MAGAZINE OF CHOICE FOR AUSTRALIA’S WEALTH INDUSTRY
www.moneymanagement.com.au
Vol. 33 No 14 | August 29, 2019
FUTURE OF WEALTH
Interview with AMP
18
GLOBAL EQUITIES
22
TECHNOLOGY
Growth in cloud computing
The US/China endgame
Do managed accounts equate to in-house products?
LEGAL
BY MIKE TAYLOR
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Law and order… and ASIC THE Australian Securities and Investments Commission (ASIC) got a real beating during the Royal Commission and it responded in the only way it could: taking a ‘why not litigate?’ approach. Despite the corporate watchdog’s litigation track record being hit and miss, most recently a miss as it lost a landmark case against Westpac on responsible lending laws, lawyers believe that this legal approach was the best response it could have after all the criticism. ASIC is serious about their legal route as it recently established its Office of Enforcement which increased the number of enforcement investigations by 20 per cent during July 2018 and July 2019. However, according to Holley Nethercote partner, Paul Derham, this ‘why not litigate’ route could lead a drop in self-reporting breaches, especially by smaller businesses. With ASIC tackling the big end of town first, smaller businesses may have some time to get their record keeping in order before the focus turns on them. Derham noted that driving the right culture, in respect to accountability and remuneration, was an important step for licensees to stay out of trouble.
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Full feature on page 26
ADVISERS using managed accounts have been cautioned to ensure that they are implementing clients’ best interests in circumstances where the Australian Securities and Investments Commission’s (ASIC’s) managed accounts project will be closely examining the issue. Partner with specialist financial services law firm, The Fold, Simon Carrodus, has drawn parallels between advice around managed accounts and that around in-house products which became the subject of ASIC scrutiny of the big five financial institutions – the Commonwealth Bank, Westpac, ANZ, National Australia Bank and AMP. “It would be naive to think that such conflicts only occur at the big end of town. The same conflict affects many small to medium-sized
advice businesses (including those that use managed accounts),” Carrodus wrote in an analysis covering ASIC Report 562. “We know that ASIC’s managed account project is focusing on a number of issues including fees, suitability and – you guessed it – conflicts!” he wrote. Carrodus said that while in-house product recommendations were not prohibited pursuant to the Corporations Act or the FASEA Code of Ethics, advisers needed to take appropriate steps to prioritise their clients’ interests above their own. “It’s not enough for an adviser to merely disclose the conflict. The adviser must explain why the in-house product is likely to leave the client in a better position and how it is more likely to satisfy the client’s needs and objectives (vs the client’s existing product),” he said.
Perpetual positions for growth despite profit decline PERPETUAL Private has been positioned for further growth, including acquisitions, despite Perpetual reporting a 17 per cent decline in net profit after tax on the back of lower performance fees, net outflows and increased investment in strategic initiatives. The company’s full-year results, announced to the Australian Securities Exchange, reflected what the chief executive and managing director, Rob Adams, described as a financial services industry experiencing significant disruption. “Along with many of our peers, our business was impacted by market uncertainty and a challenging operating environment,” he said. At the same time, the company used an investor briefing to describe Perpetual as being “uniquely positioned to benefit from industry dislocation”. It pointed to what it described as seismic shifts in the adviser Continued on page 3
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ASIC proposes ban on retail binary options and contracts for difference BY MIKE TAYLOR
THE Australian Securities and Investments Commission (ASIC) has proposed a ban on the sale of binary options to retail clients and to restrict the sale of contracts for difference (CFDs). In a consultation paper, the regulator said it was concerned that retail investors had suffered, and were likely in the future to suffer, significant detriment from binary options and CFDs. ASIC said it had issued a consultation paper in which it was proposing to: • Ban the issue and distribution of OTC binary options to retail clients; and • Impose conditions on the issue and distribution of OTC CFDs to retail clients. Commenting on the move, ASIC commissioner, Cathie Armour said, “For many years ASIC has taken strong action to protect consumers of binary options and CFDs, using the range of regulatory tools available to us. However, we are concerned that consumers continue to suffer significant harm from trading these products”. “A complete ban would
Continued from page 1
prevent retail clients from losing money trading binary options,” she said. “We believe binary options provide no meaningful investment or economic use, and have product characteristics similar to gambling products.” ASIC’s proposed restrictions on the offer of CFDs to retail clients included: • Imposing leverage limits, which are set out in Section F of CP 322; • Implementing a standardised approach to automatic
close-outs of client’s CFD positions in margin call; • Protecting retail clients against the risk of negative CFD trading account balances; • Prohibiting certain trading inducements; and • Enhancing transparency of CFD pricing, execution, costs and risks. The regulator said its proposals were broadly consistent with measures implemented in many overseas markets.
Almost 150 courses now approved by FASEA BY CHRIS DASTOOR
AS part of its legislative remit, the Financial Adviser Standards and Ethics Authority (FASEA) has now reviewed and approved 53 current bachelor or higher degrees, 66 historical courses, and 30 bridging courses. Of the currently approved courses, this included 26 bachelor degrees (AQF7), 16 graduate diplomas (AQF8), 11 master (AQF9), and 30 bridging courses (AQF8). They had also updated the list of recognised prior learning (RPL) programs that had been approved: • Financial Planning Association of Australia (FPA) five-unit Certified Financial Planner (CFP) Program, commenced after 2003; • Association of Financial Advisers (AFA) Fellow
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Perpetual positions for growth despite profit decline
• • •
• • •
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Chartered Financial Practitioner (FChFP), commenced in or after 2013; AFA Chartered Life Practitioner (ChLP), commenced in or after 2013; Self-managed Superannuation Fund Association (SMSFA) SMSF Specialist Adviser (9 topic areas); Chartered Accountants Australia and New Zealand (CAANZ) Chartered Accountant Program, commenced in or after 1972; Certified Practicing Accountants (CPA) Australia program commenced in or after 1989; CPA Program that included at least one financial planning elective; Portfolio Construction Forum Certified Investment Management Analyst (CIMA) program commenced in or after 2001; and Certified Financial Analyst (CFA) Society of Australia program.
landscape entailing significant regulatory change and large organisations exiting aligned advice models. Adams suggested that this fastchanging landscape presented opportunities in circumstances where clients were expecting personalised service from experienced and qualified advisers. The company said its response had been the launch of industry leading professional services model and flagged the recruitment of five advisers in the first quarter of the current financial year and a further six in the second quarter. Further, it said it had an active mergers and acquisitions pipeline for “bolt-on acquisitions that align to our model”. On a business unit bases, the company reported that Perpetual Private’s profit before tax was 11.2 per cent lower at $41.2 million with the decrease largely due to increased investment in strategic initiatives to support future business growth. Adams said that while the business had observed many players exiting the wealth industry, with financial advisers being displaced on a weekly basis, by contrast, Perpetual Private was well positioned to take advantage of the dislocation and had added five new quality advisers in the second half. “We have transformed Perpetual Private’s client offer to provide holistic advice in a professional services model,” he said. “The new model provides greater transparency in structure and seamless access to clients to a team of experts to meet their advice needs.” The company reported that Perpetual Investments profit before tax was $79.9 million which was 29 per cent lower than last year. The board declared a fullyfranked dividend of $2.50 per share.
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4 | Money Management August 29, 2019
Editorial
mike.taylor@moneymanagement.com.au
IS FRYDENBERG’S ROADMAP LEADING UP A BLIND ALLEY?
FE Money Management Pty Ltd Level 10 4 Martin Place, Sydney, 2000
The financial advice industry is facing yet another layer of bureaucracy as a result of the Government’s so-called Royal Commission Implementation Roadmap but the ultimate destination may prove to be a morass of expensive red tape. IT IS ENTIRELY probable that by the end of 2021, financial advice will be the most regulated profession in Australia. When the Federal Treasurer, Josh Frydenberg, last week announced the Government’s so-called Royal Commission Implementation Roadmap he was not only outlining the order and manner in which the Government would act on the recommendations of the Royal Commission, he was also ensuring that he and the Government were actually being seen to be doing something. But what the Treasurer and his advisers might have taken the time to do was actually consider the total number of changes and imposts which have been inflicted on the financial advice industry over the past five years, not least those imposed as a result of the Government’s own efforts to avoid actually holding a Royal Commission. The list of changes and imposts is long, but encompasses elements such as the Life Insurance Framework, the industry funding of the Australian Securities and Investments Commission (ASIC), the introduction of the Financial
Adviser Standards and Ethics Authority (FASEA) regime and, of course, all the elements which devolved out of the Future of Financial Advice changes. Now, according to Frydenberg’s roadmap, advisers must accommodate (and probably fund) a single disciplinary body alongside their FASEA obligation to subscribe to (and pay for) membership of a code-monitoring authority. At a time when the Government is talking about cutting red tape and streamlining the operations of the Australian Public Service, it has seen fit to impose layer upon layer on the financial advice sector. Often, when a Government introduces new legislation, it assesses the regulatory consequences and financial impacts which flow from those changes. It arguably owes it to the financial advice industry to do so with respect to the combined impacts of the Implementation Roadmap, FASEA and its other changes. In short, the Government should be prepared to deliver a regulatory impact assessment. What needs to be recognised is that the Government’s long list of changes impacting advice and the
changes being generally wrought on the industry via the exit of the major banks and the reshaping of AMP Limited will result in making advice less affordable and less accessible for the average consumer. While it is true that the implementation of digital solutions will go some way towards addressing the consequent advice gap, the reality will be that advice will very likely cost substantially more in 2022 than it did in 2018. What needs to be understood by financial advisers and the broader financial services industry is that while it has taken just a few, short years to introduce the myriad changes now impacting the delivery of advice it will take many years to see those changes moderated or even removed. Given the number of scandals which have plagued the advice industry and the testimony heard during the Royal Commission it is easy to justify a level of Government action, but the key to effective policy-making is knowing the difference between useful change and damaging overkill.
Mike Taylor Managing Editor
Managing Director: Mika-John Southworth Tel: 0455 553 775 mika-john.southworth@moneymanagement.com.au Managing Editor/Editorial Director: Mike Taylor Tel: 0438 789 214 mike.taylor@moneymanagement.com.au Associate Editor - Research: Oksana Patron Tel: 0439 137 814 oksana.patron@moneymanagement.com.au News Editor: Jassmyn Goh Tel: 0438 957 266 jassmyn.goh@moneymanagement.com.au Senior Journalist: Laura Dew Tel: 0438 836 560 laura.dew@moneymanagement.com.au Journalist: Chris Dastoor Tel: 0439 076 518 chris.dastoor@moneymanagement.com.au Events Executive: Candace Qi Tel: 0439 355 561 candace.qi@financialexpress.net ADVERTISING Sales Director: Craig Pecar Tel: 0438 905 121 craig.pecar@moneymanagement.com.au Account Manager: Amy Barnett Tel: 0438 879 685 amy.barnett@financialexpress.net PRODUCTION Graphic Design: Henry Blazhevskyi
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Money Management is printed by Bluestar Print, Silverwater NSW. Published fortnightly. Subscription rates: 1 year A$244 plus GST. Overseas prices apply. All Money Management material is copyright. Reproduction in whole or in part is not allowed without written permission from the editor. © 2019. Supplied images © 2019 iStock by Getty Images. Opinions expressed in Money Management are not necessarily those of Money Management or FE Money Management Pty Ltd.
WHAT’S ON WA Risk & Compliance Discussion Group Perth, WA 3 September superannuation.asn.au/ events/
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21/08/2019 12:56:17 PM
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6 | Money Management August 29, 2019
News
AMP looks to internal advice M&As BY MIKE TAYLOR
AMP Limited has revealed the degree to which its new strategy will involve merger and acquisition activity within its aligned advice practices. In an interview with Money Management, AMP Limited’s group executive, advice, Alex Wade, said that the company had not defined how many advisers would ultimately leave the business because the strategy was all about practices, not planners. “We’re really focused on practices rather than on advisers and on the practices of the future that are going to be more
Tell us how advisers will be affected, demands AFA THE Association of Financial Advisers (AFA) has cautioned the Australian Securities and Investments Commission (ASIC) on the manner in which it uses its product intervention powers, particularly in circumstances where it only suspects consumer detriment might occur. The AFA has expressed concerns about the manner in which advisers will be exposed to the power and the possible unintended consequences which might be inflicted on both advisers and their clients. “We continue to believe that there remains a lack of clarity with how this power may be used and with whom it may be used upon,” the AFA said. “From a financial adviser perspective, to what extent does this power allow ASIC to take action against a party who is providing financial advice with respect to a product that might be the subject of a Product Intervention Order? “Identifying detriment that has not yet occurred and identifying products and individuals involved in this, may cause unnecessary panic and contribute to the crystallisation of actual
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losses,” the AFA warned in a submission filed with ASIC this month. “It is important to be conscious that as soon as a product is subject to a potential product intervention order then it will most probably be removed from virtually all advice licensees’ approved product lists (APLs),” it said. “This will turn off new business flows, including any new business that is currently in the process of being finalised. We believe that this needs to be considered very carefully in circumstances where only a potential detriment is identified or is likely to occur,” the AFA submission said. The AFA submission said the organisation was supportive of the ability for ASIC to undertake product intervention, provided it was done in a careful and considered fashion that took into account the risk of increasing the extent of detriment for existing clients. “We believe that there is a need of greater clarity with respect to how this power will be implemented, the nature of such intervention orders and the parties that might be impacted,” the submission said.
professional, compliant and more efficient to have the scale to pick up and pursue the changes,” he said “Clearly, we’re focused on quality of business and a business model for the future. Now, that doesn’t necessarily mean that those businesses for the future are the ones that are shooting the lights out today. We’re really going practice by practice with them to see the future capability,” Wade said. “Now there may be some today that, frankly, aren’t profitable but we can see a path and we’re supporting them to the future with our business
consulting support and helping them structure for the future,” he said. Wade told Money Management that it was “really about those businesses that are capable of digesting the industry disruption along with us.” “… and I think that we’ll obviously see some smaller businesses merge with bigger businesses and various changes like that,” he said. “For us, it is not about drawing an economic line in the sand across businesses but [about] really determining how we retain talented advisers and minimise client impact and ensure best client outcomes.”
