Smart Investor magazine: Up To Speed, column, January 2009

NEW PRODUCT

Adelaide Cash Management Account

What is it?

It’s a new cash product.

Cash? What’s interesting about that?

This one comes on the back of the new government guarantee of all bank deposits, which covers holdings up to $1 million. It’s designed for existing customers of the Adelaide Cash Management Trust who want to transition to a guaranteed product, as CMTs don’t qualify for the government guarantee.

What does it do?

Like all cash accounts it’s designed to allow you to switch cash easily into other products – one reason these things are very popular with financial planners – and it allows for direct credits, BPay, cashcard access and cheque book, with interest calculated daily. In this case it also allows investors to leverage 100% of their cash deposit into a margin loan facility through Leveraged Equities (an Adelaide Bank subsidiary).

Is that wise?

If we’ve reached the bottom of the market, you couldn’t find a better time for a margin loan. If we haven’t, there’s a risk you’ll be hit for a margin call. However this product appears to allow you to have a government guaranteed cash balance as security on a margin loan.

What rate is it paying?

At the time of writing, 4%.

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