Common Questions

Is an investment strategy important?

The performance of your investments, and the construction of an investment portfolio requires careful consideration and a good understanding of your individual requirements and circumstances. As no two people are exactly the same, it is important that we help you to construct an investment strategy that is tailored to your own specific goals and requirements.

Are all Advisers the same?

Just like you, our Advisers are individuals. They have different personalities, and a range of qualifications, specialisations and experience that will be suited to different clients. We seek to ensure that new Patersons clients’ are not only matched to suitable investments, but that they are also matched to an Adviser that is appropriate to them.

Why do I need advice? Can’t I just manage my investments myself?

For some people, utilising an online, discount service will be an answer. However, like doing tax returns, or maintaining your car, there are times when you need to call in a specialist. Building and maintaining a personalised investment and financial strategy has many different elements to take into account. The best way to ensure that you are maximising your returns is to partner with a financial professional. 

You should also ask yourself the question: “Do I really have the time to manage my portfolio?”

What are franking credits?

In Australia, when a company makes a profit, pays tax, and rewards its shareholders with a dividend, they can pass on the benefits of the tax the company has already paid to shareholders, in the form or franking credits. If the dividend you receive has come from profits that have tax paid on them in their entirety, then the dividend is said to be “fully franked”. At the current Australian Corporate Tax rate of 30%, this means that if you receive a $200 dividend payment that is fully franked, this includes a useable tax credit of 30%, or $60, over and above the cash you have received.

What does wide-moat mean?

To help identify companies with competitive advantages, Morningstar developed the Economic Moat Rating. Wide-moat companies possess structural competitive advantages that are expected to allow them to earn above-average returns on capital over a sustained period of 20-plus years, and which conversely prevent those returns from quickly eroding. Without a moat, profits are more susceptible to the effects of competition.  

Morningstar’s detailed methodology identifies the underlying source of an economic moat as one, or a combination, of the following five specific categories: intangible assets; cost advantage; switching costs; network effect; and efficient scale.

Only 243 companies worldwide have a wide moat rating, indicating these companies can sustain their excess returns for the long term.

In Australia, there are only 10 companies classified as having a wide moat. In the US, just 142 have the classification. 

Source: Morningstar Australasia Pty. Ltd. http://www.morningstar.com.au/etfs/article/moat-ivated-investing/8174

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