David Alder concedes that there is little he or anyone else can do to prevent another global financial crisis.
But he can take steps to minimise his clients’ exposure and, indeed, Alder has implemented a methodical, structured plan in the event of another downturn.
“What makes me nervous is debt, and one of the lessons that can be taken from the credit crisis was how much of it was driven by greed,” he notes. “So before we invest or buy shares, we look at the level of debt the company is carrying because we know that should there be a macro event that rattles the industry, these companies [with lots of debt] are the ones that will be hardest hit.”
He notes that many retirees rely on property as their retirement stop gap, driven in part by a turbulent and ever-changing superannuation industry.
“There is a regulatory risk attached to the superannuation industry, as it keeps changing so much because it seems politicians can’t help themselves,” Alder says. “Retirees have been told they should be financially independent through their superannuation and negative gearing. Because of the super changes, many have become overly reliant on negative gearing, however, and that is a very big negative because the property market is overinflated and interest rates will not stay this low forever.
“Furthermore, [the Australian Prudential Regulation Authority] is tightening the lending conditions to investors. Here in Perth, we have seen people come in who have lost their job; they can’t pay their mortgage and they can’t pay the mortgage on their investment property and they’re in trouble.”
Alder, who obtained his own licence for his Alder and Partners Private Wealth Management in 2010, prefers to look further afield for investments for his clients.
“We’re putting more money in overseas shares,” he says. “We’re buying shares in good overseas companies now and we tend to follow the rule that you buy good quality assets and hold them.
“At the same time, we try to make sure our clients have portfolios that can be liquidated quickly if [necessary].”
To this end, Alder has a discretionary authority granted by the Australian Securities and Exchange Commission to act on behalf of his clients without seeking their express permission.
“This is really important in times when we need to act quickly, especially when selling,” he says.
Alder says while he does take commissions in a small number of cases, he also offers “a number of different fee options”.
“Our main approach is to charge a fee for service (a percentage of funds under advice) or on a fixed-dollar basis,” he says.
“This is agreed up front with the client and is either paid annually or monthly.”
Alder does receive handling fees on some capital raisings, however, he says 100 percent of this amount (net of GST) is donated to a range of registered charities. He also doesn’t charge transaction fees.
It’s a highly structured and equitable set-up that he thinks is crucial to his success.
“We represent a lot of high-net-worth clients and they value impartial advice,” he says. “If I call someone as a broker, for example, and say, ‘I think you should sell Commonwealth Bank shares and buy Wesfarmers’ and I stand to make $500 for doing so, how objective can my advice really be?”
Alder’s passion for rigorous planning advice isn’t hard to trace. He comes from a long line of successful investors.
His great-great-grandfather established JBWere in 1840, where his father worked until he retired in 2003.
No one would have been the least bit surprised if Alder had followed the family path into JBWere, but he wanted to go it alone.
“It’s completely owned by NAB now and I have worked as an adviser for a bank in the past and I didn’t like the model,” he says. “I have always wanted to start my own boutique firm, rather than selling in-house bank products and advice.”
Name of firm: Alder & Partners Private Wealth Management
Name of licensee: self-licensed
Time in the industry: 16 years; work experience at JBWere during university; 18 months at a big four bank in their graduate program and later as a financial adviser. Also spent 12 months paraplanning for boutique licensee in Geraldton and West Perth.
Academic qualifications: bachelor of commerce, diploma of financial planning, diploma of arts
Accreditations: Certified Financial Planner
Professional association memberships: Financial Planning Association
TOPICS: Alder & Partners Private Wealth Management, David Alder