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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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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