Money Management | Vol. 33 No 15 | September 12, 2019 by FE Money Management

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Vol. 33 No 15 | September 12, 2019

PROPERTY

How are AREITS performing?

EDUCATION

Guide to FASEA courses

EMERGING MARKETS

TOOLBOX

Preparing for an SMSF audit

Crown ratings – fortune favours the fortunately-diversiﬁed BY MIKE TAYLOR

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Who will be the winner of the US/China trade war? AS the US/China trade war drags on, there is little hope of a resolution being achieved soon as both US President Trump and Chinese President Xi Jinping are both reluctant to strike a deal. Having now lasted over 18 months, Trump will be hoping to achieve a successful deal by the time of his re-election campaign in November, 2020. Having built his original campaign on his skills as a negotiator, it will come across badly with the US electorate if he cannot negotiate with China. On the other hand, China are willing to wait it out and see what happens after the election, whether Trump will lose his position of power after just one term. They are also fearful that any agreement reached will be reneged on by Trump with just one Twitter comment. The turmoil was heightened more recently after Trump’s allegations that China was a ‘currency manipulator’ when the renminbi fell below seven against the US dollar, a social media taunt which threatened to prompt a global currency war. But emerging market experts believe this threat is overblown and that China meets none of the criteria for being a currency manipulator. Alex Treves, investment specialist for emerging markets at JP Morgan, said: “We don’t think China is a currency manipulator, you don’t have to look very far to find other countries which actually are manipulating their currencies whereas China’s was a managed move in the context of a strong US dollar. “We don’t think there is a currency war nor will there be one in the future.”

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Full feature on page 24

STRATEGIC stock selection combined with appropriate diversification and a modicum of luck represented the keys for the fund managers who emerged best in the latest quantitative FE/Fundinfo Crown Ratings rebalance covering the past six months. While much could be said for index-hugging over the period, the fund managers who were most rewarded were those with strategies which best accommodated the ongoing volatility. FE/Fundinfo Crown Ratings are a quantitative rating determined using FE’s performance scorecard process which analyses a fund’s performance over the last three years. The score is made up of three components – alpha, relative volatility, and consistently good performance. Three asset management firms saw significant upgrades to their funds over the period - AMP Limited’s IPAC Asset Management, Zurich Financial Services and Resolution Capital. On the downside, market conditions did not suit the strategies of six of the managers over the period. Morningstar Investment

Management Australia, IOOF Investment Management, Colonial First State (CFS), Pengana Capital, Colonial First State Global Asset Management (CFS GAM), and Australian Unity emerged as having the most five Crown downgrades. The manager that lost the most five Crown ratings was Morningstar at seven funds, followed by IOOF at five, CFS at four, and Pengana, CFS GAM, and Australian Unity all at three. However, as CFS general manager for investments, Scott Tully pointed out, it was very much a case of whether the underlying strategies of the funds had been suited to the prevailing conditions. Tully pointed to the performance of the CFS Multi-Index Balanced and Multi-Index Moderate Funds and acknowledged that their tilt to value had resulted in performance lagging global indices at a time when US technology stocks had been particularly strong. He pointed out that, at the same time, the funds had remained overweight to emerging markets in the expectation of relatively stronger returns in the future. Full coverage on page 17

Hume references central adviser disciplinary body THE Government’s proposed financial adviser central disciplinary body has been directly referenced by the Assistant Minister for Superannuation, Financial Services and Financial Technology, Senator Jane Hume. While the major financial advice bodies are still seeking details of the proposed new disciplinary structure, Hume used a speech to a Financial Services Institute of Australasia summit in Melbourne to canvass the disciplinary body as a central element of the Continued on page 3

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September 12, 2019 Money Management | 3

News

Superannuation trustees could be hit with $4,200 penalty BY JASSMYN GOH

SUPERANNUATION fund trustees could be hit by a $4,200 penalty as the Australian Taxation Office (ATO) focuses on auditing investment strategies, the SMSF Alliance warns. The ATO has requested over 17,000 funds provide evidence their investment strategy met the retirement objectives and cashflow requirements of the fund, especially those with 90% or more of its funds invested in a single asset class. SMSF Alliance principal and SMSF specialist mentor, David Busoli, said this would give auditors a reason to pay more attention to the investment strategies of all other funds as well. “The ATO seem to be prepared to overlook breaches where funds have already been audited as the letter specifically states ‘Have

your investment strategy ready to provide to your SMSF’s approved auditor as part of your next audit’,” he said. Busoli warned that if the auditor identified the fund had failed to rectify any non-compliance with the requirements it could result in a penalty. However, Busoli has previously said that diversification had to be “considered” but did not mean it must be “achieved”. “If it has been properly considered, and its absence justified, the rules are satisfied,” he said. “The problem with some investment strategies is that they are little more than a regurgitation of the requirements, a statement that they have been considered and an asset allocation that is meaningless, such as 0% to 100% in any asset.”

