addition to having a strong insight into managing media and community relations.

Prior to joining Metgasco, Richard served as Deputy Director of the Liberal Party of Australia (NSW Division) for over 3 years and also served as the Interim State Director. Other positions held by Richard include a Policy Adviser to former Senator the Hon Helen Coonan as Minister for Communications, Information Technology and the Arts.

Richard has also worked as a Senior Cnsultant [sic] for two of Australia's largest issues management firms. Drawing on his strong media and stakeholder manageent [sic] skills, Richard advises the Managing Director and Board on issues management, communications and engagement strategies and investor relations……

Insurance Business 10 June 2013:

The Insurance Council of Australia has appointed Richard Shields as general manager of government and stakeholder relations, effective 17 June, 2013.

He will be responsible for managing key stakeholder relationships and engaging with all levels of government.

Shields has two decades of experience in public affairs-related roles. He was most recently the external relations manager of ASX-listed company Metgasco.

Prior to that he was an adviser to the Minister for Sport and Tourism Hon Andrew Thomson MP and for Minister for Communications, Information Technology and the Arts Senator the Hon Helen Coonan; public affairs director for the Australian Hotels Association (WA); deputy state director and director of party affairs for the Liberal Party (NSW).

ICA CEO Rob Whelan said Shields brought an insider’s knowledge of the challenges and complexities of politics to the ICA. He said Shields would also complement the organisation’s knowledge of the legislative and regulatory processes of government……

June 2013 Memo to Ethical Investors re ERM Power Limited

Since ERM Power Limited decided to invite itself into the Northern Rivers by way of investment in coal seam gas exploration and mining companies Metgasco, Clarence Morton Resources and Red Sky Energy it has become a company which is willing to override the concerns and wishes of local communities.

ERM is currently in a trading halt as it attempts to raise $60 million by way of placement and SPP in order to reduce debt and create working capital to progress its business plans, which include its interests in NSW North Coast coal seam gas production, reserves and exploration.

Ethical investors are asked to consider what participating in this offer may mean to established regional economies, water security, agriculture, lifestyle and amenity across New South Wales by way of potential adverse impacts associated with creating and operating gas fields.

Anglican Church to vote on coal seam gas investments this weekend

“Why would the Church be interested in what we're doing in the first place?” Once again the coal seam gas industry fails to understand what a social license entails.

ABC News 11 April 2013:

The State Council of the Uniting Church will vote to exclude investments in coal seam gas and coal mining at this weekend's Synod in Sydney.

Four-hundred delegates are being asked to consider a motion that places corporations engaged in the extraction of fossil fuels on the Church's Excluded Stock List.

It also calls for an immediate freeze on new investments, and the sale within 12 months of existing holdings, in CSG and mining companies.

Uniting Church Minister in the North West Plains, the Reverend Robert Buchan, says increasing numbers of his parishioners are raising concerns about CSG expansion.

"There is an application that is on the table at the NSW and ACT Synod where there will be a vote taken about the Uniting Church's attitude towards coal seam gas and coal mining, particularly in areas that are ecologically sensitive, sensitive in terms of food production and particularly where there are significant aquifers," he said.

Moree-based Reverend Buchan says congregations are calling on the Uniting Church to engage in the debate.

"A mining executive said, 'Why would the Church be interested in what we're doing in the first place?”……

UPDATE

Channel 9 News 16 April 2013:

In a meeting held in Sydney on Tuesday, 400 synod council members from the Uniting Church in NSW and the ACT voted unanimously to divest from companies engaged in fossil fuel extraction and place them on its `excluded stock list'. The synod said investments in mining companies contradicted its ethical investment principles, which require it to shun companies involved in `substantially changing the environment'.

Metgasco's desperation out there for all to see

 

In the middle of an Australian Stock Exchange bull-run Megasco Limited shares appear to have hit what looked like an all-time low on 12-13 February 2013 when trading closed at 0.135.

 

Rather predictably the coal seam gas exploration and want-to-be production company sent forth a spinmeister which resulted in this headline in The Northern Star; Future bright for Metgasco.

 

As one has come to expect of Metgasco, there was apparently no declaration by the resources analyst whose opinion was canvassed as to whether he may have had a potential conflict of interest which might affect the weight readers would give to his pronouncements.

 

Being employed by the stockbroking firm paid by Metgasco to produce its Broker Reports does appear to be such a conflict and, only the mining company’s desperation for a ‘good news’ headline must have led it to suppose that no-one would notice this lack of transparency.

 

A lack of transparency which is obviously a deliberate, as the ABC News online article Metgasco share price weakens but outlook positive also failed to mention the mining company’s business relationship with Mr. Prendergast’s employer.

Mr. Prendergast also does not seem to have mentioned that the attractive value Metgasco shares he is busy promoting in the media are classified in ‘his’ 31 October 2012 broker’s report as high risk.

By close of trade yesterday Metgasco shares had only risen to 0.140 - a long way from the $1+ per share in those brief heady days when the market was inclined to believe this mining company's unconventional gas fairy tale.


ASX chart of monthly prices over 10 years for security MEL

Metgasco Limited - a comedy of errors but are the shareholders laughing?

 

Poor Metgasco Limited.

 

Share price in the doldrums for months on end, caught dumping wastewater in a sewerage treatment plant after being told to fix the problem with one of its holding ponds, had to beg to be excused from EPA fines, losing money hand over fist, had to put its Lions Way Pipeline plans into mothballs, in the process of losing one of its large institutional shareholders, and faced with the steady dislike of entire Northern Rivers communities, one would think matters could not get worse.

 

However, this week community members at the site, local media and at least one state politician have been telling the world that this coal seam gas exploration and wannabe production company can’t even drill a simple test shaft.

 

Seems the drill head ran into rock it could not pass through so it broke and, someone managed to let drilling mud flow free.

 

Whatever happened to the much vaunted seismic testing to map subsurface geology and structure of an area before picking an exploratory well site?

 

Didn’t do it? Forgot to bring the mapping? Thought near enough would be good enough and was rather surprised to find a very large rock in the way? Ooopps!

 

And to top the lot for this woebegone company, those pesky regional folk are still making it difficult for Metgasco to turn up to work at Glenugie in the morning.
 

The protesters who had locked themselves to the vehicle were from properties near to the CSG site at Glenugie. A young girl, believed to be the daughter of one of the farmers, was removed from the vehicle by police.

*Photograph and quote from The Daily Examiner 15 January 2013