The year 2024 is the Year of the Dragon in the Chinese horoscope. But, brokers might find next year to be the Year of the Bird

The Chinese horoscope for 2024 revealed that the Year of the Dragon would bring authority, prosperity, and good fortune. Let’s hope it has. For us brokers, however, we expect next year to be the ‘Year of the Bird’ with three dominant client profiles prevailing: The Emu, the Phoenix, and the Falcon.

In this disruptive environment, many borrowers crave ‘safe’ to offset turbulence. However, ‘safe’ can quickly convert to denial and avoidance – which is the perfect segue to introduce you to the ‘Emu.’

The Emu

An Emu client may be a personal or business borrower who is far more content with their ‘head in the sand’ than addressing an uncomfortable reality. Rather than confronting debt, they hope the state of ignorant bliss will prevail as they ride out the storm. Consequently, Emus often have mounting debt (think of piles of unopened bills building up on the kitchen table).

Despite their escalated exposure, however, Emus often turn a blind eye to the imminent crisis, including withstanding any substantial change to personal or business spending patterns.

As brokers we have to actively seek out Emus before they fall off the cliff. We do this via a financial health check to assess whether there are ways to consolidate the borrower’s debt and review areas that can be addressed to help reduce exposure.

Getting on top of tax debt is critical, too, as the ATO is openly cracking down on ‘bankrolling’ borrowers (which may result in a payment plan). This should ideally be done in conjunction with the borrower’s accountant – especially if tax debt is an issue.

The Phoenix

For more savvy borrowers, debt is under the spotlight in lieu of the ‘set and forget’ mentality. In contrast to their Emu counterparts, a Phoenix borrower hits challenges head-on and is motivated to rise to the opportunity versus being deterred by the obstacles presented.

Moreso, Phoenix borrowers see obstacles as opportunities to reassess current practices to be leaner, more efficient, and more profitable.

Phoenixes have most likely already trimmed the fat in their personal or business structures. For business borrowers, a sustained focus on efficiencies and profitability often equates to receptiveness to alternative facilities that help support cash flow management. This mindset has a ripple effect beyond refinancing or debt consolidation, to include the assessment of ancillary areas of finance such as insurance and SMSF (in particular, business SMSF investments are on the rise).

Again, as brokers we have regular check-ins, ideally in conjunction with the borrower’s accountant.

The Falcon

Onto our last group: the Falcons. Falcons are eternal opportunists who thrive in a disruptive market. Make no mistake, there will be a row of Falcons on the fence, keeping a close eye on, and ready to swoop in on businesses or houses in a state of impending liquidation.

Similarly, Falcons are true entrepreneurs and are renowned for identifying alternative business ventures, practices, and niches that emerge in shifting markets.

Falcon ventures can be great, though they equally can be shaky.

As brokers we must do thorough due diligence on Falcon borrowers to ensure that the deal’s feasibility stacks up, as lenders are not fans of having money staying lent and are very cautious in the current environment.

Nevertheless, no matter which client species dominates my aviary next year, my advice for 2025 is to be prudent, realistic, proactive. And remember: a sum is greater than its parts.

This information has been prepared by PHA Financial Services and does not take into account your objectives, financial situation or needs. Before acting on this information you should consider whether it is appropriate to your situation. We recommend you obtain financial, legal and taxation advice before making any financial investment decision. The information provided was accurate at the time of publication and changes in circumstances after a document is published may impact on the accuracy of information. Some information may have been collated from various third parties and we make no assertion that the information was originally ours.