The Experts

Jamie McGeachie
+ About Jamie McGeachie

Jamie McGeachie has utilised 20+ years’ experience in business as CEO of the McGeachie Group and founded several successful businesses in the retail and finance industries.

McGeachie established Investors Central in 2010, one of the original peer to peer lenders. Its lending arm Finance One has over 800 Finance Brokers across Australia promoting its range of products. Investors rank first before ordinary shareholders and there are no other financiers in the loan book. It is a unique business model where the Investors are at the top of the hierarchy, ranking before ordinary shareholders.

The Investors Central business model works in conjunction with Finance One providing secured motor vehicle loans. Investors Central has achieved steady growth and supplied its investor group with solid returns through a fixed interest investment.

Innovating products that have contributed to competition in the finance and retail industries has been a result of McGeachie applying thought to the changing needs of both investors and consumers over the years.

McGeachie has a keen sense for identifying opportunities to diversify and adapt businesses for relevance and growth in an ever-evolving marketplace. He has established highly sought after investment and credit products through an interconnected business venture found in Investors Central and Finance One.

McGeachie displays particularly strong skills in anticipating future trends by building businesses that promote integrity, with personalised and proactive management of clients as the goal.

The Investors Central-Finance One business collaboration is the financial practice of peer to peer lending which has created a niche market of investors.

Alternative investing: Is it right for you?

Friday, October 07, 2016

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By Jamie McGeachie

When most people think about investing, traditional methods such as stocks and bonds usually come to mind. In the past, these have been the main options available to everyday investors.

While diversification is possible through these investments, the drawback is that their overall performance is linked to the global economy. That means they tend to rise or fall in tandem, and there’s little protection against losses in the event of a global economic crisis.

Alternative investments

This has led to investors searching for other options with returns that aren’t correlated with stocks and bonds to enhance portfolio diversity and provide protection from traditional market fluctuations. These options are classified as alternative investments.

The term ‘alternative investments’ applies to a broad range of investment vehicles. Some examples include hedge funds, currency, private equity, venture capital, precious metals, fine art, wine, coins, collectables, oil and financial derivatives.

Traditionally, many of these alternatives were only available to institutions or high-net-worth individuals. However, with increasing investor appetite for alternative investment methods – particularly following the 2008 global financial crisis – avenues for alternative investments began to open up. These included various retail managed funds that pooled investor money to enter the above markets, and peer-to-peer lending.

In Australia, Investors Central meets this need by offering investors the opportunity to purchase a product called preference shares.

Preference shares

Redeemable preference shares are debt instruments where the company pays the investor monthly interest in arrears on the amount invested. The invested money is used to fund motor vehicle loans company Finance One, which in turn, lends the money to individuals and small business owners seeking to purchase a car.

Because these kind of loans attract relatively high interest rates, the returns to investors are generally better than that offered by banks. The invested funds are spread out across many loans, helping to minimise the risk of loss from defaults. With a minimum entry price of $25,000, this kind of alternative investment is firmly within reach of individual investors.

Pros and pitfalls

Alternative investments come with their own set of unique risks and advantages. Their main benefit is that they offer a low correlation with stocks and bonds, so they tend to perform best at times when the world markets are struggling.

As part of a balanced investment portfolio, they can increase long-term returns, especially during repeated periods of financial uncertainty. Gold, for example, has had an almost zero correlation with stocks and bonds during the past 40 years. Alternative investments may also result in lower transaction costs than standard ones, as they tend to be turned over less frequently.

On the flip side, some alternative investments may be less liquid than traditional stocks and bonds. That means there’s a smaller market in which to sell them. The values of commodities like oil, crops, or livestock can be volatile and affected by aspects such as global supply and natural disasters. It can be difficult to gauge the likely performance or current value of rare items, such as coins or stamps, because there’s a limited history of previous trading. During times of strength in the global economy, alternatives are often out-performed by stocks and bonds.

Bottom line

For all these reasons, it’s vital that you do your homework before deciding which alternative investment is right for you. Ideally, you want to focus on investments that have the greatest level of negative correlation to your existing portfolio.

Also factor in your investment timeframe i.e. Are you looking for long-term, or short-term returns? Assess your tolerance for risk, and bear that in mind when considering more volatile investment vehicles. If you’re looking to buy into a managed fund, ensure you thoroughly investigate the fund manager and the performance of the fund itself. Also make sure you’re fully aware of any management fees that may apply. It’s highly advisable that you engage the services of an experienced financial adviser who can assess the suitability of your chosen alternative investments in relation to your current portfolio.

There’s an ever-growing range of alternative investment options available to ordinary investors, and their strategic use within your investment portfolio can provide you with both a healthy long-term return and protection against a bear market. But remember to speak to your financial adviser about whether alternative investments are right for you.

This report contains general financial product advice which does not take your personal objectives, circumstances or needs into account. You should consider these factors before you make an investment decision and if you are unsure you should seek professional advice.


The growing popularity of peer-to-peer lending

Thursday, September 01, 2016

By Jamie McGeachie

Years ago, the financial services offered to people who wanted to profit from their savings was very cut and dry. You would either invest your money in the stock exchange, property, or in a term deposit account, to gain interest on your principal investment. Now, investors have the opportunity to expand their portfolio and commit their funds to newer, and arguably more exciting, investment options.

Peer-to-peer lending (P2P)

This disruption to traditional financial services is due to the growing popularity of peer-to-peer lending (P2P) in the market. This lending process is a method of debt financing that allows individuals to borrow and lend money without the use of an official financial institution as an intermediary. It’s lending made simple, without the mountains of paperwork and hoops to jump through.