Kogan and Mercer launch index-based super fund BY JASSMYN GOH
KOGAN and Mercer have launched Kogan Super that seeks to offer Australians a low-fee index-based superannuation product. In an announcement, the fund said it would provide members simplicity such as a short online joining process, easy digital account management, five simple investment options based on a member’s risk tolerance, and super account consolidation upon sign up. The investment options included enhanced index growth, enhanced indexed conservative growth, indexed Australian listed property, indexed diversified shares, and cash. The fund would also allow members to create a customised investment option by mixing from the five options, and default death and total and/or permanent disablement insurance for eligible members. Kogan.com chief executive and founder, Ruslan Kogan, said: “More than ever, Australians are turning to low-cost super funds to ensure that their retirement savings aren’t being eroded over time by high fees. “By leveraging our digital capabilities and delivering the superannuation needs of Australians online, Kogan Super can substantially cut annual fees for account holders,” he said. “Kogan Super provides a no-frills, low cost, index-based offering with low fees enabling Australians to invest and grow their hard earned money for the future.”
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August 29, 2019 Money Management | 7
News
Govt response to grandfathered commissions disappointing: AIST BY JASSMYN GOH
FSC urges discussion on new adviser disciplinary system BY MIKE TAYLOR
THE Financial Services Council (FSC) has urged the Government to hold further discussions around its Royal Commission implementation proposals for a new disciplinary system for financial advisers and a compensation scheme of last resort. Responding to the release of the Government’s so-called Royal Commission Implementation Roadmap, FSC chief executive, Sally Loane, specified the new disciplinary system for financial advisers as one of the issues which required further discussion with Government. However, she said the FSC looked forward to working with the Government on implementing the Royal Commission’s other recommendations including ending grandfathered commissions for financial advisers, reference checking and information sharing for financial advisers and enforceable code provisions for industry codes of conduct. The FSC broadly welcomed Treasurer, Josh Frydenberg’s release of the Implementation Roadmap with
Loane saying it had provided certainty. “It is very important to move quickly to rebuild consumer confidence and enhance consumer outcomes, however any legislation to implement the recommendations should be treated with the same diligence and rigor as any other new bill to be brought before the Parliament,” Loane said. “The industry is committed to embracing this program of reform through action, strengthening the trust and ties between financial services and the community.” However, Loane noted that the modernising of the default superannuation system to end the proliferation of duplicate accounts by implementing a ‘default once’ framework had not been dealt with as part of the Implementation Roadmap. “We look forward to the Government providing a response to the issue and timing for the reform as part of its response to the Productivity Commission’s report into the efficiency of the super system,” she said.
THE Federal Government’s legislated response to end grandfathered conflicted remuneration is disappointing, according to the Australian Institute of Superannuation Trustees (AIST). The super body said the Government’s response, which followed the Royal Commission, had fallen short on consumer protection. AIST chief executive, Eva Scheerlinck, said: “While the new law puts a stop to financial advisers charging fees-for-no-service, it does not remove the incentive for advisers to recommend that clients stay in existing, often poorly performing and expensive products”. AIST said while it had welcomed the Government’s timeframe on how it would implement the Hayne Royal Commission recommendations its response had been “far too slow”, with only a handful of recommendations having been subject to the legislative process. “The Government’s response so far has been tepid at best. It is crucial for restoring consumer trust in Australia’s financial system that key recommendations to address harmful conflicts of interest in the financial services sector are prioritised and implemented in a way that will improve outcomes for all Australians,” Scheerlinck said. Scheerlinck called on the Government to prioritise recommendations to stop the worst practices among banks and other forprofit entities, including to ban the hawking of super products, such as the upselling of super along with the sale of bank products. The super body also welcomed the Australian Securities and Investments Commission’s (ASIC’s) report that said the body would prioritise work on 13 matters referred to it by the Royal Commission. Scheerlinck noted that commissioner Hayne had not referred any profit-to-member super funds to investigation to the regulators.
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8 | Money Management August 29, 2019
News
NAB expects further adviser provisioning BY MIKE TAYLOR
THE National Australia Bank has foreshadowed further provisioning for remediation of adviser service fees for self-employed advisers, at the same time as announcing an unaudited statutory net profit of $1.7 billion for the third quarter on the back of a one per cent increase in cash earnings. In a third quarter update released to the Australian Securities Exchange (ASX) the big banking group said its transformation remained on track but that it expected a further increase in provisioning. NAB chief executive, Philip Chronican, said that as previously highlighted, customer remediation programs and regulatory compliance investigations were continuing with potential for additional costs. “While amounts and timing remain uncertain, additional provisions are expected to be recognised in the second half of 2019, including for adviser service fees for selfemployed advisers,” he said.
Industry superannuation funds urge publication of firm level complaints data BY MIKE TAYLOR
INDUSTRY funds group, the Australian Institute of Superannuation Trustees (AIST) has repeated its calls for the financial services regulators to keep registers which would allow consumers to access the level of complaints received about individual firms. In a submission filed with the Australian Securities and Investments Commission (ASIC) dealing with internal dispute resolution (IDR) procedures the AIST said it believed that consumers should be able to search complaints at both firm and aggregate level. And, in what appeared to be a pointed reference to vertically-integrated structures, the AIST said the ability to look at firm-level complaints should extend to outsourced providers and group conglomerates. It said the financial services Royal Commission had identified many instances where structural conflicts of
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interest had adversely affected consumers. “It is therefore important that the volume of complaints be at an individual firm level (e.g. a superannuation fund) as well as at a conglomerate level (e.g. a superannuation fund which forms part of a banking conglomerate),” the AIST submission said. However, in similar terms to the Financial Planning Association (FPA), the AIST expressed concern at the degree to which complaints made via social media should be recognised. “AIST acknowledges that complaints may now be made on social media platforms. That being said, anecdotal feedback from funds is that at an industry level, less than 50 per cent of people funds attempt to contact via social media respond to the fund,” the submission said. It suggested that greater guidance was needed around what actually represented a complaint on social media and whether a complaint was actually being made by a genuine member.
APRA hits Allianz with additional capital requirement GENERAL insurer Allianz Australia Limited has become the fifth entity to have additional capital requirements imposed on it by the Australian Prudential Regulation Authority (APRA). The regulator said it would be imposing an additional $250 million capital requirement to Allianz Australia Limited to reflect the issues identified in the insurer’s risk governance self-assessment. APRA said that the additional capital requirement flowed from the self-assessment undertaken by Allianz and other insurers and superannuation licensees last year in the wake of APRA’s prudential inquiry into the Commonwealth Bank. It said it had advised Allianz that the extra $250 million capital requirement would remain in place until the insurer completed remediation work underway to strengthen risk management, and closed gaps identified in its self-assessment. The APRA release said Allianz had become the fifth APRAregulated entity to have an additional capital requirement imposed due to heightened operational risk. Commenting on the move, APRA executive board member Geoff Summerhayes said APRA’s decision sent a message to all insurers. “The risk governance selfassessments not only demonstrated that the issues identified in the CBA inquiry exist beyond that institution – they also go beyond the banking sector,” he said.
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August 29, 2019 Money Management | 9
News
‘It was a test case’ insists ASIC BY MIKE TAYLOR
THE Australian Securities and Investments Commission (ASIC) has sought to defend its position as pursuit of a ‘test case’ following its Federal Court loss to Westpac over responsible lending provisions. The Federal Court found against ASIC with respect to its claims that the banking group had breached the responsible lending provisions of the National Consumer Credit Protection Act. However, ASIC commissioner, Sean Hughes claimed the regulator had actually pursued the action in the interests of judicial clarity. “ASIC took on the case against Westpac because of the need for judicial clarification of a cornerstone legal obligation on lenders, this is why ASIC refers to this case as a ‘test case’,” he said. “As a regulator, it is our role to test the law
and its ambit. The obligation to assess loan applications builds on the requirement for banks to make inquiries about a borrower’s financial circumstances and capacity to service a loan and to verify the information that borrowers give banks.” Hughes said the regulator was reviewing the judgement carefully. The Federal Court loss comes in the wake of ASIC espousing an “if not, why not” approach to litigation in the wake of the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry. Acknowledging the Federal Court judgement, Westpac Consumer Division chief executive, David Lindberg said it had been an important test for the industry. “We welcome the clarity that today’s decision provides for the interpretation of responsible lending obligations,” it said.
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10 | Money Management August 29, 2019
News
Challenger’s FY19 results hit by industry disruption BY OKSANA PATRON
CHALLENGER has reported a lower statutory net profit after tax which fell by $15 million to $308 million in FY19 due to the significant disruption in the advice industry. “Group performance was impacted by the challenging operating environment driven by the disruption in the financial advice industry, with key metrics below expectations set at the beginning of the financial year,” the group said in a press release. Following this, the company also reported a drop of $10 million in normalised net profit after tax (NPAT) to $396 million. At the same time, group assets under management (AUM) were up slightly on FY18 finishing the year at $82 billion. The slower growth was due both to industry disruption and redemption by a major superannuation fund
predominantly driven by internationalisation of their investment management. “Challenger has continued to attract solid retail inflows in both funds management and life, despite retail flows across the sector hitting record lows last year. In our life business, domestic sales were marginally down, with lower sales from major hubs offset by stronger sales by independent financial advisers,” Challenger’s managing director and chief executive, Richard Howes said. “In funds management, when removing the impact of performance fees, we saw solid growth in underlying earnings before interest and tax of 23 per cent.” Challenger’s funds management business saw strong underlying earnings offset by lower performance fees, which were down $16 million to $3 million. Subsequently, net income for the year was down $1 million to $150 million, but up $14 million excluding performance fees.
Zurich announces partnership with Celeste FM BY LAURA DEW
ZURICH Investments and Celeste Funds Management have announced a partnership to distribute Celeste’s Australian Small Companies Fund to the Australian market. Celeste was selected following a search by Zurich for a smaller companies manager and Zurich said it liked the firm’s strong track record and dedicated investment team as well as its strong retail footprint. Zurich also appointed the firm to take over the management of the existing Zurich Investments Small Companies Fund. Matthew Drennan, head of savings and investment at Zurich, said: “Celeste Funds Management is a proven manager of Australian smaller companies and an excellent addition to the suite of Zurich Investments strategic partnerships. “We are excited to welcome the Celeste team as our newest strategic partner managed by Frank Villante and Paul Biddle.” Villante, chief investment officer at Celeste, said “The Celeste team looks forward to developing a mutually beneficial strategic partnership with Zurich Investments. We believe we can deliver above benchmark returns, from the application of our investment process for the benefit of the client base.” The Celeste Australian Small Companies Fund returned 6.2 per cent over one year to 31 July, 2019, according to FE Analytics, versus returns of 5.8 per cent by the ACS EquityAustralian Small and Mid Cap sector.
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Risk advice businesses MBS and CRA to merge RISK advice businesses MBS Insurance and Complete Risk Analysis (CRA) have merged as they enter a “new era for professional advice”, creating one of the industry’s largest risk insurance advisory businesses. Sydney-based MBS and CRA, who were based in Melbourne, said they were confident the merged expertise, increased scale and improved efficiencies would be positive for the newly-combined businesses. The combined risk advisory business would have approximately $55 million in premiums under management, 18 authorised financial advisers and 40 administrative staff members. Initially the two businesses would operate under their own brands from their respective offices whilst a new corporate identity and image was developed but would be guided by a common board of directors.
