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MAGAZINE OF CHOICE FOR AUSTRALIA’S WEALTH INDUSTRY
FINAL EDITION
Vol. 36 No 10 | June 30, 2022
13
INFOCUS
A joint industry effort
END OF MM
18
35 years of Money Management
TOOLBOX
Accountbased pensions
The five priorities of the Quality of Advice Review
EQUITIES
BY LAURA DEW
PRINT POST APPROVED PP100008686
Equity opportunities … if you know where to look WHILE the Australian equity market has struggled in the first half of 2022 but there are multiple factors which suggest it is time for investors to be bullish. Contrary to concerns, experts said the stockmarket was priced normally at the moment, based on its historical earnings multiples, and was paying dividend yields of 4%, making it an attractive option compared to other global markets. Looking at specific sectors, banks were expected to be more profitable in a higher interest rate environment while mining majors would benefit from rising commodity prices in an inflationary environment. There was also the opportunity to add exposure in value and small-cap parts of the market. BlackRock managing director, Charlie Lanchester, said: “We find value across a range of sectors. In particular, we think small and mid-cap industrial stocks across a number of sectors look really interesting. “As often happens in times of dislocation, companies at the smaller end of the market can fall a lot harder than the large caps, because their liquidity is lower. It only takes one or two sellers to panic and those shares can move substantially lower. That’s where we are finding value.”
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Full feature on page 14
A JOINT association of 12 financial services organisations has highlighted five key priorities for the industry in its Quality of Advice Review. In its submission, the organisations agreed there were five areas that should be priority for the review to examine. 1) Recognising the professionalism of financial planners; 2) Addressing the needs of clients including easier-to-understand documentation; 3) Achieving regulatory certainty; 4) Improving sustainability of profession and practices; and 5) Facilitating open data and innovation. While the industry was in agreement in these issues, it was likely they would also make their own individual submissions.
Professionalism of financial planners The organisations proposed a simplified regulatory regime including eliminating the duplication between the registration and professional standards for advisers and the authorisation and obligations of the Corporations Act. Needs of clients Financial advice disclosure and documentation frameworks should be updated to ensure they are designed with clients’ needs at heart. This required a separation of what needed to be disclosed to the client in order to meet regulatory and consumer protection and the documentation of financial advice and recommendations. Continued on page 3
Australia’s life insurance industry announces new peak body BY LIAM CORMICAN
THE AUSTRALIAN life insurance industry is expected to launch a new industry body later this year known as the Council of Australian Life Insurers (CALI). A CALI spokesperson said the industry had undergone significant change, including policy reform and structural changes via industry consolidation following the Hayne Royal Commission, which meant it was time for a dedicated peak body to focus solely on matters affecting life insurers and their customers. The insurers noted that the Financial Services Council (FSC) had played a critical role in representing the life insurance industry during a period of significant change in Australian financial services over its time as the representative body. Continued on page 3
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June 30, 2022 Money Management | 3
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One-fifth of super funds to fail Choice performance test BY LIAM CORMICAN
ANALYSIS from SuperRatings predicts that approximately 20% of superannuation options will fail this year’s performance test due in August. Last year, the regulator found that 13 of the 80 products (16%) assessed were deemed to have underperformed the benchmark by more than 50 basis points. Since August when the results were released, 77% of these providers had announced their intentions to either merge or exit the industry. SuperRating’s analysis assessed over 650 options across trustee-directed products, including retail, industry, corporate, and government funds, excluding MySuper products and accounted for the industry’s performance to 31 March, 2022, using its newly-developed Performance Test IQ tool. “This year, we expect to see the second round of MySuper results likely causing some MySuper solutions to be prevented from accepting new members. This will be accompanied by the first
The five priorities of the Quality of Advice Review Continued from page 1
assessment of Choice options under the test,” the research house said. Breaking down the analysis further, all super fund option types were facing challenges. “Options with growth assets, such as equities, making up between 91%-100% of assets held were most likely to fail the test, with 26% of these options estimated as failing based on performance over the eight years to 31 March, 2022. Capital Stable options with between 20%-40% growth assets are also facing a challenge to pass the test, with around a quarter of these options estimated as failing,” it said.
Australia’s life insurance industry announces new peak body Continued from page 1
Regulatory certainty Planners were currently “going above and beyond” to reduce their risk, the working group said, as they were uncertain how laws would be interpreted. This was particularly hard for small businesses who were unable to absorb the increased costs. It recommended exempting simple strategies from Statement of Advice requirements, consolidation of advice fee authorisation requirements and temporary COVID-19 relief measures being made permanent. Sustainability of profession and practice Advice practices needed to be financially sustainable and attractive to new entrants in order to stem to tide of exiting advisers. For those practices which specialised in certain areas, regulatory conflicts needed to be removed while tax-deductibility of financial advice fees would help close the advice gap. Open data and innovation Standardisation of data under the Consumer Data Right (CDR) would improve access and affordability of advice and ensure consumer protections were preserved. All financial products should be included in the CDR.
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As the performance test captured investment returns over an eight-year period, funds had limited ability to shift their relative long-term position against the benchmark, according to SuperRatings. “However, with the test only accounting for the most recent level of fees charged, funds do have the ability to make fee changes to improve their performance test outcomes.” The research house also noted the significant impact there had been on the 13 products which failed the first performance test last year and highlighted the importance of considering nuances in different types of funds. The industry would be “closely monitoring” the second test results, it said, when they were released later this year. “Having an industry-wide benchmark gives funds a clear target with significant potential benefit for members, however ensuring the test is appropriately capturing the nuances of the range of investment options in the industry remains a challenge.”
The FSC had also been instrumental in the development of key initiatives such as the Life Insurance Code of Practice (LICOP) and establishing industry data collection and analysis. The CALI spokesperson noted the new industry body would seek to take over future responsibility of the LICOP as part of the transition arrangements with the FSC which had recently unveiled 50 additional consumer protections in the LICOP. CALI said it expected to continue to have a close working relationship with the FSC on a range of financial service matters. In addition to upholding existing industry standards and practices, CALI would initially be focused on: • Continuing to lift consumer standards within the industry through
professional standards and codes of conduct; • Advocating for Australians to have access to appropriate, affordable and sustainable life insurance protection throughout their lives; • Informing Australians and key stakeholder groups about the role and value of life insurance; and • Seeking opportunities for the industry to further contribute to the community. “Life insurance plays an essential role in Australia’s community and economy, and it is important that it remains accessible and sustainable for all Australians into the future,” CALI’s spokesperson said. “CALI will be the progressive voice of life insurance in Australia, focusing on what is important to consumers and making continuous improvements to meet those expectations.
“CALI will also look to foster and strengthen the knowledge and understanding of Australians on the value of life insurance and the importance of the benefits and protections it provides.” Recruitment was underway for a chief executive and staff at the organisation. FSC chief executive, Blake Briggs, said: “The FSC welcomes the formation of a sector-specific association that will collaborate with the FSC and compliment the FSC’s broader representation and advocacy on behalf of the financial services industry. “A priority for the FSC is ensuring continuity of consumer protections in the life insurance industry. The FSC and the life insurance industry are committed to the implementation of the new LICOP and ongoing independent oversight by the Life Code Compliance Committee.”
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4 | Money Management June 30, 2022
Editorial
laura.dew@moneymanagement.com.au
FE Money Management Pty Ltd
MOVING TO A NEW ERA
Level 10 4 Martin Place, Sydney, 2000
As the financial services industry moves into a new era, so does Money Management as it focuses on being a leading digital publication.
Editor: Laura Dew Tel: 0438 836 560 laura.dew@moneymanagement.com.au Journalist: Liam Cormican
AFTER 35 years, this will be the final print edition of Money Management. Launched in 1987 by Sunrise host David Koch, the magazine has been the pre-eminent publication for financial advisers and wealth managers ever since. Not only has there been the magazine, the brand has expanded to include websites, newsletters, awards such as the prestigious Fund Manager of the Year and conferences such as Platform & Wraps as well as the Super Review publication which launched a year later. No-one could argue that financial services is the same as it was in 1987 with the Hayne Royal Commission going a long way to making changes in the space, for better or worse. And no matter what industry challenge has presented itself, our magazine has been alongside advisers, informing and representing our audience on the things that matter. But as the financial services industry changes, so does the journalism landscape, and so we are looking forward to working with readers in a completely digital format going forward.
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
Subscription enquiries: www.moneymanagement.com.au/subscriptions
This will enable to us to provide content for readers unconstrained by print deadlines or page counts and cover all the latest news in a timely fashion. Some familiar features such as InFocus will still run online and we will also be developing new features for this online format. And what better time to make some changes than in 2022, an auspicious year with developments such as the Quality of Advice Review and the Australian Law Reform Commission’s (ALRC) financial legislation inquiry reshaping financial services. We
hope, as many of our readers do, that positive steps can be made following a four-year period of exams and compliance uncertainty. Our thanks goes to all former editors, journalists and Money Management staff for their work on the print publication over the last 35 years and we hope you will follow us on our digital journey on the Money Management website. We look forward to seeing you there.
Laura Dew Editor
WHAT’S ON North Queensland Financial Advice Roadshow
Economic update with KPMG economist, Dr Sarah Hunter
Annual AFA Quiz Night
IMAP Portfolio Management Conference
11-13 July Cairns, Townsville, Mackay afa.asn.au/events
13 July Online finsia.com/events
14 July Adelaide afa.asn.au/events
28 July Perth imap.asn.au
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6 | Money Management June 30, 2022
News
How many advisers passed the May exam? BY LAURA DEW
JUST over 40% of candidates who sat the May adviser exam have passed, according to the Australian Securities and Investments Commission (ASIC). Some 496 advisers sat the exam and 212 of those passed, representing 42.7%.
This was an improvement on the previous sitting in February when only 32% of candidates passed, the lowest of all the sittings. Almost three-quarters (72.2%) of candidates in May were resitting the exam for at least the second time while the remainder were new entrants.
The next round of exam sittings would be held on 28 July-1 August, 2022 and enrolments would be open from 20 June, 2022 until 12 July, 2022. The July sitting would be the final opportunity for advisers who were operating under the nine-month extension to pass the exam.
