28 February 2017

US Banking Systems Return Back to the Future - Investors Beware! By Steve Marsten

We rarely head into the political side of things however an issue came to my attention this week. After the 2008 financial crisis then US president Barack Obama signed the Dodd-Frank Act into federal law in 2010. The Act was badly needed and was the most far reaching “Wall Street” reform since the legislative response to the Great Depression of the 1930s.
The objective of Dodd-Frank was to reduce exposure to risky financial products and to prevent the need for hundreds of billions of dollars in bank and insurance bailouts, as seen in 2008 and 2009.
The real concern is that on Friday 3rd February, Donald Trump signed an executive order requiring the US Treasury Secretary to submit possible regulatory changes and legislation to modify Dodd-Frank within the next four months.
The Dodd-Frank Act created a new regulatory body - the Consumer Financial Protection Board, which protects retail customers across the financial sector, including banks, payday lenders, credit unions and mortgage services. This helps stabilise the financial markets.
The Big Banks that were deemed "too big to fail" are subject to more capital requirements, which have forced banks to fund themselves more by raising money from shareholders rather than by borrowing.
There are more stringent rules limiting banks taking on riskier assets, which the industry itself has identified as being costly. As part of the act there are restrictions on US banks from making certain kinds of speculative investments, including investing in hedge and private equity funds, using their own money or customer deposits — so called proprietary trading.
However, Republican lawmakers have argued that Dodd-Frank is burdensome for financial institutions. Arguably the current US model remains less stringent then the Australian Model as it currently stands. Our banks of course did not fail during the GFC. Our system held up and our government did not have to bail out any banks. Reducing the regulation seems to be allowing the big banks to return to the bad old days.
It is likely that, if the Dodd-Frank act is made impotent, shares in Australian banks may well rally.

Investors need to be weary of these scenarios. During the GFC Australian banks remained strong because of our stringent regulations compared to the US. At Sothertons, we welcomed the improved financial legislative climate that rid the market of many cowboys in the industry. Call us at Sothertons for your Financial Planning needs on 4972 1300.

21 February 2017

Saving your most valuable asset - your business. By Steve Marsten

Last week we covered the first 5 points of turning a business around. Good leaders and entrepreneurs recognise when things are getting difficult early and take immediate action. The next 5 key points are:
6. Meet with your suppliers
Company suppliers get very nervous when they hear “on the street” that one of their customers is in trouble. Sometimes word travels faster than your ability to thoughtfully alert the appropriate people. You need to develop a prepared statement outlining the problems and how you plan to deal with them. Respond quickly and thoughtfully to any enquiries.
7. Talk to the ATO
If you can’t pay your taxes, notify the ATO or work with your accountant/tax agent to negotiate a payment plan with the ATO to ease your cashflow and overall financial burden.  
8. Let your bank know that you have a plan
If you have loans or a line of credit, call—don’t just email—your bank manager and tell them you need to meet in person. Update them on your situation and explain your plan of action.  Appear confident and reassuring.
9. Keep key personnel
If necessary, figure out which employees you can let go without damaging your business.
Nobody likes to let people go, but for the business to survive you need to keep only people who are bringing in, making, or servicing sales. Maybe you can hire some back later when times are better. Or maybe some you just cut their hours for now and hope to increase again later.
Make your first cut deep, especially with employees! You want to avoid having multiple rounds of cutbacks—that becomes psychological torture, as all employees will then fear they are likely going to lose their jobs sooner or later.
10. Cut unnecessary costs
Make a list of all your expenses and eliminate what you don’t need. You need to buy time in order to fix your problems, and cutting expenses is a good way to buy “financial” time.
Going broke is like a disease, the earlier it’s treated the higher the survival rate. The aim is to get help before its terminal.
At Sothertons we have assisted many businesses turn things around. Its hard work, however there is a high probability of a great outcome. Call us on 4972 1300 to find out more.

14 February 2017

The turnaround plan for businesses on struggle street. By Steve Marsten.

Recently I called a client who has not been in touch with us for a while. Things have been tough during that time and they finally came in and admitted their business was struggling and they wanted guidance and direction.
After a very positive and forward thinking meeting we came up with 10 points to reinvigorate and turn their business around.  In this article, we will cover the first 5 points and next week we’ll discuss the other 5.
1. We re-visited and re-wrote the business plan.
Owners, management, the bank, and employees all need to know what the business’s future plans are. They need to see where they fit in, how they can help, and how they can share suggestions based on their expertise that will help the company succeed.
Companies that write and follow well-thought-out plans are much less likely to get into trouble, but when you’re already in trouble is when you need a plan most of all!
2. Meet with the key people
You must get the key people in the business together to have a no-holds-barred discussion on how to fix the business. Don’t go into the meeting without a plan of your own. People lose confidence in leaders who lack a plan and vision for their business. The key in this type of meeting is to be self-assured, open-minded, and flexible. Having a facilitator often helps with these meetings to balance the difficult parts of the conversation and keep things positive and on track.
3. Revise Plans
After listening to key personnel in the business and discussing important aspects of your plan, revise the plans again before presenting them to either the board of directors (if you have one) or your leadership team and then the employees.
4. Meet with the employees
Have a company meeting, admit that there are things wrong with the business, and discuss how management plans to fix it. Provide employees with relevant parts of the business plan and ask for their input.
5. Meet with your customers
Rumors of your imminent demise may be swirling around the business community. Key customers may become nervous and some are even looking for new vendors. Don’t stick your head in the sand. Inform your customers about your situation and tell them how you plan to correct it. Be reassuring, but not deceitful. Be on the frontfoot and not the backfoot!
At Sothertons we have assisted many businesses turn things around. Its hardwork, however there is a high probability of a great outcome. Call us on 4972 1300 to find out more.

07 February 2017

The Beauty of Business. By Tina Zawila.

It’s one thing to have an idea for an enterprise, but making it happen is a very different thing.  It demands extraordinary energy, self-belief and determination.  You must have the courage to risk not only your hard-earned money, but sometimes your precious time with family and friends.  You have to be prepared to commit 24/7, 365.
So why do we do it? 
If you truly enjoy what you do, and truly believe in your idea/enterprise, then making this commitment, taking the risk, sacrificing time spent on other things, will come naturally to you.  Work (business) will not be something you do when you’d rather be doing something else, instead you will choose to devote the time and energy required to serve your customers and make your enterprise successful.  You will love the beauty of business.
However, even with this drive and determination to succeed, most of us also need the support and connection of others.  Rarely do people “make it alone”.  Shared success is always sweeter than individual success, and support during tough times can ease the burden. 
Steve and I talk to business owners all day, every day, and one thing we know for sure is that it can be a tough journey and it can be lonely in business.  In particular, first-time business owners can struggle initially.  Usually, their friends and family are not business owners and sometimes their spouse isn’t even involved in the business. Their employees certainly don’t understand the pressure of being in business.  So the owner can find themselves feeling quite alone.
That is where building a network of professional advisors and like-minded people becomes vital. It has been said that one of the secrets to success is to surround yourself with first class people that you like, and I couldn’t agree more.  
So make sure you find and nurture your first class support team, seek advice and share your experiences.  The professional team at Sothertons are here for you.  Call us on 4972 1300.