The new brand and identity were expected to be announced before the end of the year. MBS co-partners Kris Mason and Drew Burden, and CRA founding partner Glenn Kerr said: “The merger has brought two specialist businesses together with common values, cultures and a shared commitment to put clients first. “Putting MBS and CRA together makes us far larger, gives us better scale and will deliver better benefits and reassurance to clients.” In addition, the group has 10 formalised joint ventures and the opportunity to expand this via further strategic alliances and joint venture partnerships in the future.
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21/08/2019 9:00:39 AM
12 | Money Management August 29, 2019
News
FPA backs key superannuation bill BY MIKE TAYLOR
THE Financial Planning Association (FPA) has backed legislative changes aimed at stopping unscrupulous employers from using their employees’ salary sacrifice superannuation contributions to reduce their superannuation guarantee obligations. In a submission filed with the Senate Economics Legislation Committee dealing with the legislative changes, the FPA said that it had been arguing in favour of such measures for years. In circumstances where salary sacrifice is a frequentlyrecommended tactic in wealth accumulation, the FPA said it had been pointing out the weakness in the current regime for more than a decade. “The FPA has raised concerns about weaknesses in the current
law in relation to employer payments of superannuation for nearly a decade, and we would encourage the Parliament to ensure these changes are implemented as quickly and efficiently as possible to protect employees wage entitlements,” the submission said. The Government has introduced the Treasury Laws
Amendment (2019 Tax Integrity and Other Measures No 1) Bill, which includes amendments to the Superannuation Guarantee (Administration) Act 1992 to ensure that an individual’s salary sacrifice contributions cannot be used to reduce an employer’s minimum superannuation guarantee contributions.
Advisers push risk back onto portfolio sellers BY JASSMYN GOH
FINANCIAL advisers looking to buy portfolios now have the upper hand in demanding more stringent warranties following the Royal Commission, new education standards, and dealer groups closing their planning arms, according to The Fold Legal. In an analysis, the law firm’s senior associate, Katie Johnston, said that financial advice portfolio buyers were now empowered to limit their exposure and risk to changes to remuneration and poor advice. “One way they’re doing this is by imposing more stringent warranties and indemnities in their portfolio transfer agreement,” Johnston said. “They are conducting a more extensive due diligence process and asking for better warranties than they have for similar transactions in the past.” She noted that buyers wanted more certainty around the payment of any professional indemnity claims, especially since many advisers were leaving dealer groups that were shutting down their financial planning operations entirely. Johnston said portfolio buyers now expected warranties to cover conduct in servicing clients, remuneration, and records. “To mitigate their risks, buyers are also asking
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sellers to give personal (owner/director) guarantees for these types of warranties,” she said. This was to push risk exposure back onto the seller as much as possible for poor advisory and compliance practices, Johnston said. “[This allows] the buyer to reduce the purchase price for any adverse impact on recurring revenue and retention of the acquired client base,” she said. “This isn’t entirely unreasonable given the seller is the one who ‘knows’ the clients, the business and its risks.” Johnston noted that advisers selling their portfolios could still limit their exposure and risk by: • Capping the amount the buyer would seek for a warranty breach; • Capping the time period to make a warranty claim; • Setting a minimum loss threshold so that the buyer would suffer an individual loss or an aggregate amount before they could make a warranty claim; and • Setting the process for how buyers could make a warranty claim. However, Johnston said indemnities were gaining favour with buyers and they needed to have certainty about their rights to claim against the seller and the seller’s financial resources to meet indemnity and warranty liability.
Magellan to float high conviction trust MAGELLAN Asset Management has announced it will undertake an initial public offering in a new Australian Securities Exchange (ASX) listed investment trust, the Magellan High Conviction Trust. Alpha manager Hamish Douglass’ Magellan high conviction fund would replicate the strategy of its unlisted fund that has returned 16.6 per cent per annum since its inception on 1 July 2013. Magellan said the offer expected to open on 21 August, 2019 and would invest in eight to 12 high quality global companies with a target cash distribution of three per cent per annum. “Magellan will be the investment manager and act as the responsible entity, with Hamish Douglass and Chris Wheldon acting as the portfolio managers,” the announcement said. Douglass, who is also Magellan Financial Group’s chair and chief investment officer, said the trust was not appointing a broker syndicate or paying any fees or commissions to any brokers or advisers to handle the offer to avoid concerns regarding conflicted remuneration. “Instead, Magellan is offering directly to investors who subscribe for units in the offer the right to receive additional units worth either 7.5 per cent or 2.5 per cent of their allotment depending if they subscribe under the priority offer or the wholesale/general public offer,” he said. “The full cost of the additional units and costs of the offer will be borne by Magellan… I intend to take up my priority offer and, in addition, to subscribed for $20 million worth of units under the wholesale offer.”
21/08/2019 3:25:16 PM
FOUR SEASONS, SYDNEY WEDNESDAY, 23RD OCTOBER Wednesday 23rd October
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21/08/2019 9:01:45 AM
14 | Money Management August 29, 2019
News
FASEA adds courses to help advisers meet education standard BY JASSMYN GOH
THE education standards authority has approved a further three bridging courses from the Queensland University of Technology to allow existing advisers to meet the education standards. Financial Adviser Standards and Ethics Authority (FASEA) has now approved 27 bridging courses, 66 historical courses, and 53 Bachelor or higher degrees. FASEA chief executive, Stephen Glenfield, said the additional bridging courses provided additional choice to advisers seeking to meet the education standard by 1 January 2024.
The body also approved applications for the recognition of coursework to attain a professional designation from the Portfolio Construction Forum and CFA Societies Australia as part of its education standards for financial advisers. “Advisers who have completed coursework to attain the CIMA [Certified Investment Management Analyst] designation in or after 2001, offered by the Portfolio Construction Forum, have been awarded one credit recognition for prior learning (RPL),” FASEA said. “Advisers who have completed coursework to attain the Chartered Financial Analyst designation, offered by CFA Societies Australia, have been awarded one credit for RPL.”
ASIC updates guidance on climate change THE Australian Securities and Investments Commission (ASIC) has issued an update on its guidance on climate change related disclosure. The regulator’s review, which followed the recommendations of a Senate Economics References Committee report on carbon risk, found that its existing regulatory guidance remained fit for purpose. However, to help stakeholders comply with their disclosure obligations, ASIC issued the following update to its guidance, according to which, the parties should: • Incorporate the types of climate change risk developed by the G20 Financial Stability Board’s Taskforce on Climate Related Financial Disclosures (TCFD) into the list of examples of common risks; • Highlight climate change as a systemic risk that could impact an entity’s financial prospects for future years and that may need to be disclosed in an operating and financial review (OFR); • Reinforce that disclosures made outside the OFR (such as under the voluntary TCFD framework or in a sustainability report) should not be inconsistent with disclosures made in the OFR; and • Highlight climate change and other risks that may be relevant in determining key assumptions that underly impairment calculations. ASIC commissioner, John Price, said that climate change was an area which ASIC continued to focus and it would welcome the continuing emergence of the Climate Related Financial Disclosures (TCFD) framework as the preferred market standard, both here in Australia and internationally, for voluntary climate change related disclosures. ‘While disclosure is critical, it is but one aspect of prudent corporate governance practices in connection with the mitigation of legal risks,” he said. “Directors should be able to demonstrate that they have met their legal obligations in considering, managing and disclosing all material risks that may affect their companies. This includes any risks arising from climate change, be they physical or transitional risks.”
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Millinium sues former adviser for $2.4m BY LAURA DEW
MILLINIUM Capital Managers has made a claim worth $2.4 million against a former adviser of the Millinium Alternative Fund (MAX) for misconduct. According to a filing on the Australian Securities Exchange, the claim follows an investigation by the company into its MAX fund. It alleges the former adviser recommended the fund sell certain shares it owned in a listed company, despite the adviser being in
possession of material information about said company. If this information had been disclosed, it would have led to MAX retaining its shares, which had since increased in price. If the shares had not been sold, MAX would have been $1.6 million better off, the company said. The firm was also seeking $793,000 in expenses paid or incurred to the adviser, his company or other representations. It said the $2.4 million sum was ‘material’ when compared to MAX’s net tangible assets.
21/08/2019 4:39:35 PM
August 29, 2019 Money Management | 15
News
APRA urges self-regulation of industry BY MIKE TAYLOR
THE chairman of the Australian Prudential Regulation Authority (APRA), Wayne Byres, has made a strong case for the financial services industry not to walk away from the concept of self-regulation. In an address to a Sydney conference, Byres said that while the Royal Commission had supported stronger powers for both APRA and the Australian Securities and Investments Commission (ASIC), the regulatory framework was rightly founded on boards and executives ultimately being responsible for the activities and performance of their companies. “While after-the-event punishment will act as a general deterrent against illegal behaviour, more than just
compliance with the law is needed to restore the financial sector’s reputation,” the APRA chairman said. “Individuals, companies and industries must better regulate their own behaviour: to do not only what is legal, but also have regard to what is right.” “The optimal model of financial regulation – lowest cost, best outcomes – therefore requires self-regulation to play its part,” Byres said. He said that underpinned by society’s value and norms, there would always need to be a layer of formal regulation established by Government in the public interest, but that it could be both much reduced, and at the same time made much more effective, when it was reinforced by three layers of robust self-regulation: “at the industry level, at the company level, and at the level of the individual”.
Perennial sees strong demand for unlisted space
Commbank to exit thermal coal by 2030
BY OKSANA PATRON
THE Commonwealth Bank has announced it will divest from thermal coal by 2030, after being one of the heaviest lenders to coal, oil, and gas, according to Market Forces. The bank has made a ‘dramatic turnaround’ after it loaned at least $7.2 billion to coal, oil, and gas companies and projects two years after the Paris Agreement. The announcement follows commitments by insurers Suncorp and QBE to exit the sector by 2025 and 2030, respectively. The Commonwealth Bank said it would continue to reduce its thermal coal mining and coal-fired power generation exposures with a view to exiting the sector by 2030, subject to Australia having a secure energy platform. It would also only finance new oil, gas or metallurgical coal mining projects if they demonstrated they were compatible with the goals of the Paris Agreement, and would not project finance for the mining, exploration, or development of oil sands, or for oil and gas exploration and development in the Arctic. Market Forces executive director, Julien Vincent, said firms looking to run a thermal
STRONG demand from wholesale investors interested in the unlisted space has seen Perennial Value’s pre-IPO Opportunities Fund attract $50 million only weeks after it announced plans for a new Private to Public Opportunities Fund, the firm said. The new fund, which closed on 16 August, would be an extension of the firm’s Microcap Opportunities Trust which invested primarily in private companies that became public. The microcap fund reached the targeted capacity of $200 million and closed, returning 30.4 per cent per annum net of fees since inception. Perennial’s managing director, John Murray, said: “We’ve been very pleased by the strong demand from wholesale investors for this new fund, in particular high net wealth and family office investors”. “They recognise there’s a gap in the market for opportunities to invest in early-stage companies requiring growth capital,” he said. Chart 1: Perennial Value Microcap Opportunities Fund performance v sector and index
Source: FE Analytics
14MM2908_01-17.indd 15
BY JASSMYN GOH
coal mine or coal power station in Australia beyond 2030 would not be able to get financing from Australia’s largest financial institution, or insurance from two main underwriters. “The exit of Australia’s largest company from coal should be a signal loud enough to be heard by the industry bosses and politicians who have their fingers in their ears over the need to decarbonise the economy,” said Vincent. “Now Australia’s other big banks need to step up and show the same kind of intent to get out of coal.” However, Market Forces noted the commitment by the Commonwealth Bank was a “dramatic turnaround” as the two years following the Paris Agreement being signed, the bank loaned at least $7.2 billion to coal, oil and gas companies and projects. “More recently, Commonwealth Bank has issued loans to Australia’s three big coal power station operators Energy Australia, AGL and Origin, all of which intend to keep running coal power plants beyond 2030 and the latter having plans to massively expand gas extraction,” the firm said. The organisation called on the bank to eliminate potential loopholes over financing new coal, oil, and gas projects.
