Money Management | Vol. 36 No 8 | May 19, 2022

MAGAZINE OF CHOICE FOR AUSTRALIA’S WEALTH INDUSTRY

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Vol. 36 No 8 | May 19, 2022

18

REGULATION

Decoding CSLR

ESG

22

Impact of arms

SMSF legislation

Jones commits to experience pathway

LEGAL

BY LIAM CORMICAN

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Simplifying financial services laws THE AUSTRALIAN Law Reform Commission’s (ALRC) inquiry into the simplification of financial services legislation is multi-phased and expansive, with interim reports due throughout this year and next.

Part of the Government’s response to the Hayne Royal Commission, it aims to lay the foundations for an adaptive, efficient, and navigable regulatory framework, recognising there are emerging new business models, technologies, and practices within the industry.

Welcomed by many, with 84% of an ALRC initial survey concluding there was a high or medium need for reform of financial services legislation, the review will examine definitions of ‘financial product’ and ‘financial services’, licensing, disclosure, definition of ‘financial product advice’, definitions of retail client and ‘wholesale client’ and conduct obligations.

Money Management has unpacked how the review has been set out by delving into a core issue on many minds: the current legislative distinction between personal and general advice.

Maurice Blackburn’s principal lawyer, Josh Mennen, and Super Consumers Australia’s policy manager, Franco Morelli, have explained why more needs to be done than just replacing general advice with general information in legislation.

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24

TOOLBOX

Full feature on page 14

Shadow minister for financial services Stephen Jones has assured the financial services community that Labor’s proposed ‘experience pathway’ will be implemented in the event of a minority government.

Appearing at a Stockbrokers and Investment Advisers Association (SIAA) webinar, Jones was asked whether he had any discussions with independents to ensure Labor’s promise to impose a degree carve-out for advisers with at least 10 years’ of experience would be met in the event of minority government.

“No, I haven’t, in short, and you shouldn’t be worried about that.”

He said Labor’s proposal could still be enacted through

existing ministerial and regulatory powers.

“So, no primary legislation would be needed. I’ll take advice on that. But my initial thinking and analysis is we don’t need primary legislation.

“And if that’s the case, yes, it’d be a disallowable instrument, but I’ve got to say it’d be a courageous Senate that [would try] to block it.”

Jones said Labor’s experience pathway policy would be enacted “pretty quickly” if the party was elected.

“Unless you move on quickly, it becomes a bit redundant so we want to make sure that it’s in place and up and running.”

He also said he thought the election resulting in a Labor minority government was unlikely.

Continued on page 3

Magellan appoints CEO

BY LAURA DEW

MAGELLAN Financial Group has appointed David George as chief executive and managing director.

He would take direct responsibility for the group’s investment functions as well as overall responsibility for Magellan’s operations.

He would also be appointed as managing director of the Magellan board and Magellan Asset Management Ltd, the firm’s main operating subsidiary.

In terms of remuneration, he would receive a base salary of $1.8 million per annum and a signing bonus of $600,000 paid in two instalments.

Kirsten Morton, who had been interim chief executive since the departure of Hamish Douglass in February, would work as dual chief operating officer and chief financial officer.

Continued on page 3

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May 19, 2022 Money Management | 3

News

‘Worst is over’ regarding regulatory change: Hume

BY LAURA DEW

SENATOR Jane Hume has confirmed that financial advice is being viewed as a profession rather than a sales role and that the industry has adjusted to recent changes.

In an interview with Stockspot chief executive and founder, Chris Brycki, Hume, who was minister for financial services, superannuation and the digital economy, said it had been an “uncomfortable shift” for many in the industry since the Royal Commission.

“In the last 20 years, we have seen a massive shift from being a sales job to being a proper profession where the interest of the client comes before the interest of the adviser. That’s been an uncomfortable shift for a lot of people.

“So we knew there would be some people who didn’t want to come on that journey but I think the worst is over and the industry is settled.”

Earlier this month, Financial Services Council chief executive, Blake Briggs, said he

Jones commits to experience pathway Continued from page 1 “I think it’s going to be easier for Anthony Albanese to get to 76 seats in this Parliament at the end of this election period than it will be for Scott Morrison,” he said.

“I’m not taking anything for granted. And I’ll be back out on the hustings as soon as I finished with you guys.”

Jones said in the event that he was wrong and Labor had to form a government with the support of crossbenchers, a coalition agreement would not be made.

“If you support us on legislation by legislation, fine, but we’re not going to try and get a full coalition agreement with [crossbenchers],” he said.

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felt the advice industry should be viewed as a profession and treated with a lighter touch regulatory regime.

Hume highlighted the changes had led to other benefits such as higher returns and lower product costs but this had been countered by the higher advice costs.

“This means financial advisers have to demonstrate the value they offer to their clients and sometimes that can be an uncomfortable call but it’s an important conversation because we know that advised clients tend to make better decisions especially in periods of volatility.”

Hume also said digital advice could play a role in closing the advice gap and work alongside traditional face-to-face advice for people with fewer financial needs.

“Not everybody needs a full financial plan on day one, sometimes they just need bitesized pieces of advice and certainly digital advice can fill that void.

“Digital solutions can reduce the compliance burden for traditional advisers,

that reduces the cost of a financial plan.

“It’s about making sure more people have access to advice, it’s not about eating into traditional advisers’ client base, it’s about making sure clients of traditional advice have access to cheaper advice.”

Magellan appoints CEO Continued from page 1 The changes would take place on 8 August or earlier if agreed between all parties.

George was previously deputy chief investment officer, public markets at the Future Fund where he oversaw assets in excess of $170 billion and was a member of the senior management team.

Prior to this, he held senior roles at Mercer Investment Consulting where he led investment manager research for fixed income and credit strategies in Australia and New Zealand.

Chairman Hamish McLennan

said: “We are delighted to appoint David to the role of CEO and managing director. He has deep funds management experience developed over a career in Australia and Canada. As an external hire, David brings an outstanding investment management pedigree, a strong client service and results orientation and fresh perspectives to our team. The board was unanimous in its view that David is the right person to lead Magellan.

“Magellan is in strong financial health and we are executing on our investment strategies, capital management

program and staff retention initiatives. We acknowledge that there is more work to do. I am very confident that David, working with Magellan’s best-in-class team, will achieve strong client outcomes over the years.”

George said: “It is an honour to be appointed as Magellan’s chief executive officer and managing director. I have long admired Magellan and the role it plays in safeguarding and growing the wealth of its investors across the world.

“Magellan has a significant depth of talent and has demonstrated consistent investment and operational excellence through time. I look forward to working with the team to build upon this track record of success, generating strong and sustained investment results for our clients. With the support of the board, I will be engaging widely with all stakeholders to build and maintain the relationships that will underpin future growth.”

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4 | Money Management May 19, 2022

Editorial

laura.dew@moneymanagement.com.au

WHAT MAKES AN INDUSTRY A PROFESSION?

FE Money Management Pty Ltd Level 10 4 Martin Place, Sydney, 2000

Editor: Laura Dew

As the industry changes come to an end, have they had the desired effect of making the financial advice industry a ‘profession’?

THERE has been commentary in the news lately about whether or not the financial advice industry has become a profession and whether this deserves a lighter touch regulation.

Firstly, Financial Services Council chief executive, Blake Briggs, said the advice industry should be recognised for the steps it had taken to improve since the Royal Commission and later, Senator Jane Hume agreed the advice sector was no longer considered a ‘sales job’.

Both are positive forwardthinking messages to put out to the sector that their work over the last few years is being recognised and the efforts advisers have made to pass exams and improve their standards have successfully led to increased professionalism.

According to the Oxford English Dictionary, a profession is an occupation in which a professed knowledge is applied or one that involves prolonged training and a formal qualification.

It is safe to say that thanks to the educational, professional and regulatory changes imposed on the industry, it now meets this criteria and could be classed as a

laura.dew@moneymanagement.com.au Journalist: Liam Cormican Tel: 0438 789 214 liam.cormican@moneymanagement.com.au ADVERTISING Account Director: Damien Quinn Tel: 0416 428 190 damien.quinn@moneymanagement.com.au Junior Account Manager: Karan Bagai Tel: 0438 905 121 karan.bagai@moneymanagement.com.au PRODUCTION Graphic Design: Henry Blazhevskyi

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profession in the same way as doctors or lawyers.

One downside would be these higher standards have made it harder for people to enter the industry but, on the flip side, those who do are more likely to be doing it for the right reasons rather than to just make money in commission.

The next step is whether this professional standing will be recognised when it comes to future regulation.

Briggs said he hoped the Quality of Advice Review, which was due to be completed in December, would

recognise the improvements that had been made and reduce the volume of regulation. The heavyhanded approach needed to force an industry to improve should no longer by necessary once the changes had been made, he said.

Many advisers would welcome a loosening of the tight rules they are currently bound by and appreciate being treated in the same way as other professional peers rather than as the ‘bad guys’ of financial services.

Laura Dew Editor

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6 | Money Management May 19, 2022

News

AFA outlines ways regulatory uncertainty can be reduced

BY LIAM CORMICAN

THE Association of Financial Advisers (AFA) has outlined the key levers it will be targeting to reduce regulatory uncertainty in the Quality of Advice Review.

Speaking at an AFA webinar, chief executive Phil Anderson, said the association would target four primary objectives in the review including reducing complexity, reducing the cost of financial advice and the cost of running a business, improving client capacity and service process in firms, and ensuring the financial advice profession was sustainable.

Unpacking the AFA’s target to reduce regulatory uncertainty, Anderson said the association would look at better enabling the defining of the scope of advice to facilitate the provision of limited scope advice.

“This is one of the things that links back to the code of ethics and how easy is it to define a very tightly-defined scope of advice for a client in order to enable you to be very focused in what you do,” he said.