Industry defies ALRC’s retail client definition proposals THE industry has disagreed with proposals from the Australian Law Reform Commission (ALRC) regarding retail and wholesale clients, arguing the asset and income test exemptions are outdated and require indexation. In a webinar outlining feedback to its financial advice legislation inquiry, it discussed feedback it had received about the terms ‘retail’ and ‘wholesale’ client. In its original proposals in Interim Report A, the ALRC asked whether the definition of ‘retail client’ be amended to remove sub-sections regarding certain financial products or to remove the asset and income exceptions. It then asked what conditions should be applied to the sophisticated investor exception. Dr William Isdale, senior legal officer, said: “The ALRC received a great deal of support for some amendments in this area but not for the specific proposals we had outlined. In particular, stakeholders suggested the existing product value and asset test income exemption were grossly out of date. “This is because monetary thresholds specified [in the Corporations Act 2001] have not been updated to take account of rising asset values and inflation.
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“For example, there has been a 1,000% increase in the estimated number of households that meet the asset and income exceptions, so that the exceptions appear to have become arbitrary, outdated and inconsistent with underlying policies.” Instead, the industry had made its own suggestions included a simplification or alignment of the concepts of retail client and consumer across Federal legislation. Indexation would ensure threshold amounts for product value and asset income exemptions remained up to date. The scope of assets should also be limited to investable assets and exclude the person’s place of residence. Regarding the sophisticated investor exception, stakeholders felt it was “incredibly subjective” in its current form. Dr Isdale said: “[Law firm] Minter Ellison suggested the option of enabling clients to obtain a wholesale qualification by undertaking some sort of course of financial education. It was also proposed in some circumstances, people would self-certify as wholesale. The Advisers’ Association favoured a combination of both subjective and objective test to determine whether someone would satisfy the sophisticated investor exemption”.
Weekly adviser departures fall below 10 THERE was a notable improvement in the number of adviser exits in the week to 17 June with less than 10 advisers leaving. In weekly figures from Wealth Data, there was a net change of nine advisers from 16,544 to 16,535 advisers. This compared to 89 advisers in the previous week and followed a troubled four weeks with about 500 advisers leaving the profession. Some 21 licensee owners had net gains of 25 advisers while 33 licensee owners had net losses of 38 advisers while two new licensees commenced. In positive news, six provisional advisers commenced including two at William Buck and there were signs ceased advisers were returning. Colin Williams, founder of Wealth Data, said many firms would have lost established advisers in the ‘adviser exodus’ and there were now signs of improvements as they sought to recruit. “We have seen this year that many advisers are finding their way back into advice after some time away. “It makes sense for firms to be hiring ceased advisers who are qualified. After a massive fallout at the end of 2021, many firms will have lost established advisers and now need someone who is qualified to service existing clients. “The alternative is to start new ‘provisional advisers’ but as we know, it can be a slow process to get them up to speed.” The most significant reduction in advisers came from the closure of 13 small licensees, accounting for 15 advisers. Other losses by licensee owners included Christopher Maceachren (Wealth Trail) and FSSSP (Aware Super) which were down two each. In growth, William Buck (NSW) led, adding three advisers with two being provisional advisers. Steinhardt Holdings (Infocus) was up by two advisers, with one formally joining from ANZ and one from Charter. Count Financial was also up by two advisers, with one coming from Skybridge and another being a new provisional adviser.
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How can advisers reduce their PI risk? BY LAURA DEW
STARTING months in advance, demonstrating solid risk management and keeping a detailed complaints registry are among tips for advisers when it comes to obtaining professional indemnity (PI) insurance. It was becoming more difficult and costly for advisers to obtain insurance as insurers were exiting the PI market with AIG announcing it would exit in September. Speaking at a FPA roadshow in Sydney, David Martin, director of professional lines insurance at insurer AB Phillips, suggested tips for how advisers could reduce their risk. “They don’t want to see a blank complaints registry because they implies you aren’t recording them correctly. They want to see what you are doing with the complaints registry and how you are addressing complaints. “They want to see a strong investment committee to show you are managing risk well, controlled growth and good operational controls. They will be sceptical if you are growing rapidly.”
Dean Pinto, partner at law firm Wotton and Kearney, said they wanted to see complaints were being dealt with quickly and transparently, including disclosing any past events to the insurer at the outset as this would help at the back end when processing the claim. “They also want to see regular reporting to the board, you can’t rely on the insurer to carry the risk, you have to show you are nipping any activity in the bud straightaway.” Finally, Martin recommended firms started the renewal process early in case a claim was declined. This could be as much as four months early for a large licensee. “Start the process really early, underwriters are obligated to give you 14 days notice if they aren’t going to renew and if you find out 14 days before renewal that you haven’t got an underwriter then you probably not going to find one [in that timeframe]. “What you need to be doing is if you’re a mid-sized firm, start the process two months earlier and if you’re a large licensee, then start it three or four months earlier.”
SIAA suggests ‘strategic advice’ definition THE Stockbrokers and Investments Advisers Association (SIAA) has defended the title of ‘general advice’ and refuted suggestions it should be changed to ‘information’. In its submission to the Quality of Advice review, SIAA said re-labelling general advice failed to take into account the fact that it must contain a recommendation or opinion and that general advice was an important part of the advice spectrum. “Further clarity in the law is needed on the line between both personal and general advice on the one hand and what constitutes factual information on the other.”
This was particularly relevant for SIAA’s members as it would affect their production of research reports on listed securities, which were currently classed as general advice, and there were concerns investors would dismiss ‘information’. “Investors are unlikely to ascribe value to material that is defined as ‘information’ as they would consider that they can obtain that themselves on the internet. “There will be a cohort of consumers that either don’t want or can’t afford personal advice. However, they may wish to access general advice. There will also be
a cohort of consumers who are happy to receive general advice or no advice for a certain period of time and then ‘jump in’ and receive episodic, personal advice when it suits them.” Instead, SIAA suggested there could be a category called ‘strategic advice’ which would be separate from financial product advice to accommodate the reduced risk of consumer detriment associated with this type of advice. This would include advice on areas such as budgeting, home ownership or the Centrelink pension or advice to small businesses that included financial strategic advice.
The delineation between the various terms would also help the industry to understand where to draw the line regarding ‘finfluencers’, those who offered financial information on social media. “Increasing the financial literacy of Australians is important, but those doing so on social media require clarity as to the line between both personal and general advice on the one hand (and why such advice requires licensing, qualifications in the case of personal advice and ongoing CPD) and factual information on the other.”
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8 | Money Management June 30, 2022
News
Firm fined $1.7m for charging deceased estates BY LAURA DEW
A former subsidiary of Commonwealth Bank has been penalised $1.7 million for failing to update defective disclosure statements. The defective disclosure related to the charging of fees to superannuation members after their death, when it was known that Avanteos, which traded as Colonial First State Custom Solutions, did not have lawful authority to do so.
ETF Securities acquired by Mirae Asset ETF Securities has been acquired by Mirae Asset and Global X ETFs for an undisclosed sum. The firms said the acquisition provided an opportunity for Mirae Asset and Global X to add instant scale in the Australian market. They also said ETF Securities’ product line-up of thematic, commodities and digital assets complemented their offerings. The acquisition brought Mirae’s assets under management to $85 billion. “We are incredibly excited to enter the Australian market and to meaningfully expand our global ETF footprint through the acquisition of ETF Securities’ inventive business,” said Byungsung Lee, chief executive of Mirae Asset Global Investments. “This acquisition underscores Mirae Asset’s continued commitment to maintaining industry-leading ETF businesses in key markets around the world and brings immediate scale to our operations in Australia.”
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The Australian Securities and Investments Commission (ASIC) found 499 deceased members with funds in Avanteos superannuation products were charged $700,000 in fees when the firm was not entitled to do so. The organisation was convicted and penalised a total of $1,710,000 by the County Court of Victoria. It had pleaded guilty to 18 counts in December 2021. Avanteos had remediated all affected customers’ estates.
ASIC deputy chair, Sarah Court, said: “This is the first criminal prosecution for failing to update defective disclosure statements, and it should be seen as a warning to the industry to act on advice and rectify problems quickly, or face possible criminal action. “This matter was particularly serious because senior managers within Avanteos were aware that it did not have the authority to deduct fees from its members after their death. “Despite this knowledge, there were no changes made to Avanteos’ disclosure documents and the unlawful fees continued to be charged for over two years.” Avanteos was a wholly-owned subsidiary of the Commonwealth Bank of Australia when the misconduct occurred. Since 1 December 2021, KKR has been the majority shareholder of Avanteos. Avanteos’ conduct was the subject of evidence given at the Financial Services Royal Commission. The matter was prosecuted by the Commonwealth Director of Public Prosecutions after an investigation and referral by ASIC.
Expect two more years of M&A in super: APRA THE Australian Prudential Regulation Authority (APRA) has confirmed it is expecting to see a rapid pace of consolidation occur over the next two years. Speaking at the Australian Superannuation Investment conference, held by the Australian Institute of Superannuation Trustees (AIST) in the Gold Coast, Geoff Stewart, head of investment risk at APRA, said he expected the current pace would continue. There had been a huge wave of merger activity in the past year which had created ‘mega funds’ such as the merger between QSuper and Sunsuper to create the
Australian Retirement Trust which had over $230 billion in assets under management. Stewart said the regulator was looking at the future of superannuation over three distinct time horizons; one where the pace of mergers continued, one of a period of stability and then one of an environment with few large funds. Stewart said: “The industry will change fairly rapidly over the next two years as the current trajectory continues then there will be a period of settling down for the few years after that where there’s more consolidation and peace of mind and the industry will become more familiar. “The focus will move to the Retirement Income Covenant, what the strategies produced will encompass, how that dovetails with current product ranges and what might be offered in the future. “Beyond that, you will be looking at a range of bigger funds but we’ll have fewer funds and they’ll be no doubt more impactful on investment markets directly.” He said there were three areas APRA was encouraging super fund trustees to consider; liquidity management, stress testing and unlisted assets.
