We’ve all seen and read the ads for Industry Super. The guy that goes up the escalator vs the guy who goes down, representing their investments due to commissions being paid. Now I have always said there is value in Industry Funds, depending on what value you place on Super.

One side is that you save ‘a small amount’ of fees on your super with industry funds, but the other side is that nobody monitors your super, gives advice on where your money is supposed to be invested, and generally, there is nobody to talk about salary sacrifice, government co-contributions, etc.

An adviser, or financial planner can always help with these scenarios, but of course there is a fee involved. We don’t live in a benevolent society, and you get what you pay for. Most would understand this. Well, this week uncovered the under the table commissions paid to a fund manager by an industry fund. Sure, it’s not paying a trail commission from your account to an adviser, but instead it’s paid $1 Million to a firm to provide service on a SunSuper investment.

Where does that money come from? The SunSuper accounts. The member accounts! It comes directly from the interest returns of the members.

Please CLICK HERE for the full article. I would love to get your opinion on what you think.

PD

My wife and I have discussed Solar energy for at least 12 months now,  considering we live in a new area, and the next place we plan to move to will involve building again. This puts us in a unique position to be able to direct the builders to link much of our electricity needs to solar, saving a fortune in the long run.

Until last Tuesday, the government was giving Australians a rebate if they chose to go ahead with installing solar energy to run your household. And with atake up of about 80,000 households, this was off to a good start. Why on earth they would cancel such a thing is beyond me! Especially after KRudd and many other vocals about the need for greener energy and government’s help toward becoming greener (because that seem to be the only way this is going to happen anytime soon).

In the news report from news.com.au, several people interviewed had ordered the solar and submitted paperwork for a rebate, but now are being told it has been scrapped if you hadn’t done it prior to a certain date.

After hearing a lot of ‘green’ talk in elections, both her and around the world, it’s becoming harder to understand where they are going with all of this, because it seems they implement one thing, and then in the interests of business, they terminate something that was looking like a success. If they are serious about combating the onsets of global warming, and reducing carbon emissions, they need to start sticking to their word (as hard as that is for pollies) and implement more of these schemes.

But it begs the question – Is it worth going solar? Financially speaking, upfront it can be a bit of a stretch, but if you plan to live in that particular home for a long time, then it definitely has it’s upsides. Plus the fact that you don’t jhave to see an integral energy bill hitting your doorstep ever again.

I decided to delve further into the actual costs of getting solar panels, and how much it would take to run my house. We have a relatively average household of 2 adults and 3 children.

Size & Watts: The cost of a panel depends on the Watts it puts out. Basically, panels are priced usually in dollars per Watt. Basiclaly a 100Watt panel will generate 100Watts of electricity per hour.

One of the hardest factors to determine is your energy usage. This will vary every day. The problem is from day to day, the amount of energy you use is not going to remain consistent; however, you should be able to calculate an average of your energy usage. It is always better to over estimate rather than underestimate.

A good rule of thumb is to first calculate your average daily usage and then multiply that number by .25. This will give you the number and size of solar panels you need in kilowatt-hours. Your electric meter provides you with a very straightforward way of knowing how much energy you are using each day.  Your meter should have either an odometer style readout or a dial type readout.  Your electric company should be able to provide you with instructions on how to read your meter if you are unfamiliar with it.  All you will need to do is record the meter reading and then 24 hours later record the reading again.  This will tell you the kilowatt hours you have used.  You might want to do several readings and average the results you get over a couple of days. Or just work it out from your bill.

Once you have figures out the amount, you need to find the right solar panel. There’s quite a lot of different panels varying from output of Watts and Amps. Generally speaking, it seems like the more expensive they are, the more power they output, which then uses less roof space.

In the end, it will generally take about 15-20 years to pay back the savings of your investment. Depending on your opinion toward climate change will depend on whether you think this is a worthwhile investment.

For me, it’s just a matter of giving government and large organsations les control over what I spend, along with the knowledge that I have contributed less towards the destruction of the place where my children will grow up.
By the way, I’m no greenie and don’t hug trees, but I do think that while we are gifted with a place that has so many things to appreciate that are beautiful, we should at least ‘try’ to do something small. Or in plain English, just give a toss.

Here are some links to help you in your research toward solar energy, and try to write a letter to your local member on the importance of giving us an incentive for doing things such as these.

Have you already installed solar at your work or home?

www.energymatters.com.au
www.gepower.com

PD

Last night the International Monetary Fund declared the world will experience the deepest and longest recession since World War II, with global economic growth set to slump to -1.3% this year.

