Lemming on the loose

When we last left our favourite lemming, newly annointed dealer principal Nick Bruining, being atacked by a group of brochure delivery men (BDMs). In this exciting installment, we find out what happens when ASIC finally says yes to his proposal.

Whatever happened to that bloke with the rat name?

Well, like an awful Stephen King novel "I'm baaaack".

Yes, the lemming lives, I'm sure a few thought I had become the final chapter in a year 10 biology text -The Web of Life, Chapter 12, Decomposition.

The fact is, it took a little longer to take the leap of faith than I had originally bargained for and, if they say a week is a long time in politics, six weeks is an eternity in this industry. Just look what's happened since I've been gone.

"Stewy the Fridge" has the top job at MM (apologies to Engel Car Coolers) and Ray "Tamworth" Griffin takes over from the Little Generalat the FPA. I guess future FPA conferences will start with Slim Dusty singing "A Pub With No Beer" while all the CFPs have to get up and line dance. Anyway, a good choice on all sides (Stewy, where's that $20.00).

Anyway, back to the story of why it took so long for me to go jump. The fact is, I've decided that the world needs more bankers.

There's some I know who really enjoy a good bank, and those bankers must enjoy there own banks best of all. A couple of them asked me to join in and bank with them, but I declined their kind offer.

Why you ask? One of the Australian Securities and Investments Commission (ASIC) requirements is to lodge a performance bond with them which basically ensures that if I or any of my PAs decide to diddle a client, there'll be something in the kitty to compensate. I won't go into the relative merits of this versus a mandatory requirement to hold professional indemnity insurance, but that's the deal.

Some, with good memories, will also recall that I suggested you can obtain a performance bond through certain insurers, a little like an insurance policy but relatively expensive - or so I thought. The going rate for the $20,000 bond is around $1,200 per annum or about 6 per cent per annum.

Since we've had a reasonable year, I was in the rare position of being able to rustle up the $20,000 and had an idea that went something like this:

Go to bank. Deposit $20,000. Get Bank to fill in Bond. Send Bond to ASIC.

Collect interest on bond. Get license. Sounds okay right?

Oh nooooo no no no no, nooooo!

The conversation went something like this:

"Ring ring, Ring ring".

Banker - "Hello, Big Banker here."

Me - "Hi, are you the banker who can set up performance bonds?"

Banker "Sure can, how much for?"

So I tell him my idea, hoping to squeeze him into a spectacular rate of interest for $20,000.

Banker - "Yeah, well that's well and good, but we charge $600 to establish it and 4 per cent per annum."

"PLEEEEEZZZ! You're going to what ?" - Me looking desperately for a calendar to check it is not April 1.

"Yes, well you see it's a loan" - Banker.

"But I'm giving you $20,000 CASH. It's not a loan it's a bloody gift. You get to take my money, pay me a paltry 5 per cent and charge me 16 per cent for the same money back on my Bankcard AND make profits that would allow Christopher Skase to set up a resort on the moon."

"Sorry mate, all the bankers do it, that's why we're called bankers".

Well, the banker, whom I later discovered is called Ali Barba, was right on two fronts. He was a banker and all of the major banks do the same thing albeit at different rates.

I may be accused of bank bashing and not fully understand the finer points of contingent liabilities but I reckon being charged money to open an account, paying interest to the bank for my cash to sit there is my kind of bank. Lead me to a bank which specialises in setting up performance bonds for dealers, I want some of that action!

The sad fact is, I took all my business from a bank to a credit union. Thankfully, under changes which came into effect on July 1, APRA now regulates credit unions and bonds issued by these institutions will now be accepted by ASIC.

So, I get my 4.6 per cent interest, pay less fees on my banking, ASIC has the bond, and I finally receive the license!

Yes readers, NC Bruining & Associates Pty Ltd - licensed securities dealer is now a happening thing.

There's a few minor issues to tidy up, like the appointment of an auditor, the setting up of registers, the transfer of clients (helloooo Mr Hillross!) - basically the upheaval of the world as I once knew it.

Now the question you've all been waiting for; is it worth it?

Like I said in an earlier column, it doesn't suit everyone and with fairly stringent educational and experience requirements to be met, not everyone has the choice.

In my case, I didn't believe the dealer cut was justified for the benefits received.

The actual task of obtaining the license was in itself, reasonably straight forward.

ASIC have a great web site atwww.asic.gov.auwhere you can download a "701 kit" which contains all the information you'll need.

Only time will tell if it was the right decision, but I'm already enjoying the responsibilities and satisfaction which comes with being in greater control of where the business is heading.

How to become a lemming in six easy steps

As a final point in this series, I suggest the following checklist and in the order stated:

1. Find out what the costs are of running independently, PI Cover, Software, research etc.

2. Establish exactly what your costs are or would be and realistically assess if there is an immediate benefit in changing. If not, don't do it.

3. Download the 701 Kit and see if you meet the requirements.

4. Meet with the dealer and have an honest discussion about their cut, your costs and where you are heading. See if they'll do a deal.

5. After weighing up the pros and cons (personal & financial) of doing it and if it stacks up.

6. Become a Lemming!