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News
Overseas insurers hesitant to insure Aussie financial advisers BY LAURA DEW
THE Australian financial advice industry needs to demonstrate to overseas insurers that it has improved or face increased professional indemnity costs. Speaking at the FPA roadshow in Sydney, Dean Pinto, partner at law firm Wotton and Kearney, said actions prior to the Royal Commission had deterred insurers from insuring financial advisers.
It was becoming more difficult to obtain insurance as insurers were exiting the PI market with AIG announcing it would exit in September, following previous exits by Dual Australia and Vero. “There is a genuine concern around insuring financial advisers and large dealer groups, the focus is on past losses by authorised representatives. There is a greater risk when insuring financial advisers.
“There are a lot of mum and dad investors in Australia, a higher number than globally, which gives insurers cause for concern that once the COVID support is stopped, there will be a growing number of claims to follow.” David Martin, director of professional lines insurance at insurance broker AB Phillips, added: “We’re getting to a point where underwriters are becoming very, very selective and that adds another dimension
to the scarcity of capacity”. The biggest challenge, Pinto said, that was deterring insurers was rogue operators who were leading to costly claims, although Pinto acknowledged many of these advisers or firms had since left the market. “Rogue operators are the obvious source, some insurers cannot make those losses back so they have decided to exit the market. One bad authorised representative (AR) can cost a lot especially if the advice model is a one-size-fits-all model or a cookie cutter approach, that can be costly.” He said there had been a lot of regulatory change in Australia lately but, overseas some “were more aware of it than others”, putting the onus on Australia to demonstrate how it had improved. “Financial planners need to help educate their insurers on the steps that have been taken to improve regulation and compliance. They are not all across that overseas, that there have been these improvements.”
Central bank jawboning is effective only with credibility BY LIAM CORMICAN
THE Reserve Bank of Australia has a “harder road to hoe” than the Federal Reserve in terms of jawboning the economy downwards as it is “losing credibility”, according to QIC’s chief economist. Speaking at the Australian Superannuation Investment conference, held by the Australian Institute of Superannuation Trustees (AIST) on the Gold Coast, Dr Matthew Peter, QIC chief economist, said central bank jawboning was “incredibly effective”, as long as the central bank had credibility. He said RBA governor Philip Lowe’s previous messaging that interest rates would remain at around zero until 2024 was effective jawboning because it was believed by the market. “So it is incredibly powerful, but it’s only powerful as long as the central bank has credibility,” Peter said. “At the moment, the Fed still has credibility in my opinion. The RBA less so. That’s where
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the RBA gets itself into difficulty.” Peter said the RBA had lost credibility after being forced out of a zero-interest rate position, losing yield curve control and anchoring the three-year yield to zero. “They gave really mixed messages about where they were taking interest rates after that, instead of just saying, ‘yeah, we’ve got to tighten…’ which they should have done last year. They’ve dilly-dallied around.” Peter was cautiously supportive of the ability of central banks to facilitate a soft landing but said the US would have an easier experience at achieving it than Australia. “When we look at the consumer, the balance sheets are really strong. In the US and Australia, net wealth is at an all-time high. And you say ‘but aren’t equities rolling up and bringing net wealth down? “It’s bringing it down in the US from 800% of disposable income maybe down to 740%. Prior to COVID net wealth was sitting at 700%.
“Savings rates are high. In the US the amount of deposits that households are holding is at $14 trillion - up from $10 trillion before COVID-19. “You’re also looking at very low debt levels in the US - the household debt to income ratio there is 75%. “So you’ve got a lot of conditions that are very supportive of being able to support the household sector both in the US and in Australia - perhaps less so in Australia. “I think that they will back off on rate hikes once they see the economy starting to slow in inflation stabilising.” Peter said a soft landing in Australia would be a “hard road to hoe” partly because Australian consumers were in a slightly worse position and partly because the RBA was losing credibility. “So they’ve got to really be strong now in terms of their jawbone, let’s call it, to the market.”
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News
The questions ASIC hope will stop fund greenwashing
Insignia Financial shakes up asset management model
BY LAURA DEW
BY LIAM CORMICAN
THERE are nine questions that fund managers need to consider when launching a fund in order to prevent greenwashing, according to the Australian Securities and Investments Commission (ASIC). The regulator had announced a crackdown on greenwashing to prevent investors being misled by products that purported to be sustainable. If funds failed to met the below criteria, it could be find they had breached the Corporations Act 2001 regarding false or misleading statements or by engaging in dishonest, misleading or deceptive conduct in relation to a financial product or financial service. This particularly arose when representations were made about future matters that were unsupported with reasonable grounds, the regulator said. For example, if a fund that stated it would achieve a carbon emission target by a particular date. Meanwhile, the product’s Product Disclosure Statements were required to describe the extent to which labour standards or
INSIGNIA Financial has announced the completion of the next stage of its asset management integration, developing a simplified model with two distinct investment streams. The firm also announced MLC chief investment officer, Jonathan Armitage, would be leaving the business. The first investment stream combined the management of diversified multi-asset strategies under a sole chief investment officer, Dan Farmer. The second would separate out directly-managed single asset class strategies under Jason Komadina, general manager for direct capabilities and specialist investment services. The wealth management firm said the new model integrated similar investment teams while also enabling focus on each investment capability. Garry Mulcahy, chief asset management officer of Insignia Financial, said: “We have retained exceptional talent and deep expertise within our investment teams, providing continuity for clients and key stakeholders. “We have taken the time to deeply understand the combined investment capabilities. One year on from MLC joining Insignia Financial, we are bringing together the IOOF and MLC investment teams. “The first investment stream brings our diversified multi-asset portfolios under a single CIO, allowing for dedicated focus on multi-asset strategies. The second stream separates out directly managed single asset class strategies of Antares Equities, Antares Fixed Income, and Property, and couples that with our managed account capabilities and specialist investment services. “These changes will provide clear accountabilities, governance, and alignment around investment outcomes. Mulcahy said Insignia was delighted to announce Farmer as CIO. “Dan is a seasoned investment professional with over 30 years’ experience in investment markets and has been CIO at IOOF since 2017. He will be responsible for overseeing the investment management team and the performance they deliver to our clients.” He said Armitage would be leaving the business to pursue the next stage of his career. “We would like to thank him for his commitment and invaluable contribution over the past 11 years, helping to build a great team whilst delivering strong investment outcomes for our clients. Jonathan’s focus on attracting and developing investment talent has put us in a very strong position to develop and grow our business.”
environmental or ethical considerations were taken into account when selecting, retaining or realising investments related to the product. ASIC’s questions were: • Is your product true to label? • Have you used vague terminology? • Are your headline claims potentially misleading? • Have you explained how sustainability-related factors are incorporated into investment decisions and stewardship activities? • Have you explained your investment screening criteria? Are any of the
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screening criteria subject to any exceptions or qualifications? Do you have any influence over the benchmark index for your sustainabilityrelated product? If you do, is your level of influence accurately described? Have you explained how you use metrics related to sustainability? Do you have reasonable grounds for a stated sustainability target? Have you explained how this target will be measured and achieved? Is it easy for investors to locate and access relevant information?
How many advisers would benefit from experience pathway? RESEARCH by Wealth Data has compiled the total number of advisers who have enough experience to qualify for the proposed experience pathway. The experience pathway was proposed by minister for financial services, Stephen Jones, last year and would allow advisers who had 10 years of experience as a financial adviser in the last 12 years to only complete a tertiary level unit on the code of ethics. However, it was expected the pathway would have some additional constraints by the time it was enacted following feedback from industry associations.
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According to Wealth Data, 63.1% of all advisers had a commencement date of before 2012. Financial planning, specifically, had a higher percentage at 66.5% while investment advice had 67.9%. Accounting-limited advice (SMSF advice) had the least-experienced advisers at only 12.5% as most had commenced post-2016. When broken down by licensees in the financial planning business model, 89.4% of advisers in the single-adviser licensee category had commenced before 2012. Licensees with between five and nine advisers had the lowest rate at 58.2%.
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12 | Money Management June 30, 2022
News
APRA warns on impact of repeated performance test failures BY LAURA DEW
FUNDS which fail the Your Future, Your Super performance test for two consecutive years will be unable to accept any new beneficiaries until they pass a future test, according to updated guidance. In the information from the Australian Prudential Regulation Authority (APRA), it said Registrable Superannuation Entity (RSE) licensees were expected to ensure they complied with obligations to prevent new beneficiaries from holding the product on and from the day the second fail notification was received. This would be in place until the fund had passed a future performance test.
ASIC makes second Spaceship Capital ban SPACESHIP Capital director and chairman, Paul Ernest Dortkamp, has been banned from performing functions as an officer and responsible manager of a financial services business for two years. The Australian Securities and Investments Commission (ASIC) found Dortkamp, of Caringbah South, NSW, failed to understand the financial services offered by Spaceship under its licence. Spaceship was the promoter of the Spaceship Super Fund which is issued by Diversa Trustees Limited as trustee of the Tidswell Master Superannuation Plan. Specifically, in late 2018 and early 2019, Dortkamp failed to take the necessary steps in relation to a fault in Spaceship Super Fund’s consumer onboarding system in a timely way. The fault resulted in an unknown number of members being assigned to the incorrect superannuation product. This was because he had incorrectly concluded it was not Spaceship’s responsibility nor his responsibility to deal with the fault, ASIC said this was a “fundamental oversight” for someone in his position. As a result, ASIC decided he was not competent to perform functions as an officer or responsible manager of a financial services business. He had the right to appeal to the Administrative Appeals Tribunal. This was the second banning for Spaceship after former chief executive, Paul Kevin Bennetts, was banned for six years in January for dishonestly obtaining his Australian Institute of Company Directors qualification.
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Any contributions received from or on behalf of persons who were not holding the product before that day of the second fail notification would need to be returned. Licensees of MySuper products were expected to ensure their stakeholders and
employer-sponsors were aware that this was a possibility if the fund failed for a second time. The regulator said it would provide a written notification to licensees of their performance test prior to publication of results at the end of August but that the gap would be short. Notice would then need to be given to beneficiaries who held the product within 28 days. “Recognising that the timing between the running of the performance test and notification is short, APRA’s ability to provide any results in advance of publication is limited. However, provisional results will be provided to RSE licensees ahead of publication where a product appears likely to fail the test.”