The bad news comes just days after Reserve Bank documents revealed the Australian economy is likely to contract by around 1% in 2009.

But what will a deep and long recession actually mean for Australian SMEs? Here are a few of the key issues entrepreneurs will need to watch out for.

Cashflow

Every business owner knows how tight cashflow is getting - average payment terms have now stretched to over 57 days, almost twice the standard term.

The message from Dun & Bradstreet chief executive Christine Christian is; get ready for cash to get even tighter.

Her agency revealed yesterday that it has downgraded the risk ratings on a record number of businesses in the last six months: 150,000 business are now considered at risk of not paying bills on time and 130,000 companies are rated as being at increased risk of failure.

It’s time to start monitoring cashflow every week, if not more often. Late payers must be followed up immediately, and don’t be afraid to pester them for your money - the squeaky wheel often gets the oil.

If you feel your debtors situation is getting out of control, consider getting help from a debt collection agency - most of them only charge when they collect the debt.

Customers

According to Westpac’s consumer confidence index, households are actually feeling a bit more positive about their situation right now. Don’t expect this to last. As soon as unemployment starts to rise (and most economists are tipping it will hit 9% in the early stages of next year) then consumers will shut their wallets.

This is the time to look hard at your customer base and try and figure out how a recession will affect them. How is their sector performing? Is the CEO getting grief from head office overseas? Are they a subsidiary of bigger group that is struggling?

Not only will this help you identify the customers who could be at risk of not paying on time, but it will also help you pick the customers who are in the best position to get through the recession.

Make sure you get especially close to these customers. Most customers are going to be far less tolerant of mistakes and far more demanding of discounts and better payment terms, so relationship management will be crucial if you want to meet their needs and protect your margins.

Directors and investors

If you are feeling nervous, so are you shareholders and board members. They are going to want to see even more information about cashflow and financial performance. Keep talking to them and remember the golden rule - no surprises.

Take a tip from Bakers Delight general manager Chris Caldwell. His company is going to the extent of checking the financial health of their shareholders (in this case, their franchisees).

“One thing we need to be very cognisant of is what their own financial position is like, and whether they as individuals have suffered anything outside of Bakers Delight, whether the investments they have got have faltered and are placing them under stress.”

Access to finance

As cashflow becomes tighter, bad debts increase and more companies start to collapse, the banks are going to clamp down even more tightly on business lending. New finance will be more difficult to come by and the process by which the banks have been re-rating businesses and increasing the loan rates will continue.

If you want money, be prepared to be asked for a wall of documentation. Tony Markwell, national head of privately held business at Grant Thornton, says banks want to see “three-way” forecasts, where a cashflow statement, a profit and loss statement, and a balance sheet are combined.

However, it is likely that the recession will weigh heavily on business investment, which means the fewer companies are going to need to access finance.

Managing people

Leadership and people management are going to become even more important as the recession drags on.

First, you’ll need to get your labour cost base right. If that means making staff cuts, do it sooner rather than later. If you want to try and hang on to staff for the recovery, you’ll need to look at options such as four-day weeks, leave without pay or salary reductions.

Second, you need to keep your team motivated. Gary Cohen, chief executive of software provider IBA Health, told SmartCompany recently that this all comes down to communication. “Obviously, you can’t share everything that is going on in your mind, but you have to give enough visibility that you are looking after their long-term interests and that you are looking after the business’s long-term interests. If staff think you are out for yourself or looking after somebody else’s interests, they won’t trust you.”

Finally, think about whether you can pick up any talent in the downturn. Federal Treasurer Wayne Swan has warned unemployment could hit 10% by the end of the downturn, which means there will be good people dying to work for you.

Stress

Getting through this recession will not be easy. SmartCompany blogger and clinical psychologist Tim Sharp has a few tips for dealing with stress:

•- Simplify; take some time to clarify what’s really important (and what’s not) and stay focused on your real priorities (personal and working).

•- Keep up your energy; don’t let your diet, exercise or sleep slip. It’s hard to be happy if you’re literally sick and tired!

•- Develop optimism; face up to the cold hard realities, what ever they may be, but make sure you face them in a constructive way, and in addition, do what you can to also actively search for positives.

•- Don’t feel you have to do it all on your own; resilient people are better at reaching out to others and appropriately asking for help.

•- Use your strengths to deal with your problems; give some thought to what you’re best at and how you can use these attributes to take on these adverse circumstances.

•- Practice gratitude; as bad as things might seem try not to forget that there are almost certainly others worse off.