“Now, all sorts of challenges come up in this, whether the code of ethics is a factor, licensee expectations is a factor.

But what if we had regulatory certainty that allowed you to just dive into a particular issue with appropriate consideration of other factors and give really

limited scope advice?”

Anderson said the association would also push for certainty on client data collection for limited scope advice.

The AFA also wanted to see a policy focus on the simplification of Records of Advice, according to Anderson, acknowledging the work already done in this space by the Australian Securities and Investments Commission (ASIC).

“Now, I think with Records of Advice, we want to see the simplicity of providing records of advice as a focus, but also the opportunities,” he said.

“But what we want is more

certainty around when you can provide the Record of Advice.”

Anderson’s other key levers to reduce regulatory uncertainty were: • Clear articulation of requirements for Best Interests Duty compliance; • Clarity on the requirements for consideration of alternative strategies and products; • Certainty enabling shorter advice documents; • Increased certainty with how AFCA will judge complaints; and • Introduction of a mechanism/ forum to resolve regulatory uncertainty issues.

PIMCO appoints business head for ANZ PIMCO has appointed Samuel Watkins as executive vice president, head of business, Australia and New Zealand.

Based in Sydney, he started the role on 9 May and would work closely with Rob Mead, head of PIMCO Australia and co-head of portfolio management, to lead Australia’s growth strategy.

He would have local oversight of business management functions and report to Alec Kersman, head of Asia Pacific.

Watkins joined the firm from Goldman Sachs where he was managing director and head of equity finance product, Asia Pacific. Prior to that, he worked at Deutsche Bank, Credit Suisse and Macquarie Bank.

Mead said: “Sam brings a differentiated skill set that will further empower our team and help deepen and broaden PIMCO’s client relationships. We look forward to partnering with Sam to continue to deliver innovative solutions and exemplary client service”.

Kersman added: “Sam is a tremendous addition to our firm and to our business leadership in Australia. Sam will lead our talented teams in these markets to continue to deliver PIMCO’s industry-leading investment solutions”.

De Gori takes up new position

BY LAURA DEW

FORMER chief executive of the Financial Planning Association of Australia (FPA), Dante De Gori, has taken up a position.

De Gori would now be working as head of stakeholder engagement at the Financial Planning Standards Board (FPSB).

FPSB was a global organisation responsible for the Certified Financial Planner (CFP) qualification outside of the US.

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Writing on LinkedIn, De Gori said: “I am delighted to be able to take my experience internationally and support the growth of the financial planning profession around the world”.

De Gori was formerly CEO at the FPA for six years before he left at the end of 2021 and was a former chair of the FPSB council and chief executive committee from 2018 to 2021.

His role at the FPA was taken over by Sarah Abood from January 2022.

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May 19, 2022 Money Management | 7

News

AFCA adopts early merit assessment of complaints

BY LIAM CORMICAN

EARLY merit assessments of complaints are now a permanent feature of the Australian Financial Complaints Authority’s (AFCA) process following a pilot program.

AFCA said its pilot program showed the early identification and exclusion of unmeritorious complaints - those where there was clearly no error or financial loss - made complaints handling faster, cheaper and fairer for all parties.

The process was tested in a three-month pilot last year which found the time taken to resolve the selected cases was half that of comparable cases, and the fee charged was as much as 75% lower.

Further analysis resulted in the decision to adopt merit assessment as a permanent feature, to be applied to types of complaint where the pilot showed it worked well.

AFCA chief operating officer, Justin

Untersteiner, said: “Our pilot was in direct response to feedback from members that the cost of paying for some determinations – the final, formal decision-making stage of our process – can outweigh the value of the initial service or product that was provided.

“Firms told us this meant they sometimes made a commercial decision to concede the complaint on the basis of cost, regardless of the merits of the case.”

Untersteiner said the issue was made worse by the conduct of a small number of third-party paid representatives using questionable tactics, with complainants refusing to consider a reasonable resolution in the earlier stages of AFCA’s process.

Merit assessment would be applied in cases where sufficient information about a complaint was available at an early stage, and it clearly showed there was no error and/or loss.

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Complaints that raised more complex issues, with significant documentation involved, would still require an investigation to reach a view on what had most likely occurred, AFCA said.

“The balancing act is to ensure we are not closing complaints that do have merit.

Sometimes the only way to determine this is through further investigation,” Untersteiner said.

AFCA said the merit assessment was part of its response to Recommendations 4 and 7 of the Independent Review of AFCA, by addressing poor conduct by some paid advocates and ensuring its funding model did not deter firms from defending complaints.

Responding to the news, Financial Services Council chief executive, Blake Briggs, said: “Ensuring AFCA’s processes are fair to all parties by incorporating practices to identify complaints without merit quickly is a positive step”.

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8 | Money Management May 19, 2022

News

Four advice issues for the next Government

BY LIAM CORMICAN

LIFESPAN Financial Planning has penned an open letter to Prime Minister Scott Morrison and Opposition Leader Anthony Albanese, setting out four key issues it would like the next Government to address.

Lifespan Financial Planning chief executive, Eugene Ardino, said he felt compelled to put pen to paper to highlight the issues plaguing the financial services community, arguing the outcome of the election would affect access to quality financial advice for years to come.

“We are at a critical crossroad, with an aging population, and the ‘great Australian wealth transfer’ on our doorstep, or potentially already here,” Ardino said.

“Access to quality financial advice has never been so important, however, if we do not seek significant change, many will not be able to access affordable advice from a professional financial adviser.”

The four key issues were: • The provision of legislative certainty and stability “Ongoing change and upheaval has left

licensees, and advisers battered and bruised,” Ardino said.

“In practice, this means a commitment to not increase compliance requirements for some time and where appropriate, to reduce some of these compliance requirements.”

• The simplification of the advice process Ardino argued in favour of simplifying file keeping requirements as he believed there were few other professions with such a high burden of proof to demonstrate the appropriateness of their advice.

He said Safe Harbour would need to be abolished, the Statements of Advice framework would need to be simplified and Financial Disclosure Statements would need to be scrapped.

• The end of the perpetuation of mistrust in financial advisers “We have held up our end of the bargain… and we need support from the government to rebuild consumer perception regarding the value of quality financial advice,” he said.

• The continuation of certainty in the superannuation system “The superannuation system must continue to serve its purpose in ensuring that Australians

Future cybersecurity breaches could incur $525m penalties

BY LAURA DEW

COMPANIES which fail to have adequate risk management systems to manage cybersecurity risk could be fined as much as $525 million by the regulator in the future.

Earlier this month, RI Advice was found to have breached its Australian Financial Services license obligations to act efficiently and fairly when it failed to have adequate risk management systems to manage cybersecurity risks. This occurred between June 2014 and May 2020.

While RI Advice had to pay $750,000 in costs, it did not receive a penalty now or in any later hearing as the breach occurred before it was a civil penalty.

However, for any future breaches, firms would incur significant penalties which could be as high as $525 million, the regulator said.

Speaking to Money Management, an ASIC spokesperson said: “The maximum penalties available for a breach of section 912A(1) are now: • The greatest of $10.5 million; • Three times the benefit obtained; or • 10% of annual turnover (capped at $525 million).

“If appropriate, ASIC may seek substantial civil penalties in future cases, if licensees breach their obligations to manage cybersecurity risk”.

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have security and financial independence in retirement. Superannuation legislation needs to be viewed with a long-term lens, and not as an election sweetener,” he said.

The profitability uplift of managed accounts FIRMS using managed accounts for more than three years have achieved 79% more profit per owner than firms not using managed accounts, according to research from Praemium.

The research was conducted with advisory consultancy Business Health, assessing 224 advice practices with 76 of those using managed accounts. The data assumed a $100,000 notional salary package for each working owner.

Praemium chief distribution officer, Martin Morris, said: “The quantifiable benefits of using managed accounts are incredibly compelling and those firms fully embracing managed accounts are thriving”.

Morris said it was interesting to see how client-centric and business-minded those firms who were using managed accounts for

most of their client base had become.

The research also found that firms with three quarters of their client base falling under managed accounts had turned a notional profit per owner of 127% higher than non-users.

The incremental benefits of embracing managed accounts as a whole of business solution were also seen in the revenue figures.

Those firms using managed accounts for 75% of their client base had an 84% uplift in practice revenue and a 200% uplift in revenue per client.

It also showed investors were benefiting from more time in client-facing engagements with longer client meetings and more in-depth reviews, with 89% of firms using managed accounts spending 60 minutes or more in client reviews.

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May 19, 2022 Money Management | 9

News

Adviser exits fail to translate into business sales

BY LAURA DEW

NOW may be the best time to sell a financial planning business but sellers should be aware it can take up to three years for them to fully exit a business.

Stephen Prendeville, founder and director at Forte Asset Solutions, said he had been in the business for 19 years and currently had the lowest level of sellers he had seen in his tenure.

This was despite the number of advisers falling to around 17,000 as thousands exited the market.

“There is a misunderstanding about adviser exits, 9,000 advisers have left in the last three years but the vast majority of them were accountants or were salaried advisers at banks, they didn’t own any clients. There is the least amount of sales I have seen in 19 years but the highest level of demand.

“The industry has been working on the assumption that value will have crashed but prices are up to 3x recurring revenue.”

However, he warned any advisers who had planned to not sit the financial adviser exam and sell their businesses instead would be unable to achieve a sale that quickly.

“It is not like selling a house in a few weeks, it takes six to nine months to sell a business and most principals want to stay for another 12-24 months to ensure a smooth transition for clients. I would look now if you want to leave in the next two to three years.”

This left those sellers in an ideal position of being able to pick the right business for them and one that would culturally-align with their business and clients.

“It is the best sellers’ market, they have plenty of choice to pick the right buyer from and to pick with confidence that it will be the right fit for their client.”

