Summer 2008 looking back, looking forward ground breaking research who's rich after the turmoil 50 short cuts christmas message staff news looking back, looking forward 2008 has been a challenging year indeed. As I write this article the Australian sharemarket has recorded the second biggest fall of all time. This downturn has been worse than 1929/31 and 1987 but not quite as bad as 1973/74. The rear view mirror does not show a pretty picture. Many have asked how we are travelling at such a difficult time and we thank you for your kind thoughts. I am pleased to report that whilst things are tough at the present time, the future for Goodman private wealth advisers remains bright. It is true that many in our industry are struggling. At Goodmans we stuck to our conservative value investment style during the boom times and as a result our clients have fared better than most during the downturn. It follows that if our clients are faring relatively well then we too are faring relatively well. Our business does not rely on product sales, but rather, on the strength of long term relationships. We are determined to keep looking forward and fulfil our purpose. We have long stated that our purpose is to help our clients invest and use their wealth for their own benefit, the benefit of their family and the benefit of the broader community. Over the last twelve months one way in which we fulfilled our purpose was by supporting a unique research study that was conducted by the Australian Centre for Philanthropy and Nonprofit Studies at Queensland University of Technology. This research made a major contribution to understanding the needs of high net worth Australians, particularly in the areas of professional services and philanthropy. We also continued to invest in the business during the year. We have developed a range of new services for successful families. You will hear more about this in 2009 but in a nutshell the new services are designed to provide a comprehensive range of “family office” solutions for high net worth families. We may not be able to predict the future for investment markets but we are confident that, in time, economies, sharemarkets and property markets will recover. Things may get a little worse before they get better and the various economies and markets may follow different paths to recovery, but it WILL happen. Goodman private wealth advisers is here for the long term. We will emerge from this challenging year stronger. We will remember the lessons of the last twelve months and use it to improve our business intelligence in the future. We will continue to help you and future Elephants: are strong, live long and generations of your family make informed financial decisions, so that have good memories. you can experience those things that are important to you. BRAD CHURCH Level 16 CPA Centre, 307 Queen Street, Brisbane QLD 4000 | GPO Box 1203 Brisbane Qld 4001 P 07 3221 0333 | F 07 3221 0830 | E email@example.com | W www.goodmanwealth.com.au | John Goodman & Company Ltd ABN 95 009 938 514 AFS Licence No. 238363 ground breaking research We recently released the findings of a ground breaking We are already working in the area of philanthropy. research study conducted by the Australian Centre For clients, we provide information and advice to for Philanthropy and Nonprofit Studies (CPNS) at support their family giving programmes. In the wider Queensland University of Technology. The study community we seek to increase awareness of giving was funded by a grant from Goodman private wealth options to donors by delivering talks to community advisers. organisations and write articles for professional The study comprised personal in-depth interviews publications on effective ways to organise their giving. with a number of families, mostly from South East To find out more about our philanthropy services Queensland, with significant investment assets. please contact us. If you or a colleague have an Dr Kym Madden of the CPNS who headed the project involvement with a nonprofit organisation, consider said the study was long overdue and filled a gap in having one of our directors address your members on what was known about the advice wanted by better giving from the donor’s perspective. off Australian’s managing their wealth. While our endeavours in philanthropy are an integral We sponsored the study for two reasons. First we part of the Goodman business, don’t forget our catch wanted to find out more about the advice needs of phrase – It’s more than business, it’s personal. better off families which are an increasing segment of JOHN GOODMAN our clients. The study also filled a gap in Australian research on philanthropy from the view point of the CPNS Research affluent donor. To read the report, follow this link We’re using the findings of the study to compliment http://eprints.qut.edu.au/archive/00015426/ our already substantial experience in advising successful families. Several additional services to those we already provide will be introduced in the near future. who's rich? We often hear the comment that being a millionaire is The accepted definition of rich or high net worth common place these days. individual is those people with one million dollars in net You may wonder about whether that’s still true given investment assets under their control. This measure the sharp falls in asset prices that have occurred calculates all of the family’s assets excluding the value during the past twelve months. In our experience well of the family home, and then deducts the value of all off investors do relatively well in bad times. There are debts. still plenty with plenty. The graph below provides an estimate on the number Notwithstanding recent events, it is the case that of financially well off people in Australia. we, as a nation, are much richer than we used to be. Sustained growth in our economy, rising house prices, and the introduction of superannuation have all added significantly to the collective wealth of Australian individuals over the past 15 years. But how many are rich? And how do they invest their money? We have researched this subject. There is a surprisingly large number of well off Australians. At least 150,000 families have investment assets of one million dollars or more. One source of data on the rich is the 2008 Wealth Report - produced by Capgemini and Merrill Lynch. who's