AFA warns ASIC on inadvertent adviser anti-hawking impacts BY MIKE TAYLOR

THE Australian Securities and Investments Commission (ASIC) needs to be careful to ensure that financial advisers are not inadvertently caught up in the new, tougher anti-hawking provisions around the sale of life insurance products, according to Association of Financial Advisers (AFA). In a submission responding to ASIC’s tough new approach to unsolicited telephone sales of direct life insurance and consumer credit insurance, the AFA has backed the banning of unsolicited telephone sales of life insurance but has warned of the need to avoid unintended consequences. The AFA said that life insurance was a complex product that should never be sold without the benefit of personal financial advice in circumstances where the average Australian was unlikely to have a good understanding of their insurance needs or the products available. However, the AFA warned ASIC that the consumer protection messaging around life insurance needed to be carefully modulated to ensure that the value of life insurance was not undermined. It also noted the anti-hawking provisions and warned against allowing financial advisers to get caught up in the definition of “unsolicited”. “One important consideration for us is the definition of ‘unsolicited’ and the risk that a financial adviser contacting an existing client about the suitability of their current insurance could be considered unsolicited,” the AFA submission said. “We also believe that extra consideration needs to be given to financial advisers who work with regional and remote clients, where interaction with their clients is more often done via the telephone,” it said. “We would not like to see this proposal place limitations or additional costs on these regional/remote financial advisers. “In addition, given the changes in communication technology, maybe there is a need to address other forms of contact that are possible through social media applications.”

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Hume references central adviser disciplinary body Continued from page 1 Government’s approach to addressing adviser misconduct. While backing the value of quality financial advice and referencing the important role advisers play, Hume said it was critical the industry was held to high standards and any misconduct eliminated. “The Government is committed to ensuring Australia has a vibrant and well-respected financial advice industry. One that customers feel confident that the advice they get is the best advice for them,” she said. “As such, the Morrison Government has increased the requirements for entities to investigate the full extent of financial adviser misconduct, introduced legislation to end grandfathering of conflicted remuneration and is establishing a new approach for disciplining financial advisers for misconduct through a central body.” Hume’s comments come at the same time as the Financial Planning Association (FPA) and the other bodies making up a consortium to establish a Code Monitoring Authority have sought clarity about where the authority will sit in a landscape inhabited but not only the Australian Securities and Investments Commission (ASIC) and the proposed new central disciplinary body. The central disciplinary body was recommended by the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry and the Treasurer, Josh Frydenberg, outlined that both it and the Financial Adviser Standards and Ethics Authority would exist within the proposed new framework. However, while financial advisers who sign up to the Code Monitoring Authority are expected to fund its operations, there has been no discussion around how the central disciplinary body would be funded and whether it would be separate from ASIC. FPA chief executive, Dante De Gori, said the FPA was seeking clarity of the new regime in the context of the operations of a Code Monitoring Authority and any additional monetary imposts on members.

5/09/2019 5:06:21 PM

4 | Money Management September 12, 2019

Editorial

mike.taylor@moneymanagement.com.au

WITH GREATER REGULATORY POWER COMES GREAT RESPONSIBILITY

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

Australia’s financial services regulators have been handed greater regulatory powers but is there a danger that their interventions will result in distortions to otherwise healthy and competitive markets?