Claiming deductions post-work test changes BY LIAM CORMICAN
CLIENTS are still going to need to meet the work test if they want to claim a deduction for a personal contribution despite the removal of the work test for voluntary contributions to superannuation up to age 74. Speaking to Money Management, Tim Howard, BT advice technical and regulatory, said one of the main questions he had been receiving from advisers was about the implications of the change in process from this financial year to next around claiming a deduction for personal super contribution. He said clients who had declared to have worked this financial year and were able to claim a deduction would be impacted most. “Now previously, this [financial] year inclusive, the trustee of the super fund had to be satisfied so the declaration that the member was signing, effectively stated that ‘yes, I’ve met the work test this year so the trustees therefore able to… accept my contribution’. “Whereas from next year, the trustee of the super fund doesn’t need to check or doesn’t need to be satisfied the client’s met the work test – it’s the ATO that needs to be satisfied that they’ve met the work test, in order to claim the deduction. “So they’re still going to need to lodge their Section 290 form with the trustee, the trustee is still going to need to acknowledge that they’ve received that form and the intent to claim a deduction for it, they’re still going to have to put the deduction in their tax return.”
In essence, the client would need to declare to the ATO that they had met the work test this financial year but they could make the contribution before meeting the work test. “Whereas at the moment, you need to meet the work test before making the contribution. “So it’s a bit of a timing difference there but the outcomes are sort of the same. “But because the need to meet the work test has moved from the superannuation legislation, and is now in the income tax legislation, there’s just a little bit of a difference around when that work test has to be met. “Not before the contribution, just anytime in the financial year.” “I think the impact it makes is that if a client isn’t working, they make a voluntary contribution. It’s going to be a non-concessional in the first instance. “But then after making that contribution, they find themselves meeting the work test, then the opportunity will open up that they can claim a deduction for part of that contribution if they wish, whereas previously whether the super fund trustee was checking compliance with the work test, they actually couldn’t contribute in the first instance, without meeting it. “So I think it created a bit more flexibility around contributions and around the ability to claim a deduction for those contributions.”
22/06/2022 4:27:45 PM
June 30, 2022 Money Management | 13
InFocus
A COLLABORATIVE PUSH FOR THE QUALITY OF ADVICE REVIEW The major associations have thrown their weight behind a joint submission to the Quality of Advice Review, Liam Cormican writes, arguing for a more consumer-focused approach. THE JOINT ASSOCIATIONS Working Group (JAWG), a collaboration of leading financial services industry associations, has joined forces to push for common goals in a submission to Treasury for the Quality of Advice Review. Calling for a more consumerfocused regulatory approach, reduced costs, and greater recognition of professional judgement, the joint submission made several key recommendations which this InFocus will unpack. The 12 organisations were: • The Association of Financial Advisers (AFA); • Boutique Financial Planners (BFP); • Chartered Accountants Australian and New Zealand (CA ANZ); • Certified Practising Accountant Australia (CPA); • Financial Planning Association of Australia (FPA); • Financial Services Council (FSC); • The Financial Services Institute of Australasia (FINSIA); • The Institute of Public Accountants; • The Licensee Leadership Forum; • The Self-Managed Superannuation Fund Association; • The Stockbrokers and Investment Advisers Association (SIAA); and • The Advisers Association The collection of associations broke their joint submission down into five key themes or priorities which it hoped would improve the accessibility, affordability and quality of financial advice for consumers. These were: • Consumer focused – putting consumer, customer and client needs first;
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• Recognition of professionalism – recognising financial advice as a profession and financial advisers as professionals; • Regulatory certainty – ensuring the regulation and enforcement of the law are consistent; • Open data and innovation – standardising and sharing data to remove duplication and reduce rework; and • Sustainability – ensuring the sustainability of the financial advice profession and practices, with a focus on continuous innovation and improvement. The intent was to have deliverable actions with outcomes, some in the short term (12 months or less from the final report) and some in the medium to long-term (13+ months). The group’s submission stated the introduction of the financial planner and financial adviser professional standards which asked financial advisers to become professionals had been a successful development.
“Data from ASIC and AFCA has demonstrated that the combination of reforms such as the Future of Financial Advice (FOFA), Life Insurance Framework (LIF) and the professional standards framework have significantly improved the overall quality, education standards, competency and compliance of financial advisers.” However, the organisations felt the Government and regulators still appeared to have taken the view that financial advice should remain a highly-regulated environment which relied on black letter law and legislative instruments. This was despite advisers being viewed as trusted and valued professionals by their clients and improvement being demonstrated by decreased complaints. This was why the working group had specifically focused on tackling the complex, inconsistent and costly regulatory environment where licensees and advisers were fearful of making even minor errors.
The submission therefore made several recommendations and observations that included: • A regulatory regime that supported an advice process aligned to professional judgement and the situations of individual consumers guided by professional standards, as opposed to compliance with prescriptive regulation. This had several advantages including lower compliance costs via a risk-weighted approach to advice outcomes, and recognition of the advice sector as a profession. • The removal of the safe harbour steps from the Corporations Act, and clarity on what is needed to satisfy the Best Interests Duty must be provided. • Open data and the sustainability of the financial advice sector were prerequisites to improving access to affordable quality professional advice and encouraging innovation in the sector. There was a significant amount of unnecessary waste in the system, the group said, that led to additional cost, time and resource requirements for consumers and advice providers. Much could be reduced or eliminated through access to up-to-date and reliable data that was already available within the financial services ecosystem. • A profession-wide position on the tax-deductibility of initial and ongoing advice fees and a review of the ASIC industry funding model are needed. • Retention of professional standards and education requirements while reviewing the one-size-fits-all education pathway with respect to current and potential advice specialisations and business models.
22/06/2022 12:21:23 PM
14 | Money Management June 30, 2022
Equities
EQUITY OPPORTUNITIES … IF YOU KNOW WHERE TO LOOK
Investors are keeping an eye on three factors in markets, writes Alexandra Cain, which could drive help to positive equity performance in the second half of 2022. THE AUSTRALIAN EQUITIES market has exhibited substantial volatility through 2022 thanks to uncertainty about a range of micro- and macroeconomic elements. Nonetheless, investor sentiment remains bullish. But they are keeping an eagle eye on a range of factors that have the potential to drive the performance of shares for the remainder of 2022. As daily headlines across the business press indicate inflation, interest rates and geopolitics are the three main economic drivers investors are watching.
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BlackRock managing director, Charlie Lanchester, said the team is monitoring inflation across the economy. “It’s not as rampant here in Australia as it is in other parts of the world, particularly the US. But it is still early days, so it will be interesting to see just how persistent and endemic it becomes in the next six months.” Consensus indicates local headline inflation will reach 6% in 2022 against underlying inflation of around 4.75%, before easing to around 3% by mid 2024. CEO of Redpoint Investment
Management, Max Cappetta, agreed inflation will be the critical factor for markets over the next six months. “Higher and less transitory inflation will require already-lagging central banks to tighten monetary conditions with the real risk of tipping the global economy into recession in 2023. If inflation has already peaked, there is a chance a recession could be avoided. In this event, interest rates and monetary stimuli will be normalised back to pre-COVID levels, while a loosening of current supply chain issues will support ongoing growth with modest inflation.”
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June 30, 2022 Money Management | 15
Equities
Lanchester said the determining element when it comes to interest rates’ impact on markets will be how fast they rise here and across the world. “The bond market has already priced in a reasonably aggressive step-up in rates. What’s key is the effect on consumer behaviour. The transmission effect of rising rates is much more immediate in this country, because many people have variable rate mortgages. So, their cashflows will change almost immediately as rates go up. We shall see what effect that has on the underlying economy.” There are various views about the direction of the cash rate. CBA expects the cash rate to be at 1.35% by year’s end, peaking in February 2023 at 1.60% and then on hold over 2023. In contrast, NAB says the cash rate will reach 0.75% by the end of 2022 and reach 1.25% by mid-2023. Lanchester observed the stockmarket is predicting consumer spending will weaken even though unemployment is at record lows. The unemployment rate reached a low of 3.9% in April 2022. Geopolitical risk is the third issue weighing on investors’ minds. “Markets are observing the events in Ukraine and whether there is an improvement or a deterioration in this situation. This has flow-on effects for inflationary pressures across soft commodities, as well as oil and gas,” he said. China’s pursuit of a zero COVID policy is another geopolitical hot button, said Lanchester. “This has prompted shutdowns of parts of one of the world’s largest economies, adding to inflationary pressures. Just how that develops over the next six months is critical for companies and economies.”