rich? continued from page two You will note that the rich have a minority of their assets invested in the ‘safe’ classes of cash and fixed interest, and a majority of their assets in the ‘risky’ shares, property and alternatives (hedge funds, private equity, other). The message here might be that the rich know they need to take on some risk to grow and maintain their wealth. In the end what constitutes being rich is subjective. Each person or family will have their own yardstick. Certainly, to many the level of net assets is an important measure. To others, the better measure might be having enough to fulfill what’s important to them. To our simple minds, is there anything wrong with the definition of just being healthy and happy. If you’d like to know more about the statistics of wealth, please contact us. JAMES GOODMAN after the turmoil The wise and reassuring Bruce Teal, Chairman of The authorities are carrying out these expansionary Australian Foundation Investment Company, recently policies as they rightly dread the thread of spiralling offered investors some sage advice: “Picture the deflation which is the stuff of depression. They portfolio you would like to own after the turmoil is knowingly risk inflation to avoid the even worse over. I’m sure it includes shares that were previously consequences of deflation. too expensive, in the companies that will continue to have wonderful businesses.” He went on to say Central bankers hope that when their economies start “now is the time to identify and start acquiring those growing again, they can apply the brakes gently at companies.” just the right time to avoid an inflationary blowout. What little precedent there is, tells us that this requires Wonderful advice but I would go further. To identify an extraordinary degree of finesse. A surge in inflation the right companies, we as investors need to picture after the current turmoil is a very credible scenario. the economic and business environment that will exist once the dust settles. Our investment committee’s thinking is that an environment of high inflation must be one possibility One issue, a very important one, is how the inflation when we are applying Bruce Teal’s wise advice. rate might change. In the recessionary environment that now exists in many countries around the world, Companies that can more easily pass on costs are and which may well exist in Australia shortly, prices likely to do relatively well in a time of high inflation. fall. Has any reader contemplated buying a new car, Borrowers do better than lenders. appliance, or house recently? We feel no urgency as Asset classes that have done well in past inflationary we expect them to be cheaper next month. environments include gold and real assets. Are there The response of central banks around the world has others? been to increase the supply of money to facilitate It is early days. But we are already asking ourselves, bank lending. The extent of this intervention is to what extent and when, should such assets be unprecedented. Governments too are attempting acquired. Your comments are welcome. to prime the pump with substantial government spending initiatives. JOHN GOODMAN 50 short cuts Would you tell your barber everything? Brisbane barber of 40 years, Ross Coco asked fifty of his clients for a snapshot of their lives and successes. 50 Short Cuts is the result. It contains moving and funny anecdotes about the lives of relatively unknown yet influential Brisbane people. This collection of illustrated and moving stories on local business entities who have influenced the fabric of Brisbane culture included Maggie Goodman, John and Meta’s daughter. While not a business identity, her poignant story added diversity and complemented those of others. As the cost of producing the book was generously met by Peter Flynn, founder of The Amanda Flynn Foundation, all of the proceeds go to Prostate Cancer Research. Goodman private wealth advisers were proud donors. In addition, we have elected to support this charity in lieu of sending Christmas cards this year. To find out more and make your purchase visit www.50shortcuts.com.au. christmas message We wish you and your loved ones a very happy Christmas and good health and prosperity in 2009. Thank you for your support during what has been a challenging year in 2008. As always, it is much appreciated. Our office will close at 12:30pm on Wednesday 24 December 2008 and reopen on Monday 5 January 2009 at 8:30am. If you need to contact us during this time you can call our office on 07 3221 0333. An answering service will take your call and ensure that your message gets through to your adviser. staff news Our paraplanner Kathryn Schimke, is currently studying the Graduate Diploma in Applied Finance and Investment. Kathryn was the recipient of the finsia award - 2007/2008 Queensland Subject Prize for Applied Portfolio Management. Well done Kathryn! Geraldine Simpson is taking a well deserved long break. After many years at Goodman, Geraldine has decided to take two months long service leave during December and January. We hope she has a relaxing break and look forward to her returning with renewed energy in the new year. is published by John Goodman & Company Ltd. In accordance with Section 947B of the Corporations Act we advise that John Goodman & Company Limited, ABN 95 009 938 514, AFS Licence No. 238363, its employees and/or their families may have an interest in the financial products referred to in this Newsletter and that they may hold financial products or receive brokerage from the managers. The information contained in this publication is given in good faith and has been derived from sources believed to be reliable and accurate. However, no warranty is given in relation thereto and no liability accepted by the firm, its employees or consultants for errors or omissions or for loss or damage suffered as a result of any person acting in reliance thereon. It contains general financial products advice only. In preparing this document, John Goodman & Company Limited have not taken into account the investment objectives, financial situation and particular needs (“Financial circumstances”) of any particular person. Accordingly, before acting on any advice contained in this document, you should assess whether the advice is appropriate in light of your own financial circumstances or contact your adviser.