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

GIVEN THAT AUSTRALIA on 18 May re-elected what could broadly be viewed as a conservative and avowedly free-market Government, there is reason to be concerned about reports suggesting our financial services regulators feel compelled to interfere in the operations of markets. Just days after the chairman of the Australian Securities and Investments Commission (ASIC), James Shipton, acknowledged that it was not, strictly speaking, illegal for superannuation funds to underperform relative to their peers, reports emerged of both ASIC and its sister regulator, the Australian Prudential Regulation Authority (APRA), reading the riot act to super fund executives on the issue of under-performance and delivering member value. Given that 9.5% of most workers’ wages are compulsorily directed to superannuation, a case can certainly be made that superannuation funds and their executives should be reminded of their higher duty of care to their members, but the track-records of Australia’s financial services regulators suggest they have neither the credentials nor the expertise to force market outcomes

for other than disciplinary reasons. Thus, if a superannuation fund can be proved to have underperformed relative to its peers over an extended period because of mismanagement or a lack of diligence on the part of its executives and trustees, then APRA has never lacked the power to act. However, as any financial planner or fund manager knows, investment performance is a much more subjective issue open to a wide range of variables and past performance is no guarantee of future returns and, anyway, who are the regulators to judge? Then, too, is investment performance the only measure upon which a superannuation fund should be judged? What about member communications and servicing? What about the quality of its insurance offering to members, particularly those working in what represent high-risk occupations? What about a particular fund’s relevance to people working in remote and regional areas? The problem with giving regulators extensive powers, some of which go well beyond their originally-envisaged ambit, is that they must be capable of administering those powers appropriately and not distorting or

influencing markets. The Australian Competition and Consumer Commission (ACCC) has developed an excellent reputation as this nation’s competition watchdog, but ASIC now has a product intervention power within which it can make assessments as to the appropriateness or otherwise of financial products being offered to consumers. What will that mean for competition? ASIC has not yet acted to use its product intervention power, but it should be well aware that the industry will be closely scrutinising its first move and, quite properly, its reasons for its decisions to use that power must be the subject of questioning by the relevant Parliamentary committees with a view to whether it has created broader market issues. The reactionary responses of the Government and the regulators to the criticisms delivered by the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry need to be tempered by the reality that markets operate best when they are not distorted by unreasonable and gratuitous regulatory interference.

Mike Taylor Managing Editor

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 Account Manager: Amelia King Tel: 0407 702 765 amelia.king@financialexpress.net PRODUCTION Graphic Design: Henry Blazhevskyi

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WHAT’S ON FAA Tax Day Sydney, NSW 19 September finsia.com/events/

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‘Best in Show’ Lunch Briefing Adelaide, SA 19 September superannuation.asn. au/events/

2019 FPA Melbourne Chapter AFL Grand Final Lunch Melbourne, Vic 23 September fpa.com.au/events/

Aon Hazards Conference Gold Coast, QLD 25 September apra.gov.au/news-media/ events/

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4/09/2019 1:22:50 PM

September 12, 2019 Money Management | 5

News

AFA warns ASIC on inadvertent adviser anti-hawking impacts BY MIKE TAYLOR

THE AUSTRALIAN SECURITIES and Investments Commission (ASIC) needs to be careful to ensure that financial advisers are not inadvertently caught up in the new, tougher anti-hawking provisions around the sale of life insurance products, according to Association of Financial Advisers (AFA). In a submission responding to ASIC’s tough new approach to unsolicited telephone sales of direct life insurance and consumer credit insurance, the AFA backed the banning of unsolicited telephone sales of life insurance but warned of the need to avoid unintended consequences. The AFA said that life insurance was a complex product that should never be sold without the benefit of personal financial advice in circumstances where the average Australian was unlikely to have a good understanding of their insurance needs or the products available. However, the AFA warned ASIC that the consumer protection messaging around life insurance needed to be carefully modulated to ensure that the value of life insurance was not undermined. It also noted the anti-hawking provisions and warned against allowing financial advisers to get caught up in the

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definition of “unsolicited”. “One important consideration for us is the definition of ‘unsolicited’ and the risk that a financial adviser contacting an existing

client about the suitability of their current insurance could be considered unsolicited,” the AFA submission said. “We also believe that extra

consideration needs to be given to financial advisers who work with regional and remote clients, where interaction with their clients is more often done via the

telephone,” it said. “We would not like to see this proposal place limitations or additional costs on these regional/remote financial advisers. “In addition, given

the changes in communication technology, maybe there is a need to address other forms of contact that are possible through social media applications.”