Bank
Coal Power
Thermal coal mining
CommBank
Zero exposure by 2030
Zero exposure by 2030
ANZ
Excludes projects of more than 0.8 tonnes CO2 / MWh
Excludes new to bank customers with more than 50% of revenue from coal
NAB
No policy restrictions
Will not finance new thermal coal mines or extensions
Westpac
Target of average power sector emissions intensity of 0.3 tonnes CO2 / MWh by 2020
Will not finance new thermal coal basins or projects with energy content less than 6,300 kCal / tonne
21/08/2019 1:03:20 PM
16 | Money Management August 29, 2019
News
FPA warns ASIC on social media complaints FPA warns
on product intervention consequences
BY MIKE TAYLOR
THE Financial Planning Association (FPA) has warned the Australian Securities and Investments Commission (ASIC) of the dangers inherent in allowing social media to be used as an unmoderated and uninhibited means of filing complaints against financial planning firms and their planners. The FPA has used a submission to ASIC’s review of Internal Dispute Resolution arrangements to argue that concerns expressed through social media should not, of themselves, be considered complaints in the first instance. “The definition of a complaint should not be loosened to elevate an expression of dissatisfaction into a matter requiring a fulsome response,” it said. “Every expression of concern should be dealt with on its merits, but should a concern be completely frivolous, a financial services company should be able to defer handling the matter unless it is escalated appropriately,” the submission said. In doing so, the FPA has argued that people should not be
allowed to hide behind the anonymity of social media and that they should be diverted to welldefined but private channels. “By having appropriately defined channels for consumers to lodge a complaint, it instils responsibility for the individual to verify the complaint, in writing, through the appropriate channels that will clearly determine that the content is a complaint rather than a vexatious comment,” the submission said.
It said customer verification was a must because true forms of social media such as Facebook, Twitter and Linkedin, were “completely open to abuse by scammers, hackers, social engineers and others.” “There needs to be a valid connection between the customer and the business, and this cannot be established through social media channels, at least as they operate at present,” the submission said.
AMP wealth strategy returns to dark ages BY OKSANA PATRON
THE wealth management strategy recently announced by AMP is a return to the dark ages, according to Synchron’s chair, Michael Harrison. Harrison believed the AMP announcements were very bad news as the new strategy would again represent a situation where institutions create products and force people into them. He stressed that the core of the problems across the wealth management industry lay with banks and institutions while the sanctions introduced only caused a growing burden of obligations for advisers. “To make matters worse, governments, and institutions with big budgets, appear to have also somehow manipulated the rhetoric to such an extent that many people seem to genuinely believe advisers have brought the current set of circumstances on
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themselves and have no empathy for them,” he added. “What many people have failed to understand is that AMP and the institutions were largely responsible for the fees-for-no-service debacle, not advisers.” Harrisson said that although AMP did not indicate how many advisers would be forced to exit the industry, following the rationalisation of its network, the estimates ranged from 30 to 80 per cent of adviser network. According to Synchron, the Government mismanaged the financial services industry to such an extent that it has effectively handed institutions like AMP a free pass. “The fundamental question governments and institutions need to ask themselves now is, how are consumers better off without advice?”
THE Financial Planning Association (FPA) has alerted the Australian Securities and Investment Commission (ASIC) to the possibility of its product intervention power leading to product manufacturers seeking to recoup potential losses from intervention via higher fees or reduced services. In a submission filed in response to ASIC consultation around implementation of the product intervention power, the FPA said that while it supported the measure ASIC needed to consider the implications. It said one of those implications was that product providers would seek to recoup potential losses from intervention and exampled them seeking to increase fees or reduce service levels. “The problem will be exacerbated by the potential for the intervention power to affect the management of liquidity by product providers,” the FPA said. “The result is that consumers end up paying for the protection, which may not be the best use of their resources.” However, the FPA said that it supported the proactive power for ASIC to intervene when a product resulted or was likely to result in significant detriment to consumers. “We welcome the provision that a type of product intervention includes the mandate of seeking personal advice before being offered the product,” the FPA submission said.
21/08/2019 12:59:52 PM
August 29, 2019 Money Management | 17
InFocus
HOW CAN THE ADVICE INDUSTRY PERSUADE PEOPLE TO PAY? Integrity Life’s Suzie Brown explores how, post Royal Commission, financial advisers can encourage clients to pay for their services. A SEISMIC SHIFT in the advice industry is already underway and we are at the dawn of a new era for advisers. This transformation is being driven by an urgent need to repair the fracture in consumer trust across the financial services industry. There is a universal agreement that, in order to achieve this, measures must first be put in place so the needs of consumers are the priority. This will ensure that businesses act fairly, honestly and transparently in the best interest of consumers. Legislative guardrails are being put in place, with the banning of grandfathered commissions across wealth more broadly one such example of these protection measures. But whilst adviser commissions have become a controversial issue amid fears they encourage mis-selling and other anti-consumer behaviour, the evidence is indisputable that the advice industry, built primarily on a commission structure, has had a profoundly positive impact on the finances of Australians who receive advice. Banning commissions has a far-reaching impact on the entire industry, largely because there is, as yet, no alternative remuneration structure accepted. We know that upfront fees are not popular. For consumers, going from paying
AUSTRALIAN FINANCIAL COMPLAINTS AUTHORITY (AFCA) 2019 SNAPSHOT (1 NOV 2018 – 31 MAY 2019)
nothing upfront to potentially paying thousands is an almighty jump – particularly given a general unwillingness and lack of precedence in paying for advice. Fee for service models are standard across so many industries – consumers are happy to pay lawyers, plumbers, designers, marketeers and many other occupation groups for their time. So why not advisers? A lack of immediate reward or gratification is likely to be part of the issue, but we also have an image problem. It is difficult for our industry to tell the good stories of when insurance has helped, because death and illness are still very much taboo topics. We also face headwinds from the commoditisation of life insurance, and this undermines the value of advice in helping consumers select a policy appropriate to their needs.
We are left in a difficult situation and advisers could be forgiven for feeling like they can’t win – consumers are disapproving of hidden or opaque remuneration structures but extremely unreceptive to the idea of being presented with a bill. Clearly something has to give. In order to ensure the advice industry is sustainable, the industry must change perceptions around the value of advice and the role it plays in helping consumers to obtain products suited to their circumstances. It is clear that consumers need more time to get comfortable with paying an upfront fee for advice so for now, it may be that commissions are the preferred remuneration structure, but with far greater transparency, in order to build trust in the adviser consumer
relationship. As well as having full visibility of adviser remuneration, consumer choice should be an important factor to winning back trust. Giving the client choice in the way they pay for insurance advice puts the power back in their hands. At Integrity, we recognise that change has been a long time coming. We’ve built our systems with a huge amount of flexibility in mind to allow a variety of fee options with the basics like commission, fees, a mix of both, and even split commissions We are trying to make it easier for advisers to build those great relationships with their clients, ones that are based on trust and transparency. This also means simplifying the process for both parties. Advisers are able to give their clients full visibility of premiums and the factors that impact their calculation. Resolving the complex issue of remuneration will require insurers and advisers to work together in consultation, collaboration and education with consumers. To ensure our industry moves forward with consumers it’s essential that we move to a model where advisers are remunerated fairly – and where their clients see the value of their adviser’s fee. Suzie Brown is general manager, distribution at Integrity Life.
41,528
$99m
88%
complaints received
in compensation paid
of financial firms did not have a single complaint lodged against them
Source: AFCA
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21/08/2019 1:00:54 PM
18 | Money Management August 29, 2019
Future of wealth
AMP – A FOCUS ON PRACTICES RATHER THAN ADVISERS In the aftermath of AMP Limited’s dramatic announcements about the future of its financial advice business which accompanied the release of its full-year results, Mike Taylor interviewed AMP’s group executive, advice, Alex Wade. MT: YOU’VE MADE some significant announcements around the financial advice business which have significant implications for advisers. How have you gone in terms of briefing those advisers? AW: OBVIOUSLY YOU’VE got some [advisers] who are more impacted than others and need to change their model or are concerned about their future, clearly, because of some of the announcements we’ve made and because of the impact they’ve had on certain practices. And then we’ve got the other bucket [of advisers] who have been incredibly supportive about the need for change and understand the opportunity and the future and really want to be part of that future and focus on where we are. We’re really focused on practices rather than on advisers and, the sort of practices of the future that are going to be more professional, compliant and more efficient to have the scale to pick up and pursue the changes.
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MERGERS AND QUALITY PRACTICES MT: WELL, FROM the outside looking in, it looked like AMP selected particular businesses and had stakes in some of those businesses and that is how it played out. Is that a fair assessment? AW: Clearly we’re focused on quality of business and a business model for the future. Now, that doesn’t necessarily mean that those businesses for the future are the ones that are shooting the lights out today. We’re really going practice by practice with them to see the future capability. Now there may be some today that, frankly, aren’t profitable but we can see a path and we’re supporting them to the future with our business consulting support and helping them structure for the future. It’s really about those businesses that are capable of digesting the industry disruption along with us and I think that we’ll obviously see some smaller businesses merge with bigger
21/08/2019 9:40:47 AM
August 29, 2019 Money Management | 19
Future of Strap wealth
businesses and various changes like that. For us, it is not about drawing an economic line in the sand across businesses but really determining how we retain talented advisers and minimise client impact and ensure best client outcomes.
IT’S ABOUT PRACTICES, PLANNERS MT: ULTIMATELY, OF course, everyone wants to know about planner numbers. Money Management is currently undertaking it’s TOP 100 research. How many planners will you ultimately have in 12 months’ time? AW: WE DON’T have a set target. Clearly our aligned network will reduce in size and I think that it is essential to have high quality and profitability but we haven’t put an absolute set target on it given the range of options we have. As I said, we have many practices which see this as a huge opportunity to acquire talent, to grow their businesses and we’re looking at everything from geographic factors to commercial capacity to where we can rehome quality advisers. There are loads of stats out there about impacts on the industry, industry disruption and [the Financial Adviser Standards and Ethics Authority] FASEA and what have you but, for us, it’s about ensuring we have strong businesses which we want to lead the professionalism of advice by partnering with those businesses in the future.
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ADVICE ACADEMY AND THE FUTURE MT: AMP HAS been notable in the industry for training and fostering people into the advice industry via mechanisms such as the AMP Adviser Academy. Will that continue? AW: TRAINING AND fostering people into the advice industry will continue. We want to guide the industry and help lead that professionalism of advice. Clearly, we had a strategy in the past of being the biggest and now it’s about being the partner of choice and then growing a sustainable business together. We are investing heavily in the compliance space and through our digital capabilities and that is something which we hope will help the practices and their clients.
EMBRACING DIGITAL MT: YOU HAVE mentioned digital capabilities. Does that entail utilising robo-advice or similar as a triage and then gradually moving clients through the system? AW: TRIAGE AND then moving people through – 100 per cent. For me it’s about somehow solving advice for the masses and the reality and economics today of face to face advice is that it has become too expensive for the average person and we look to now have a greater serviceability and delivery to those clients. And they can go up and down that model – they may be able to do everything digitally, they may be able to talk to someone on the phone or
face to face, depending, and likewise they can go down [the system], for example, a high net worth individual may wish to be self-direct in the sense of knowing exactly what they want and how they want to do it and do it totally on digital if they want to.
APLs TO EMBRACE BEST OF BREED MT: ARE THERE going to be any changes to the way AMP approaches the development of approved product lists (APLs)? AW: OUR IMMEDIATE priority is simplification of all our products. We simply just have way too many and that’s a legacy of our age and a few other things. We will simplify the product suite we have. But for me it’s about having the best of breed or best of offerings for clients whether it be a product or a solution and that doesn’t mean that AMP will necessarily manufacture that product. Obviously, we believe that we manufacture very good products but in instances where we believe there is a client need that is not a strength of ours we will source that elsewhere.
FUTURE RECRUITING MT: YOU’VE INDICATED that AMP will continue to grow adviser numbers. How will that work? AW: DIRECT CHANNELS we will be growing and investing in our direct channels. Grow through stronger practices and stronger business models and our aligned practices will be able to use our digital capabilities.
21/08/2019 9:41:05 AM
20 | Money Management August 29, 2019
Future of wealth
AUS UNITY: OPPORTUNITY IS WORTH THE PAIN OF CHANGE In this edition, Money Management launches a new series in which we speak to financial planning groups and ask them to share their views on the industry in a new post-Royal Commission environment. This month MM interviewed Matt Brown, head of financial planning at Australian Unity. MM: WHAT ARE your general market thoughts this year? MATT BROWN: THERE is indeed an acceleration of change in the landscape. I guess there are some who are surprised at the pace of that change, but to be honest, I am not personally surprised by it. If you look back at the impacts of the Royal Commission – and we know it for ourselves – it forces an internal look at your business once you’ve digested the recommendations to understand the meaning behind them and pre-empt the regulatory reform
14MM2908_18-30.indd 20
that comes off the back of it. You need to assess what you need to do in order to comply with the new regulation while supporting your advisers to implement the changes and keep everyone safe. That actually drives up cost and the complexity, perhaps a little counterintuitively to the intent of the Royal Commission. So there are a few players in the market who would be looking at increasing costs and complexity relative to the inherent risk of their businesses, particularly the bigger players who have decided in various ways to move on. When you are assessing the value and the purpose of the
business against its costs and complexity moving forward, as well as, for some, quite costly remedial actions then it’s not surprising that they made the decisions that they have. Something you can see, once you move beyond regulatory reform, are the real opportunities that exist. There is irrefutable evidence and data that shows that the demand for advice is large and growing, and yet supply is diminishing. And when coupled with significant disruption, then it seems to me that the opportunity is worth the pain of change. Something to consider if you want
to participate is the emergence of business models in the market that haven’t been around before. MM: HOW DO you think the business model across the industry will evolve and which ones will struggle? MB: BUSINESS MODELS that have relied on being formed as a means of distribution for other products and services will struggle in the new environment. In this new economic reality it is unlikely to last. That said, I think some larger organisations in the marketplace
21/08/2019 3:24:28 PM
August 29, 2019 Money Management | 21
Future of wealth
MATT BROWN
will absolutely flourish – I think the trend you can see in the marketplace which is gaining momentum is self-licencing and perhaps conglomeration altogether. I think a fair portion of those will succeed but also a portion of those will be at risk of failure. MM: WHAT ARE your views on the self-licencing? MB: I THINK we need to take care (as a collective industry) with selflicensed becoming the dominant model. I think that there is absolutely a place for it and it’s a valid model for those advisers who are well-resourced, focused and capable of running a licence. There are a few things to consider though: one is that the advisers need to understand the skills required to run a license, which are very different from advising clients. It’s one thing to run a business and being in a business, seeing clients and another matter all together in running your own licence. The time and ability to step back and think, innovate by challenging established norms sort of diminishes. I don’t think it’s wrong, it’s just an observation that there is something to notice for the industry in how we collectively react to that. We need to encourage innovation, not restrict nor diminish it.