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10 | Money Management May 19, 2022

News

Synchron chair to depart after 15 years Good news for financial planning models

BY LIAM CORMICAN

WT Financial Group, acquirer of Synchron, has thanked retiring Synchron chair, Michael Harrison, for his contribution to the financial services industry and to the firm.

He had worked at Synchron since 2007, initially as a business strategy and marketing consultant, then became chair in 2011 until its acquisition by WT Financial Group.

His position as chair would be taken over by Synchron director, Don Trapnell.

Managing director of WT Financial Group, Keith Cullen, said: “Over that time, the advice and counsel he provided clearly helped the directors grow the business into the vibrant, progressive group it is today.

“He joined Synchron at a pivotal time in its history, helping reinvent the company to become more attractive to younger advisers, while also remaining a preferred licensee for its traditional adviser base

“His contribution to Synchron, and to the industry, cannot be overstated.”

Harrison’s career spanned accountancy, retail sales, insurance, and banking, consulting to numerous entities, including Citibank, the STAR Alliance Network, the Australian

Competition and Consumer Commission (ACCC) and Zurich Financial Services.

Harrison was also the author of three books and a corporate speaker, served three terms as deputy lord mayor of Adelaide, and sat on numerous government and private company boards.

Households have prepared for incoming rate rises: RBA THE Reserve Bank of Australia’s (RBA) governor says people have understood that interest rate rises are coming and have responded appropriately.

Following the increase to the official cash rate by 25 basis points to 0.35%, RBA governor, Philip Lowe, told a press conference that households had prepared for rate rises by saving an extra $240 billion over the last two years.

“They’ve squirrelled that away. It’s in bank accounts and the average owner occupier with a mortgage is more than two years ahead of the mortgage repayments. Back in 2018, they were only one year ahead,” Lowe said.

“So people have understood that interest rates would go up. It’s happening earlier than many borrowers expected but we all knew that interest rates couldn’t stay at this current level forever.”

Lowe said low interest rates were no longer needed which he believed was a testimony to a resilient economy.

“Nobody predicted, at least to my knowledge, that we would be looking at the lowest unemployment rate in decades now.

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“During the dark days of the pandemic, through March of 2020, people were talking about an unemployment rate in Australia of 15%, that there would be deep scarring that would take many, many years to overcome.

“Fortunately, things have worked out much better than that, which means that we don’t need these very low level of interest rates.”

Kerry Craig, global market strategist at J.P. Morgan Asset Management, said: “Clearly the RBA’s tolerance for an inflation overshoot is very limited and we expect further rate hikes in June and August, one of which may see the RBA move by more than 25bps to get back to a more familiar path”.

Shane Oliver, chief economist at AMP, expected the cash rate to rise to 1.5% by year-end and to 2% by mid next year.

“But the RBA will only raise rates as far as necessary to cool inflation and high household debt has likely made rate hikes more potent”.

“We expect the bank to increase the cash rate relatively aggressively until the Official Cash Rate reaches the pre-COVID level of 1.5%.”

BY LAURA DEW

THE financial planning model has seen the lowest level of resignations and switches in 2022 while the holistic model saw the highest number of new AFSLs. According to Wealth Data, between 1 December, 2021 and 21 April, 2022, a total of 2,556 resignations occurred and 683 advisers switched and current.

The financial planning business model suffered the least losses while accounting-limited advice saw significant losses of 98%.

Small licensee owners, those which had less than 10 advisers, suffered the smallest losses in percentage terms and gained the greatest number of switched advisers.

Meanwhile, there had been 52 self-licensed AFSLs (defined as a firm with less than 10 advisers) who had commenced during 2022 as of 21 April, 2022. These 52 firms had 118 advisers attached to them and three licensee owners represented more than 50% of the advisers who switched.

The vast majority of these had financial planning- holistic advice models and those who had moved had left large licensee owners.

Only 11 advisers had moved from a licensee with less than 10 advisers to another small one.

Looking at closures, defined as a licensee which reduced to zero advisers, the number of closed licensees was 65 during 2022, affecting 115 advisers. Most of these closed licensees came from the accounting- limited advice (self-managed superannuation fund) model.

Of the 115 advisers affected, only 25 were current as of 21 April and 22 of those were from financial planning business models.

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12 | Money Management May 19, 2022

News

Light-touch regulation needed for advice profession: FSC

BY LAURA DEW

ADVICE should be treated with the respect given to doctors or lawyers as the industry has successfully improved itself to become a profession, according to Financial Services Council chief executive Blake Briggs.

Speaking to Money Management, Briggs, who took over as CEO in March after an acting period, said he believed the industry had successful improved its standing with the public. “[Lawyers and doctors] are treated with the respect they deserve and I think advice is now in that space and should be treated with a lot more respect, particularly in Canberra, than it is by a lot of participants.

“Here is the opportunity to treat it like a profession, treat it with respect, have a lighter-touch regulatory regime and trust the professional judgement of individual advisers. They are the ones who sit down with the clients, who know their best interests and

how to deliver them.”

Referencing the Quality of Advice Review, he said he was pleased the Government was acting promptly to assess the impact of the financial services Royal Commission. The challenge for Michelle Levy, he said, would be to establish which issues were going to be her focus from a very broad remit.

“If we had a backward-looking review looking

Unlicensed trader sentenced after fraud DR Roger Munro has been sentenced to four and a half years imprisonment after pleading guilty to fraud.

Munro was sentenced in the District Court of Queensland for the term, which included a non-parole period of 15 months, following an investigation by the Australian Securities and Investments Commission (ASIC).

ASIC found Munro had received $299,600 from three investors between March 2013-April 2014 after he invited them to invest in his TradeStation Futures Trading Fund.

Rather than investing the money, he spent it on personal expenses, made cash withdrawals, made payments to other investors and transferred funds into a trading account held in his wife’s name.

Investors were unaware their funds were being used by Dr Munro in this way and he continued to falsely represent to investors that the funds were still invested by falsely reporting profit and losses made by TradeStation.

In sentencing, Judge Smith said that the offending had a significant impact on the victims.

Munro pled guilty to three charges in July 2021 while two other fraud charges did not proceed.

He had previously been charged in 2015 by ASIC for carrying on a financial services business without holding an Australian financial services licence.

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at regulatory change over the last decade, it would be much more difficult to achieve consensus because we’d be picking over the embers of prior battles. What we need to do now is focus on what to do next and what is the regulatory regime appropriate for the future.

“Traditionally reviews result in the ratcheting up of the regulatory overlay but I think there’s optimism that we’re going in the opposite direction. This review is about what sensible changes can be made to deregulate the industry.

“If you look at the journey that advice has been on, so much of it has been about getting the advice industry to a point where it is recognised as a profession and our view is that has worked.

“The regulatory overlay required to get to the profession isn’t the same one you need when it is a profession. So we need a lighter touch regulatory system that reflects the professionalised nature of advice as opposed to the heavy-handed approach that was required to get it.”

Election underscores need for financial literacy

BY LIAM CORMICAN

THE Federal election is reaffirming the need for financial literacy to be taught in schools, according to Connect Financial Service Brokers, as better financial literacy would lead to better informed voters.

Connect Financial Service Brokers chief executive, Paul Tynan, said compulsory financial literacy in school would go a long way to helping future generations make more informed decisions about their long-term personal and professional interests.

“With most commitments being made by politicians during elections, it has become an imperative to understand how they will impact the broader economy as well as individuals, their families – and business owners and their employees,” he said.

“Financial literacy is a core life skill to successfully participate in an increasingly complex modern society.

So why should young Australians be forced to play catch up with respect to the increasingly complex world of finance and money after leaving school?”

Looking to models overseas, he said the US was seeing a growing trend of

more states making the teaching of financial literacy mandatory, with 54 personal financial education bills pending in 26 states.

“Now, 11 states, including Florida, require students to take a stand-alone personal finance course to graduate and more than 20 other states include some sort of personal finance education in their curriculum in different ways.

“Regrettably, although the benefits of financial education can make an immense difference by empowering and equipping Australians – especially young people – government and the education system are dragging their collective feet.”

Tynan said financial literacy should run throughout the secondary school curriculum and be integrated into a framework that allowed students to gradually build and expand their knowledge.

“Just as learning a new language or skill takes time, building financial skills requires time and years to gradually build knowledge, familiarity, and confidence to manage one’s own finances when leaving school and entering adulthood.”

11/05/2022 3:37:15 PM

May 19, 2022 Money Management | 13

News

Breach reporting rules corroding financial services sector

BY LIAM CORMICAN

THE enhanced breach reporting regime has been rough on the financial services industry, according to a report, as the industry contends with a hawkish Australian Securities and Investments Commission (ASIC) and new civil and criminal penalties.

The research was conducted by CoreData Research and commissioned by legal technology company Lawcadia and leading law firm Gadens, following the introduction of new mandatory breach reporting obligations in October 2021.

The report considered the legislation as “overly excessive”, and not achieving the goals Commissioner Hayne had in mind in recommending the changes.

Lawcadia co-founder, Sacha Kirk, said the new reporting measures were also taking a significant toll on the mental health and wellbeing of staff in the sector.

“The research highlights there is a high level of stress and anxiety being experienced by legal, risk and compliance professionals, who have been tasked with planning, implementing and administering the requirements – regulatory design seems to be a factor here,” she said.

Kirk said the report, which was based on survey results of 160 staff from Australian financial services organisations and a multiple

in-depth interviews, also found the sector had low confidence in the new reporting regime.

Around half of survey respondents did not believe ASIC could administer the new regime effectively and fairly across all financial services providers.

Gadens partner, Liam Hennessy, said the research was valuable because it provided an insight into the quantitative and qualitative trends of breach reporting, ahead of ASIC’s plans to publicly release data in the future which would compare organisations.

Hennessy said this would be “ritualistic public shaming”.