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6 | Money Management September 12, 2019

News

Have licensees been clearing out their breach skeletons? BY MIKE TAYLOR

THERE has been a 50% increase in breach reporting since this time last year and this may represent the clearing out of skeletons from the closets of Australian Financial Services Licensees, according to the Australian Securities and Investments Commission (ASIC). ASIC commissioner, Sean Hughes, revealed the statistic at a Banking and Financial Services Law Association conference saying that it had been revealed by the regulator’s Close and Continuing Monitoring program which had been reviewing breach reporting processes. “One improvement has been an increase in the number of breach reports received,” he said. “We have seen an increase in breach reports by financial services licensees of over 50% compared to the previous year, and an increase of 99% compared to two years ago. “However, our observation is that the time taken to both identify and report breaches has not improved overall,” he said. Hughes said that ASIC had also seen

some slight improvement (though not universal) in time to remediate customers, noting that the “importance of fair and timely outcomes for consumers affected by institutions mistakes and breaches, cannot be understated”. “We can speculate that the Royal Commission together with ASIC’s focus on the area, has led to a proverbial ‘clearing out the skeletons’, which has had an influence,” he said. “Whether these changes are only short-term remains to be seen, but ASIC’s focus on breach reporting is very much long term and will continue to be so.”

Proposed Code Monitoring Authority will be ready to roll THE Code Monitoring Authority established by a consortium of professional associations including the Financial Planning Association (FPA) and the Association of Financial Advisers (AFA) will be ready to start registering advisers as early as the start of October if it gets the green light from the Australian Securities and Investments Commission (ASIC). Not only has the consortium begun the recruitment process to find the senior executives necessary to run the Authority, FPA chief executive, Dante De Gori, has confirmed that much of the infrastructure including development is nearly completed. The consortium, made up of the FPA, the AFA, the Boutique Financial Planners (BFP), the Financial Services Institute of Australasia (FINSIA), the Self-Managed Super Fund Association (SMSF Association), and Stockbrokers and Financial Advisers Association (SAFAA) lodged its formal application to deliver the Code Monitoring Authority last month. De Gori said that the timeframes around having the Authority up and running and registering financial advisers by 15 November meant that the organisations had committed to investing in the necessary infrastructure before ASIC had made its determination. The timeframe meant that the professional bodies had also committed to the move before the Treasurer, Josh Frydenberg, had released the Government’s so-called Royal Commission Implementation Roadmap. Frydenberg announced that not only would the Government be proceeding with the establishment of Code Monitoring Authorities covering financial advisers but would also be creating a new central disciplinary body. Money Management understands that the member associations of the consortium are seeking clarity from the Government on how it expects Code Monitoring Authorities will work alongside or under the new central disciplinary body.

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FPA/AFA unity credited with FASEA exam extension

THE Financial Planning Association (FPA) and the Association of Financial Advisers (AFA) has shared the plaudits for having successfully lobbied the Government for an extension of the Financial Adviser Standards and Ethics Authority (FASEA) exam timetable. In what represented a significant united approach to a key issue for the financial advice sector, the two organisations coordinated efforts to achieve the extension, with AFA chief executive, Phil Kewin, specifically referring to the collaborative effort. The successful joint lobbying effort came ahead of the FPA and AFA being part of the consortium of advice organisations which last month formally lodged an application with the Australian Securities and Investments Commission (ASIC) to constitute a FASEA code-monitoring body. “This was the collaborative effort where, in conjunction with Dante De Gori and FPA Australia, and our respective members who actively engaged their local politicians, we achieved a great outcome for all advisers, their clients and the many Australians who need and deserve financial advice. One message, many voices that’s united,” Kewin said. FPA chief executive, Dante De Gori, expressed similar views about the benefits of the two major planning organisations acting collaboratively. “We’re pleased that Minister Hume has listened to the feedback from our members and been willing to work with the FPA and AFA jointly to deliver a better outcome for all financial planners and their clients,” he said. The Assistant Minister for Superannuation, Financial Services and Financial Services Technology, Senator Jane Hume had been expected to make the announcement during the AFA conference in Adelaide but ultimately did so after the conference. She announced that, under the new requirements, advisers who were registered on the Financial Adviser Register on 1 January 2019 must: • Complete the FASEA-approved exam by 1 January, 2022 (one additional year); and • Meet FASEA’s qualification requirements by 1 January, 2026 (two additional years). These changes will not apply to new advisers registered after 1 January, 2019. Senator Hume’s announcement was welcomed by a wide cross-section of the financial services industry including the Financial Services Council (FSC) which said it represented a sensible tweak to the reforms and one which would alleviate pressure on the advice industry.

