Demand from financial planners sparks development of new adviser portal

Unexpected demand from financial planners to help SMSF clients find income-producing investments has led boutique fund manager Balmain Private to start work on an adviser portal for its online mortgage investment platform.

Balmain has to date originated, credit reviewed and funded in advance about $30 million of mortgages, predominantly over over commercial properties, that SMSF trustees access via a range of sub-trusts, each of which contains a single, specific loan diversified by location, borrower, asset type, risk and reward. Trustees invest a minimum of $50,000 in a National Australia Bank cash fund, which gives them the right to review and analyse investment opportunities before committing funds to any specific sub-trust.The minimum investment in each sub trust is $10,000. This “fractional ownership” first-mortgage investment model, based on a proprietary transaction and reporting platform, has sparked considerable interest among financial planners who are actively seeking income-producing investment opportunities for the SMSFs they advise, says Steve Tunley, chief executive officer of Balmain Private. Tunley says the average commitment to date is $100,000 per SMSF, with a largest single investment of about $700,000. “We built this business to go direct to the public, but we have had an extraordinary response from mid-tier accounting firms and high end, independent planning firms,” he says. “So we are building the adviser portal.”


Part of the project is to ensure the Balmain platform integrates with existing financial planning software to enable planners to produce consolidated client reports. The portal will allow planners to transact on behalf of clients if they want; and it will report back to planners on any transactions undertaken directly by clients themselves. Tunley says that investors are highly engaged with the platform because it gives them “control, clarity as to risk and reward, it’s paperless and online 24/7?. “In other words – what they want, how they want it, when they want it,” he says. “We have conversations with our clients from Monday to Friday, between 8am and 6pm, but they typically transact after 6pm and on weekends. “And we see a peak on day two or three of a long weekend.” Tunley says direct investment in first mortgages is a way to diversify income-producing assets in an SMSF portfolio. He says that so far Balmain has created 24 sub-trusts – each holding a single first mortgage over a specific property – and of those 11 have completed. Of the 11, nine exceeded the target rate of return, and two came in right on target, producing returns ranging from 6.05 per cent a year to 9.23 per cent a year – an average of 7.16 per cent net, across all completed sub-trusts.


John Kennedy, principal of the Brisbane based advice from KR Securities, says there’s no shortage of income-producing investment opportunities for SMSFs, but advisers need to be cautious about which they recommend. “Everyone is out to make a buck against the poor old SMSF client, so we are quite guarded,” Kennedy says. “For us, anyway, we do not want to be too sexy. I think the short answer is, there are a lot of alternatives coming through, but you have got to be very careful. They are not always all they’re cracked up to be, and the risks aren’t always being fully explained. “Anything that’s got a number in front of it that’s higher than a term deposit, there’s plenty of idiots going for it.” Kennedy says first mortgages secured against high-quality commercial properties are worth considering as part of the mix. A simple and transparent mechanism for investing in such assets is a useful service. “When we first went into this, it was a bit sticky for us, because we like to do things for the client,” Kennedy says. “Once they’ve agreed and they get the concept, then they are happy for us to look for mortgages that suit their risk profile.” Transacting can be cumbersome if can be done only by the client, Kennedy says. KR Securities “made a list of things” that it believed could be improved, including a facility to enable advisers to be more directly involved in transactions on behalf of clients, which has led to the announced development of the adviser portal.

About The Author

Simon Hoyle has been a finance journalist for more than 25 years – a finance journalist because the football and motorsports rounds at The Age were filled when he was awarded a cadetship. He worked on BRW and Personal Investment magazines, and was part of the team that launched Money Management. Hoyle spent 11 years at the Australian Financial Review before moving on to be an investment writer for The Sydney Morning Herald and The Australian. He was appointed editor of Professional Planner in November 2007.

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