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Investing in pets a life and death opportunity

Glenn Freeman  |  17 May 2018Text size  Decrease  Increase  |  
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As the outsize segment of Australia's population aged 65 years and over expands, it's creating investment opportunities in several areas, but here's one you might have missed.

The proportion of older people has been steadily increasing over the last century, for both men and women, and this trend is expected to continue, according to the Australian Bureau of Statistics' 2016 Census data.

Morningstar.com.au has covered this from several perspectives in recent years, a topic which ties into various homegrown ASX-listed success stories. Funeral industry specialist Invocare (ASX: IVC) ; hearing aid innovator Cochlear (ASX: COH) and healthcare companies Ramsay Healthcare (ASX: RHC) and Healthscope (ASX: HSO) - the latter set for a multi-billion dollar acquisition - are mentioned in this context.

Pet care is a more tangential, but no less compelling investment angle, explored with the help of Morningstar equity analysts Chris Kallos and now Daniel Ragonese, who took over Greencross (ASX: GXL) coverage last year.

Morningstar head of equities research, Peter Warnes, believes it's a theme worth paying attention too, having picked it up in his popular Your Money Weekly newsletter a few times. Warnes says: "We like the thematic of consumers spending more on their pets and Greencross's potential to grow its share in the vet and pet retailing markets".

A sad story

Financial planners are also recognising the increasing "humanising" of pets among their client base as something of an opportunity. This humanisation effect is something Morningstar's Ragonese has spoken about in his own reports about Greencross.

Omniwealth's head of estate planning, Danielle Radomyski, recently told us the sad story of a client without a will, who had been diagnosed with an aggressive form of cancer. "It was quite sudden. This client had no family in Australia, however she did have a special companion, a cat named Millie, for whom she wanted to ensure a comfortable life after she passed away.

"As my client’s death was imminent, we put in place a Power of Attorney so my client’s attorney could transfer funds to Millie’s new owner, so my client knew there were no financial barriers to Millie’s ongoing care," Radomyski says.

Pets are often considered an integral part of families, a bond that is stronger still among older Australians.

"It’s easy to overlook providing for our pets in our Wills…we all presume we will outlive our pets, but what if you don’t?
"Animals are property, so a will maker gives them away rather than appoints a guardian for them."

Pet pocket money

To ensure pets are well cared-for in the event their owner passes away, people will often nominate the replacement carers in a will.

"But the people you appoint may not be able to take the pet, so always include discretion of the trustee to give the pet to an appropriate person or an organisation," says Radomyski. In the latter example, such organisations may include the likes of animal shelters with "pet legacy programmes" such as the Animal Welfare League or RSPCA.

As she also explains, it's not possible to leave money to a pet in your Will, "so you must leave money to cover the pet’s expenses to the person that receives your pets - the carer".
Options here include the following:

  1. Giving a sum of money to a friend or relative with a non-binding request that they look after your pet;
  2. Leave the required specific sum money to a charity that can look after animals;
  3. Establish a trust fund with a sum of money to be invested and used over time for your pet’s expenses; or
  4. Give an annual sum - CPI indexed to keep the amount current - payable to the carer for each year the pet lives after your death.

The last point is useful because "you don't know how many pets will survive you, or their life expectancy, payable to the carer for each year that each of your pets live after your death", Radomyski says.

"The key is preparing a thorough pet budget of how much to leave to the carer. If the carer changes, the payee of the annuity/ gift also changes."

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Glenn Freeman is senior editor, Morningstar Australia.

© 2018 Morningstar, Inc. All rights reserved. Neither Morningstar, its affiliates, nor the content providers guarantee the data or content contained herein to be accurate, complete or timely nor will they have any liability for its use or distribution. This information is to be used for personal, non-commercial purposes only. No reproduction is permitted without the prior written consent of Morningstar. Any general advice or 'class service' have been prepared by Morningstar Australasia Pty Ltd (ABN: 95 090 665 544, AFSL: 240892), or its Authorised Representatives, and/or Morningstar Research Ltd, subsidiaries of Morningstar, Inc, without reference to your objectives, financial situation or needs. Please refer to our Financial Services Guide (FSG) for more information at www.morningstar.com.au/s/fsg.pdf. Our publications, ratings and products should be viewed as an additional investment resource, not as your sole source of information. Past performance does not necessarily indicate a financial product's future performance. To obtain advice tailored to your situation, contact a licensed financial adviser. Some material is copyright and published under licence from ASX Operations Pty Ltd ACN 004 523 782 ("ASXO"). The article is current as at date of publication.

is senior editor for Morningstar Australia

© 2020 Morningstar, Inc. All rights reserved. Neither Morningstar, its affiliates, nor the content providers guarantee the data or content contained herein to be accurate, complete or timely nor will they have any liability for its use or distribution. This information is to be used for personal, non-commercial purposes only. No reproduction is permitted without the prior written consent of Morningstar. Any general advice or 'class service' have been prepared by Morningstar Australasia Pty Ltd (ABN: 95 090 665 544, AFSL: 240892), or its Authorised Representatives, and/or Morningstar Research Ltd, subsidiaries of Morningstar, Inc, without reference to your objectives, financial situation or needs. Please refer to our Financial Services Guide (FSG) for more information at www.morningstar.com.au/s/fsg.pdf. Our publications, ratings and products should be viewed as an additional investment resource, not as your sole source of information. Past performance does not necessarily indicate a financial product's future performance. To obtain advice tailored to your situation, contact a licensed financial adviser. Some material is copyright and published under licence from ASX Operations Pty Ltd ACN 004 523 782. The article is current as at date of publication.

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