4/09/2019 2:50:56 PM

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8 | Money Management September 12, 2019

News

ASIC research confirms value of advisers BY MIKE TAYLOR

THE Australian Securities and Investments Commission (ASIC) has released research which it says shows Australians believe financial advisers can offer significant expertise in financial matters, yet they remain distrustful of using them. The research showed that while 41% of Australians intend to get personal financial advice in the future, many would not proceed because of perceived barriers such as distrust, high cost and the perception that financial advice is only for the wealthy. The research found that 27% of Australians had received financial advice in the past, and 12% of Australians received advice in the past 12 months. It also highlighted that a significant majority of consumers sought financial advice because they felt advisers had expertise in financial matters and could recommend products that they, as consumers, could not normally find on their own. Commenting on the research, ASIC commissioner, Danielle Press, said that the good news for the industry was that

consumers who had recently received financial advice had more positive attitudes towards financial advisers than those who had not. “The good news for industry is that consumers who had recently received financial advice had more positive attitudes towards financial advisers than those who had not. Moreover, even limited knowledge of industry

HUB24 posts strong profit on record inflows PUBLICLY-LISTED platform provider and financial services house HUB24 has recorded a 27% increase in net profit after tax to $6.8 million in its full-year results released to the Australian Securities Exchange (ASX). The result was achieved on the back of a 15% increase in operating revenues to $96.3 million and record annual net inflows of $3.9 billion. It said the record net inflows of $3.9 billion had been achieved in the context of structural change and distraction across the industry and that the company’s capability to assist advisers with bulk fund under advice (FUA) transitions had supplemented organic adviser flows to maintain growth. The ASX announcement said that its financial planning licensee business, Paragem had contributed a slightly decreased $35.2 million in revenue which had resulted in some advice practices moving to self-licensing during the year. However, it said the pipeline for future growth was strong due to the increasing migration of advisers away from institutional licensees. Elsewhere in its ASX notification, the company pointed to a new leadership team having been appointed to Paragem with a refreshed strategy and broadened offer. It referred to a recent period of transition for the license with the departure of three practices and the recruitment of 11 new practices.

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reforms such as FOFA (Future of Financial Advice) appears to have improved consumer attitudes towards the sector. So, it is even more important for industry to get on board with the reforms. “Although not all Australians need financial advice, it is imperative that people wanting advice when making critical financial decisions are able to access high quality advice and equally, feel confident that the advice is in their best interests,” Press said. The research found that consumers generally seek financial advice for investments such as shares and managed funds, retirement income planning, growing their superannuation and budgeting or cashflow management. Interestingly, it highlighted that use of digital advice (also known as robo-advice) is still very low (1%). However, 19% of research participants said they were open to getting digital advice once it was explained to them. “Financial advisers have an important role to play in helping consumers improve their financial position, and there is a real opportunity for the advice industry to rebuild that trust by reorienting itself and putting consumers at the heart of its services,” Press said.

FASEA extends FPA CFP coursework recognition THE Financial Planning Association (FPA) has succeeded in having more of its Certified Financial Planner (CFP) designation coursework recognised by the Financial Adviser Standards and Ethics Authority (FASEA). FASEA has announced it has approved an application for the recognition of coursework to attain a professional designation from the FPA as part of its education standards for financial advisers. It said that advisers who, after 1 July, 1999 and before 31 December, 2003, had completed the CFP 1-4 program coursework to attain the FPA CFP designation were eligible to be awarded two credits recognition for prior learning (RPL) in an approved Graduate Diploma. Commenting on the move, FASEA chief executive, Stephen Glenfield, said the awarding of credits for the

CFP 1-4 program coursework to attain the FPA CFP designation provided appropriate recognition FASEA’s review of the CFP 1-4 program coursework followed an application from the FPA. He said the approval was recognition of the course content and assessments advisers were required to undertake to successfully complete the program. The approved RPL will be added to FASEA’s Degree, Qualifications and Courses legislative instrument. A maximum of two credits towards completion of higher education requirements can be awarded for an existing adviser who has completed one or more of the prescribed approved courses to attain a professional designation. These credits are in addition to any credits available for completing other relevant studies.

4/09/2019 12:26:10 PM

September 12, 2019 Money Management | 9

News

ASIC approves AFCA naming firms BY MIKE TAYLOR

THE Australian Securities and Investments Commission (ASIC) has approved changes to the Australian Financial Complaints Authority (AFCA) rules allowing the authority to name the financial firms it rules both for and against. ASIC said AFCA had applied for the rule change to enable the identification of firms following a public consultation process, although consumers would remain anonymous. ASIC said that in its first six months, AFCA had received 35,263 complaints and while publication of determinations had been a longstanding feature of the external dispute resolution schemes, the names of firms involved in financial services, superannuation and credit complaints had not been published. ASIC said it viewed that the naming of firms would help identify conduct or market problems within firms or affected specific products or services, as well as highlighting where firms had done the right thing.