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Financial planning group name
Australian Unity Personal Financial Services
AFSL Licence No
234459
Head of Financial Planning
Matt Brown
Ownership
Australian Unity Limited (100%)
Number of financial planners (as of July)
185
MM: WHAT ARE, according to you, the potential red flags across the industry moving forward? MB: I THINK we can’t underestimate, regardless of a business model, a fatigue that has led to some significant mental health challenges for advisers within the marketplace. It is real and something that must be addressed, and something obviously that we at Australian Unity as a wellbeing organisation – are critically aware of. One of my personal frustrations post-Royal Commission – [is that] all important reform actually does not get to the root cause of some of the challenges that the industry is facing. By that I mean it’s not simplifying industry, it’s not making it more sustainable. It’s adding costs and complexity. So if we could address the fundamental issue which is why many clients won’t pay what it costs an adviser to advise them and advisers by the same token typically haven’t been in the past prepared to pay a licensee what it costs to licence them and we’ve got a real problem. The opportunity was wasted through the recommendations of the Commission to address that fundamental economic imbalance – and that’s certainly one that we at Australian Unity are trying to address. MM: WHAT ARE the strengths of your business?
MB: WHAT I think we are really clear about, and what I think other participants in the market need to be much clearer about, is purpose. We are clear on our purpose – we are a wellbeing organisation. Our advice business exists to look after the financial wellbeing of our clients. We get that right balance between being institutionally-owned and supported and being product agnostic in terms of getting the right product solutions are for clients. So that’s sort of the unique mix which seems to be resonating for some advisers and clients in the market. So, we are not like some other players in the marketplace, we are not a platform provider, we are not a superannuation company, we are not an insurance company, we are a wellbeing organisation and believe in looking after the wealth of our clients. We’ve now got 20 years of data that we call our wellbeing index, which was developed in conjunction with Deakin University, which shows irrefutably how important wealth is, as one of the seven pillars in someone’s overall actual sense of wellbeing. Our ownership structure is also unique in that we are a mutual and that brings with it a certain business model that I guess is something that advisers who have the same philosophy and purpose are interested in.
22/08/2019 10:35:00 AM
22 | Money Management August 29, 2019
Global equities
CHINA AND THE US ENDGAME While the world watches the US/China trade war with fascination, Jonathan Wu explains what President Trump is demanding and his ultimate ‘endgame’. WHILE WE HAVE seen on the one hand that Avengers Endgame has beaten all records at the box office, so has the US/China trade war broken records in terms of reversing almost 100 years of progress on globalisation. Many have chosen to focus on the short-term tit for tat strategies launched by the US in the name of ‘more open and free markets’ yet all of the actions taken by the Trump administration have only reflected an increase in protectionism. What we need to focus on though, as the title suggests, is what the endgame looks like for
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this trade war that is threatening to derail global growth leading into 2020. Central banks have taken actions across the globe by slashing rates to try to offset the effects of increased protectionism. In order to work out this endgame we must first consider the demands made of the Trump presidency. While the trade war and tariff implementations have certainly made headlines, the three key demands that have remained unchanged since the start: Equal Footing on Trade – If there is one thing that President Donald Trump has been consistent on in all his years in
public life it is that he believes the rest of the world has taken the US for a ride in terms of trade, whether that be with China, India or any other country with which it has significant ties. The US simply wants China to import more US goods to balance out the trade deficit. On balance, this is something China is working on to effectively de-escalate the overall tension. So, no major issues here. Reduction in power of China’s central government influence on the economy – This second ‘demand’ is ambitious no matter how you want to look at it. It is not hard to conclude that neither the
US nor Trump has any right to dictate how China should manage its economy. From an economic standpoint, if China didn’t have a command and control economy, they would not have been able to: • Implement the ¥4 trillion ($838 billion) stimulus package back in 2008 to bring the world back from the brink of collapse due to the misgivings of the US capitalist society being the root cause of the global financial crisis; • Bring a significant proportion of the population out of poverty and the speed with which they have done so;
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August 29, 2019 Money Management | 23
Global equities
• Even out population dispersion via its Hukou reform system to ensure Tier 1 cities do not suffer from overcrowding; • Build infrastructure like the high-speed rail network, the Three Gorges dam hydroelectricity generators to sure up electricity for the population. While it is noted that the economy is command and control, at the heart of it is the core value of utilitarianism – achieving the greatest good for the greatest number of people. Without this core value, you would not have seen the wealth being generated within China over the last three decades. Therefore, the US is very concerned. There are two parts to this. Firstly, on a macroeconomic front, China is getting closer to surpassing the US in terms of nominal GDP in USD dollar terms, but if you calculate GDP on a PPP (Purchasing Power Parity or the ‘McDonalds Index’) basis, China is already the largest, surpassing the US just a few years ago. By different estimates, on a nominal GDP basis in USD terms, China is looking to overtake the US by 2030. The US also understands this reality and is wrestling with what this will mean for geopolitics in the future. One technological advancement recently coined as the new ‘Cold War’ is 5G. Huawei, one of China’s success stories in the private sector in telecommunications technology has successfully achieved 5G alongside other Chinese corporates and in places like Shanghai the speed has already hit 6000mbs in speed (to put this in context, our NBN locally maxes out at 100mbs). Why is 5G so critical? Because of the development of the next generation of tools including
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“If there is one thing that President Donald Trump has been consistent on, it is that he believes the rest of the world has taken the US for a ride in terms of trade.” – Jonathan Wu, Premium China Funds Management artificial intelligence and driverless cars. The 5G network spectrum would allow the transfer of information fast enough to make calculations so fast, that it could support these two technologies as well as increase the speed of commerce globally. Former Google chair Eric Schmidt and LinkedIn founder Reid Hoffman published a report for the US government effectively stating that whoever leads 5G globally will stand to benefit from hundreds of billions of dollars in revenue across the next decade. They also made reference in the report that “that country is currently not likely to be the United States”. So why then can’t the US achieve global 5G superiority like it has done with other technologies over the last few decades? It is a rather ironic reason to say the least. 5G needs low-band spectrum which allows signals to travel farther than high-band spectrum. What that effectively means is that if a signal can travel further, then less infrastructure has to be deployed saving overall capital expenditure. Unfortunately, in the case of the US, that low-band spectrum is reserved for the military and hence cannot be used for commercial purposes. Huawei, as a result of this problem the US faces, has been subject to sanctions including the
arrest of its chief financial officer Meng Wanzhou, as well as banning US firms from dealing with Huawei in the hope that it will slow down Huawei and its 5G development and deployment. The second concern on the part of the US is that many US conglomerates have not had the ability to successfully partake in China’s growth. This includes Facebook, Google, Apple and Uber. This is to a certain extent the direct result of China encouraging and supporting the growth of its local players in the same space, three of which most people have now heard of – Alibaba, Tencent and Didi. IP Law Enforcement and Opening Up of the Chinese Judicial System – This third ‘demand’ of Trump is somewhat linked to the second demand as they want the Chinese government to step up in its efforts to protect intellectual property rights of more foreign firms. From the Chinese perspective, their priority is to protect the domestic players because they don’t want to be in a situation where there is still significant dependence on the US for key components (vis a vis Huawei). While the Trump administration has continuously stated that the sanctions on Huawei have nothing to do with the trade war and is not being used as a pawn, all the
JONATHAN WU
evidence suggests otherwise vis a vis the agreement at the recent G20 meeting where Trump said he would raise the bans on Huawei if China started importing more agricultural goods from the US. So given these demands, what is the endgame? The US will accept that it will no longer be the biggest economic power in the world. This is simply fact, and the best way to embrace this is not to reverse the positive effects of globalisation over the last hundred years through increased protectionism, but to work with China in a more culturally nuanced manner which respects the way the Chinese government runs its economy for the benefit of its people. From an investment perspective, it’s also something we need to embrace when it comes to portfolio construction. Gone must be the days of saying China and Asia is a ‘niche’ investment given China is the world’s second-largest equities market. Embracing it means letting go of any biases or stereotypes you may have had in the past and objectively understanding the structure, culture and nuances of investing in the region and reaping the longterm fruits of that allocation. Jonathan Wu is executive director & chief investment specialist, Premium China Funds Management.
21/08/2019 10:12:07 AM
24 | Money Management August 29, 2019
Funds management
INDEX OR ACTIVE? A FOUR-STEP FRAMEWORK FOR DECIDING THE RIGHT MIX Vanguard’s Aidan Geysen explains how advisers can determine the right mix between active and passive funds for a client’s portfolio and how they can help a client meet their investment objectives. ALTHOUGH OFTEN VIEWED as a binary, either-or, decision, in fact there is often room for both active and index management styles within a portfolio. The decision point then becomes about the right mix versus a binary choice. Selecting the right asset class exposures that fits with a client’s risk profile and investment objective – from equities to bonds and everything in between – is an important step in planning for advisers. What follows is to determine the preferred investment style to deliver on investment goals, whether an index fund or an actively-managed strategy, or a mix of both. It may be that an activelymanaged strategy improves the chances of meeting an investment goal, whether that is outperforming a benchmark, maximising yield or dampening portfolio volatility, equally an index exposure may suit better for introducing greater diversification, lowering cost and reducing risk in a portfolio. The big question then is how to achieve that Goldilocks scenario of having the mix of index and active just right. To make an informed decision, a framework that helps set the proportions of active and index exposure across a given asset class in a portfolio can support advisers in making a disciplined call that will
set their clients up for the best chance of success.
INVESTING IS A ZERO SUM GAME The starting premise for this framework is that investing is a zero sum game, in which each fund that outperforms the market does so at the expense of others, which underperform average market returns. While index managers should deliver close to the market return after costs, active managers will either beat or be beaten by their benchmark. According to S&P’s SPIVA scorecard of Australian active manager performance for 2018, 83 per cent of Australian-domiciled broad-cap active equity funds underperformed over 10 years, after costs. From this, it is reasonable to conclude that the odds of making a successful choice of active manager can be low – hence the importance of putting rigorous standards in place when deciding how much active and index exposure is appropriate.
EXPECTATIONS AND CONVICTION The first consideration relates to the level of outperformance expected from the active strategy, and your conviction in the investment manager’s ability to deliver it.
Higher conviction in a manager or strategy would warrant a higher allocation to active, whereas lower conviction may indicate a higher allocation to an index strategy. Conviction can be difficult to form, however. When deciding on whether you have confidence in an active manager’s potential to outperform, look to understand characteristics like their investment principles, their security selection process, firm ownership structure and the experience and tenure of their team. For instance, looking at Australian small caps, a higher proportion of active managers have tended to outperform the index over time. With this in mind, an investor might opt to have a higher weight to a dedicated active small cap fund if they are comfortable that a particular strategy has a good chance of providing outperformance over a given time period.
THE COST FACTOR The second consideration is cost, which has a direct impact on the potential for outperformance. If you don’t have the means to access active management at a low cost compared to your expected outperformance, then a lower level of active may be appropriate. Again, the S&P scorecard proves an important point in that it’s calculations on active manager
Chart 1: Key Decision Factors and their impact on the active / passive mix
Source: Vanguard'
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performance are made after fees. Lower fees mean an investor keeps more of their returns, increasing their odds of achieving outperformance.
