Case Study: Financial Planner – Cloud Financial

We talk to some key clients about XTBs and why they find them beneficial in their portfolios.

Shaun Liddicoat, Cloud Financial Planning

“XTBs provide an efficient and easy to manage fixed interest solution for my clients. They offer a superior fixed interest return for the risk that investors are exposed to.”

Shaun Liddicoat of Cloud Financial Planning

Company Cloud Financial Planning
Location Geelong, Ballarat
Title Financial Adviser
Brief overview Cloud Financial Planning has no product alliances, but has a preference for clients to directly own their investments. We believe in simple and easy to understand products which are cost effective.

What have you traditionally used for fixed income and what attracted you to XTBs?

“We have many members in Self-Managed Super Funds. Given the low interest rate environment we are in, we found the returns on term deposits no longer satisfactory. Furthermore, term deposits can be an administrative hassle, as most fall due within 12 months and require decisions about where to reinvest.

This led us to consider corporate bonds via XTBs. They  have longer durations than term deposits, and offer a higher yield. They can also be easily purchased via a client’s low cost online share trading platform.”

How did you hear about XTBs?

“We were aware that the direct bond market was changing. There had been talk of opening up to the market to retail investors and allowing them to buy bonds in smaller parcels.

We dipped our toes in the water to see what the various providers could offer our clients. We found the XTB offer to be superior. The relationship was further enhanced by their team of professional Business Development Managers.”

What stood out to you about XTBs compared with  other fixed income solutions?

“Although bonds do not provide the safety of a government guarantee like term deposits, a lot of the risk with bonds can be mitigated by investing in companies with strong balance sheets and a large amount of tangible assets. This is because the assets can be sold off to repay bond holders in the event the company being wound up.

My preference was to invest in XTBs compared to other bond providers, as they can be easily purchased via a clients’ low-cost online stockbroker. Furthermore, the range of XTBs were all over reputable Australian companies with strong balance sheets.

The process is extremely easy from purchase, to tax reporting and all the way through to bond maturity.”

XTBs vs Bond ETFs

“Direct bond ownership via XTBs is also superior to ownership via a managed fund or exchange traded fund as there is no risk of capital loss if the bond is held to maturity.

At the time of purchasing an XTB you are aware of the yield you will receive until the bond matures. By comparison, with managed funds or ETFs there is the risk of capital loss with bonds should there be a change in interest rates.”

What’s a specific XTB strategy that you have implemented for your clients?

“Our members who are in retirement phase, typically have up to half of their superannuation invested in XTBs. The other half, tends to be invested in a portfolio of direct shares / exchange traded funds, with a small cash holding.”

Income sourced from bonds and dividends

“The income produced from XTBs, plus the share dividends is usually sufficient to meet a retiree’s income needs through their superannuation fund. As such, they do not need to draw down on capital to provide for their liquidity needs.

This allows us to take a long term investment approach for the direct share portfolio, while the maturity of the XTBs can be staggered to allow for any additional liquidity needs.

This combination allow us to run our client’s portfolios efficiently and cost effectively.”

What has been your experience of holding XTBs to date?

“While the typical client may not initially understand bonds, a properly constructed education meeting with them to identify the benefits of bonds has proven a winner.

XTBs have increased our business efficiency whilst most importantly increased the fixed interest return for our clients.”

What do you think investors need to be aware of in today’s markets?

“Investors must understand the risk/return trade off. Just because an investment is advertised as “fixed interest” does not necessarily translate to being “risk free”. In many cases a higher return also equates to higher risk.

Investors need to understand what they are investing in.

In the case of XTBs, we feel content having clients lend money to a major Australian institution, provided it has a strong balance sheet and a large amount of tangible assets. These assets could then be sold off to help safeguard the investment.

By comparison, we do not feel comfortable lending money to less secure companies. We avoid companies who carry a large amount of intangible assets on their balance sheet, even if the investment return on offer is higher.

The same risk / return trade off can be said for some risky mortgage-backed investments. During Global Financial Crisis we witnessed many investments classified as “fixed interest” which were definitely far from “risk free”.

More about Cloud Financial Planning

Cloud Financial Planning dates back to 2008. We run a holistic financial planning service via our head office in Highton – Geelong, Ballarat and an online financial planning service throughout Australia.

Cloud Financial Planning has no product alliances but has a preference for clients to directly own their investments. We believe in simple and easy to understand products which are cost effective.

We are licensed through AVALONfs – a non-product aligned licensee with an emphasis on compliance.

Contact Cloud Financial Planning:

T: 03 5215 0400



The views expressed in this case study are not necessarily the views of XTB.  The information in this article is general in nature. It should not be the sole source of information. It does not take into account the investment objectives or circumstances of any particular investor. You should consider, with or without advice from a professional adviser, whether an investment is appropriate to your circumstances. Australian Corporate Bond Company Limited is the Securities Manager of XTBs and will earn fees in connection with an investment in XTBs.

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