RETIREMENT INCOME MONTHLY UPDATE

How to Spot Elder Financial Abuse Elder financial abuse is not a new problem. Throughout Australia the elderly have lost their savings, valuables and homes through financial abuse but it’s only now that serious steps are being taken to address the issue. As a financial adviser, you’re in a unique position to spot questionable behaviour and create a safe environment where clients can speak openly without pressure or intimidation. WHAT IS ELDER FINANCIAL ABUSE?

Elder financial abuse is the theft or improper use of money or assets of an elder person (generally aged 65 or older). “It can include but is not limited to, behaviours such as using finances without permission, using a legal document such as an enduring power of attorney for purposes outside what it was originally signed for, withholding care for financial gain, or selling or transferring property against a person’s wishes.”1 It can happen to any elderly person regardless of their socio-economic status. It can include a broad range of conduct from deception to intimidation from family members, friends or carers. Whilst the number of Australians suffering financial abuse is unknown, it’s conservatively estimated to be at least 10% of older Australians each year and the perpetrators are most likely their own adult children.2 COMMON WARNING SIGNS

Do lawmakers understand the damage to accounting and planning? THE Government needs to understand the impact of its over-regulation of the financial planning and accounting sectors and, in particular, the impact on what amount to small and medium-sized businesses, according to Australian Wealth Solutions principal, Sam Zervides. However, he said the growing calls for government to stop interfering, over-regulating and irreparably harming the important financial planning and accounting sectors were continuing to fall on deaf ears with the economy, employment and consumers equal losers. Zervides said planners and accountants could accept the decline in their livelihood if it was the result of new technologies, outsourcing, overseas competition or product innovation but it was a bitter pill to swallow when it was the result of relentless and incoherent reform and imposition of government red tape, over policing and escalating compliance costs. “Costs that are making the provision of affordable professional financial advice and services harder and harder to provide for clients are simultaneously driving practitioners out of the industry,” he said. “The financial planning and accounting professions are predominantly comprised of SMEs. Collectively they’ve been severely impacted by government-initiated reforms with the large institutions, fund managers and industry funds the major beneficiaries.” Zervides said it appeared the legislators and advocates of industry reform had no appreciation or regard for the damage they were inflicting and the legacy being left in their wake.

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A combination of diminished mental capacity and questionable changes in behaviour can be red flags signalling financial exploitation. Below are some of the things to look out for when meeting with your older clients: 1. Diminished capacity or vulnerability • Signs of depression, loneliness or forgetfulness; • Changes in their ability to care for themselves or becoming dependent on others for care; and • The person providing your client’s care or managing their finances makes you feel uncomfortable. 2. Questionable changes in financial behaviour • Suspicious signatures on financial transactions; • Sudden/unexplained changes to the power of attorney, will, or ownership of assets; • A new ‘best friend’ in your client’s life who is making decisions; • Sudden or large amounts of money are given to family, friends, charities or others; and • An overall disappearance of money, valuables or financial statements. WHAT TO DO IF YOU SUSPECT ELDER FINANCIAL ABUSE?

As a trusted financial adviser to older clients, not only can you help make their money go the distance, you can also help them if they become vulnerable to financial abuse. By engaging with your client on an emotional level, you can build trust beyond conversations about their investment portfolio. This is particularly important when they’re vulnerable, as you can provide them a safe space to talk about their circumstances. If you do see the warning signs for financial exploitation, you can call 1800 ELDERHelp (1800 353 374) which connects you to information and advice on elder abuse. 1 National Plan to Respond to the Abuse of Older Australians [Elder Abuse] 2019-2023, Council of Attorneys-General, 19 March 2019. 2 Elder Abuse, Bina Brown, https://thirdagematters.com.au/elder-abuse/, 2 April 2018.