ACTIVE RISK & RISK TOLERANCE The third consideration is the level of active risk that the investment manager is taking, measured by the expected difference in returns both above and below the benchmark. A greater level of active risk may be tempered by a higher allocation to indexing. Related to the active risk of the manager’s strategy, is your client’s level of tolerance for taking active risk. If they can tolerate a high degree of underperformance without losing their nerve, then a higher weight to active may be appropriate. Following the framework of conviction, cost, active risk and risk tolerance to decide on the mix of active and index requires qualitative judgement on the adviser’s part. But the bottom line is that the motivations for using both forms of management vary. Using a decision-based framework to determine the appropriate mix can help advisers consider why they believe a given active or index strategy is right for their individual client’s circumstances, rather than simply making a choice based on how they view an investment strategy on its own merits. This framework might not always deliver investors the ‘just right’ combination of index and active in their portfolio, but it can help keep their investment goals at the forefront of their decisionmaking, ensuring that they choose the right funds or investment strategies for the right reasons. Aidan Geysen is Vanguard's head of investment strategy for Australia.
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August 29, 2019 Money Management | 25
Mixed asset funds
THE BEST OF BOTH WORLDS Laura Dew writes that the mixed asset sectors offer investors ‘the best of both worlds’ by allowing them to hold a varied range of assets in one fund which can be rebalanced in line with the market environment. EQUITIES VERSUS BONDS is an age-old conundrum but for those investors who are unwilling to make a commitment to either, there is a third option to offer the best of both worlds in the shape of a multi-asset fund which can hold both type of assets. These funds will usually invest in a combination of assets such as equities, bonds, property and cash and will be rebalanced depending on the market environment. This reduces the risk from holding one type of asset but may simultaneously hinder potential returns. You can also get balanced multiasset funds, otherwise known as asset allocation funds, which will invest in a mixture of assets but hold the same proportion in each asset. The amount in each asset will usually be within a minimum and maximum limit depending on the fund’s goals. Unlike multi-asset funds, they do not usually rebalance or change their asset mix so may not be suitable for all market environments. Simon Doyle, head of fixed income and multi-asset at Schroders, said: “Mixed asset funds provide investors with several benefits. The first of these is exposure to a wide mix of assets, this allows the investors to benefit from diversification to many different assets for a relatively small investment size. The theory is these assets often move in different directions so holding them together should result in a smoother, less volatile return for investors. “The second potential benefit is professional management where experienced investors decide when to move in and out of each asset type. Markets move in cycles and sometimes over-exuberance can see one asset type become expensive while another type falls out of favour and becomes cheap. Timing markets like this is difficult and most individuals don’t have the time or expertise to do this themselves.”
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PERFORMANCE Looking at the ACS sectors available for Australian investors, there are six sectors for multiasset funds depending on the varying risk levels of the portfolios. These are mixed asset aggressive, balanced, cautious, flexible, growth and moderate. The most popular of these is the mixed asset-growth sector which has 119 funds included and mixed asset-balanced which has 105 funds. Meanwhile, the ACS mixed asset-cautious sector has only 41. By the nature of their diverse allocations, these type of funds are suited to a wider range of market environments than single asset funds and actively-managed funds will be able to rebalance their portfolios in order to suit the market activity. “Some mixed asset funds have a relative static high exposure to single assets like shares which means that the market environment is almost as important to the mixed asset fund as it is to a single asset fund like a share fund,” said Doyle. “On the other hand if the manager has been given lots of flexibility to move between
assets then the market environment becomes less of an issue as the market timing decision has been passed from the investor to the manager.” In a historic context, the best sector over 10 years is the mixed asset-aggressive sector which has returned 132 per cent, according to FE Analytics, although this is to be expected due to high-risk nature of the investments held in those sectors. Conversely, the lowestrisk mixed asset-cautious sector has returned 67 per cent over the same period. Looking at more recent performance, the best-performing fund across the six sectors over the past 12 months to 31 July, 2019 was the Sandhurst Bendigo Socially Responsible Growth fund which has returned 13.1 per cent over the period and sits in the mixed assetflexible sector. This fund adopts a responsible environment, social, and governance (ESG) investment process and is diversified with allocations to multiple asset classes including Australian equities, property and fixed interest. It has a medium to high risk level and a recommended
five-year time horizon. The worst one was the QIC Liquid Alternatives fund, which also sits in the mixed asset-flexible sector, which lost 7.9 per cent over the same period, according to FE Analytics. It aims to offer equitylike returns but with less risk by down-weighting broad equity market risk and generating returns from alternative risk factors. However, pleasingly, there were only four funds out of more than 450 funds across the various Mixed Asset sectors that saw negative returns over the past year. When the returns of the various six sectors were averaged out, the average mixed asset fund returned 6.2 per cent over one year to 31 July, 2019. Doyle said: “The return of a mixed asset fund will always be a mix of its single asset components. What multi-asset funds provide are better risk-adjusted returns than single asset funds as a result of the diversification to assets which perform differently to each other. In other words, investors should be able to grow their savings with less volatility than would be the case with investing in a single asset fund.”
Chart 1: Performance of ACS Mixed Asset sectors over three years to 31 July, 2019
Source: FE Analytics
21/08/2019 9:43:41 AM
26 | Money Management August 29, 2019
Legal
LAW AND ORDER… AND ASIC The financial services regulator responded to Royal Commission criticism with a ‘why not litigate?’ approach. Jassmyn Goh finds out what this means for advisers and how to avoid getting caught in the crossfire. WHILE BANKS CAME under fire during the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry, the regulatory body may have come under more scrutiny and criticism for failing to enforce current laws. The Australian Securities and Investments Commission (ASIC) responded in the only way it felt appropriate – enforcing harsher punishment in the way of more litigation. In October last year, the commission said it would take a “Why not litigate” approach to enforcement to “deter future misconduct and address the community expectation that wrongdoing be punished and denounced through the courts”. Then at the beginning of this year the regulator announced that it had created a separate Office of Enforcement away from its regulatory team. Indicating that ASIC would make more court appearances, it said they would only pursue the litigation route if the breach of law was more likely than not and if it was evident that the pursuit of the matter would be in the public interest. ASIC’s track record of litigation has been hit and miss in the past and earlier this month the watchdog lost a landmark case against Westpac Banking Corporation over the bank’s alleged breach of responsible lending laws. ASIC alleged the bank was “required to have regard to the higher repayments at the end of the interest-only period” but did not. However, the judge found that a lender “may do what it wants in the assessment process” and that other provisions of the National Credit Protection Act 2009 impose penalties if lenders make unsuitable
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loans as a result of that process. ASIC commissioner Sean Hughes responded to the outcome by stating the case was needed for judicial clarification of a cornerstone legal obligation on lenders and referred to the case as a “test case”. “As a regulator, it is our role to test the law and its ambit,” he said. Speaking to Money Management, solicitor director at The Fold Legal, Simon Carrodus, said the commission has taken this route in response to criticism and it was trying to do the right thing. “They’re copping the criticism on the chin and adapting which I think is better than just stubbornly refusing to adapt,” Carrodus said. “In many ways they didn’t have a choice so they’re hiring new people, and taking a new approach.”
FEAR OF SELF-REPORTING While ASIC seems to be doing the right thing, Hall & Wilcox Lawyers partner, Graydon Dowd, said some advisers were feeling isolated from their licensee, especially institutions that looked to shed their advice arm as a result of misconduct. “What I have seen first-hand are examples where ASIC focused their attention on large corporates in relation to the conduct of the financial advisers who are affiliated or employed by large corporates and this could give tension to the corporate and individual financial advisers. Sometimes the advisers might feel isolated in relation to that,” he said. “I have seen that firsthand and rather than it being advisers scared of losing their AFSL [Australian Financial Services Licence] or having some other penalty imposed, it’s more that they won’t have the backing of the corporate with whom they have the affiliation with.” Holley Nethercote Commercial
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Legal
WHAT CAN ADVISERS DO? However, smaller businesses may have some time to get themselves in order as ASIC tackles the larger institutions but it won’t be forever. “ASIC has limited resources and history tells us they generally investigate the bigger end of town first, like the Big Four, Macquarie and AMP. They do this to gather information and develop an enforcement framework,” Carrodus said. “However, we have been pretty quick to disabuse our smaller clients of the notion that smaller licensees are immune from ASIC’s new enforcement approach. ASIC will eventually apply its framework to the rest of the market.” Advisers need to get their record keeping right, Carrodus explains, as the big remediation programs that the Big Six have run have been due to lax record keeping.
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“One of the biggest problems is record-keeping by advisers and licensees. We’ve seen cases of inappropriate advice and fees-forno-service, but in a lot of those cases we don’t actually know whether service was provided or if advice was appropriate – because there are no records,” he said. “I’ve seen cases where an adviser can verbally explain why a recommendation was in the client’s best interests, or they remember meeting a client five years ago. However, if there is no record of these events, the adviser is effectively guilty until proven innocent.” “There is no substitute for contemporaneous records. This is the holy grail for ASIC. Advisers should keep detailed file notes, ROAs, and SOAs.” Dowd said advisers needed to check they were complying with obligations, and to ensure that their advice was in accordance with their licensee to ensure they were not contributing to a culture of breach.
CULTURAL EXPERIENCE For Derham driving the right culture is what is needed. “To really do something about driving a good culture firms need to look at the behaviour drivers. We’re seeing changes by Australian Prudential Regulation Authority (APRA) related organisations with respect to accountability and remuneration,” he said. “Everyone talks about culture and doing the right thing but actually saying ‘we have to change the way we incentivise people and actually make a financial decision to change that’ is what’s going to drive change. “It is obvious academically but when you’re in thick of running a business you try and change the culture by doing everything except change the very incentives that form the basis of the organisation.”
WILL ASIC SUCCEED? Derham, Dowd, and Carrodus agree that it is too early to tell whether this new legal route will be successful but that it was not just the case of the regulator beating its chest. All three believed it was the most appropriate response the body could make after the criticism it received,
ASIC ENFORCEMENT OUTCOMES SO FAR IN 2019 ASIC’s Office of Enforcement has increased the number of enforcement investigations by 20 per cent between July 2018 and July 2019, increased enforcement investigations involving the Big Six by 51 per cent, and increased wealth management investigations by 216 per cent. In its latest enforcement report, ASIC deputy chair, Daniel Crennan, said the ‘why not litigate?’ approach “does not suggest we take every matter to court but allows us to consider relevant factors to ensure we are doing what we should to punish past misconduct and to deter future misconduct”. The report noted that between January to June 2019: • 10 individuals had been charged in criminal proceedings; • 70 criminal charges laid; • Seven custodial sentences (six people imprisoned); • Six non-custodial sentences; • 191 individuals charged in prosecutions for strict liability offences; • 386 criminal charges laid in prosecutions for strict liability offences; • 103 individuals removed or restricted from providing financial services or credit; • 29 individuals disqualified or removed from directing companies; • Five infringement notices issued; • $370,800 in infringement penalties paid; • $19.2 million in compensation and remediation for consumers and investors; and • One court enforceable undertaking. In terms of financial services outcomes, between 1 January to 30 June 2019 there were 51 financial services-related outcomes. Only seven of these outcomes were negotiated. Financial services outcomes by misconduct and remedy type during 1 January to 30 June 2019 Misconduct type
Criminal
Civil
Court Administrative enforceable undertaking
Negotiated Total outcome (misconduct)
Dishonest conduct, misleading statements
2
3
7
0
0
12
Misappropriation, theft, fraud
1
3
2
0
0
6
Unlicensed conduct
0
2
0
0
0
2
Other financial services misconduct
0
4
19
1
7
31
Total (remedy)
3
12
28
1
7
51
Source: ASIC
and Financial Services Lawyers partner, Paul Derham, said ASIC’s litigation approach would lead to a drop in self-reporting due to fear. “The fear is that if they report a significant breach that has some real problems to it, the licensees are afraid ASIC will now take them to federal court,” Derham said. Derham noted that prior to this regime, the best thing licensees could have done was to self-report the breach and show how they selfremediated and self-regulated. “However, now it’s like you have two different messages. One is to self-report and show you’ve remediated and fixed the problem but, two, ASIC is now asking ‘why not litigate?’,” he said. “I think there will be less selfreporting of significant breaches that will take a long time to fix. I have seen an increase in reluctance to tell ASIC from smaller businesses, especially when they’re in selfpreservation mode,” Derham said. “We have also seen a lot of regulatory training requests since the ‘why not litigate’ approach. “Training for responsible managers and best interest duty are the two main topics and these requests are coming from banks, financial planning dealer groups and even industry funds as they are responding to that message.”
