Franked dividends and your investment strategy

Is franking a free lunch …

Many D-I-Y investors skew their investment portfolios towards shares that pay franked dividends. This is particularly prevalent amongst trustees of self managed superannuation funds who appear to over value the benefit of franking credits.

There appears to be a view that franking offers “a free lunch”, resulting in its overemphasis as a driver of investment strategy.

We believe investors should not favour particular shares simply because they pay franked dividends. The usual thinking behind such behaviour is, in our view, flawed.
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Financial Planning: Personal Financial Advice or “Product Flogging”?

They make used car salesmen look good …

The financial planning industry (and a number of accountants dubiously playing on the edge) has come under intense fire recently.

The downturn in investment markets has exposed a number of products that have not turned out to be in clients’ best interests. These include high yield mortgage funds, absolute returns funds, agribusiness and protected equity products and excessive margin lending.

Criticism of planners and offending accountants that promoted these products is well justified. In many instances, it is difficult to resist the conclusion that their sale was driven or too heavily influenced by what was best for the promoter.

But, judging from public responses to a number of recent newspaper articles adverse to financial planners many people also blame their financial adviser for recent poor investment performance and/or failing to get them out of share markets prior to the downturn.
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