Making cash work for you

Christine St Anne  |  12/12/2012Text size  Decrease  Increase  |  
Christine St Anne: With another rate cut, term deposits are certainly losing their attractiveness, but are there alternatives. Today I am joined by Wealth Enhancers' Sarah Riegelhuth to look at how to make cash work harder for you. Sarah welcome.

Sarah Riegelhuth: Thanks Christine. Thanks for having me on.

St Anne: With rates falling, can people look at getting better returns from other institutions beside the major banks?|

Riegelhuth: Actually, most of the major banks are roughly pegged pretty equivalently across the board, that’s certainly a good time to be having a look outside of that. We've got institutions like ME Bank, UBank, Teachers Mutual Heritage Bank all offering quite competitive rates at different terms between three, six months, 12 months. So, it's definitely worth having a look and see what you can find out there, because there are some more competitive rates available.

St Anne: Can people actually renegotiate a better rate with their existing bank?

Riegelhuth: That's a really good point and they can. I've actually had a client recently who had a large term deposit with one of the major institutions and she was about to move it out we found her a rate that was more competitive. She went to her bank and explained what was happening obviously to do the paper work, which can be a bit of a burden, and the bank actually decided they would – they will be happy to match it for us.

So, it's definitely worth having a chat. If you found something that's more competitive, you're about to move it, have a chat with your current bank, they may match it. Saves you a bit of work this time around, you might not get it next time, but it's certainly worth a try.

St Anne: Sarah, a lot of investors have a number of term deposits. Is there an admin service that can manage this portfolio?

Riegelhuth: It's probably one of the downsides with term deposit season, having all of that admin burden every single time and if you're going to move it to another institution, it can be quite a lot of work.

Fixed Income Group, FIG, commonly known as FIG actually have a service called the rolling term deposit service, which is a great service. It doesn't cost anything for investors. Once you've set up – set it a lot with them, they'll actually manage your term deposits ongoing. So, you'll have access to all of the term deposits in the market, but you get to actually when your turn comes up, tell them well, I want to move to that one or I want to move to that one and I'll do it for you that's a really fantastic product that's available out there for people.

St Anne: Sarah, should investors be looking at more longer term, term deposits?
Riegelhuth: I think it's a good idea to have a look at some of the longer rates, obviously with anything when you're going for a longer term, there is that risk that potentially rates are going to go up and you're locked into that longer term, but that's just a risk that you have to consider, reality is interest rates are probably not going in that direction. So, I think it's safe to say that if you can find some good longer term rates and you're comfortable with it, you don't need the money, you're not going to face the penalty if you are pulling out earlier than. That could be quite a good option, really have to look at your individual circumstances rate.

St Anne: Sarah, are there any risks that people need to be aware of, given some of the higher attractive rates that could be soon be on offer?

Riegelhuth: I think it's important that people make sure that they do understand what they are investing in that it is genuinely a cash product with an interest rate, so that would have to be within ADI, Australian Deposit Taking Institution.

Now, we've got the government guarantee of  $250,000, so your risk is relatively low and amounts below $250,000. And if you are looking at another institution that you haven't heard of or another product that you are not too sure about, make sure you understand fully what you are investing in. If you don't understand, ask for more information, take professional advice, keep digging until you are really comfortable with what you are investing in and that it is a cash product or whatever it's going to be, and then make the decision to invest.

But we're definitely saying a not just within cash products, but in all sorts of investments in the past. It's generally when people don't understand what they are investing in and they sometimes get burnt because they didn't realise the risk they were taking on so. Be really careful, make sure you understand, it's fully you know what's going on and you should be fine.  

Video Archive...