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SECTOR PERSPECTIVE Markets have displayed clear sectoral bias over the past six months. Investors have been long resources stocks, which tend to do well in an inflationary environment, and short technology shares, particularly companies that don’t yet make a profit. This is because with interest rates rising, the discount rate has risen and the value of technology shares has fallen as a result. Analysts use the discount rate, the interest rate used in discounted cashflow analysis, to work out the value of a company’s future cashflows. Lanchester cautioned, however, against taking an overlysimplistic, helicopter view of markets. “That’s a very top-down way of looking at the market, particularly with the falls and rises we’ve seen recently. It’s much more interesting to be more stockspecific. We find value across a range of sectors. In particular, we think small and mid-cap industrial stocks across a number of sectors look really interesting. “As often happens in times of dislocation, companies at the smaller end of the market can fall a lot harder than the large caps, because their liquidity is lower. It only takes one or two sellers to panic and those shares can move substantially lower. That’s where we are finding value.” For instance, certain mining service companies are attractive, except those with fixed price contracts. Additionally, selective technology names are of interest. Companies that have been consigned as loss-making and aggressively sold off this year, but which are actually on track to be cashflow positive, are still
exhibiting excellent levels of growth and display proven business models. “Unlike the tech boom of 1999/2000, we think there are some interesting names in that part of the market,” said Lanchester. Cappetta agreed companies with strong operating positions, which are profitable, growing and paying dividends, may be safe havens for investors. “This points to sectors where consumer spending is expected to remain robust regardless of tighter economic conditions. These include utilities, telecommunications, banking, consumer staples and healthcare.” Financial services should also benefit in this environment, said Tony Davison, managing director of and financial adviser with Pride Advice Sydney. He agreed market conditions favour resources stocks. “Banks are showing signs of resilience and this is likely to continue in the near term. While a global slowdown due to rising interest rates is advancing, commodity prices should be beneficiaries of an inflationary environment. “We think the sector, particularly the mining majors, are well positioned to take advantage of conditions in the near and medium term. In principle, banks, should be more profitable in a higher interest rate environment, as long as impairments remain low and the majors are operationally sound.” As for sectors on the decline, Ray David, portfolio manager for Schroder’s Australian Equity Long Short fund, noted the consumer discretionary sector is facing significant headwinds. This is due to a thriftier consumer, given the absence of the pandemic-induced, government
Continued on page 16
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16 | Money Management June 30, 2022
Equities
Continued from page 15 stimulus that brought forward consumption for household items over the past few years. “Discretionary retailers face challenges with supply chains and reduced access to inventory, which is impacting forward planning. Embedded CPI escalators in lease agreements and union pressure to lift award rates in line with CPI could see fixed costs rise at the fastest pace since the pandemic, putting further pressure on this sector,” he explained. Generally, however, investors expect local equities will remain attractive in the medium term, unforeseen events notwithstanding. “The dividend yield and value of our market relative to other assets is likely to be a significant driver of shares over the remainder of 2022. Compared to the income returns of other investments, Australian shares still look fairly attractive,” said Chris Brycki, founder and CEO of Stockspot. Data backs this up. Despite rising interest rates, cash, term deposits and Australian government bonds still only deliver a return of between 0.5% and 2.5% a year. Residential property rental yields in major Australian cities aren’t much better at 2.7% a year, according to SQM Research. Also, most global stockmarkets are only paying 1%-2% in dividend income. Comparatively, the Australian stockmarket has an attractive dividend yield of 4%, which reaches close to 5% with franking credits. “In fact, the extra dividend return received from investing in Australian indexed shares compared to the RBA interest rate hasn’t looked as good for 20 years,” Brycki said.
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Furthermore, from a historic perspective, the Australian stockmarket looks normally priced at the moment, based on its earnings multiple. “The market price-to-earnings multiple, known as the price-toearnings ratio, measures the market index divided by market earnings. It’s a quick and easy way to see how much investors are prepared to pay for earnings. “A higher P/E means people are willing to pay more for earnings. That could be because they’re confident in those earnings growing or simply because alternative investments like cash or term deposits don’t offer much of a return. The Australian market, measured by the ASX 300 is currently near its long term historical average of 14.8 times earnings,” he noted. Risks abound, however. For instance, Davison noted the rapid decline in the Australian dollar
since the beginning of April may have further to play out. He also said it’s important to look beyond these shores when forming investment views. “Global inflation significantly impacts the Australian market. When it comes to interest rates, where rates go in the US, Australia will go to some extent. So it’s important to see our market in a global context.” The elephant in the room is ongoing COVID-19 disruption. As recent COVID-19 shutdowns in China demonstrate, it could be wishful thinking to assume pandemic is over. The possibility of another virulent strain shuttering global markets is also a possibility. On balance, however, investor sentiment remains positive and there are numerous reasons to be bullish about Aussie equities. Time will tell how the market performs for the remainder of 2022.
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18 | Money Management June 30, 2022
35 years of Money Management
1987
Money Management launched by David Koch The first issue of Money Management was printed in May 1987, initially in a monthly format.
1988 1988
Super Review launched Super Review, focusing exclusively on the superannuation sector, was launched the following year.
Fund Manager of the Year awards launched These awards recognised the leading fund managers of the industry, eventually expanding to 16 different categories by 2021.
1989
Financial Planner of the Year awards launched Recognising the great and good in financial planning, many winners went on to have illustrious careers in the field.
2014
Women in Financial Services awards launched As diversity improved in the industry, these awards recognised women who were leading the way in the financial services sector.
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of the Year wins Woman Deborah Kent was because she skills, but also her leadership and adapt herself ted to change UR and always motiva SANTHEBENN of her clients the betterment and others for the Association around her. of the most l president of those one at nationa has AFA ER h Kent, FORM led the “Deborah has rs (AFA), Debora and during our industr y of the Year at of Financial Advise trollging times for ious title of Woman criticism and FST challen won the prestig subjected to Review, and this has been ement, Super s Manag Service ial Money ing,” Curtin said. Women in Financ st in her (and the Media’s 2016 remains steadfa “However, she es for clients.” of Awards. and director of the best outcom also the owner r, Dr Rebecca t AFA’s) pursuit Kent, who is Institute directo won the bigges The Beddoes s Institute’s ial Services, other Integra Financ the 2015 Beddoe also included ted Sheils, quoted night, which which was conduc r of the Year, award of the ence Survey, Client Experi base. as Financial Planne client Mentor active Year, categories such ’s total the se rate of across Integra n Execut ive of a high respon Supera nnuatio did it receive y Advocacy award. only her for Not Industr an clients rated Kent showed of the Year, and 9.1 out of 10 al ing the fact that 47 per cent, and for her technic ging Notwit hstand advice challen ed h one of the most providing unbias her for formal commended resilience throug nine out 10 rated history, she was skills, while 28 years of years in the AFA gs. of integrity with review meetin ratings as well strong client for being a woman of which she has ional“Based on these experience, 20 nce and profess ss. fi nancia l advice g other experie trustadvice busine meetin own “most as a her as g ed spent runnin Partnerships’ , Debora h qualifi MLC Advice , ism criteria Her nominator, said. Tanya Curtin ment manager, ed adviser,” Sheils practice develop ate not only for a deserv ing candid said Kent was
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BY JASSMYN GOH
The biggest change for the sector in recent years, the Hayne Royal Commission kicked off in December 2017 and its recommendations paved the way for the financial advice sector for subsequent years.
Zenith back on
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AFTER last year’s indecisiveness, fund managers have voted research teams’ stability and thoroug for h processes this restoring Zenith year, to the top of the podium, accordi of Money Manage ng to the part one ment’s 2021 Rate the Raters survey. The study, which examined fund manage the research houses rs’ sentiment toward which rate their product won the manage s, found Zenith had rs’ trust in five out of seven categor research method ies including its ology, personnel quality, feedback accurate selectio and the most n of the peer group and sectors used evaluation of funds. for On top of this, Zenith had also manage d to attract the highest number of fund manage rs of those particip had seen their product ating in the study who s rated by this researc h house. Sydney-based SQM Research came second as the firm the highest ratings earned from managers across two categor respondents decided ies. The that SQM had provide transparency for d the highest level its process and its of ratings were deemed most satisfac tory. to be the This year’s study also identified the potential conflict interest which arose s of in the case of some raters who were, managers’ eyes, in fund gradually transiti oning from research to management. asset
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[The Australian Pruden AUSTRALIANSUPER tial has said it Regulation Authori would hand over membe ty] and OAIC rs’ emails [Office of the Austral and first names if ian an arrangement Information Commis with The New Daily sioner] have were to go ahead communicated with but that was subject us and our to advice. current plan is to wait advice During a Parliam entary hearing, from OAIC before we execute AustralianSuper was asked by ,” he said. “The motivation from Liberal’s Julian Simmon ds about AustralianSuper what member informa is one to enhance tion had been financia handed over to The l literacy of Australi New Daily. anSuper members and secondl AustralianSuper y to extract chief member engagem executive, Ian Silk, ent benefits from said currently it. We have been speakin the industr y superan g to The nuation fund New Daily about means had not provided any information to extend benefits that current but that it had commu recipients of nicated to a The New Daily receive number of its membe to a broader rs that the cohort of the fund’s fund was proposi members.” ng to do so and Simmonds then asked: that this enabled members to “Let’s say the arrangement advise the fund if continues, they did not want and you intend to that to occur. continue with the arrange, what data “Subsequent to that would you be handing over?” communication with members “We would hand The advising of that intentio New Daily n to provide material to The New Daily, APRA Continued on page 3
FASEA exam tak ers not rely on license should e policies
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FINANCIAL Adviser and Standards Ethics Authority (FASEA takers need to underst ) exam and their legal obligati Act, rather than what ons in the Corpora tions their licensee policies asked them to do. Speaking at a webina r hosted by the Associa Adviser s (AFA), tion of Financial Amelia Constantinidis , FASEA standar said this had been ds director, an issue with key advice documentation was an area of underp and erformance across May exam. all exams, not just the “You might all think you know exactly what you need to terms of advice docume do in ntation and you probabl be related to the y do, but it needs scenario provide to d in the exam,” Constan tinidis said. Continued on page 3
1
As COVID-19 hit Australia and people moved to work remotely, Money Management hosted its annual awards on a virtual basis in 2020 and 2021.
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22/06/2022 5:20:37 PM
June 30, 2022 Money Management | 19
35 years of Money Management
If Helen of Troy was the face that launched a thousand ships, Money Management launched a thousand careers. The magazine of my era in the 1990s was full of fortnightly news, gossip, columns written by emerging industry luminaries and its back pages devoted to the ubiquitous performance tables. Money Management galvanised a community of wonderful people around its purpose and its reputation for quality always.
I took on the role of editor at a drinks function in 1995 hosted by industry impresario and Money Management publisher Kochie, who remarked: “Here’s Madden, he had better not f**k it up”. Back then, press releases were distributed by fax, print deadlines for 48 pages of sparkling news were fortnightly and social media meant having a few beers at the pub. Almost 30 years later, I am glad to see the digital masthead still going strong and wish it the best of luck.
Susie Newham, former publishing director.