As at 1 July, 2019 there were 17 criminal and 29 civil financial services-related matters still awaiting outcomes. Crennan noted that Australian financial services licensees who failed to ensure their financial services that were provided were “efficiently honestly, and fairly,” could expect the enforcement team to pursue the harsher civil penalties now available to the regulator. “These include financial penalties of up to $525 million. When a person engages in dishonest conduct in carrying on a financial services business, they now face imprisonment of up to 15 years,” he said.
and that it would take at least six to 12 months to truly see whether this was the right path. Derham said while there was no reason to think ASIC’s success rate would be any better he noted the watchdog had boosted its budget. In the regulator’s latest enforcement report, ASIC deputy chair, Daniel Crennan, said it looked to recruit litigation lawyers, analysts and
investigators, through a funding of $404 million over four years by the Australian Government following the Royal Commission. “The enforcement division has a new deputy chair and it operates independently of the supervisory teams. It will pursue remedies, including litigation, without fear or favour where in the past ASIC may have looked for a negotiated outcome,” Carrodus said.
22/08/2019 2:20:38 PM
28 | Money Management August 29, 2019
Technology
HEAD INTO THE The continuing rise of cloud computing is playing an unprecedented role in growth investing, Nick Griffin explores how IT stocks are assessed and where growth will come from in the future. WHEN ASSESSING COMPANIES for growth, there are a number of common characteristics. And when it comes to IT, it is critical to ensure that potential for future growth is strong and enduring. The business must be one where the total addressable market is growing and large, that is, where the gross sales or revenue are growing faster than GDP. This is commonly referred to as a tailwind. Complementing that growth potential is economic leverage,
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with the business needing to be able to grow its earnings faster than revenue, indicating efficiency increases and therefore increased profits. Once the characteristics have been assessed other factors – such as the sustainability of the business offering over a three to five-year period, shareholder alignment (ideally controlled by company management), and customer perception of the brand’s product or service offering – need to come together in order to fully formulate a
considered evaluation of a company and its investment potential.
ECONOMIC WOES BENEFITTING TECH RETURNS Economic instability both here and overseas is evidently having a detrimental impact on equity markets. A prolonging of the current trade impasse between China and the US looks likely to extend the status quo of sub-par economic growth and record low interest rates for the
medium-term. The key risk in this outlook is that sub-par growth actually turns into negative growth as policy missteps continue to escalate. However, notwithstanding these factors, this environment actually favours growth equities. Low interest rates mean investors are attracted to, and eventually are prepared to pay more for, scarce growth assets in what has become a low-growth world. Regardless of the prevailing
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Technology
market noise, the key is to look for the aforementioned strong investment fundamentals to drive returns in the months and years ahead. That is, assets that can grow much faster than the economy and that can give returns much better than the economy. So-called ‘S-curves’ are also becoming more apparent in assessing growth stocks. S-curves are characterised by an ability to identify additional growth in an environment where there’s not a lot of overall growth. The best recent example of this is the trajectory of Apple’s domination of the smartphone market. It went from a 10 per cent share of the overall mobile phone market to a 75 per cent share in just six years. During this period, Apple’s stock increased seven times in value and drove competitors out of business in the process.
CLOUD MONOPOLISING THE IT STACK Software as a service (SaaS) or cloud computing is shaping up as the next fundamental S-curve and we would expect it to quickly move from a 10 per cent share of all enterprise computing spend today, to around a 40 to 50 per cent share over the next 10 years. IT expenditure – which grows between one to two per cent annually – is split between four key pillars: hardware, software, IT services and data centres. The adoption of cloud computing makes redundant the need for these pillars independently, with cost savings redirected into the one-stop-shop of the cloud. Companies don’t need to buy as much IT support, for example, as much of the software support previously provided by people is now automatically updated in the cloud. Microsoft is the obvious
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Chart 1: Apple’s smartphone domination
Source: Munro Partners
example of this working in practice, where people have moved from the purchasing of the Microsoft Office suite every few years to a subscription service with Microsoft 365 where they pay on a per annum basis. This is happening in most parts of the software ecosystem with different companies dominating different verticals. The effect of this will be a new wave of high growth software companies that will dominate the market, and there are no better examples at the moment than Adobe (media suite), Salesforce (CRM), and Atlassian (software developers). But while these stocks are highly valued, as investors can see the growth potential, they are still not valued correctly because of particular cashflow characteristics – this will correct itself as they move up the S-curve.
UNDERSTANDING THE APPEAL OF AI Artificial intelligence (AI) is another theme within the tech space that’s likely to dominate over the coming years. The structural trend towards companies investing in AI will drive structural earnings growth for key beneficiaries and ultimately, result in positive investment returns regardless of what the market cycle brings in the short term. Notably, it is virtually impossible to find beneficiaries of this theme if only investing in the Australian market. At a basic level, AI is simply taking volumes of unstructured data and plugging it through a ‘big computer’ to give the user a predictive outcome that enhances their experience. The simplest forms today include the dynamic newsfeed on a Facebook profile,
predictive shopping results on Amazon, or Google Maps highlighting the time your daily trip to work will take, before you asked for it. Ultimately in its full form, AI is likely to penetrate all businesses globally, and provide advertisers, consumer product companies and even industrial companies with better outcomes and insights for the same dollars spent. There are two primary facilitators of AI – connectivity and data. That is, companies that provide the technological infrastructure to connect with, receive and compute all the volumes of data in real time, and data companies that own the proprietary data sets that fuel AI to provide the required corporate insights. Continued on page 30
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30 | Money Management August 29, 2019
Technology
Continued from page 29 Connectivity between devices (including phones, homes, cars, industrial equipment, and health devices, to name just a few) and the network (cloud) is growing at an exponential rate. Data generated by all these connected devices can now be analysed and interpreted in real time by emerging AI applications. Memory, cloud and internet companies will all be the beneficiaries of this trend. The second key component of building AI is data. Data is the fuel that drives the predictive outcomes and consequently we see any company that owns a large dataset as likely to be more valuable in an AI world. Clearly the key internet players – in Google, Amazon and Facebook – are in the box seat, but many other companies possess datasets that cannot be replicated by the internet giants. Credit bureaus are one such example. Credit reporting agencies own unique datasets and products, and credit agencies have been collecting data on individuals since before the internet existed. Today, their datasets extend to other verticals including employment, healthcare, insurance, and utilities, with a view to building the dataset, technology and platform once and selling it many times over to corporates across multiple industries.
5G: THE NEW CONNECTIVITY WAVE With this in mind, the development and adoption of 5G infrastructure is also driving the shift in tech
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Chart 2: Average 5G speed will increase to 170Mbps per second in 2022
Chart 2: 5G will enable a broadband-like experience everywhere
Source: Munro Partners
investing. With linkage between the progress of 5G to data integrity and security, the technology remains an intriguing investment theme. As 5G will enable a wide number of technological advancements in areas such as progressive health tech, autonomous vehicles, smart phones, smart cities, and virtual and augmented reality, the integrity of the infrastructure is paramount. For investors, this infrastructure will take some time to develop, and establish principles of how data integrity is ensured. The technology has a long runway of growth ahead of it and is currently almost non-existent in connections and mobile devices in terms of penetration. The perception that cybersecurity requirements are already challenging for companies will be further tested
with 5G. But, these increased demands will, in turn, have a positive flow on effect for cloud computing providers tasked with ensuring data security.
TECH CAN WEATHER THE STORM So, despite economic conditions here and abroad hampering equities growth, there are nevertheless certain segments of the tech sector are well positioned to weather this instability – particularly when it comes to global opportunities. Investors should shift their focus to these growth stocks with structural tailwinds. While all companies lay claim to growth, only a very small portion grow independently of the broader economic cycle. Nick Griffin is chief investment officer at Munro Partners.
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August 29, 2019 Money Management | 31
Toolbox
COMPLYING WITH PENSION DRAWDOWN REQUIREMENTS Accurium’s Melanie Dunn explores how payments and withdrawals from superannuation can be carried out in the most compliant way. AT THE START of each new financial year self-managed superannuation fund (SMSF) trustees will re-calculate the minimum pension payment requirements for each income stream. Members may desire an amount higher than the minimum pension and so it is important to consider how and when to make payments from the SMSF to ensure the minimum pension standards are met, transfer balance account reporting (TBAR) requirements are met, and tax efficiencies are considered.
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MEETING THE MINIMUM PENSION STANDARDS The first step is to work out the minimum pension that must be paid by 30 June from each income stream in order to meet the minimum pension standards set out in Superannuation Industry (Supervision) Regulations (SISR) 1994. There can be serious consequences where the pension standards are not met, for example an account-based pension (ABP) that does not meet the pension standards will not be eligible to claim exempt current
pension income (ECPI) in that year. For an existing ABP or transition to retirement income stream (TRIS) the minimum pension in 2019-20 is a percentage of the balance of the ABP at 1 July 2019 based on the member’s age: Minimum pension = % based on member age x 1 July balance Example: Anna had $125,000 in a non-retirement phase TRIS at 1 July 2019 and was aged 61, her minimum pension for 2019/20 is 4% of her 1 July balance = 0.04 x 125,000 = $5,000. If an income stream is
commenced or fully commuted during the year then the member must pay a pro-rated minimum pension based on the number of days in the year the pension was in existence. A partial commutation of an income stream does not lead to the minimum pension being re-calculated or pro-rated. Example: if Anna’s pension commenced 30 September, 2019 on her 62nd birthday then her minimum pension would be $3,750 and this must be paid by midnight Continued on page 32
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Toolbox
Continued from page 31 30 June, 2020. Her minimum pension = 125,000 x 0.04 x 274/365 = 3,753 rounded to nearest $10. Each individual income stream must meet the minimum pension standards and payments must be ‘cashed’ and paid out of the SMSF to the member. A partial commutation of an income stream does not count towards the minimum pension nor does a lump sum payment. This means an in-specie transfer (which is enacted by way of a partial commutation and lump sum payment) does not count towards the minimum pension. A lump sum payment or partial commutation will however raise a debit to the member’s transfer balance account and a TBAR needs to be completed.
WHAT HAPPENS TO MINIMUM PENSION REQUIREMENTS ON DEATH On the death of a member where their income stream was not automatically reversionary the minimum pension does not need to be paid. However, if the benefit is paid as a death benefit income stream, a pro-rata payment must be paid prior to 30 June. Example: Consider SMSF member Sam aged 80 had an ABP which was not automatically reversionary. He passed away on 4 August, 2019. His wife Serena joined the fund and commenced a death benefit income stream with the balance of $834,000 on 16 August. Sam’s ABP remains eligible for ECPI even if the minimum pension was not paid prior to his death. Serena was aged 78 and must make a payment of $43,750 prior to 30 June, 2020 to meet the pension standards. Minimum pension = 834,000 x 0.06 x 320/366 = 43,751, rounded to nearest $10 Death benefits paid as an automatically reversionary income streams must pay a minimum pension. The minimum pension is not recalculated on death, and the
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sum of payments made prior to and after the member passes away count towards meeting the minimum pension. Example: If Sam’s pension was automatically reversionary the minimum pension would be based on his age and balance at 1 July, 2019. Consider that his minimum pension had been determined at 1 July, 2019 to be $60,900 and Sam had already paid $40,000 in pension payments prior to passing away. In this case Serena must make a pension payment of $20,900 by year-end to satisfy the pension standards on the income stream that has reverted to her. More useful information about how to meet the minimum pension standards can be found on the Australian Taxation Office’s (ATO’s) webpage ‘pension standards for self-managed super funds’.
OPTIONS FOR TAKING A BENEFIT PAYMENT There are several ways in which an SMSF trustee can make a payment to a member including: 1. Pension payment from an income stream • Must take at least the minimum pension requirement as a pension payment; and • No TBAR required. 2. Lump sum payment from a retirement phase income stream • Can be in-specie or cash; and • Is a TBAR event and must be reported. 3. Lump sum from an accumulation account • Can be in-specie or cash; and • No TBAR required.
STRATEGIES FOR SOURCE OF BENEFIT PAYMENTS If a member desires to draw more than the minimum pension from their SMSF in 2019/20 they must decide from which interest to make
the additional payments. Some considerations are outlined below: • Each income stream must make a pension payment equal to the minimum pension amount; and • If a member has an accumulation interest, taking additional payments from that ahead of a retirement phase income stream may help increase ECPI; and • If a member takes additional payments from retirement phase, then reporting those under TBAR as a lump sum payment will reduce the member’s TBA increasing their remaining transfer balance cap. If a member desires less than their full minimum pension, for example if it is currently more than they need to spend in a year, the trustee may consider the following trade-off: • Unless an income stream is commuted in full during 2019/20 the minimum pension is now locked in based on the calculation completed at 1 July and cannot be reduced; • Completing a partial commutation to accumulation phase on or prior to 30 June could reduce next year’s minimum pension, however; • This will create or add to an accumulation interest in the SMSF reducing ECPI in future years; and • The taxable component of the accumulation interest will increase with earnings which could impact tax payable on future death benefits to non-dependents.
proportion in non-retirement phase, to maximise ECPI. The trustees could consider the following: • Draw pension payments and lump sums from retirement phase as late in a financial year as possible; • Draw payments from non-retirement phase accounts as early in a financial year as possible; and • This strategic timing of payments will be particularly effective for large one-off transactions. Where a fund does not have disregarded small fund assets and has periods of deemed segregation the fund will use the segregated method for ECPI in those periods. In this scenario, the timing of pension payments or lump sums in the segregated periods will not impact ECPI, timing of payments in any other periods will be helpful in maximising ECPI claimed using the proportionate (unsegregated) method.