Earnings season FY17 mixed bag so far
18/08/2017  Aside from a few high-profile earnings guidance misses, large-cap stocks are doing okay as FY17 reporting season passes halfway, says AMP chief economist Shane Oliver.
Rio Tinto posts mixed result for 1H17
10/08/2017  An interim result of US$3.9 billion in net profits after tax for one of the world's largest mining companies was positive but slightly weaker than expected, even alongside a record dividend, explains Morningstar's Mat Hodge.
Kerr Neilson on why global investment exposure is key
07/08/2017  There are two types of investors, regardless of market noise, imputation credits, diversification approaches and market indices, says the managing director of Platinum Asset Management.
Finding fixed income opportunities in new paradigm
02/08/2017  Slowing economic growth in the US and parts of Europe emphasises the need to carefully select credit opportunities, says Vincent Reinhart, chief economist, Standish Mellon Asset Management.
Exclusive: An interview with Westpac CEO, Brian Hartzer - Part 3
20/07/2017  Insights on Australia's housing market, China's effect on domestic banks, and cyber-security readiness, in the final instalment of Brian Hartzer's interview with Morningstar's David Ellis.
Telstra won't be blown away by headwinds
17/07/2017  While it faces what Morningstar equity analyst Brian Han describes as a whirlwind of negatives, he suggests investors shouldn’t hang up on Telstra.
Exclusive: An interview with Westpac CEO, Brian Hartzer - Part 2
13/07/2017  Westpac CEO Brian Hartzer joins Morningstar banking analyst David Ellis to discuss digital disruption, regulatory change and Australian banks' social license.
The home-truths of investing
12/07/2017  Look for companies that sit outside the cycle; heed the lessons of history; and remember the power of compounding, says Bennelong's Neale Goldston-Morris.
Exclusive: An interview with Westpac CEO, Brian Hartzer - Part 1
06/07/2017  Brian Hartzer, CEO, Westpac joins Morningstar senior analyst David Ellis to discuss his role leading Australia's oldest bank, how Westpac can continue to grow value, and its commitment to sustainability.
Self-managed super is not Do-it-yourself
03/07/2017  There are a few common pitfalls in running a self-managed super fund that mean trustees shouldn't go it alone entirely, says BT Financial Group's head of financial literacy, Bryan Ashenden.
Investing to protect on the downside
30/06/2017  There are investment strategies you can adopt to mitigate volatility-linked fear and uncertainty in markets, explains Roy Maslen, chief investment officer – Australian equities, AllianceBernstein.
Don’t overdo benchmark consideration
28/06/2017  Being benchmark agnostic is the most effective approach to fixed income investing, according to Anujeet Sareen, portfolio manager, Brandywine Global.
Factor-based investing using ETFs
26/06/2017  Investors should consider style-exposures--such as value, defensive or yield-- they would like in their portfolios, explains Jonathan Shead, head of portfolio strategists – Asia Pacific, State Street Global Advisors
Volatility plays to active manager strengths
--  The climate of political volatility in the US holds important implications for investors and the funds they invest in, particularly around Donald Trump's ability to pass legislation through Congress, says Pimco's Libby Cantrill.
Is the FTSE 100 Facing Another Market Crash?
16/06/2017  Ten years on from the pre-crisis FTSE 100 high, Morningstar UK's Emma Wall examines how UK stocks have fared
How to guard against retirement threats
16/06/2017  As retirement approaches, even the best-laid plans can go awry, as Tim Steffen tells Christine Benz, Morningstar US.
PIMCO Global Credit Fund
07/06/2017  The PIMCO Global Credit strategy receives a Morningstar Analyst Rating of Silver due to its sizeable and highly capable credit research team.
PIMCO Income Fund
07/06/2017  Morningstar's Tim Wong looks at the strengths and competitive advantages of this Silver-rated strategy.
3 pockets of opportunity in fixed income
07/06/2017  The head of PIMCO Australia portfolio management explains his views on active management in fixed income and outlines where he sees most value in this space.
Trump administration biggest macro threat for investors
05/06/2017  Even as European political volatility subsides, the US Government remains a considerable threat to financial markets, says Colleen Barbeau, director of equity portfolio management, Franklin Templeton.