“Breach reporting has very markedly increased, and the main pain points are around misleading and deceptive conduct, advice failures and conduct issues. Misleading and deceptive conduct isn’t a big surprise – an incorrect fee on a bank statement technically triggers a report, which is asinine and a waste of organisations’ and ASIC’s time,” he said.

Hennessy said the report showed that the industry at large was struggling to prepare for and maintain the onerous compliance demands, and that a combination of policy amendments scaling back the more onerous features of the regime and technology adoption was the answer.

Superannuation members overlook need for advice ONLY 10% of superannuation members want to be referred to an adviser before they retire, while 50% want information to help them choose a retirement income solution, according to research from Frontier.

Frontier’s survey of 3,500 superannuation members also showed around one-in-five members were looking to their fund to recommend a suitable

solution for them, also known as a default. Meanwhile, a similar proportion were not looking to their fund for any help.

Speaking at the Association of Superannuation Funds of Australia (ASFA) conference, David Carruthers, senior consultant and author of the report, said the superannuation industry needed the “rubber to hit the road” in the retirement

space, especially with the Retirement Income Covenant (RIC) coming on 1 July.

According to the report, about 65% of members were expecting to retire between 60 and 70 while one-in-eight members were expecting to retire before 60.

“So if your engagement policy is to engage the member five years before retirement, you want to be engaging with them at 55 not

60 because at 60 they’ve gone.”

Frontier asked respondents what they thought was the most important retirement feature of a superannuation fund, aligning the possible answers with the goals of the RIC. Lifetime income was the most important with 44% of respondents putting it as first priority, followed by flexibility (28%), high return (24%) and bequests (6%).

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11/05/2022 3:51:58 PM

14 | Money Management May 19, 2022

Legal

BREAKING DOWN THE ALRC’S LEGISLATION REVIEW The Australian Law Reform Commission’s inquiry into the simplification of financial services legislation is expansive, multi-phased and worthy of unpacking, Liam Cormican writes.

THE SCOPE OF the Australian Law Reform Commission’s inquiry into the simplification of laws that regulate financial services is anything but simple.

Part of the Government’s response to the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry, the terms of reference of the ALRC’s Financial Services Legislation Review is to consider whether the Corporations Act 2001 and its

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regulations could be simplified and rationalised, particularly in relation to: • The use of definitions; • The coherence of the regulatory design and hierarchy; • How the provisions in Chapter 7 of the Corporations Act and regulations can be reframed or restructured.

The review has been split into three separate reports based on the above themes, the first of which (Interim Report A) was

tabled in Parliament in November 2021. The second (Interim Report B) and third report (Interim Report C) will be released in September 2022 and August 2023, respectively, with a final report due in November 2023.

IMPETUS AND SCOPE The review explores legislation at the centre of financial services regulation in Australia, including the Corporations Act, particularly Chapter 7, the National Consumer

Credit Protection Act (NCCP) and the ASIC Act. The Corporations Act (the Act) provides the broad legislative architecture of corporations and financial services regulation, with a number of provisions dedicated to consumer protection. The ASIC Act is more specifically focused upon consumer protection, while also containing the provisions dealing with the general functions, operations, and powers of ASIC. Furthermore, the

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May 19, 2022 Money Management | 15

Legal

Chart 1: Financial Services Legislation review timeline

Source: Australian Law Reform Commission - Financial Services Legislation: Interim Report A (ALRC Report 137)

regulation of consumer credit — including in relation to licensing, disclosure, and conduct regulation — occurs pursuant to its own separate regime, which is contained in the NCCP Act. The Corporations Act, where most legislation pertaining to consumer protection within the architecture of corporations and financial services regulation is found, is now two decades old and has had a handful of inquiries and reports, including the Royal Commission.

Throughout 2019, the ALRC conducted a national conversation with interested parties to ascertain appropriate topics for future law reform inquiries, publishing a final report on law reform topics in December 2019.

Of approximately 100 respondents who answered the relevant question in the ALRC’s initial survey, 84% considered there was a high or medium need for reform of financial services legislation. Many submitted that the legislation was too long, complex, and inaccessible, detracting from principles of transparency and facilitated ‘abuse’ of the law by institutions.

The Terms of Reference require the ALRC to survey the gamut of corporations and financial services legislation and make recommendations for simplification, with the aim of

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promoting meaningful compliance with the substance and intent of the law. It aims to lay the foundations for an adaptive, efficient, and navigable regulatory framework, recognising that there are emerging new business models, technologies, and practices.

UNPACKING REPORT A – THE USE OF DEFINITIONS The key concepts examined in the review include definitions of ‘financial product’ and ‘financial services’, licensing, disclosure, definition of ‘financial product advice’, definitions of ‘retail client’ and ‘wholesale client’ and conduct obligations.

As the review is expansive in nature, this article will delve into one key issue affecting financial advisers in the Interim Report A: the debate over the definition of financial product advice and the naming of ‘personal’ versus ‘general’ advice.

PERSONAL VERSUS GENERAL ADVICE Section 766B(2) of the Act provides that there are two types of financial product advice: personal advice and general advice.

Under the Act, personal advice is defined in s 766B(3) as: “For the purposes of this Chapter, personal advice is financial product advice that is given or directed to a person

(including by electronic means) in circumstances where: a) the provider of the advice has considered one or more of the person’s objectives, financial situation and needs (otherwise than for the purposes of compliance with the Anti-Money Laundering and CounterTerrorism Financing Act 2006 or with regulations, or AML/CTF Rules, under that Act); or b) a reasonable person might expect the provider to have considered one or more of those matters.”

And general advice is in turn defined as ‘financial product advice that is not personal advice’.

Speaking to Money Management, Maurice Blackburn principal lawyer, Josh Mennen, outlined the problems with the legislative distinction between general and personal advice as presented in his submission to the inquiry.

Referring to himself as a consumer advocate, Mennen said he had been involved in a good number of disputes with financial planners, where his law firm alleged that the advice given was negligent or otherwise inappropriate.

Mennen’s submission agreed with ALRC proposals A13, A14 and A15 which aimed to “simplify, clarify, and improve the navigability of concepts relating to ‘financial product advice’”, through: • The removal of the definition of

‘financial product advice’ and the substitution of the term with ‘general advice and personal advice’; • The removal of ‘financial service’ and ‘financial product advice’ and substitution with ‘general advice; and • Amending to replace the term ‘general advice’ with a term that corresponds intuitively with the substance of the definition.

But, according to Mennen, the term ‘general advice’, in its current use, is a misnomer which leads to confusion and poor financial outcomes for consumers.

“It gives the impression to a layperson that there is a level of tailoring or bespokeness to it,” he said.

“In fact, its definition is not something which is tailored or bespoke at all. It is merely the provision of a particular product and it puts all of the onus on the consumer themselves to determine whether or not that particular product is appropriate for their needs, circumstances and objectives.

“Now, that’s a large onus to impose on a consumer who may, through no fault of their own, consider that they’re being guided by a qualified professional through a complex process that they’re not familiar with.

Continued on page 16

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16 | Money Management May 19, 2022

Legal

Continued from page 15 Therefore, in Mennen’s view, a better term for general advice would be general information.

Mennen is not alone in expressing this view, with the Financial Planning Association of Australia also holding this stance.

Mennen acknowledges that just a name change is never going to be sufficient as that is “merely semantics”.

“What we need is for the industry to ensure that when it is providing personal advice, or advice of any type, it clearly delineates the nature of the advice being provided and clearly states whether it is bespoke and actually ensures that the client is educated about that.

“Because what we see time and time again, is that the paperwork says in the fine print, ‘this is general advice, you’ve got to go work out for yourself whether it’s appropriate’, but there’s a schism between the client’s understanding and what is said in the fine print.”

Super Consumers Australia policy manager, Franco Morelli, agrees with Mennen’s assessment that more is needed to be done than a name change.

“The consumer research shows it isn’t that simple; in fact the naming has no effect on a consumer’s understanding,” he said.

“Instead, people tend to base their belief as to whether the advice takes into account their personal circumstances on other factors, like who is giving the information or when. The ALRC acknowledges a name change wouldn’t help consumers, but recommends it anyway to assist “users of the legislation” (e.g.

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lawyers and some practitioners).

“While it might be nice to help lawyers with their problem in understanding legislation, a name change does nothing to help consumers with a much larger problem. We’d rather legislators spend their limited resources on solving real problems for consumers, rather than rearranging deck chairs with name changes.”

Morelli and Super Consumers expects the Quality of Advice Review to pick up this issue and deal with the actual problem facing consumers.

Mennen said a clear delineation was needed because consumers have a high level of trust in their adviser, opening the door for exploitation.

“The reality is that once trust is built in an adviser-consumer relationship, which advisers are very good at building, consumers ask very few questions and they go along with the process and they sign paperwork without going through it with a fine-tooth comb,” Mennen said.

“When it turns out that the product is no good, and that it is tainted by conflicts of interest, for

example, then [the consumer] comes back and says, ‘why did you give me this product?’

“And the adviser says ‘hey, we just gave you a brochure and here’s a general advice warning, and here’s the bit you signed on page 37’.

“So that’s a poor system for a consumer to be in and we need to deal with that problem.”

POSSIBLE AMENDMENTS To address this concern, Mennen proposed an amendment to the Act in his submission which would reframe this definition of personal product advice so that, whether or not personal advice is given is based on the subjective understanding of the consumer.

He said this could be done through a fact-find exercise by the adviser, as well as through educational conversations with clients.

“Now of course, that understanding has to be reasonable. And you can determine the reasonableness on the facts and the evidence,” Mennen said.

“But if a consumer reasonably believes that they’re receiving

tailored advice, then it’s tailored advice. And I believe that the legal definition should confirm that that’s the case.”

Mennen gave support for his proposal by stating, under common law, the general advice warning was not, in and of itself, enough to protect a financial services provider.