Research published this week by the University of Melbourne Centre for Corporate Law and Securities Regulation challenges some common perceptions about personal insolvency.

The headline numbers are disturbing enough – a 261% increase in personal insolvency between 1990 and 2008. But more interesting is the impact of easier credit, and the explosion in the use of credit and debit cards among Australian households.

According to the report written by Professor Ian Ramsay and Cameron Sim, excessive use of credit caused 13.3% of non-business related bankruptcies in 1997. By 2008, that figure had climbed dramatically with excessive use of credit accounting for 39.4% of non-business related bankruptcies.

Now, given the current economic climate, it is reasonable to expect that the rate of bankruptcy is likely to continue to rise, particularly as unemployment rises and more people struggle to meet financial commitments.

But the profile of people becoming personal insolvents is changing – they are more likely to be employed, older and have higher levels of personal and household income. Personal insolvency is definitely becoming more of a middle class phenomenon.

Since the global financial crisis started to bite, the good news is that the rate of growth in credit card debt has slowed significantly and households have been reducing debt. Perversely, that was not want the federal government wanted to happen as they were busily trying to stimulate consumer spending, but individuals sensibly took the chance to reduce personal debt.

But outstanding balances on credit and charge cards accruing interest, according to the Reserve Bank data, was $32.9 billion at the end of January this year. Rewind 12 months to January 2008, and the outstanding credit card balances accruing interest was $30.6 billion - so despite the global financial crisis credit card debt continues to climb. And despite the fact that money is pouring into bank term deposits, courtesy of the government guarantee and official interest rates falling steeply, interest rates on credit cards remain stubbornly high.

Mainstream rewards-based cards have an interest rate of 17.9% and cash advances are being charged interest at 20.9% on some leading cards.

Investors are understandably concerned about returns on their superannuation funds and the outlook for investment markets. But for many people, focusing on reducing the cost of servicing credit card debt could be a more effective strategy to improve their overall financial position. No-one can control market performance, but we can all control the amount we pay in fees to financial institutions – be they credit card companies, banks or fund managers.

PD

Is it any surprise that the banks claims that they can’t pass on the interest rate cuts, have been shot down by analysts who point to burgeoning margins on margins and corporate loans?

Last week, there was, yet again, another rate cut for Australian mortgage holders, and once again we get the message that banks will not be passing on the full cut due to “increasing cost of obtaining capital”. Verbal diarrhea I hear you say? I’m inclined to agree with you on that one.

It baffles me to think that every time there is a rate hike, the banks put the rate up instantly, but on the reverse side of the coin, nothing happens. It’s a blatant money grab that defies the law of fair trade in this country.

Then we have the Almighty Wayne ‘Super’ Swan coming out against the banks in all his might stating “Certainly I’m pretty disappointed with their decision or the decisions that have been announced so far” on Wednesday. He went on to say that “You know what they’re like, they do need a good kick up the bum occasionally.”

This comes from the treasurer of our country! His opinion is laughed at by bankers, and should not even be printed as it’s not worth the overpriced parliamentary paper it’s written on. What Wayne Swan needs to do is put something in place to demand that banks follow the lead of the reserve bank, as that is what they base their pricing on, otherwise keep his mouth shut. I understand that banks have a responsibility to their shareholders to return a profit, but they also have a responsibility to their customers to give fair business practice, which is clearl not taking place here.

Call me a conspiracy theorist, but do you think a backroom idea is for people to lock in fixed rates in the short term, and then bring in the rate cut to it’s existing customers? Possibly. The fact is that Wayne Swan needs to grow a pair, and do something about the people he is supposed to serve before corporate greed takes over, if it hasn’t already.

If you would like to voice your opinion to Wayne Swan, as I have here, his parliamentary email address is Wayne.Swan.MP@aph.gov.au

PD

Super funds may finally recoup some of the losses incurred over the past few months according to ratings house, Super ratings. The new data pointed to another negative month of returns in February (down 3.66 per cent) but suggested that some of this was likely to be recouped in March due to a sharp rally in both Australian and international share markets.

It said balanced fund options might recoup as much as 4 per cent in March, which, if it happened, would effectively offset the losses of both January and February.

However, the ratings house said notwithstanding the better prospects in March, Australian super funds balanced options were still set to deliver a second successive year of negative returns and that these negative returns would most likely be in double digits. (Source: Money Management)

Well, talk about giving with one hand and taking with the other. It looks like returns are a likely source of frustration yet again for many Australians. We hear so much about negatives in the media, tell us if you have had some glimmer of hope through your fund manager.

PD