Case study: thinking strategically to maximise ECPI Tim and Kate (both aged 66) have all their superannuation in an SMSF and are retired. In 2019/20 they have: • 1 July, 2019 balances of $1,412,090 and $820,300 in
STRATEGIES FOR TIMING OF BENEFIT PAYMENTS A strategy that trustees can consider where they have retirement phase and non-retirement phase accounts is to maintain as high a proportion of the fund in retirement phase as possible, relative to the
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retirement phase, Tim also has $3,045 in accumulation phase having been subject to the transfer balance cap at 1 July, 2017; • They would like to draw $75,000 from their SMSF over the year; • Also require an additional $65,000 this year to pay for their daughter’s wedding. Based on this information payments totalling $140,000 are required. This includes minimum pensions of five per cent of the 1 July pension balances which is $70,600 for Tim and $41,020 for Kate, totalling $111,620. The fund will not have disregarded small fund assets in 2019/20 as neither member had a total super balance in excess of $1.6 million just prior to the start of the financial year. To maximise ECPI Tim and Kate considered the following: • Tim withdrew $3,085 as a lump sum payment from accumulation on 2 July, 2019 to draw this account to $0 as early in the year as possible; • The SMSF will be deemed as having segregated pension assets from 2 July, 2019 as the fund will be solely in retirement phase. The fund will claim ECPI using the segregated method for income earned between 2 July, 2019 and 30 June, 2020 (assuming no contributions are received later in the year); • They must take $111,620 in pension payments over the year and decide to make regular payments to meet this requirement; and • They will take the remaining $25,295 in payments as pension lump sums once the pension standards have been met and will complete a TBAR for those payments within 28 days of the end of the quarter in which the payment occurred. Melanie Dunn is head of technical services at Accurium.
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CPD QUIZ This activity has been pre-accredited by the Financial Planning Association for 0.25 CPD credit, which may be used by financial planners as supporting evidence of ongoing professional development. 1. If an account-based income stream is partially commuted in a financial year then the minimum pension requirement is pro-rated based on the commutation date? a) True b) False 2. An SMSF has two members John and Jill. If John passes away and Jill receives his pension as an automatically reversionary income stream which of the following actions does she need to take to ensure the pension standards are met over the year? Calculate the annual minimum pension payment requirement based on the original balance at 1 July a) but use the factor based on Jill’s age and make that payment by year-end. Determine what pension payments have been paid in the year and if required make a payment so that b) total payments in the year equal at least the annual minimum pension payment determined back at 1 July based on John’s age. Calculate the minimum pension requirement for the financial year based on the balance at the date the c) new pension commenced and Jill’s age, and make that pro-rata payment prior to year-end. d) No actions need to be taken to ensure the pension standards are met. 3. An SMSF has two members Mike and Mary. If Mary passes away and Mike takes her benefit as a new death benefit income stream which of the following actions does he need to take? a) Calculate the annual minimum pension payment requirement based on the original balance at 1 July but use the factor based on Mike’s age and make that payment by year-end. b) Determine what pension payments have been paid in the year and if required make a payment so that total payments in the year equal at least the annual minimum pension payment determined back at 1 July based on Mary’s age. c) Calculate the minimum pension requirement for the financial year based on the balance at the date the new pension commenced and Mike’s age, and make that pro-rata payment prior to year-end. d) No actions need to be taken to ensure the pension standards are met. 4. What types of payments count towards an income stream meeting the minimum pension standards? a) A pension payment from the income stream b) A lump sum payment taken by way of a partial commutation from the income stream c) An in-specie payment from the income stream d) A lump sum payment from an accumulation account e) Both a) and b) 5. Which of the following strategies, all other things equal, can increase the exempt current pension income claim of a fund using the unsegregated method? a) Take pension payments from a retirement phase income stream as late in the year as possible b) Take payments from accumulation as early in the year as possible c) Take lump sum payments from a retirement phase income stream as late in the year as possible d) All of the above
TO SUBMIT YOUR ANSWERS VISIT https://www.moneymanagement.com.au/features/tools-guides/ complying-pension-drawdown-requirements
For more information about the CPD Quiz, please email education@moneymanagement.com.au
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34 | Money Management August 29, 2019
Send your appointments to chris.dastoor@moneymanagement.com.au
Appointments
Move of the WEEK Jonty Vavasour Executive director, M&A and transaction solutions Aon
Aon has appointed Jonty Vavasour as executive director, mergers and acquisitions (M&A), and transaction solutions in New Zealand. Vavasour would be responsible for building Aon’s M&A and transaction liability offering in New Zealand, which provided support across a range of risk and people issues, from transaction risks to due diligence and post-merger
Banking and wealth management group MyState has appointed Vaughn Richtor as a nonexecutive director, effective from 1 September, 2019. Vaughn was chairman of Ratesetter Australia and a nonexecutive director of TMB Bank in Thailand. He served previously as chief executive and head of retail banking, Asia with ING; managing director of ING Vysya Bank in India; and chief executive of ING Direct Australia where he led the establishment of their digital bank. Vaughn was named Executive of the Year at the 2016 Australian Retail Banking awards. BlackRock Investment Management has appointed David Porter in the newly-created role of head of Melbourne, starting from 1 January, 2020. Porter would lead the
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integration. Aon’s and Mergermarket’s recent Asia-Pacific M&A and Transaction Solutions Risk in Review 2019 report found the M&A market in Australia and New Zealand had undergone rapid change. Activity increased in Australia and New Zealand to 754 deals worth $96 billion from 731 deals worth $88 billion in 2017. Vavasour joined from Bupa where
Melbourne team to deliver tailored solutions to meet clients’ needs and develop strategic relationships. He would report to Andrew Landman, head of BlackRock Australasia, and Jason Collins, head of client business, BlackRock Australasia. Porter was currently managing director, head of UK consultant relations, for BlackRock based in London. Before joining BlackRock in 2017, he had worked for PIMCO in London for almost 10 years, most recently as head of UK business development. Stock exchange Chi-X Australia has appointed Peter Warton to the newly-created position of director of technical account management. Warton would now be responsible for driving the client service function and technology
he led the legal team across Asia, responsible for insurance and healthcare business across multiple regions. In London, he was Bupa’s head of legal M&A and led various cross border M&A transactions, and before that was a M&A lawyer at White & Case in London, Minter Ellison in Melbourne, and Simpson Grierson in Wellington, New Zealand.
infrastructure for Chi-X’s future growth and continued innovation projects. He had previously been head of market operations at Chi-X Australia, where he was responsible for the division for the last five years. Warton had over 30 years’ experience in financial markets technology and had joined Chi-X Australia in 2011 as it entered the Australian market. Prior to that, he had spent six years working at trading firms IMC and Tibra Capital, and had senior positions trading software development firms Actant, LCH, GL Trade and the Australian Securities Exchange (ASX). Spectrum Asset Management will see the departure of Damien Wood, head of research, and Rick Steele, director, while adding Darren Raward as head of research and
portfolio analysis, and Christina Chan as operations manager. Wood was known for his research and ‘credit insights’ and leaves after five years with the company, while Steele had stepped down from the board to focus on other business interests. Spectrum claimed the changes would not impact their credit decisions and their credit processes would remain unchanged. Raward would oversee the credit and portfolio analytics, while the day to day management of investment portfolios would continue to be managed by Lindsay Skardoon, portfolio manager. Raward had over 25 years’ experience covering research, portfolio and credit analysis in the Australian financial markets. Chan joined as the newly created position of operations manager, and was a certified public accountant (CPA) and business manager.
21/08/2019 3:09:47 PM
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Learn more at fidelity.com.au/fidelity-asia-fund Issued by FIL Responsible Entity (Australia) Limited ABN 33 148 059 009, AFSL No. 409340 (‘Fidelity Australia’). Fidelity Australia is a member of the FIL Limited group of companies commonly known as Fidelity International. Investments in overseas markets can be affected by currency exchange and this may affect the value of your investment. Investments in small and emerging markets can be more volatile than investments in developed markets. This document does not take into account your objectives, financial situation or needs. You should consider these matters before acting on the information. You also should consider the Product Disclosure Statements (‘PDS’) for respective Fidelity products before making a decision whether to acquire or hold the product. The relevant PDS can be obtained by contacting Fidelity Australia on 1800 119 270 or from our website at www.fidelity.com.au. The issuer of Fidelity’s managed investment schemes is FIL Responsible Entity (Australia) Limited ABN 33 148 059 009. ©2019 FIL Responsible Entity (Australia) Limited. Fidelity, Fidelity International, the Fidelity International logo and F symbol are trademarks of FIL Limited.
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OUTSIDER
ManagementAugust April 2,29, 2015 36 | Money Management 2019
A light-hearted look at the other side of making money
Avoiding making a Burke of oneself
The FSC and the accidental oracle
philosopher, Edmund Burke, prompting Fahy to assert that: “A lack of empathy for lower professionals is not about class warfare as some may think of it but rather the mark of a certain vulgarity/lack of moral elegance in an important debate which as early as the 18th century defined pension as a sacred”. “It is important to maintain a certain moral elegance,” Fahy said before citing Burke’s reply to the somewhat portly and privileged Duke of Bedford who had seen fit to question Burke’s own receipt of a pension after years of service to the Crown. Burke’s reply to Bedford, whose ancestor had benefited of a pension due to their noble station was: “I was not, like his grace of Bedford, swaddled, and rocked, and dandled into a legislator; ‘Nitor in adversum’ is the motto for a man like me.” For those without Latin, Burke essentially said he had worked for whatever he got where, clearly Bedford had not. So, there!
OUTSIDER has concluded that those organising this year’s Financial Services Council Leaders Summit have taken the view that diversity can trump relevance when it is coupled with notoriety. So while your venerable correspondent can understand the value of having former Foreign Minister, Julie (J-Bish) Bishop address the Leader’s Forum because of her understanding of the value of Australia’s trade in financial services, he is not entirely sure what value will be delivered by former coal miner turned One Nation Senator and climate change denier, Senator Malcolm Roberts. Indeed, Outsider was even more confused when he weighed Senator Roberts’ views about climate change with the fact that the Australian Prudential Regulation Authority has decided to increase its scrutiny of how banks, insurers and superannuation trustees are managing the risk of climate change on their business. If Outsider’s reading of Senator Roberts’ statements on climate change is accurate then neither the regulator nor those it regulates have got anything to worry about. In any case, the title of Senator Roberts’ address will be Financial Services in the Morrison Government – what are the implications? Perhaps he will surprise everyone.
OUTSIDER does enjoy a good intellectual joust but he also knows when he is out of his league. Thus, he enjoyed the discourse when he attended Super Review's Future of Superannuation event in Melbourne in mid-August where newly-elected NSW Liberal Senator and former Financial Services Council policy director, Andrew Bragg, espoused his views on the vested interests in superannuation prompting some intellectual rejoinders from Association of Superannuation Funds of Australia (ASFA) chief executive, Dr Martin Fahy. Fahy, you see, was particularly animated about suggestions by Senator Bragg that the superannuation guarantee should be voluntary for those earning less than $50,000 – something which the egalitarian Irishman suggested failed on equity and other grounds. But what seemed most to give offence was the passing use by Bragg of a reference to the 18th century Anglo-Irish statesman and
Celebrities walking NAB’s halls OUTSIDER was disappointed to find that the Royal Commission did not find that a future Z-grade celebrity was working within NAB’s walls, namely Australia’s current bachelor, Matt Agnew. Agnew is a familiar face to Outsider as (the younger members of) his family gather around the television twice a week to watch “their show”. Outsider was amused to find an investigative piece by Nine claiming that the bachelor in question had a “secret” job at NAB despite the astrophysicist label which has been attached to him since the show’s promos aired.
OUT OF CONTEXT www.moneymanagement.com.au
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The article said the astrophysicist bachie technically worked at data analytics firm Quantium but had been an analyst at NAB while on secondment. However, Agnew refuted these claims and said while at Quantium he had two or three meetings at a NAB office. Now Outsider wonders how many more banks are harbouring Z-grade celebrities and wished the Royal Commission had found out for him. Alas, he’ll just have to endure the new Bachelorette season when it airs! What a good excuse!
"Even if you have a PhD in finance it's really hard to make sense of the terms and conditions of products."
"I don't see a recession; the world is in a recession."
- Professor Carsten Murawski, co-author of FinFuture: The Future of Personal Finance in Australia from the University of Melbourne
- US President, Donald Trump
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