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Money Management was the first place I had a regular print byline after backpacking in the Northern Hemisphere and I was fortunate to experience producing a print magazine before online publishing became the norm. As the title closes this chapter of its history, I am thankful for the career path it opened for me and many others who found their feet in journalism via its’ pages. Jason Spits, editor from 2001-2004
Bruce Madden, editor from 1995-2000
The end of the printed edition represents the end of era because many elements of Money Management's content, particularly Outsider, were at their best on a printed page. However, the title's success will always be more dependent on the team writing for it than the manner in which it is delivered. Mike Taylor, editor from 2004-2021
I am so grateful to have been part of Money Management and Super Review for about five and a half years across two stints, the publications are the reason why I am in financial journalism. The quality of the masthead and fellow editorial team members made my time there an absolute pleasure. I wish all the best to the current and future Money Management teams. Jassmyn Goh, editor from 2021-2022
21 2:30:28 PM
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23/06/2022 11:08:08 AM
20 | Money Management June 30, 2022
Advice
AND NOW FOR SOME GOOD NEWS Research is finding that demand for advice is rising amid a world of rising interest rates and presenting opportunities for those who remain in the industry, writes Neil Macdonald. AFTER SEVERAL TOUGH years for financial advisers, there has been some good news lately. Yes, really. Not the election results and political promises, or adviser education standards, or the Quality of Advice Review, or the Australian Law Reform Commission (ALRC) review into financial services legislation because the ultimate outcome of all those things is still some way off. Instead, there are several pieces of research which all say similarly positive things about the future of the financial advice profession for years to come.
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MILLENNIALS Firstly, there’s ‘five financial truths about millennials at 40’ research drawn from the 2021 Natixis Investment Managers survey of investors around the globe. As the report says, while it may come as a surprise for some, millennials are no longer ‘20-something hipsters obsessed with avocado on toast and Instagramable experiences’ anymore. This research reveals millennials want personal financial advice – in fact, those with minimum investable assets of $100,000 are already much more likely to work with a financial professional (40%)
than rely on robo-advice (7%), although many (19%) use a combination of both. The even-better news is that almost nine in ten (88%) of the millennials surveyed said that when it comes to their finances, they trust their adviser – only 81% trust their family, only 68% trust close friends and fewer than 25% trust social media. According to Natixis, more millennials are already working with an adviser than either Gen-X or Baby Boomer generations. That’s quite a turnaround for the so-called smashed avocado generation. But then again, they are hitting middle
age, have multiple sources of income, are getting married, starting families, building careers, growing businesses and running global corporations, so perhaps it’s not that surprising.
GENERATION Z What is arguably more surprising is Australian Investment Exchange Limited (AUSIEX) research that revealed that younger adults, those who belong to Generation Z (Gen Z), are also very interested in their financial future, as evidenced by the increasing number who are choosing to trade shares and invest in exchange traded funds (ETFs).
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June 30, 2022 Money Management | 21
Advice AUSIEX’s Australia’s trading transformation research focussed on the trading behaviours of the generations amongst advised, advised (platforms) and self-directed investors, using trading data. Last year, AUSIEX found many more investors entered the market during COVID-19. Demographically, while almost one in four (24.7%) advised clients are from the older Generation X, the number of millennials doubled from 3.8% to 8.4%, and the number of Gen Zs more than tripled to 1.7%. Despite the market volatility over the last two to three years, clients of financial planners traded less than self-directed clients, who were described as having a ‘trading frenzy’. The reason for this, and one of the key benefits of having a financial planner, according to AUSIEX’s head of advised distribution and service, Andrew Stewart, is they are ‘focused on helping their clients execute on a strategy’. Financial planners help clients avoid silly decisions at the wrong time and stay on track to achieve longer-term goals. This research acknowledged that financial planners, in Stewart’s words, “played an important role in the investor community by helping to address the concerns of clients who were understandably worried about the impact of the crisis on their investments”. This research also revealed some interesting statistics about female investors. The findings indicate that new female financial planning clients have outnumbered new male clients every month since 2019, putting them on track to outnumber men overall as a percentage of the adviser’s client base some time in 2022.
SMSF INVESTORS This year, AUSIEX produced research on its self-managed superannuation funds (SMSFs) clients: SMSFs under advice. Again, the research was across advised, self-directed and advised (wrap) investors. It concluded ‘advised SMSF clients have become younger, more female and more active, favouring a distinct mix of investment sectors and securities’.
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While most advised SMSF clients are from the older generations, the research says, ‘growth is coming from generation next with the self-directed segment signalling the change’. Around 5.5% of SMSFs are held by young self-directed investors, which is more than double the number held by young advised SMSF clients, something that may be explained by the cost of advice, at least in part. Similar research from AUSIEX last year revealed that millennials represent the fastest-growing segment of new SMSF accounts (10% of all new accounts from 2020, double the rate over previous years). The number of SMSF accounts owned by Gen Z investors also doubled over the previous 12 months. This suggests vast numbers of people are becoming more interested in their investments and open to seek help from a financial adviser. And there’s better news about advised communities, via a recent University of NSW Business School study, Unsung Guardians. This study found that financial crime has increased in areas where adviser numbers have fallen. There was an 8.8% increase in average fraud rates in local government areas with abovemedian financial adviser departures over 2018 and 2019. While that’s hardly good news, the opposite was true in areas with proportionately more advisers. That is to say that, according to the study findings, “establishing a longterm relationship with a financial planner can help to reduce fraud within the community”. The authors concluded that “exposure to professional financial acumen improves public awareness of deceitful financial schemes and reduces communal fraud susceptibility”. This is another previously misunderstood benefit of professional personal advice being accessible, affordable and of the right quality for everyday Australians. But the study then suggests that the forced higher education standards have served to “indirectly heighten industry quality despite mandates for higher education
having no direct evidence of improving adviser performance”. Now that’s an interesting take. It could be interpreted as: • The adviser force has been slashed due to forced higher education obligations; • In an environment of burgeoning demand for advice; • From a larger slice of the population, and • Those left standing have gone the extra education mile, but it has not improved adviser performance. It could be suggested adviser performance has not been improved because most advisers were already performing exceptionally well long before onerous education obligations, with limited recognition of prior learning, were put in place. This leaves us to ponder whether the baby has been thrown out with the bathwater in an attempt to improve the financial advice landscape. That would be a resounding ‘yes’ in our opinion.
WHAT NEXT? We need to re-populate our adviser force and enable advisers to provide the kind of bite-sized pieces of advice that people, particularly younger people, are likely to want. But as we all know, currently, numerous things are impeding that, and they are not limited to education standards. The code of ethics forces advisers to consider all aspects of the client’s situation, making it very difficult to provide scoped advice. Other obligations make it difficult to provide simple advice simply. The requirement for evidence and lengthy statement of advice (SoA) documents, combined with a zero-tolerance on documentation in the client file, means it is also expensive to provide this kind of advice. As a result, many of those consumers and clients who want and need advice just can’t get the advice they want at a price they can afford. As another positive, the profession itself has shown a great willingness to collaborate in order to change this state of affairs, with a record 12 associations working together on a joint submission to the Quality of Advice Review.
The Quality of Advice Review offers an opportunity to address many of the impediments to providing quality, affordable advice – but only if our freshly-minted Government can demonstrate the leadership, vision and commitment required to make it happen. There is no doubt that the financial adviser’s role today is very different to 2004, when the financial services reforms first came in. All the traits and obligations of being a financial advice professional are already in place, including a focus on the client and not sales, tertiary level education standards, the financial adviser exam, continuing professional development, a code of ethics, internal and external dispute resolution processes, etc. The new Government should be satisfied that the Best Interests Duty (BID) is the adviser’s core and overriding obligation. BID compels advisers to provide advice that is in their clients’ best interests. The overlaying of additional, disclosurebased and often inconsistent regulation has done little to improve consumer protection and has instead resulted in access to affordable quality personal advice becoming much harder. It should also be evident to the Government that the advisers remaining in our community enjoy the work they do for their clients and are absolutely committed to staying in the profession. These advisers like helping people arrive at better financial outcomes. After all the slings and arrows of the past decade(s), the advisers left standing are clearly those who have done everything they possibly can to stay in it. Despite years and years of experience and meeting all the educational requirements along the way, some of these people are going to university for the first time in their lives so that they can continue doing work they believe in. Some are returning to university, despite already holding closely-related master’s level qualifications and/or PhDs. And some of the people are well over the age of 70. That’s what I call commitment. Neil Macdonald is CEO of The Advisers Association.
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22 | Money Management June 30, 2022
Fixed income
BEING WARY ON HIGH YIELD AND PRIVATE DEBT Paul Strano writes how the global rising rate environment will affect yields offered by Australian fixed income assets and which areas investors could consider. INCREASED VOLATILITY IS seemingly the dominant theme for 2022, with higher inflation, sharply escalating interest rates –including domestically with the Reserve Bank of Australia’s latest 50bps rise – and prolonged supply chain disruptions from COVID-19 and the Ukraine/Russia conflict all contributing factors. Through the back half of 2020 and into the first half of 2021 we have been wary of the re-emergence of higher rates and vulnerability of longer interest rate duration assets (e.g. traditional fixed income). While not surprised by the duration sell-off, its magnitude has surprised, with the Bloomberg Composite Index down ~8% year-on-year. By contrast, the total return from the Bloomberg Credit FRN Index – which is of inferior credit quality but has much shorter interest rate duration – is down just 0.16% over the same timeframe (see Chart 1). For credit, the movement higher in yields has not been confined purely to risk-free rates. Investment grade (IG) credit margins in public markets across high quality financials and corporates have also widened by an average ~50bps from their late 2021 lows . Certainly, in our view, the movement wider in credit margins has restored value to high-quality credit, with recent issuance providing tangible examples of the attractive returns currently on offer. The recent A$550 million bond issuance by the BBB-rated and NZ government majority owned Air New Zealand is one example. The four & seven-year
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bonds priced at a ~5.7% and 6.6% yield respectively, with the credit margin on the seven-year securities set at exactly 3% over the swap rate. Albeit a smaller deal, the recent issuance of higher-yielding Tier 1 capital notes from BBB rated P&N Bank also represented excellent risk-adjusted returns. Priced at 5.75% over a rising cash rate (i.e. returns that will increase with a higher RBA cash rate), these securities provide more than ample compensation for the subordinated BB- rated Tier 1 securities which are secured by ~14% in equity capital. We regard this as more than sufficient to weather any plausible downturn on its housing loans exposure. Likewise, attractive credit margins of ~2% coupled with expected new supply in coming months makes BBB+ rated major bank Tier 2 securities a standout for most higher-yielding credit portfolios. Much of our conviction for Australian investment grade credit is predicated on the current health of mainstream corporate Australia, with financial leverage as measured by net debt to EBITDA currently at its equal lowest point for ~20 years. Along with having a proven ability to access new public equity to deliver balance sheets when required, the current low leverage of corporate Australia provides a significant buffer to coming headwinds (i.e. a slowing economy from higher input costs and rising interest rates). By contrast, the same cannot currently be said for some segments of the Australian credit
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June 30, 2022 Money Management | 23
Fixed income Strap
Chart 1: Higher rates end bull market for longer duration fixed income
Source: Bloomberg, YCM
market. In particular we are cautious on the levered loan space, where it seems significant inflows of new money from institutional and retail clients chasing a relatively smaller pool of assets (~$10bn per annum of issuance) is driving poorer risk adjusted return outcomes. From our observations, while valuations have cheapened up significantly in publicly-traded credit and look increasingly attractive, they have barely moved in the levered loan segment of the market. While confidentiality agreements preclude disclosure of specific deals, we can provide some broad assessments of risk and return in this part of the market. For instance, levered names generally carry much higher risk, with credit ratings in the segment averaging ~B+ which is several notches below investment grade (which requires a minimum BBB- credit rating). With typical terms of between five to seven years, these loans are still being largely issued at unchanged credit margins of between 350-400bps; in our assessment these offer poor riskadjusted returns compared to public markets.