He referred to a High Court decision against Westpac in which the bank was fined $10.5 million for actively conducting a sales campaign aimed at rolling customers from their existing superannuation accounts into Westpac superannuation products.

“What they were doing is a good example of a huge problem in the industry, around vertical integration.

“The super fund [thought] ‘where can we get more members? Well we’ve got a beautiful opportunity to get them from our parent company’s customer banking list.”

“I referenced that as further support for the proposition that it should be about the consumer’s own personal understanding of the relationship.”

10/05/2022 2:40:53 PM

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18 | Money Management May 19, 2022

Regulation

WILL THE ELECTION CHANGE CSLR?

Alexandra Cain writes that the outcome of the Federal election could have an effect on funding of the Compensation Scheme of Last Resort.

THE SOMETIMECONTROVERSIAL, HAYNE Royal Commission-prompted, financial services Compensation Scheme of Last Resort (CSLR) could be broadened, should Labor prevail at the upcoming federal election.

Industry leaders say implementing the scheme is premature unless other structural issues are addressed across the financial services sector to support consumers to receive compensation should they suffer a loss as a result of the actions of members of the financial services sector.

Three bills tabled in October 2021, whose purpose was to establish a framework for the administration and management of the CSLR, never made it through Parliament before the Federal election was called, putting the scheme on the backburner.

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In its current form, the CSLR would compensate consumers who have been found by the Australian Financial Complaints Authority (AFCA) to be victims of financial misconduct. This would only be in the event other compensation options have run dry, such as a payout under a professional indemnity (PI) insurance policy.

The proposed scheme would cover personal and general advice on financial products to retail clients, credit intermediation, securities dealing and credit provision. If Labor wins, the scheme could be extended to cover managed investment schemes (MIS).

Labor has also criticised the Coalition for watering down the proposed maximum payout from $550,000 to the current proposed maximum of $150,000.

Collapsed financial services business Sterling Group’s Sterling Income fund is the poster child for failed MIS. According to consumer group CHOICE, which has organised an action group around this, 100 people lost $18.5 million through the disastrous investment.

As it stands, the CSLR would not compensate these investors. Even if it did, any compensation would be capped at $150,000.

Neil Younger, managing director at Fortnum Private Wealth, said a number of issues need to be resolved before the CSLR can be properly designed and implemented.

“It’s essential there’s a safety net that protects consumers where providers are unable to meet their obligations. But the question is why the pool is required in the first place. There’s been no testing of the quality of professional

indemnity cover that sits against an AFSL. Plus, it’s been increasingly difficult to maintain PI insurance and insurers have been dialling back benefit positions. That’s creating gaps in the market.

“Also, we’re seeing more small businesses with AFSLs emerging.

There needs to be an assessment of their capacity to meet their obligations if, through the AFCA process, they receive a sizeable determination. Nothing has been done to address those two fundamental issues. We’re just assuming the problem exists and now we’ve got to solve the problem by funding it.”

Younger said fixing the PI problem needs to go beyond just ensuring cover limits are adequate to reimburse consumers who have achieved a successful action through AFCA.

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May 19, 2022 Money Management | 19

Regulation Strap

“There has to be a minimum set of standards around the adequacy of PI insurance beyond the premium. There are some challenges in this space because if the insurers don’t like the risk, they won’t provide the cover. There needs to be a concerted effort to ensure appropriate coverage in the PI space, including looking at how new facilities can be opened up to service the financial planning sector.”

On the AFSL side, Younger said AFSL businesses need to demonstrate their capacity to meet their obligations.

“My concern is capital adequacy provisions are too light.

Licensees have to show solvency but the limits are low.”

ClearView Wealth managing director, Simon Swanson, said the starting point for any scheme is to create a compensation mechanism that puts people back in the position they were in before they suffered financial misconduct.

“They should be able to return to the position they were in before receiving the advice or investing in the product that was the instrument for the misconduct.

You have to tread gently and carefully around compensation schemes of last resort, as they can be extremely problematic.

These schemes are important and the design must be properly thought through.”

As an example, the capital requirements are very low with managed investment schemes. So if something goes wrong, the scheme designers do not have much to lose. However consumers who invest in failed schemes have a lot to lose.

Consequently, Swanson agrees consideration needs to be made about the appropriate intersection between scheme participants’ capitalisation, professional

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indemnity insurance and a CSLR. He said more broadly, policymakers and legislators need to take a smarter approach to the CSLR. “We would like to see the Government and regulators step back and take an integrated approach. This is a classic case of Australia having another regulation, which doesn’t dovetail neatly with other regulations.”

Importantly Swanson said the scheme must truly be a last resort after all other avenues have been exhausted.

“Then you deal with the moral hazard.”

This arises if operators know they can rely on a CSLR and therefore are purposely not adequately capitalised and underinsured, in the knowledge the scheme will cover them if they are pursued through AFCA and receive an adverse ruling.

MONEY FOR NOTHING The structure of the scheme’s funding model is one of its most controversial aspects. As it stands, the CSLR would be funded in its first year by a special levy imposed on the 10 largest AFCA member firms. Subsequently, all firms would be required to pay an annual levy, which would be capped at $250 million, with individual sub-sector contributions capped at $10 million.

The Financial Planning Association of Australia’s (FPA’s) head of policy, strategy and innovation, Benjamin Marshan, said the ideal CSLR funding model would be an administration charge that is shared across the whole financial services industry based on AFCA membership, with each sector paying a levy based on its risks.

“Over the years, it’s true some sectors have had issues with unpaid determinations from external

dispute resolution schemes.

“Nevertheless, the levy should be based on the current risks around non-payment. Financial advice complaints taken to AFCA have dropped significantly and cases found in favour of the complainant are around only 30% of complaints that go through the process. So there is little evidence of unpaid determinations in financial advice since AFCA was founded.”

Younger concurs. He believes everyone in the financial services sector should fund the levy. “The burden disproportionately falls to financial advisers. That’s a problem because financial planning clients will ultimately end up paying for it, which exacerbates the high cost of advice.”

Founder and principal adviser at Wealtheon Financial Services, Kristopher Meuwissen, said administration costs for the CSLR should be borne by the Federal government if the scheme is going to be run by AFCA and overseen by ASIC. The plan is for the CSLR to be an AFCA subsidiary.

“Then, the Government has oversight over any wastage and can ensure costs don’t blow out. The industry should only have to foot the bill for the unfunded component of any compensation scheme.

“It’s likely the CLSR in its current structure will further exacerbate the contraction of the financial advice sector. Sometimes it feels like we’re being administered out of a job and hit by regulation after regulation. The Government has a huge role to play in running these schemes and reducing the compliance burden on the advice sector.”

THE RIGHT STRUCTURE In terms of structure, Marshan said it should have pools of compensation for any consumer who has not been compensated as

a result of a complaint made and withheld through AFCA. “One of the common areas where consumers go uncompensated is in relation to investments, in particular managed investment schemes.

But the problem of failure to compensate can happen across the whole financial services sector, particularly when professional indemnity insurance doesn’t respond to a complaint due to it sitting in an excluded area.”

He acknowledges in an ideal world, the financial services sector would set up the scheme.

“But in reality, this won’t happen, so you need the Federal government to step in and make it mandatory. But after that, it would be better once it is set up if it is left to the industry to run.

“This will create the right tensions between making sure it is appropriately funded and ensuring all financial services entities do their part to ensure behaviours are improved through doing something about misconduct when it is seen, rather than turning a blind eye.

“Given we are talking about compensating consumers who have unpaid determinations through AFCA, it isn’t appropriate for the scheme awarding compensation to also be responsible for administering it.

“The FPA believes the scheme should be managed independently of AFCA, to ensure it operates fairly for the whole financial services industry.”

Despite the various frustrations across the financial advice sector in relation to it, the CSLR issue hasn’t been put to bed years after the Hayne Royal Commission recommended it.

The Federal election means nothing is likely to move any time soon on the scheme, if it gets up at all.

10/05/2022 2:41:50 PM

20 | Money Management May 19, 2022

Advice

MIND THE GAP There is lots Australia can learn from the United Kingdom’s experience, writes Eric Mellor, including how it can close the advice gap.

THE UNITED KINGDOM has an advice problem, and it should serve as a warning to Australia.

A survey conducted in 2021 by Open Money, an online provider of financial advice and money management tools, suggested the number of people who had paid for advice in the UK was just one in 14 – down from one in 10 in the previous year. It noted, however, that of those who had paid for advice, 90% found it helpful and valuable.

NEGLECTED CUSTOMER SEGMENTS Advisers felt that the ‘floor’ – the minimum sum of investable assets needed to bring on a new client, ranges around £48,000, or approximately $87,000. In fact, 20% of the respondents suggested the figure could even be as high as £100,000 ($180,000).

An evaluation into the impact of the Retail Distribution Review (RDR) and financial advice market by the UK regulator, the Financial Conduct Authority (FCA), determined that customers with investable assets of just £10,000 ($18,000) would benefit from some form of professional financial advice. Still, this segment of consumers continues to be neglected by the industry.

In fact, the RDR is generally considered to be the trigger event that led to this advice gap.

The removal of commissionbased products saw many financial advisers, both independent and tied agents, exit the industry or downsize and switch to a fee-based model.

Skyrocketing prices caused by higher education standards and tighter regulations drove those who remained in the industry towards the wealthier end of the market, increasing competition for a smaller customer segment and leaving many people unadvised.

Direct parallels can be drawn

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with the current state of the Australian market following the Hayne Royal Commission.

FOCUS ON PENSION CONTRIBUTIONS Obviously, pension planning is just one of many financial areas that a customer may seek advice, but in considering a looming advice gap, this is the area in which the UK elected to focus.

To combat some of the challenges, they introduced a mandatory low-cost pension product, one of which advisers could earn a small commission. Despite some encouraging early adoption, actual contribution rates are considered inadequate by most.

