My financial planning 'start up' is 18 months old and still no clients

As readers may recall, I completed my Diploma of Financial Planning in late 2018 in order to get 'registered' as an 'existing' Financial Planner (aka Financial Adviser) in Australia before the rules changed on 1 Jan 2019 (which required all 'new' Financial Advisers do a year of supervised training/experience). I'd been studying for my DFP qualification on and off for several years (just out of interest), and the rule change prompted me to get my butt into gear and get 'registered'. As I still have a full time 'day job' that has nothing to do with financial planning, having to quit a relatively well-paid job in order to get an entry-level Financial Planner position just to meet the 'training' requirement would not have been feasible. Since getting 'registered' in late 2018 I've been doing a bit of local advertising (dropping free booklets into local letter boxes) and set up my 'business' website with an online appointment booking tool.

The result? So far, only two 'serious' enquiries (made a booking for a complimentary introductory meeting) that resulted in one meeting (that didn't work out as they had minimal income, no significant savings, and the person I met with wasn't really interested - their partner had booked the meeting but didn't attend) and a last minute cancellation.

I'm currently paying around $1,500 per month fee to my 'dealer group' (I have to be an authorised representative of an AFSL holder to be a Financial Planner here in Australia, or have my own AFSL which would cost a lot more) just to stay 'in business'. I had hoped to get a couple of clients in my first year (2019) and to get enough clients by the end of this year to at least cover the fixed costs of remaining registered (and a member of the FPA and AFA, which each charge around $500pa). Now I'm just hanging out to get my first client...

Oh well, I plan on staying in my full-time paid work for several more years (unless I get laid off), and in the meantime will complete my Master of Financial Planning degree next year and (hopefully) then enrol in a PhD. The Masters degree is costing me $3,500 per subject (there are 12 subjects in total for the degree), but fortunately if/when I enrol in the PhD course next year I shouldn't need to pay any more uni fees as this is generally covered by the Commonwealth-funded RTS (Research Training Scheme).

Once the Covid-19 restrictions are lifted I might start offering free lunchtime seminars for the staff of local business. And I'll start doing some 'cold calling' of locals.

Subscribe to Enough Wealth. Copyright 2006-2020

Revisiting "the chart I wish I'd seen a year ago"

Way back in 2008 I posted about a chart I made of the All Ords Index vs the Australian GDP price index series, which appeared to be a good warning sign of when the market was 'irrationally exuberant' and when it was 'oversold'. ie. When you might think about 'taking profits' and getting out of the stock market, and when the market was 'on sale' and a good buying opportunity. Of course, as Moom pointed out at the time, there are reasons why the stock market may increase relative to GDP, such as the decades long decline in interest rates (which made higher stock p/e multiples sensible - from 8-12x in the 80s and 90s to 15x-20x today). However, in the 'long term' it seems rational for the stock market as a whole to increase in line with GDP. So when the 'irrationality of crowds' makes the market oversold or overbought, one has better than normal chance of actually benefiting from trying to 'time the market' (I generally buy and hold, as timing attempts generally increase transaction costs more than performance, and I tend to buy index funds or ETFs rather than trying to 'pick' individual stocks or sector funds).

So, with the recent market drop and recovery during the first half of 2020, I thought I'd get some updated data on the AllOrds Index (the ASX200 Index follows the same basic pattern) and the Australian GDP Price index series, and see how the plot looks today. As you can see below, this plot is still pretty good at showing when the market is relatively 'expensive' (too high) and when it is probably 'cheap' (too low). But, as DS1 pointed out, if you sold out of the market when it goes 5% or 10% above the 'expected' level, and bough back in once it dropped 5% or 10% below the expected level, you would have missed the large market gains of 1986-87 and 2005-2007.  So, you'd probably want to take these levels as warning bells, rather than simplistic buy/sell signals. Possible it would be useful to combine tracking 30 vs 90 day moving averages with this simple 'too high'/'too low' market indicator to decide when a long-term investor should consider reducing and increasing their exposure to the stock market. That would help with making the decision to buy into the market when it is oversold, as it is usually quite hard to 'pull the trigger' and invest/reinvest when the market has dropped a lot - like in Mar 2008 or March 2020. Seeing that the market may have 'turned around' (rather than just a 'relief rally' during a bear market run), helps identify if the 'bottom' has passed.

If anyone is interested in tracking this relationship for themselves, quarterly GDP Price Index data and Monthly adjusted close All Ords Index data was obtained from the following free resources:

ABS website

Yahoo Finance

Subscribe to Enough Wealth. Copyright 2006-2020

Time for the Aussie government to borrow and invest big

Ross Gittins has a good article in today's SMH outlining the reasons why the right wing Morrison government should be not looking to 'cut the deficit' (usual Liberal mantra) as the post Covid-19 economic recovery starts to tentatively materialize later this year. With the government able to effectively borrow at 0% real interest rate, they should restart the old 'government bonds' program (that issued 10 or 20 year bonds) with an interest rate of, say, 1.0%. A lot of super funds and pensioners would probably take these up, given the bank interest rates on savings being around 0%. That wouldn't raise a lot of money, but the government could also set up a few government-back statutory infrastructure bodies that could borrow globally at close to 1% for the long term, and then invest all this borrowed money in major projects that are a) sensible and add to long-term national productivity and/or development, b) relatively labor intensive, and c) have a decent 'multiplier effect'. There a experts that could (and probably already have) provide the government with a list of projects, but a few that spring to mind and such as - constructing defense assets such as destroyers, submarines, and possibly even an aircraft carrier (we used to have one) - building a large-scale solar electricity 'farm' (or farms) in outback regional Australia, with associated storage battery farms and connection to existing transmission lines - building adequate amounts of social housing, preferably with a bias towards regional towns to aid with decentralization - upgrading Woomera to support satellite launches using the commercial launch vehicles becoming available, and to add some 'bricks and mortar' to the recently created Australian Space Agency (with a budget allocation last year of just $9.8 million it could probably fund one episode of 'The Orville' - hardly a serious initiate for the 'clever country'). Anyhow, there are probably a lot of better ideas on how the government could spend a few billion dollars of cheaply borrowed money to help grow the Australian economy, address our contribution to global warming, develop local technology business, and provide skilled jobs. Hopefully the delayed budget later this year might actually include some large public spending initiatives. We'll see.

Subscribe to Enough Wealth. Copyright 2006-2020

Net Worth: May 2020

The markets recovered somewhat during April/May, so my NW is close to the previous all-time high already. The house price and estimate off-the-plan unit valuation are less accurate than usual, as some of the sales price data I use for my estimates had not been updated in May. In any case, it appears that real estate is only down slightly so far, and may not fall as much as some pundits were predicting. We'll see.

Subscribe to Enough Wealth. Copyright 2006-2020