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Chart 2: Likely rise in HY defaults with higher interest rates (%)
Source: S&P, YCM
Moreover, the higher risk in the segment is largely predicated on much greater debt usage with leverage multiples (debt to EBITDA) averaging between 4-5 times, significantly higher than the current 1-times for mainstream corporate Australia. This higher debt burden can become problematic, with interest rates normalising over the next 12-18 months set to increase interest costs and potentially depress earnings in line with moderating economic growth. This combination of higher inflation, increasing interest rates and shrinking central bank balance sheets is likely to increase asset impairment risk in high yielding segments of the market such as levered loans. In the US, previous peaks in HY defaults have followed the peak in interest rates by ~12 months. By contrast, IG defaults are virtually non-existent according to S&P data (see Chart 2). Given the projected increases in interest rates by central banks, it’s likely that high yield defaults will rise from 2022, especially after a prolonged period of lowerthan-average defaults due to the uber accommodative monetary policy.
So why does demand for levered loans currently remain so strong that valuations remain unchanged? Having access to this segment – and thus running the ruler over most of these deals – along with the best of the publicly traded space, we observe that while some levered loan deals continue to appeal, there are fewer in the current stage of the cycle which stack up on a relative value basis across the entirety of Australian credit. Tracing the origins of the appeal of levered loans and other private debt style securities typically focuses on its track record post-Global Financial Crisis, with strong returns and minimal impairments that have been underpinned by more than a decade of quantitative easing. Clients have generally been attracted to its higher credit returns, but also its low volatility on account of most private style debt portfolios being hold to maturity and not markto-market like publicly traded credit securities. This has appeal for institutional and retail client and while this strategy has worked effectively for over a decade, the segment’s primacy over publiclytraded credit – particularly IG – might soon be ending.
As we move into this new environment of higher inflation and interest rates, we expect investment grade credit’s riskadjusted returns to increasingly outperform private debt. At current valuations, investors should be cognisant of the rising opportunity cost of remaining underweight. Moreover, private debt’s low volatility and hold to maturity status in a rising interest rate environment could be camouflaging rising impairments which are obviously not priced into current valuations. In being truly multi-sector and operating across all sleeves of Australian credit, our Higher Income and Enhanced Income portfolios remain agnostic on where to source higher risk-adjusted returns, with a current bias to investment grade over high yield. The portfolios are generating ~5.8% and 5.4% yields* respectively from their high-quality average investment grade portfolios. Moreover, their floating rate running yields of ~3.8% and 3.1%* will also naturally increase with the cash rate and continue to provide interest rate duration risk protection. Phil Strano is portfolio manager at Yarra Capital Management.
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24 | Money Management June 30, 2022
Toolbox
GRANDFATHERED OR DEEMED?
Anna Mirzoyan examines how grandfathering affects income support payments and how factors such as paying for aged care can impact them. ON 1 JANUARY, 2015, the income test assessment of accountbased pensions changed for income support payments and also for the Commonwealth Seniors Health Card (CSHC). Account-based pensions commenced on or after 1 January, 2015 are deemed for income test purposes for both, income support payments and CSHC assessment. Account-based pensions established prior to 1 January, 2015 may be grandfathered if certain requirements are met. For income support payments, account-based pensions are classed as grandfathered if all of the following requirements are met: • The account-based pension commenced before 1 January, 2015, and • The account holder was in receipt of an eligible income support payment immediately prior to 1 January, 2015, and
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• The account holder has been in continuous receipt of an income support payment since that time. For CSHC assessment, accountbased pensions are grandfathered if all of the following requirements are met: • The account-based pension commenced before 1 January, 2015, and • The account holder held the CSHC immediately prior to 1 January, 2015, and • The account holder continuously held the card since that time.
What is the income test assessment of grandfathered pensions? For income support payments, the ‘deductible amount’ calculations are applied. The deductible amount represents a return of capital from the original purchase price and reduces the assessable income drawn from
the pension. The following formula is used to determine the assessable income: Assessable income = income payments less deductible amount Where: Deductible amount = (Purchase price less Commutations)/ Relevant number Advisers can obtain the relevant information from the Centrelink Schedule provided by the product. For the CSHC, grandfathered account-based pensions are exempt from the assessment. This is because the income test for CSHC is based on adjusted taxable income and with pension payments being tax free to individuals aged 60 and above, $0 is assessed from a grandfathered pension.
Which payments are eligible income support payments for this purpose? The most-common eligible income support payments for this
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June 30, 2022 Money Management | 25
Toolbox
:Table 1: Current and proposed arrangements for case study
Estimated rate of Age pension including supplements Difference (increase)
Current arrangement
Proposed arrangement
Grandfathered pension
Loss of grandfathering. Deeming is applied to account based pension
$884 per fortnight (part pension)
$987.60 per fortnight (full rate) $103.60 per fortnight
Source: Lifespan Financial Planning.
purpose include: • Age Pension • Disability support pension • DVA Service pension • Carer payment It is worth mentioning that when the pensioner moves from one eligible income support payment to another, the grandfathering is not impacted if the income support is not interrupted. For example, if the individual has been in receipt of a disability support pension since 2014 and has recently moved to an age pension with no interruptions, the grandfathered account-based pension will remain unchanged.
Is it important to retain grandfathered pensions? With these changes being in force for some seven years now, and also with deeming rates being so low lately, a question arises whether it is important to retain grandfathered pensions? Is the client trapped in an existing grandfathered pension that may now be a legacy product or may be less cost-effective when compared to other products available in the market or maybe providing limited investment options? There could be several valid reasons for advisers wanting to provide a recommendation that may lead to loss of grandfathering. Can the client benefit from losing grandfathered provisions and instead, being assessed under the deeming rules? The short answer is it would depend on the clients’ circumstances. In some cases, the client may be better off losing grandfathered provisions and being assessed
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under deeming rules. For example, if the client has a grandfathered account-based pension but over the years they have made lump sum withdrawals (also known as commutations) from the pension in addition to regular pension payments. These lump sum commutations would have reduced the deductible amount of the pension and therefore, increased the assessable income for income support payment purposes. If assessed under the deeming rules, these clients may be able to increase the rate of their income support payment. Financial advisers will be able to determine the appropriateness of retaining grandfathered pensions by completing an assessment based on clients’ circumstances as demonstrated in the case study below. Case study Phillip is a single homeowner claiming the Age Pension. Phillip has $20,000 held in the bank account, $20,000 of personal assets, and an account-based pension valued at $200,000. Phillip is drawing $20,000 each year from the account-based pension to support his lifestyle. The accountbased pension is grandfathered and has a deductible amount of $10,000. The current pension product is a legacy product that has higher than average ongoing investment and management costs and only offers a limited number of investment options. Phillip’s financial adviser is considering rolling his existing pension to another product where ongoing fees are expected to be considerably lower and the
proposed product offers more investment options and better features. Phillip’s adviser is aware that the recommendation to change products will trigger the loss of grandfathered assessment and the new pension will be deemed. The adviser is concerned that the recommendation may negatively impact the client, Phillip. However, after doing the numbers, it would appear that Phillip is not going to be negatively impacted if he changes products. In fact, Phillip will be better off changing products as he will benefit from lower ongoing product costs, will have more investment options and features to choose from, and more importantly, the rate of his age pension will increase by approximately $103 per fortnight as demonstrated in Table 1. The above calculations are based on rates and thresholds current as at June 2022.
Is the client's income support determined by the assets test? The rate of clients’ income support payments may be determined by the assets test (not the income test). In these situations, especially when the combined value of assets is leaning more towards the upper threshold of the assets test, losing grandfathered provisions will not have a shortterm negative impact on the rate of their income support payment. Depending on the amount of capital drawdowns, the client may be assessed under the assets test for some time before their income support payment is determined by the income test.
Continued on page 26
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26 | Money Management June 30, 2022
Toolbox Continued from page 25 Doing the numbers and having an open conversation with your clients (e.g. pros and cons short term and long term, what is more important to them) may determine the appropriateness of advice.
Strategies that may lead to loss of grandfathering Common strategies that may lead to loss of grandfathering include: • Changing pension products; • Combining existing pension and accumulation accounts to restart a new pension; • Consolidating multiple pensions into one; • Following the death of a member with a non-reversionary nomination, surviving spouse opting to commence a death benefit income stream; • Adding or removing a reversionary death benefit nomination. This may vary from one product to another. Some products are able to implement this change without stopping or starting an existing pension. Others may need to stop the current pension and restart. It is always best practice to check with the product provider. • Winding up an SMSF and rolling existing pension into a non-SMSF account-based pension; • Loss of income support payment or loss of CSHC.
Implications for aged care residents and recipients of home care services In situations where the client is either in receipt of aged care or home care services or is likely to access these services, losing grandfathered assessment may also impact fees paid for these services. This is because fees for home care and certain fees for aged care are determined by the income test. The loss of grandfathered assessment may inadvertently increase the cost of their care.