A 2021 study by Standard Life found that 10% of those aged 55-64 felt they would have sufficient income to last five years, and 25% felt their savings would last for only 10 years.

Even if it seemed like Australia is able to rely on superannuation to avoid a similar issue, the Mercer Global Pensions Index, which measures the integrity, adequacy and sustainability of a developed nation’s pension systems, has already seen Australia drop to sixth place in 2021, from fourth in 2020.

Some of this fall can be attributed to changes in policy, but a measurable increase in household debt has also led to a reduction.

The Open Money survey mentioned previously further highlighted a worrying emerging trend – that almost one in 10 younger people, those aged 18-24, were more likely to turn to social media platforms such as TikTok and Instagram for advice than to seek help from a professional adviser.

The ‘financial advice’ available on these platforms feels somewhat inadequate to deliver a well-rounded personal finance education.

10/05/2022 2:42:12 PM

P

May 19, 2022 Money Management | 21

Strap Advice DIGITAL IS NOT THE SILVER BULLET So what are some options available to the Australian industry to avoid following in the UK’s footsteps?

To fully understand the problem and to consider suitable solutions, we must first acknowledge that one touted solutions may not be a solution at all?

Technology-enabled business will help advisory firms to reduce operating costs. The savviest will enable ‘digital only’ offerings that can serve basic solutions to retail customers at low cost, but they may be a far cry from the much-needed, gap-closing silver bullet.

Australia has recently seen a raft of new market entrants with varying flavours of digital advice.

The common themes are high levels of technology enablement, fully automated end-to-end execution, digital channel delivery of relatively basic advice and placing the onus upon the client to implement any recommendations that are made.

While some of the solutions will consider and make recommendations in areas such as debt restructuring, cash-based savings and, for some, insurance needs, most are focused on client education only and are built around a robo-advisory type solution.

Obviously, a ‘robo adviser’ is not an adviser at all. We are yet to encounter one that will advise you to buy some life insurance, stay in cash and call your mum more often.

LIMITS OF ROBO-ADVISORY Robo-advisers are simply automated portfolio management systems that enable more efficient, and therefore cheaper investment management operations.

Some may be linked to goalbased planning tools and many will incorporate risk tolerance questionnaires, thereby creating a perception of ‘advice’.

For most, the output, regardless of input, is a recommendation to buy an investment portfolio, falling a long way short of the ability to provide true ‘holistic’ advice.

When adviser remuneration was linked only (or primarily) to product sales, the outcome of a meeting with an adviser may often have been the same. The perception

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was, and remains, that only by paying a fee will consumers receive real holistic advice that is not influenced by the need to sell.

Whilst portfolios of low-cost exchange traded funds (ETFs) can be bought on a mobile device with a small lump sum or a minimal monthly contribution, what these solutions cannot do is control and balance emotions.

A robo-solution will not tell an investor to hold a falling position or provide a long-term economic outlook. It may not encourage a customer to take advantage of a market dip nor to lock in a gain. On the plus side, it may also not expose clients to unnecessary switching fees or high annual management charges, but it will do very little to educate and enforce discipline.

While technology has made it easy for customers to buy financial assets at the push of a button, has it also made it too easy? Has the removal of the gatekeepers also removed the protection?

And this is where the real challenge begins. KPMG now estimates the cost of providing truly holistic advice in Australia could be as high as $5,335, significantly higher than the Netflix style ‘subscription’ models being offered by several digital advice providers.

The requirement to produce a full statement of advice for almost every recommendation means that advisers can no longer answer simple questions such as those related to a fund switch without fear of falling foul of the regulator.

BARRIERS TO FINANCIAL ADVICE Clearly, for individuals with only small sums in investible assets, the fees are likely to be very difficult to justify.

Explicit fees, those not linked to commission payments, have always been a challenge for the wealth management and financial advisory industry. Most of the products and services are intangible at the point of sale.

The true value of an insurance product may only be recognised if an insurable event occurs and the benefit of a well-diversified portfolio may only be known during a market downturn

To convince the most inexperienced consumers or those with lower levels of investible assets that any feel level could represent value, they must first be convinced of where the value may lie and then overcome some historical challenges related to trust.

The number of casual workers in Australia in 2019 was almost 25% of the total employed workforce.

During the onset of the COVID-19 pandemic, many of these workers, especially those employed in retail and hospitality, were unemployed and with limited access to benefits.

This single event shone a light on how unprepared many younger, lower-income earners are for unexpected events.

These consumers may not require detailed portfolio recommendations, tax planning, estate planning or other highly specialised services that would require a significant investible sum or a hefty initial fee – but they clearly need, and may continue to need access to financial education, cash management, debt structuring mortgage advice and advice on life, income and health insurance.

By using investible assets as a selection tool for access to an adviser and robo or other digital solutions as the only viable alternative, it is easy to see that many Australians will not gain access to advice in many other important areas.

CLOSING THE ADVICE GAP So what actions could now be taken to help stave off the growing gap before the problem becomes too big to manage?

There have been several calls from key industry participants that the reintroduction of commissions on some products may now be justified. Providing the underlying products are not complex, a defined sales process is in place and the products remain competitive from a cost perspective, a move such as this would be better than nothing.

Given the perceived victory for some very vocal consumer groups, this seems very unlikely to occur.

What is required is a clearer and perhaps less onerous boundary between ‘advice’ and ‘guidance and education’. Many financial

professionals are willing to spend time with less affluent customers, some on an entirely pro bono basis, to help provide education.

A clearer definition that provides advisers with the confidence and freedom to offer limited guidance and education without the need to conduct a full review or produce a full, detailed statement of advice would likely be welcomed by all.

Another recommendation would be for an advice sub-segment limited to the basic products and services – an ‘advice-lite’ model.

Product manufacturers would be incentivised to launch low-cost products with capped fees and basic options. Driven by access to the larger volume retail segment, adviser firms can leverage technology to aid in the most costefficient distribution methods.

More streamlined and less onerous regulatory requirements could support the provision of limited advice. Reducing the educational and qualification requirements for advisers who service this segment would also benefit the industry.

Many advisers have exited the industry and firms are faced with a difficult choice – spend large sums of money recruiting and retaining experienced and qualified professionals or spending time to recruit, train, coach and develop unqualified or less qualified new industry entrants.

Due to the risk that these new entrants could subsequently move to another organisation, the commitment to training is a significant undertaking and financial risk. Allowing new entrants to service less-sophisticated clients with basic needs could partially subsidise this investment as the advisers develop.

Financial education needs to be woven into the fabric of Australian education. All consumers should have access to a basic education that highlights the benefits and importance of quality financial planning. If the Government can work with the industry, it is possible the worst impacts of a looming crisis could still be averted.

Eric Mellor is wealth management specialist, APAC, at Temenos.

10/05/2022 2:42:19 PM

22 | Money Management May 19, 2022

ESG

ARE SOME CAUSES WORTH BENDING ESG RULES? Russia’s invasion of Ukraine has caused a line of thinking that investing in arms can be ESG if it’s for a good cause, write Victoria MacLean and Claire Jervis.

EXCLUDING DEFENCE COMPANIES has long been common practice for responsible investors. At a minimum, most negatively screened ‘ethical’ funds exclude the controversial weapons banned under international law: for example, chemical weapons and cluster bombs. However, most funds take it a step further and exclude all companies (typically screened on the basis of revenue) involved in weapons manufacture, in line with the preferences of many underlying investors.

The invasion of Ukraine has shocked the world and spurred

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many countries to increase their spending on defence. Germany announced a €100 billion (AU$153 billion) spending package and a commitment to reach 2% of GDP spent on defence. Poland will raise its defence spending to 3% of GDP starting next year, and Lithuania, Romania, Sweden and Denmark have all announced dramatic spending increases.

Even in Australia, Prime Minister Scott Morrison announced a plan to increase the size of the Australian Defence Force by 30% over the next 18 years.

Whilst the reaction of these countries is not unexpected, it has

been fascinating to follow the conversations from within the investment industry about whether armaments could, or should, now be considered appropriate ESG, or even ‘impact’ investments. We have seen calls for the EU to recognise the defence industry as a positive contribution to ‘social sustainability’ under the EU Taxonomy, which has been convened by the European Union to define the ESG investment rules.

According to the UN Global Compact, social sustainability is about identifying and managing business impacts, both positive and negative, on people. Within

social sustainability, human rights is the main component that would be relevant to questions of defence. Protecting and promoting human rights would be seen as a positive contribution to social sustainability.

A recent report from Citi seems to indicate that they see no challenge in applying this definition: “Defence is likely to be increasingly seen as a necessity that facilitates ESG as an enterprise as well as maintaining peace, stability and other social goods.” Similar conclusions have been reached in the financial press: if something is obviously

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ESG

vital to maintaining peace how can it also cause social harm?

At Pengana, we find this approach astonishing. The defence function of governments is an important one and they rely on the private sector for components and equipment. But the social sustainability of their use will be entirely dependent on how a government manages its defence function. We don’t need to look too far into history to find examples of actions taken in the name of defence which have resulted in significant social harm.

Taking the view that weapons contribute to positive impacts that outweigh the harm is a challenging conclusion to reach in our view. Not only does it require analysis of the customer base, it also requires normative judgements of who are the good and bad actors, and which conflicts are justified.

We prefer to consider the issue from the perspective of risk of negative impact, rather than taking a normative view. With this lens it is very difficult to reach a conclusion of net positive impact from these activities given the inherently high risk of human harm, particularly given that the companies can’t influence their product’s end use.

CREATING POSITIVE IMPACT Investors have two main ways of creating positive impact: influencing the cost of capital; and engagement. These have evidence of success in climate and diversity. In the defence industry they risk being significantly less effective: Defence expenditure and budgets are set by governments and those spending decisions are likely to outweigh any impact on the cost of capital from investor decisions.