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4/09/2019 12:25:42 PM

10 | Money Management September 12, 2019

News

CBA takes $150m haircut in CommInsure sale BY MIKE TAYLOR

THE Commonwealth Bank and AIA Australia have entered into further arrangements in a bid to complete the prolonged transaction around the sale of CommInsure, involving a $150 million reduction in the original sale price. The Commonwealth Bank has announced to the Australian Securities Exchange (ASX) that a revised transaction path comprising a joint cooperation agreement, reinsurance arrangements, partnership milestone payments and a statutory asset transfer. The announcement said the aggregate proceeds for CBA

from the transaction were expected to be $2,375 million – a $150 million reduction from the original sale price. It said the arrangements were expected to be implemented in a staged manner through the current financial year, with the Commonwealth Bank to receive approximately $750 million of proceeds and distributions by the end of the first half and the remaining amount by the end of the financial year. The announcement said the two parties had also agreed to grant AIA an option to extend its respective Australia and New Zealand distribution agreements from 20 years to 25 years.

AMP FPA accuses AMP of clouding key BOLR issues THE AMP Financial Planning Association (AMP FPA) has hit back at the company’s claims that it was consulted over the company’s moves to reduce adviser numbers and change buyer of last resort (BOLR) arrangements, telling members the AMP FPA board was not consulted and was certainly did not given the required 13 months’ notice of change. A notice to AMP FPA members signed by the association’s chief executive officer, Neil Macdonald makes clear he believes that reports that AMP had entered into consultations ahead of this month’s announcements were deliberately misleading. “Please, do not let the statements divert your attention from the key fact that AMP did not consult with the board of AMP FPA before making these changes,” Macdonald’s message to members said. “This is key because AMP relies on a particular clause in the BOLR Policy in order to make these purported amendments, and one of the requirements of this clause is that AMP must first consult with the board of AMP FPA.” “AMP has failed to do this. (In our view, that clause does not apply, so even if AMP had consulted with the board of AMP FPA, AMP still would have had no right to make the amendments to the BOLR Policy without giving 13 months’ notice.) Macdonald’s message to AMP FPA members went on to say that it was irrelevant that AMP had informed the association ahead of time because under the terms of their agreement the company was required to give 13 months’ notice. “In any case, the clause of the BOLR Policy that

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AMP is relying on required AMP to ‘consult’ with the board of AMP FPA. Consulting requires much more than simply providing information. No consultation occurred,” he said. Further he said that suggestions by the company that it had sought feedback from advisers in shaping its new strategy were misleading because “while some directors of AMP FPA were informed that AMP had requested meetings with a few advisers, but we are unaware of any details about these meetings or whether any meetings occurred”. “In any event, AMP seeking feedback from advisers on anything is irrelevant to the key issue of whether AMP had the right to amend the BOLR Policy. And seeking feedback does not amount to consultation,” it said. Macdonald said it had also been wrong of AMP Limited to suggest that the AMP FPA board had received a full briefing on the BOLR changes on 25 July because only a subset of the board had received a briefing which amounted to merely being shown a PowerPoint presentation that AMP acknowledged contained factual errors and inaccuracies. His message to members suggested that AMP was seeking to “cloud the issue” and that references to AMP providing information to a select subset of directors of the AMP FPA board and to AMP seeking feedback from advisers “appears to be an attempt by AMP to divert attention from this key, material point: AMP did not consult with the board of AMP FPA and in any case, was required to give 13 months’ notice of the change”.

ASIC waves big stick on adoption of regtech THE Australian Securities and Investments Commission (ASIC) has given an overt push to financial planning groups to embrace and explore technology, with its deputy chair, Daniel Crennan QC, arguing that it may help minimise compliance risks. In doing so, Crennan pointed out that the compensation paid to financial advice complaints stood at $119.7 million as at 30 June, this year, and to a 10-year jail sentence handed out to a financial adviser for engaging in dishonest conduct. Opening an ASIX Regtech Financial Advice Files Symposium, Crennan said that technology’s potential was becoming more obvious and “we do expect financial services organisations to keep up”. “We’re all aware of the consequences of not keeping up, particularly relating to the provision of financial advice.,” Crennan said. “We only need to recall the $119.7 million in compensation as at 30 June, 2019 that has been paid out to customers who suffered loss or detriment because of non-compliant advice given by financial advisers.” Crennan pointed out that he was the sponsoring commissioner of ASIC’s Office of Enforcement and that the regulator’s Annual Report data showed that in January to June, 2019, ASIC stopped 24 people from working in the financial services industry and that 13 of those gave financial advice. “In this same six-month period, one financial adviser received a 10-year jail sentence for engaging in dishonest conduct,” he said. “Within the last six months, ASIC increased its overall Wealth Management–related investigations by 216%.” He said that it was in these circumstances that, in order to improve risk-management and minimise compliance risks, firms had to include the capacity to explore, test, and implement ‘compliance-bydesign’ regtech solutions within their business models.

