We put investors first

When we puts clients interest first, our business succeeds as only long term happy clients can build an enduring and profitable firm.

WHY IT MATTERS: Financial services companies can be guilty promoting their own funds or SMA solutions over better suited or lower cost alternatives. They can indavertantly allow conflicts of interest to subvert their decision making.

Snowgum Financial Services does not have in-house funds or a restrictive 'approved products list' which funnels funds to an aligned business. We look for external managers with ownership interests in their investment decisions and clear, consistent and repeatable investment philosophy at a low or fair cost structure.

We are independent-minded

As Howard Marks said "to get a different outcome to the market, you must must do something different to the market".

"Diversification protects wealth, concentration grows it" - Warren Buffet. Many portfolios are over-diversified. Balancing concentrated positions, into attractive busiunesses, within a risk management framework, can deliver differentiated outcomes over the long term. In particular, we allow positions to concentrate over time should performance deliver this outcome, including in direct international equity positions, something unique in Australian wealth management.

We incorporate private equity and alternate assets where liquidity profile affords.

WHY IT MATTERS: Herding is commonplace in investing. It generally delivers average results for investors in normal times, as well as being destructive during booms and bust cycles. Meeting your investment goals may often mean acting independently from the herd, which introduces agency risk to our business, something Snowgum Financial Services is willing to shoulder.

We invest for the long term

Taking a patient, long-term view helps people ride out the market’s ups and downs and take advantage of opportunities when they arise.

WHY IT MATTERS: Investors often overemphasize the importance of recent events, rushing into hot stocks when they’re overpriced and fleeing from market downturns. Investors can fight this common error by focusing on long term lessons and long-term performance.  Our investment decisions concentrate on fundamental, long-term value drivers, selecting investments or asset managers we believe we can and should hold for the long haul, then measuring how long we hold them in practice. This may mean tactically underweighting overvalued asset classes to allow excess capital to move into underpriced asset classes.

We are value and investment thematic investors

Anchoring decisions to an investment’s fair value — or what it’s really worth — can lead to greater potential for returns. Doing this within industries that have positive macro-drivers further enhances investment outcomes.

WHY IT MATTERS: Much of the market’s daily volatility is just meaningless noise. Researchers have found that in the long term, the underlying value of a company, relative to its price, drives performance. This is particularly the case for a handful of businesses which drive a disproportionate amount of an index's return.

Snowgum Financial Services takes a view of longer term intrinsic value, to help minimize the cognitive impact of short-term fads and noise. We may use concentrated direct investment positions or external managers where we don't have capacity to assess underlying asset class positions ourselves. We rely on external, independant research houses to support these assessments.

Finally, we prefer to take overweight positions in long term opportunistic industries. Key themes of note have been the rise of A.I., cloud computing, the convergence of technology and health sciences, healthier living, ageing populations and renewable energy.

We take a fundamental approach

Research is behind each decision we make, and we understand what drives each investment we select.

WHY IT MATTERS: Researchers find that investors are fallable to heuristics and biases, like seeking out data that confirms pre-existing conclusions. 

Snowgum Financial Services structures analysis around fundamental characteristics of each company, including its cash flow, balance sheet, competitive advantage, industry opportunity and pricing power of the business.

We leverage research houses to support this assessment and will employ suitable asset managers that abide by these principles.

We strive to minimise costs

Controlling costs helps investors build wealth by keeping more of what they earn.

WHY IT MATTERS: Investors face a barrage of information, and our minds tend to focus on one or two narrow characteristics. While returns can be volatile and uncertain, costs aren’t: they are one of the few factors we can control with certainty.

Snowgum Financial Services seeks to partner with investment managers that have costs in the lower quartile of their respective categories. We target wholesale versions of funds and will cut out management costs entirely for direct large cap positions.

We build portfolios holistically

To help manage risk and deliver better returns, we combine investments with different underlying drivers into diversified portfolios. In particular, we think private market opportunities provide material improvements in risk and return outcomes for clients.

WHY IT MATTERS: Diversify what you cannot see. Nobody has reliably predicted short term market movements. Diversification, or the careful selection of a range of investments that aim to minimize unpallitable volatilty, helps manage company specific risk and when diversifying amongst asset classes, market noise.

Managing risk effectively, with realistic expectations, is the only way to ensure you achieve your goals. In particular, when you manage volatility well, you can also mitigate human induced portfolio turnover. This can deliver meaningful performance improvements by reducing behavioural drags on return.

Snowgum Financial Services embraces balanced diversification with targetted concentrated exposures to attractive opportunities. By taking the story out of the equation, we can create portfolios designed to improve the probabulity for individual investors to meet their goals, through the cycle.

Establishment

You will need to engage a suitable philanthropic legal service (or we can do this on your behalf) to draft a legal deed that broadly governs the charitable actions of your private ancillary fund (PAF). A private ancillary fund is the specific not-for-profit vehicle that can house philanthropic proceeds in a tax free manner. You will also need to establish a corporate trustee which is responsible for controlling and managing the PAF. You and other family/related parties can be directors of this company, but you are required to nominate an independent director of suitable standing to act as a responsible entity. This independent director cannot be a related party or family member and generally needs to be someone of good standing within the community.

Investment policy statement

You will need to begin formulating a robust investment policy statement that provides clear guidelines on governance, roles and responsibilities with clear articulation on investment expectations, reporting obligations, allowable distributions, allowable investments and investment selection process (among much more). This is critically important, especially when significant assets are to be managed or the philanthropic vehicle is of public significance.

This can be done in conjunction with an experienced asset manager or financial adviser. A draft example of what this document covers is available here (credit: The CFA Institute).

Implement investment structures

Prior to receipt of any proceeds, the investment policy statement will guide the establishment of cash management account and investment administration service structures required to administer charitable capital. Typically, you would expect a clearing account (like a cash management account) to act as the central point for reconciling all investment sales, contributions, distributions and new donations.

Founding donation

A donation to a PAF is not revocable. Once contributed, the only way for capital to exit the PAF is via a charitable donation to a suitably aligned philanthropic endevour. All contributions to a PAF are tax deductible donations. This provides significant scope to time future contributions with significant capital gains tax events. A donation offsetting an assessable capital gain essentially doubles the capital base available for philanthropic pursuits for most natural persons running PAFs in Australia. The tax deductibility of your donation can be carried forward over the following five years.

Ongoing investment returns from asset management within the PAF are tax exempt.

Ongoing reporting

There are two primary ongoing reporting obligations;

• Lodgement of returns to the ATO (although no tax is payable), tax refunds will be payable on tax paid income like franking credits. The philanthropic vehicle will receive a payment from the ATO on any tax-paid income.
• Maintaining compliance with the Australian Charities and Not-For-Profits Commission (ACNC) governance requirements.

Director and community education

It is important to regularly report investment management, charitable activity and community impact back to director's, donor's and the community broadly. Depending on the stakeholders involved this may be an opportunity to engage with external consultants to convey financial data in a meaningful way or further educate potential recipients on best practice activites to make your charitable activities more meaningful.