Secondly, private enterprise doesn’t influence defence

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strategy, it merely acts as part of the governmental supply chain. It is difficult to see how investors could have any influence over the use of these products to ensure they only achieve social good.

More importantly, it’s questionable whether we would actually want either capital markets or the companies themselves to have influence over defence decisions.

The debate has made clear that there is still a lack of clarity on the difference between impact and ESG investing. The latter is about risk mitigation and the sustainability of internal operations. Investors who choose to invest in the defence sector should certainly consider material ESG risks in their decision-making and engage on those matters.

Impact is about furthering social sustainability, and this is where it is hard to make the case for the defence sector.

This conflict is different. Its potential scale and the nuclear threat are unlike anything that we have seen in recent years. Who it’s affecting and our ability to identify with the victims of this crisis may also have played a role in the sudden emergence of the ‘defence is ESG’ claim.

But the need for defence is not new. Larger budgets may improve the growth opportunity and for some that will make defence a more attractive investment.

However, it doesn’t change the underlying principles of ESG and impact investing, and it doesn’t justify the conclusion that defence contributes to social good more so now than it did before this conflict.

OTHER ESG IMPLICATIONS There are many knock-on effects related to the invasion, including ongoing supply chain disruptions.

But the effect on oil and natural gas prices will have broader implications for companies and the global economy.

Combined, Russia is the largest net exporter of oil and gas in the world, earning $241 billion in 2021. Europe is its biggest customer, buying nearly half of Russia’s oil and three quarters of its natural gas exports last year.

Historically, fossil fuels have accounted for as much as 63% of Russia’s exports and a third of its federal budget. This cash has helped fund the military force that is currently destroying Ukraine.

Aware that Russia’s economy is propped up by its fossil fuel exports, America has already banned imports of Russian oil and gas. But, given the implications to its own economy and citizens, Europe has been unable to do the same – at least, not yet. Germany is particularly reliant on Russian energy imports – thinktank IMK has argued that halting Russian energy imports would cause a deep recession in Germany.

Nonetheless, European citizens are still paying a high price for its reliance on imported fossil fuels. 35% higher, to be precise, as the invasion of Ukraine adds fuel to the fire of an already deepening energy crisis. Clean and sustainable energy has always been an environmental priority for the EU. Now it is a political one as well.

In March, the European Commission unveiled RePower EU, a policy initiative which aims to achieve independence from Russian energy by 2030. However, Europe’s slow approval process may make this target unattainable. The permitting process in the EU is slow and over-complicated. In fact, it is the number one constraining factor on European wind development.

As the CEO of Vestas Wind Systems complained to WHEB last month – “It’s not lack of capital, we just need to get permitting going”.

If Europe can fix this issue, it may finally be able to deliver on

its pledge to install 451GW of wind capacity by 2030.

Meanwhile, in the US, President Joe Biden has announced several initiatives aimed at “achieving real American energy independence”.

These include a further $3 billion in funding for household efficiency and electrification upgrades and smart standards focused on more efficient home appliances and equipment.

The Biden administration tried and failed to pass big Cleaner Energy policies last year. Their mistake was to appeal to ideals of environmental justice and climate resilience that are simply not strong enough in America, the world’s largest oil producer. So they are changing the narrative.

American Cleaner Energy policy is now being framed as a battle between democracy and autocracy, in which America must compete to win.

Europe has always had big ambitions for environmental policy. The EU has so far failed to build capacity at a fast enough rate to meet its commitments, however. That looks set to change as Europe’s reliance on Russian power weakens its ability to respond to acts of atrocity and leaves its own energy security hanging in the balance. Europe can no longer afford to drag its feet.

Russia’s huge military and its invasion of Ukraine is largely funded by its fossil fuel exports.

While investing in armaments to help Ukraine seems a bridge too far regarding ESG, ending the West’s reliance on Russia through investments in clean and efficient energy is a much better bet, with undeniable ESG benefits, while potentially constraining an autocratic regime for years to come.

Victoria MacLean is associate fund manager and Claire Jervis is senior analyst for the Pengana WHEB Sustainable Impact fund.

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24 | Money Management May 19, 2022

Toolbox

KEEPING AN SMSF’S INVESTMENT STRATEGY ON TRACK There are specific requirements that only apply to trustees of self-managed superannuation funds, writes Tim Howard, including the allocation in their investment strategy.

SELF-MANAGED SUPER FUND (SMSF) trustees are ultimately required to take on many responsibilities. From being the decision point for all fund actions, to managing the fund prudently for the benefit of all fund members – all while being aware that they, as members, will not have access to any special compensation schemes or access to the Australian Financial Complaints Authority (AFCA) if something goes wrong. It’s a lot to take on, and a financial adviser can help trustees understand how both superannuation and tax law may apply in their circumstances.

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A key responsibility for any trustee is ensuring the fund has an investment strategy, which is appropriate, regularly reviewed and managed for the benefit of all fund members. An investment strategy is all about having a plan in place to manage the fund’s assets in a way that the trustees expect will meet the members’ retirement objectives.

Superannuation law specifically requires all SMSF trustees to ‘formulate, review regularly and give effect to an investment strategy’ that not only has regard to the whole circumstances of the fund, but includes the specific

considerations discussed below.

With this in mind, an investment strategy should not just be a document simply repeating the requirements of legislation, but a live document tailored to the relevant circumstances of the fund.

As circumstances change, so should the plan, to ensure things remain on track.

SPECIFIC LEGISLATIVE REQUIREMENTS While there is no prescribed format for an investment strategy, nor does it technically have to be in writing, a fund’s trustee(s) may have trouble demonstrating they

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Toolbox

have met their various legislative requirements without having documented evidence of this having occurred.

An investment strategy is required to consider the following specific factors: 1) The risks involved in making, holding and realising, and the likely return from, the entity's investments, having regard to its objectives and expected cash flow requirements; 2) The composition of the entity's investments as a whole, including the extent to which they are diverse or involve exposure of the entity to risks from inadequate diversification; 3) The liquidity of the entity's investments, having regard to its expected cashflow requirements; 4) The ability of the entity to discharge its existing and prospective liabilities; and 5) Whether the trustees of the fund should hold a contract of insurance that provides insurance cover for one or more members of the fund.

GUIDANCE FROM THE REGULATOR While these specific requirements provide direction to fund trustee(s), further guidance over time has been provided by the Australian Taxation Office (ATO) to help trustee(s) understand their responsibilities.

One of the first points which challenges trustees is the requirement to ‘give effect to an investment strategy that has regard to the whole of the circumstances of the entity’.

Giving effect simply means the trustee(s) have ensured the fund’s investments are held in accordance with the investment strategy and the investments and strategy remain on track to provide for the members’

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retirement goals and objectives.

ATO guidance suggests an investment strategy should be reviewed at least annually, with the trustees ensuring they document this review, including any decisions arising from it, to demonstrate they have met the requirement to ‘review regularly’ the fund’s strategy.

The fund’s auditor will also want to check each year that the SMSF has an investment strategy, the investments were held in accordance with that strategy, and the strategy has been reviewed.

Significant events may require the strategy to be reviewed more regularly than on an annual basis.

For example, where new members join or existing members depart the fund, the investment strategy may need to change.

Where a member commences a pension, or a lump sum benefit is requested, the fund’s investments may need to be restructured to manage the payment of a lump sum or to provide the ongoing liquidity needed to meet the regular pension payments.

Having regard to the composition of the fund’s investments, including diversification, is probably the next area trustees need to understand when it comes to formulating and managing the fund’s investment strategy. This requirement tends to raise such questions as ‘do my fund’s investments need to be diversified?’ or ‘is it appropriate if all my fund’s investable assets are invested in one single asset such as a property, or in a single asset class such as direct Australian shares?’

In late 2019 the issue of diversification was raised when the ATO issued correspondence to nearly 18,000 SMSF trustees who may have held 90% or more of their fund’s investment in one asset, or a single class of assets.

Ultimately the ATO’s correspondence was a reminder to trustees that they are responsible for ensuring the fund’s investment strategy meets the requirements under superannuation law. It also prompted trustees who had a high concentration in a single asset or asset class, to provide additional details in their investment strategy, or in notes accompanying the strategy, around why they consider their investments to be appropriate, in light of the legislative requirement to consider diversification as part of the investment strategy.

Alongside considering how the fund may discharge its existing and prospective liabilities, expected cashflow requirements is mentioned twice.

One of the more obvious situations where this consideration would become a reality is where the fund starts paying a benefit to its members, in the form of either an income stream payment or member benefit lump sum. The timing of such payments may be expected, such as when a member attains their preservation age or retirement, or at other times unexpected, such as a premature death benefit or disability income stream payment.

An SMSF also has an ongoing liability to manage annual tax payments, plus the associated operating expenses of the fund such as accounting, auditing and sometimes advice services fees.

Where an SMSF invests in direct property, the fund may have repairs, maintenance, and other ongoing operating expenses which need to be considered.

When the fund has borrowed to purchase an asset, such as a direct property, under a limited recourse borrowing arrangement (LRBA), meeting ongoing loan repayments need to be considered.

Continued on page 26

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Toolbox

CPD QUIZ This activity has been pre-accredited by the Financial Planning Association for 0.25 CPD credit points, which may be used by financial planners as supporting evidence of ongoing professional development.

Continued from page 25 The requirement to take into account the liquidity of the fund’s investments sits alongside considering cash flow requirements. Where the fund holds an investment which may not be immediately liquid, can the fund’s ongoing liabilities be met by the investment returns, such as rent or distributions; or are the regular contributions being made my members predictable and reliable enough to assist in providing the liquidity the fund needs?

The requirement for fund trustee(s) to consider whether they hold insurance for a fund member was enacted back in August 2012. Similar to the requirements to consider cashflow and diversification, there is no compulsion for a fund to hold insurance cover for a fund member; the trustee(s) simply need to consider whether it is appropriate or not to do so.

