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Driving Profit From Debt – The Tides are Turning in 2007

Are you advising your clients’ on their biggest asset? Someone is!

Steve CrawfordMLC Alliances - Victoria

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The Great Aussie Dream – What Happened in 2006?

-6%

-4%

-2%

0%

2%

4%

6%

8%

10%

12%

Change in medianhouse price

Increase in medianfamily income

Change in home loanaffordability

Increase in the numberof loans created

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Driving Profit From DebtThe Tides are Turning in 2007

The Tides Are Turning – By 2008……..

Opportunities in 2007 – Strategies for the Pre Retiree

Opportunities in 2007 – Strategies for the Accumulator

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Driving Profit From DebtThe Tides are Turning in 2007

The Tides Are Turning – By 2008……..

Opportunities in 2007 – Strategies for the Pre Retiree

Opportunities in 2007 – Strategies for the Accumulator

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The Tides Are Turning - By 2008……

ANZ14.1% Westpac

15.6%

NAB16.3%

St George9.0%

CBA21.6%

Others23.4%

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The Tides Are Turning - By 2008……

0

10

20

30

40

50

60

2003 2004 2005 2006 20070

500

1000

1500

2000

2500

$mil per week

Referrals per week?

7

-40%

-30%

-20%

-10%

0%

10%

20%

30%

40%

2003 2004 2005 2006 2007

Investments Insurance

The Tides Are Turning - By 2008……

?

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The Tides Are Turning - By 2008……

13%

22%

31%

45%

2000 2002 2004 2006

Market Share growth of Brokers

Concentration of Broker Aggregators

Other (10%)

Top 10 Aggregators

(90%)

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Driving Profit From DebtThe Tides are Turning in 2007

The Tides Are Turning – By 2008……..

Opportunities in 2007 – Strategies for the Pre Retiree

Opportunities in 2007 – Strategies for the Accumulator

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Accelerate your salary sacrifice strategy by converting your loan into an interest only facility.

Strategies for 2007 – Pre Retirees

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Accelerate your salary sacrifice strategy by converting your loan into an interest only facility.

Strategies for 2007 – Pre Retirees

Unit trust and super invested in Australian shares

Investment return is 8.5% p.a. (split 3% income and 5.5% growth)

Franking level on income is 75%

Interest on instalment margin loan is 8.25% p.a.

10 year comparison

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Strategies for 2007 – Pre Retirees

$0

$50,000

$100,000

$150,000

$200,000

Super -Undeducted

Salary Sacrifice Geared to 50% Loan then UnitTrust

After Super Changes

After Super Changes, using IO Strategy

$35,643

$54,335 $37,25

1$37,39

6

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Strategies for 2007 – Pre Retirees

$0

$50,000

$100,000

$150,000

$200,000

Super -Undeducted

Salary Sacrifice Geared to 50% Loan then UnitTrust

After Super Changes

After Super Changes, using IO Strategy

$35,643

$54,335 $37,25

1$37,39

6

$50,113

$48,949

$35,643

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Strategies for 2007 – Pre Retirees

$0

$50,000

$100,000

$150,000

$200,000

Super -Undeducted

Salary Sacrifice Geared to 50% Loan then UnitTrust

After Super Changes

After Super Changes, using IO Strategy

$186,061

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Driving Profit From DebtThe Tides are Turning in 2007

The Tides Are Turning – By 2008……..

Opportunities in 2007 – Strategies for the Pre Retiree

Opportunities in 2007 – Strategies for the Accumulator

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Maximise your future investment and cash-flow options by better structuring your owner occupied home loan.

Strategies for 2007 – Accumulators

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Strategies for 2007 – Accumulators

Home Loan

Year 1

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Strategies for 2007 – Accumulators

Home Loan

Year 8

Actual loan is reduced

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Strategies for 2007 – Accumulators

Home Loan

Year 8

Actual loan is reduced

Redrawn for purchase

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Strategies for 2007 – Accumulators

Investment

Loan

Year 8

Actual loan is reduced

Redrawn for purchase

Only partially deductible

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Strategies for 2007 – Accumulators

Home Loan

Year 1

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Strategies for 2007 – Accumulators

Home Loan

Year 8

Actual loan is not reduced

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Strategies for 2007 – Accumulators

Investment

Loan

Year 8

Actual loan is not reduced

Purchase done with cash

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Strategies for 2007 – Accumulators

Investment

Loan

Year 8

Actual loan is not reduced

Purchase done with cash

Original loan fully deductible

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Solution – NAB / MLC Customised Solutions

Take advantage the transitional cap by investing the sale of your property sooner.

Tailored Solutions

Credit Approved

Short Term Finance

Working with Financial Planners

NAB Business Bank

Adviser Business Lending

Portfolio Package

MLC Mortgage Solutions

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Provide a simple, non-underwritten insurance cover designed specifically to cover your customers home loan responsibilities.

Strategies for 2007 – Accumulators – Debt Protection

Introducing MLC EasyCover

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Under-Insurance – A significant problem

Generation X’ers make up a large portion of the “At Risk Population”

70% of 33 – 44 year olds with a household income greater than $100K have a Home Loan, but only 29% have life insurance*1

60% of Australian families with dependants will run out of money within 12 months if the main breadwinner dies*2

*1 – Roy Morgan Research, FAMIS database Dec 05*2 – IFSA Research by Rice Walker Actuaries & TNS Australia 2005 *4 - IFSA report Cost of Under-insurance 2005

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Critical Illness*

Death*

Involuntary Unemployment*

Illness* / Accidental Injury*

MLC Easy Cover – Solution to Debt Protection

Automatic Acceptance*

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Client Retention – Keeping Them on the Books

05

101520253035404550

1 2 3 4

Probability %

Financial services held

Source: National Customer Convergence in Retail Financial Services (Insurance Study)

50%

10%5.5%

1%

Meeting more customer needs reduces the probability of customer defection.

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Conclusion – Will Your Business Expand in 2007…..?

The Tides are Turning in 2007 – Will you be affected?

Opportunities Do Exist – Take advantage of this in 2007

Practical Implementation – Effective Solutions

The Portfolio Package The NAB Business Bank MLC Mortgage Solutions Easy Cover