Now, the banking community is taking notice of these emerging competitors in the lending sphere. As P2P lending moves towards bigger loan offerings, rather than offering small-dollar-amount personal loans, customer bases appear to be decreasing in the big banks. As more borrowers start to outsource their loan options from the big banks, the user-friendly and efficient lending and investing experience of P2P lending could emerge as the preferred option.

But, the lending options coming out of the woodwork are not just limited to P2P lenders. In fact, the new breed of alternative investments known as financial technology, or fintech start-ups, have easy and ready to use options for investors looking for better returns.  

Never in a million years would you think that Woolworths would give the banks a run for their money, but the loans sphere has succumbed to evolution, and your grocer is now offering credit cards, personal loans, and insurance options.

According to the Australian Prudential Regulation Authority (APRA), “many fintech developments will not fall directly within APRA’s regulatory perimeter, and hence, will not need approvals or oversight from APRA.” This creates a new market for companies looking for start-up funds without the same regulations as the banks.

The flipside

Banks and the stock market are, however, not entirely redundant. With the interest rate for a one-year term deposit sitting at 3.00% p.a. with Commonwealth and Westpac, the stability of these institutions seems to be reliable for investors.

According to Canstar, the banks are protecting their margins on their existing loans and utilising some of the retained margin to offer a more attractive term deposit rate – hence attracting new business.

But, will the banks be able to keep a strong hold on business when P2P lenders like Investors Central can offer a return of 9% p.a. to 16% p.a. on your investment?

These innovations in financial services have, however, caught the attention of the Federal Government, with Malcolm Turnbull launching the On Market Bookbuilds’ website and app last year. It aims to provide better access to initial public offerings and share placements for a wider group of investors, including those who normally don’t get a look-in.

This democratisation of finance is expected to continue, but at present, it seems that peer-to-peer lending is here to stay.

The advancement in investment options has seen a move away from banks, as the business model of investing in banks can offer a low return for investors, while borrowers are faced with a high interest rate. This increases their margins and profits while the customers seem to luck out.

Technology has also been at the forefront in establishing a P2P lending branch. The idea of easily tracking an investment online in has increased investor interest.  

This niche trend has turned peers from individuals, to institutions. And for the more hands-on clients, there are options to be as involved in the investment process as they would like.

So, will P2P lending’s most significant impact be not only how it changes the process of lending, but how it changes the banking industry?

Disclaimer: This is a sponsored article by Investors Central.

This report contains general financial product advice which does not take your personal objectives, circumstances or needs into account. You should consider these factors before you make an investment decision and if you are unsure you should seek professional advice.


Fuelled demand for high-yielding fixed interest securities

Wednesday, August 17, 2016

By Jamie McGeachie

Fixed interest security issuers in Australia are eyeing perfect conditions for continued growth, following a further cut to the official cash rate this month to 1.50%.

Record low interest rates and increased instability in global economies are fuelling demand for high-yielding fixed interest securities.

May’s interest rate cut to 1.75% saw inflationary pressures rebound modestly, with house prices and credit appetite lifting, but not enough. The June-quarter CPI report recorded levels softening to their lowest since 1998.

Coupled with ongoing global financial market volatility and the surprise vote by Britain to leave the European Union, investors are feeling nervous.

On the upside, this environment has created the perfect melting pot for Australian fixed interest security issuers. They are benefiting from a combination of deposit holders exiting safe, secure return sectors like banks and typically aggressive investors searching for more security on the back of global instability.

According to ANZ's head of Australian Economics, Felicity Emmett, “Confidence has been buffeted by uncertainty surrounding the domestic political outlook, as well as concerns over global growth”.

With low wages growth and weak commodity prices set to continue and a subdued inflation outlook, most analysts forecast our official cash rate will remain low for some time.

As mentioned, a continued low rates market amidst a period of global unrest is a good sign for fixed interest security issuers, who, according to a market research report by IBIS world, will continue to reap the benefits through the remainder of 2016 and into 2017.

Their report on Australian Fixed Interest Security issuers shows Australia's growing number of high-net-worth individuals has increased the need for investment services, which is also fuelling revenue growth.

Industry revenue is forecast to increase at an annualised 5.2% over the five years through to 2016, with further cuts to the official cash rate spurring on the hunt for high-yielding, low-risk investments.

While the move by the Reserve Bank to cut rates again in August has been partly attributed to a need to maintain downward pressure on the Australian dollar, Reserve Bank Governor Glenn Stevens acknowledged last week that we are unlikely to see this trend reverse in the near future.

"We have interest rates at levels lower than any of us have seen before in our lifetimes.

"Moreover, the 'return to normal' at the global level looks like being a very, very slow process. And normal is a different place now," he said.

Obviously, Australia’s record low rates in a low rate global market have helped drive growth in an industry that provides independently high rates on fixed-term cash investments.

The August cut to a record low 1.5% however has further fuelled the demand for high-yield investment options, despite the big banks maintaining their fixed term deposit rates at around 3%, according to Canstar Cannex.

With fixed-interest security issuers like Investors Central offering fixed return rates from 9%-16% per annum – paid monthly – the banks are struggling to compete.

That makes fixed interest securities a very attractive proposition, not just for investors, but for advisors seeking to help their clients increase their portfolios exposure to higher yielding products.

While the big banks offer certainty on cash investments through the Federal Government’s guarantee on deposits up to $250,000, traditional term deposits are struggling to deliver returns that outpace inflation.

Any wonder market research is showing continued growth in the sector where investors are seeking alternative fixed cash investment options in pursuit of better yield as part of their diversified portfolios.

DisclaimerThis report contains general financial product advice which does not take your personal objectives, circumstances or needs into account. You should consider these factors before you make an investment decision and if you are unsure you should seek professional advice.