APPROACHING AN INVESTMENT STRATEGY While not specified how, trustees still need to demonstrate they have implemented their fund’s investment strategy. A common way to do this would be to include target allocations, generally percentages, to various assets or asset classes.

Alternatively, if asset allocation ranges aren’t chosen, a trustee could list the material assets of the fund in the investment strategy. Including a statement as to why investing in the nominated asset or assets will achieve the retirement goals of all fund members would be helpful to support such a strategy.

As the range of investments options continues to grow, the best way to look at where and SMSF trustee could invest is to look at it from the perspective of what is not allowed. A trustee is free to choose from virtually any type of investment, provided that the investment is firstly permitted, or not otherwise prohibited by the fund’s trust deed, is not prohibited under super law, and meets the sole purpose test.

Common considerations for SMSFs in this area often include the acquisition of assets from related party rules, in-house asset considerations, and non-arm’s length income and expenditure rules for income tax purposes.

Finally, what happens when an SMSF’s investment strategy is not compliant?

The ATO can take compliance action against trustee(s) when fund’s investments breach super laws, or when investment strategies don’t meet the requirements. The ATO has a range of measures to deal with non-compliance more broadly from education or rectification directions through to administrative penalties or disqualification of a trustee.

When it comes to a fund’s investment strategy, a breach that has not been rectified can result in a penalty of $4,440 for each individual trustee or the corporate trustee.

While the role of an SMSF trustee carries with it a number of responsibilities, the ongoing implementation and review of the fund’s investment strategy is essentially important from both a legislative and member outcome basis.

Tim Howard is a technical specialist at BT.

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1. Giving effect to a fund’s investment strategy simply means which of the following? a) Placing the fund’s investments. b) Signing the trustee meeting minutes indicating the proposed investment strategy has been accepted. c) Ensuring the fund’s investments are reviewed on an annual basis, or when a pension or lump sum is requested by a fund member. d) Ensuring the fund’s investments are held in accordance with the investment strategy and the investments and strategy remain on track.

2. It is a legislative requirement for an SMSF’s investment strategy to be in writing. a) True. b) False.

3. a) b) c)

How often should an SMSF’s investment strategy be reviewed?

At least annually.

Only when there is a change of circumstances for a fund member.

Only when the fund’s investments move outside the investment strategy because of market movements. d) At least every three years.

4. The requirement for an SMSF trustee to consider holding insurance for a fund member means which of the following? a) A trustee must hold insurance for all fund members. b) A trustee must consider whether it is appropriate to hold insurance for a fund member. c) A trustee must hold insurance for fund members in accumulation phase. d) A trustee must only consider holding insurance for a fund member if specifically requested to by that member.

5. When articulating their investment strategy, an SMSF trustee can take which action? a) They must include target asset allocation ranges in dollars or percentages. b) They must include a target rate of return. c) They can consider using asset allocation target ranges or listing the material assets of the fund. d) They must include a cash reserve allocation in the investment strategy.

TO SUBMIT YOUR ANSWERS VISIT https://www.moneymanagement.com.au/ features/tools-guides/ keeping-smsf-investment-strategy-track For more information about the CPD Quiz, please email education@moneymanagement.com.au

11/05/2022 3:42:35 PM

May 19, 2022 Money Management | 27

Send your appointments to liam.cormican@moneymanagement.com.au

Appointments

Move of the WEEK David Evans Executive chairman Evans & Partners

Evans & Partners founder, David Evans, will step down as executive chairman but will remain a substantial shareholder and contribute to the firm’s strategic direction as non-executive chairman, effective 1 July.

Evans’ announcement came a month after the Australian Securities and Investments Commission (ASIC) suspended the Australian Financial Services licence of E&P subsidiary, Dixon Advisory & Superannuation

Services Pty Limited (DASS).

Announcing his transition on the Australian Securities Exchange (ASX), Evans would be replaced by Tony Johnson who would step into the role on 1 June.

Rest appointed Joanne Lester as a director, hiring her for her experience in corporate superannuation.

She was appointed as an employee-representative, having been nominated by the Australian Retailers Association and would replace Catriona Noble who had joined Australia Post.

Lester had more than 30 years’ experience in corporate superannuation, predominately with ASX-listed firm Wesfarmers.

She had also served as an alternate director to the Rest board since July 2016.

background was in public, private and not-for-profit sectors and this was her first role in superannuation. She joined from the Southern Migrant & Refugee Centre where she was general manager of corporate services.

been chief executive of Aware Super since 2018. During her leadership, Aware Super had completed three mergers, undergone a rebrand and assets had grown from $71 billion to $155 billion.

Samuels was HESTA’s chief experience officer with responsibility for strategy, brand, marketing, customer and employee experience, insights and people and culture. She had also been a member of the FEAL Program Committee since 2018 and had completed the FEAL Masters of Organisational Leadership.

Australian Institute of Superannuation Trustees (AIST) appointed two executives to its management team.

Soula Konstantopoulos was appointed as general manager for finance and corporate services while Trish Curry was appointed as general manager for memberships and partnerships.

Curry had 25 years’ experience in superannuation including almost two decades at AustralianSuper, including five years setting up the fund’s UK entity in London.

Meanwhile, Konstantopoulos’s

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Abrdn has hired State Street’s Raf Choudhury to work as an investment director in its Australian multi-asset investment solutions business.

Choudhury was formerly head of investment strategy and researchAustralia at State Street Global Advisors (SSGA) and had worked at the firm for 17 years in the UK and Australia.

At Abrdn, he would play a key role in managing the firm’s Australian multi-asset funds and its managed accounts capability, a newly-created position for the business following client feedback.

The Fund Executives Association (FEAL), provider of professional development and education for fund executives, announced the appointment of Deanne Stewart and Lisa Samuels to its board of directors.

Stewart was director of the Association of Superannuation Funds of Australia (ASFA) and had

Small-cap fund manager OC Funds Management appointed Aaron Yeoh as senior investment analyst.

Yeoh would join OC from Cooper Investors where he was a research analyst responsible for Asian and global consumer brand companies. Before that, he worked in equity research for five years at Goldman Sachs in the emerging companies team.

At OC, he would be responsible for research and analysis of Australian small and mid-cap companies including in consumer discretionary, industrials and information technology. This

would be across the firm’s three funds; OC Premium Small Companies, OC Dynamic Equity and OC Micro-Cap. Cbus appointed a head of retirement and head of product governance to the fund.

Jon Sedawie was promoted from his role of head of product to become head of retirement while Craig Plain was appointed head of product governance.

Plain would join Cbus from Equipsuper where he was head of product and had worked for 15 years and would join Cbus in mid-May. Cbus said the head of retirement role was created to build a greater focus on the fund’s retirement offering and Sedawie would have a wide range of responsibilities including product development, member experience and retirement modelling.

Meanwhile, Plain would be responsible for the end-to-end process and controls used to design, launch and monitor products. It would also be responsible for product governance framework including rigorous policies, processes and systems to ensure alignment across a product’s lifecycle.

11/05/2022 11:17:29 AM

OUTSIDER OUT

ManagementMay April19, 2, 2022 2015 28 | Money Management

A light-hearted look at the other side of making money

The ‘not-so-great debate’ UNLIKE most of Twitter, Outsider enjoyed Channel Nine’s great debate between Prime Minister Scott Morrison and Opposition Leader Anthony Albanese.

He, at no point, found it to be an ‘absolute bin fire’ as one Twitter user called it, instead finding it rather endearing seeing two grown men verbally brawl in an indecipherable

mess of rhetoric, without any moderation.

In fact, the format of the ‘not-sogreat debate’, as Outsider’s wife coined it, reminded Outsider of his local bowling club of a Saturday, after a few schooners and his weekly roll-up.

There it is typical to see men arguing over which party could better manage an economy, with both parties unconsciously sprinkling in lies picked up from the tele.

Nothing should get in the way of partisan and ideologically-driven arguments that go absolutely nowhere, Outsider believes, as those are always the most fun.

Perhaps the same format should be used for a debate between Minister for Superannuation, Financial Services and the Digital Economy, Senator Jane Hume, and her opposition Stephen Jones?

While it might not end up being a particularly productive or meaningful debate, it would certainly be entertaining to watch.

What’s on the mennu?

WITH in-person conferences back in full swing, Outsider is making regular visits to the CBD. One benefit of conferences being in person again is that Outsider can treat himself to a free lunch, cake and a coffee.

Being brought one by Mrs O while he sat with headphones on in front of his laptop just wasn’t quite the same, although beggars can’t be choosers when it comes to meals.

However, while the food may be good, the organisers at these events could do with proofreading their menus.

At one conference, he was invited to ‘mornning tea’ while for lunch, it was prime rib with ‘green beads’.

With a lull in his workload, Outsider is willing to offer his services on a freelance basis as a spellchecker for these types of events.

His only payment request? An extra helping of food to enjoy with Mrs O when he gets back home.

A fair dinkum Aussie OUTSIDER was pleased to see his dear friend and Money Management colleague becoming an Australian citizen recently and was revved up at the thought of attending the ceremony.

Having a lot of things in common, including a passion for Australian politics, Outsider was proud to now call his friend a fellow Australian.

Rocking up with gifts in the form of a brand-spanking new Akubra hat and thongs, Outsider was first in line to congratulate his

OUT OF CONTEXT www.moneymanagement.com.au

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fair dinkum Aussie mate.

“How’s it going old mate? Do ya feel any more Aussie than before?”

Outsider asked.

“Not really?” replied Outsider’s freshly-crowned Aussie friend.

Throwing the gifts into his colleagues’ hands, Outsider asked the same question again.

“How about now?” he said.

“I think so?” the mate replied as he slapped on his hat.

Too bad old mate missed the deadline on enrolling to vote.

"Because of Russia's invasion of Kuwait"

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12/05/2022 10:24:23 AM