Interruptions to income support payment or CSHC When a holder of CSHC becomes eligible to access the Age pension, the grandfathering of their account-based pension will not be applied to Age pension assessment. This is because the person hasn’t been in continuous receipt of income support payment since 1 January, 2015. Their existing account-based pension will now be deemed when determining the rate of the Age Pension. This may occur when they previously had an excessive level of assessable assets and as such, did not qualify for the age pension. However, over time their assessable assets have gradually reduced, and they now qualify. Similarly, if the person in receipt of the Age pension is no longer eligible for the Age pension and wishes to apply for the CSHC, the accountbased pension that may have been grandfathered for age pension assessment will not be grandfathered for CSHC. The account-based pension will be deemed for the income test assessment of CSHC. This may occur when their income or assets have increased as a result of a recent inheritance for example or when a member of a couple dies and the surviving spouse is now being assessed as a single person.
Conclusion While grandfathered account-based pensions may be important or beneficial to some clients, others may not have compelling reasons to retain their grandfathered pension. An individual assessment should be completed based on the client’s personal circumstances, objectives, and needs, including future aged care needs. A potential future increase in deeming rates also should be taken into consideration as these rates have been historically low in the past few years. Anna Mirzoyan is technical and compliance officer at Lifespan Financial Planning.
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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. 1. Account-based pensions are grandfathered for income support payments if: a) The account-based pension commenced before 1 January, 2015. b) The account holder was in receipt of an eligible income support payment immediately prior to 1 January, 2015. c) The account holder has been in continuous receipt of an income support payment since that time. d) All of the above. 2. a) b) c) d)
For the CSHC, grandfathered account-based pensions are: Deemed. Assessed under the deductible amount calculations. Exempt from assessment. None of the above.
3. Maureen has been a holder of CSHC since 2013 and has a grandfathered account-based pension. Maureen will soon qualify for a small amount in age pension. How would the existing account-based pension be assessed for age pension calculations? Maureen’s existing account-based pension will be: a) Assessed under the deductible amount calculations. b) Deemed. c) Exempt from assessment d) None of the above. 4. Which of the following answers is correct in relation to grandfathered account-based pensions? When calculating assessable income for income support payment, advisers must: a) Obtain a Centrelink schedule from the product provider to be able to access the relevant information required for calculations. b) Obtain the latest statement from the product provider to access the most recent balance. c) Obtain the relevant information from clients’ MyGov account. d) Apply deeming rates and thresholds. 5. Which of the following strategies may lead to the loss of grandfathering: a) Consolidating two grandfathered account-based pensions into one. b) Rebalancing existing account-based pension. c) Making a partial commutation to cover medical expenses. d) Renewing binding death benefit nomination.
TO SUBMIT YOUR ANSWERS VISIT https://www.moneymanagement.com.au/ features/tools-guides/grandfathered-or-deemed
For more information about the CPD Quiz, please email education@moneymanagement.com.au
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June 30, 2022 Money Management | 27
Send your appointments to liam.cormican@moneymanagement.com.au
Appointments
Move of the WEEK Hamish Douglass Consultant Magellan
Magellan confirmed Hamish Douglass would return to the firm in a consultancy role from October 2022. In an announcement to the Australian Securities Exchange, the firm said he would provide investment insights, geopolitical and macroeconomic views. The consultancy role would allow him to “deliver his expertise to investors free from board, management and portfolio responsibilities”.
He ceased as a permanent member of Magellan staff on 15 June and would commence the consultancy role on 1 October. David George would join as chief executive on 19 July, brought forward from 8 August. Chairman, Hamish McLennan, said: “The board and Hamish have carefully considered the right balance for Hamish,
MLC Life Insurance announced chief executive, Rodney Cook, would retire at the end of the year. Cook had been chief executive and managing director since June 2020 and had helped the firm through the COVID-19 pandemic and the completion of its technology transformation programme. Kent Griffin, chief finance officer (CFO), would replace Cook in late October but would stay in the business until the end of the year to ensure a smooth transition. Griffin had worked at MLC since February 2020 and was formerly CFO at TAL and a partner at Ernst & Young. MLC Ltd chairman, Peter Grey, said: “Since he joined us in early 2020, Kent has helped to strengthen our business and has overseen our return to profitability. He is a strong leader with a clear vision for the future of MLC Life Insurance as we face the challenges of a fastchanging life insurance sector and ever evolving customer needs”.
of corporate and financial services experience and was currently the chair of QBE Insurance Group’s Australian and New Zealand subsidiaries. He was also independent chair of digital property exchange platform PEXA and an independent non-executive director of Latitude Financial Services. He had held senior executive roles in Australia, the UK and the US at National Australia Bank, Citigroup and the Boston Consulting Group. Joiner said: “I am delighted to be given the opportunity to contribute to the next phase of development for TAL. “I have been impressed by the transformation that has taken place over the last decade to establish TAL as the leading life insurer in Australia and look forward to working with the team to maintain that momentum for the benefit of all our stakeholders.”
TAL announced the appointment of Mark Joiner as independent chair, following Duncan Boyle’s decision to retire after eight years leading the board. Joiner had more than 30 years
The Financial Services Institute of Australasia (FINSIA) elected David Cox as its president, succeeding Victoria Weekes who was retiring after serving a maximum term at the financial services membership body.
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for Magellan and most importantly for our clients as they navigate global markets. Hamish’s appointment in this new role is another important step as Magellan moves forward as a focused global funds manager”. Douglass, who was formerly chairman and chief investment officer, announced he would be taking a leave of absence from the firm back in February.
Cox, a PwC partner with more than 20 years’ experience was appointed as president alongside three new directors: Christine Yates, Rodney Jackson and Paul Riordan. Cox said: “It is an enormous honour and privilege to be appointed as President of FINSIA. “I would like to thank the board for its confidence that it has placed in me at this important time in FINSIA’s history.” Cox’s association with FINSIA dated back more than a decade having been a member of the Consumer Finance Advisory Group and chair of the Institutional Markets Council. Financial advice and technology services firm Padua Solutions appointed Rudy Haddad to the newly-created role of head of technical advice, overseeing Padua’s technical capabilities. Haddad had over 23 years’ experience in financial advice and product and was most recently head of practice management and technical advice delivery at Wealth Market. He had also held senior positions at ING Australia, OnePath and ANZ Wealth, including
heading up technical services and intermediated life risk sales strategies. His appointment followed that of Kun Singh who was appointed to the newly-created role of head of marketing in April. Singh was responsible for overseeing the development and implementation of Padua’s marketing strategies that showcase the breadth of technology, data and people expertise across the business. AXA IM Alts appointed Antoine Mesnage joining as head of Australia effective 1 October, replacing Kumar Kalyanakumar. Mesnage, who was currently head of transactions for France at AXA IM Alts, would be relocating to Australia and would bring over 16 years of real estate investment management expertise. The business also announced the promotions of Chris Willey and James Cox to head of asset management and ESG, and head of fund management for AXA IM Alts in Australia, respectively, replacing Quentin Shaw who previously held the combined role of head of asset and funds management.
22/06/2022 3:55:29 PM
OUTSIDER OUT
ManagementJune April30, 2, 2015 28 | Money Management 2022
A light-hearted look at the other side of making money
The high flying days
Plus ça change
IN honour of this final edition, Outsider has been looking at the very first Money Management issue and what caught his eye back in the day. It is fair to say the 1980s were a different period when Outsider was younger and the salaries were higher. The first-ever Outsiders covered a departing general manager trying to keep his company Mercedes which was worth $41,000 at the time and another industry veteran buying two vintage Rolls Royce cars. One Outsider references a golden handshake at an investment advice group of $5 million, some $13 million in today’s money, while another states “a good sales person can easily command a salary of $100k”, around $250k in 2022. With regulation and compliance costs through the roof in 2022, Outsider is sure many advisers would love the idea of receiving a $13 million golden handshake at their firms. Even Outsider himself was not doing too badly, one column referenced him having friends in high places overseas and knowing the Governor of the Bank of England.
THINKING back, Outsider can fondly remember his early days at Money Management; sitting at his desk in a smoky office wearing a wide pinstriped, doublebreasted suit and bold tie, pounding the keys on his computer and using a landline phone before taking off early for a few beers and yet more cigarettes down the pub. Fashion and work mentality may have changed since then but as Outsider scours the hallowed pages of the back issues, he is surprised by how many similarities there are in what Money Management was writing about in 1987 and what we are writing about now. The Australian market outperforming other
developed markets...too much regulation...clueless industry bodies….mergers in the financial planning space and a lack of female representation in the industry. Luckily, not everything is the same, as other articles focused on the AIDS crisis threatening the
life insurance industry and the appeal of a new innovation called ‘direct marketing mail’. As we move into a digital-only format, perhaps there is no need for Outsider to be concerned, after all ‘the more things change, the more they stay the same’.
Work hard, play hard at conference AFTER attending his first interstate work conference since the start of the pandemic, Outsider returned home a battered man. After spending months on Zoom, it was a shock to his system to be socialising and making small talk for a whole three days, even if the venue was a luxurious Gold Coast hotel. Sitting down to a nice cup of coffee after a busy day dealing with long queues at airports and intense taxi trips with more G-force than a rollercoaster, Outsider was keen to sink into a familiar bed. But not before his usual debrief with Mrs O, or as she likes to call it, his senseless soliloquy.
OUT OF CONTEXT www.moneymanagement.com.au
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Opening up about the time he spilt sauce on his new business shirt in front of his conference pals or his recital of some exciting investment opportunities, Outsider was keen to divulge as many anecdotes as he could. “Hold it right there,” Mrs O interjected. “I’ve been stuck at home while you have been lapping up five-star hotels and room service.” It seemed no-one appreciated how hard Outsider had worked, contrary to Mrs O’s ideas, he shockingly hadn’t managed to spend any time by the pool at all. “See you in the morning, I’m going to bed,” Outsider wearily replied.
"Either give us a discount or go away."
"Most people thought industry super was cheap, nasty and bound to fail"
-Hostplus’ Sam Sicilia on negotiating fee discounts
-Australian Super’s Mark Delaney on the fund’s origins
Find us here:
23/06/2022 11:09:20 AM