4/09/2019 2:51:24 PM

September 12, 2019 Money Management | 11

News

ASIC sues NAB for unlicensed home loan introducers BY CHRIS DASTOOR

IN one of the first pieces of litigation as a result of the Royal Commission, the Australian Securities and Investment Commission (ASIC) has sued the National Australia Bank (NAB) for dealing with unlicensed home loan introducers. ASIC alleged NAB breached s31(1) of the National Consumer Credit Protection Act 2009 (National Credit Act), which prohibited credit licensees from conducting business with parties engaged in credit activity without an Australian credit licence (ACL). It was alleged by ASIC between 3 September 2013 and 29 July 2016 NAB accepted information and documents in support of consumer loan applications from third party introducers who were not licensed to engage in credit activity. The proceedings would be listed for directions on a date to be determined by the Federal Court

BY LAURA DEW

and the maximum penalty for one breach of the National Credit Act was 10,000 penalty units which equates to $1.7-1.8 million. ASIC also alleged NAB breached its obligations under s47 of the National Credit Act requiring it to engage in credit activities efficiently, honestly and fairly and to comply with the Act. The proceedings related to the conduct of 16 bankers accepting

loan information and documentation from 25 unlicensed introducers in relation to 297 loans. One of the National Credit Act's key objectives was consumer protection and the imposition of a licensing regime was intended to address concerns thirdparty referrers may misrepresent consumers financial details to ensure loans were approved for their own benefit.

Remuneration model changes drops Iress NPAT BY JASSMYN GOH

IRESS has reported a net profit after tax reduction of 5% for H119, after the adoption of the new lease accounting standard, the QuantHouse acquisition, and increased share-based payments following changes to remuneration models in recent years. In an announcement to the Australian

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Bravura to acquire Midwinter for $50 million

Securities Exchange (ASX) Iress said its group operating revenue increased 5% to $241.8 billion and segment profit increased 10% to $74.1 million on the previous corresponding period (PCP). Its APAC operating revenue was up 3% to $128.2 million, the announcement said. “Revenue growth was driven by underlying performance in Australia, the UK, South Africa, and the acquisition of market data business QuantHouse,” it said. Iress chief executive, Andrew Walsh, said: “Our clients are particularly focused on data capabilities and automation as they seek to meet significant change in the regulatory and operating environment, drive business growth, and enhance their customer experience”. The firm said it expected to report a segment profit growth in 2019 of between six to 11% ($146 million to $153 million). “Beyond 2019, we expect a continuation of significant industry change and a climate of economic and structural uncertainty,” it said.

FINANCIAL software firm Bravura Solutions is to acquire Midwinter Financial Services for $50 million, with Bravura describing the move as ‘strong strategic fit’ for the two companies as it seeks to expand its reach in Australia and internationally. The appeal of Midwinter was its AdviceOS financial planning software which powers back office administration for financial advisers and online self-directed digital advice portals for superannuation funds. Bravura said the addition of Midwinter was a ‘natural extension’ for its existing software solutions and opened up an important avenue for growth. It said, following the Royal Commission, there was significant potential for a differentiated technology-based solution to support traditional advice methods. The deal was expected to be completed this month and the Midwinter founders and senior management were expected to remain a core part of the business. Tony Klim, chief executive of Bravura, said: “The Midwinter team have built a strong, highly functional and well-regarded cloud-based SaaS application for the financial advice market”. “The acquisition has a strong fit with our mission to provide best-in-class software solutions that comprehensively satisfy our clients requirements and help them navigate complex regulatory environments,” he said. “Midwinter’s modern technology offering complements and extends Bravura’s broad suite of products in both Australia and internationally.”

4/09/2019 12:23:55 PM

12 | Money Management September 12, 2019

InFocus

ENDING GRANDFATHERING – WHO REALLY WINS? Mike Taylor writes that in the absence of a definitive methodology for ensuring clients are rebated the grandfathered remuneration which would otherwise have gone to financial advisers, there is no certain way of knowing who the real beneficiaries really are. THE AUSTRALIAN SECURITIES and Investments Commission (ASIC) has been tasked by the Government with investigating the manner in which financial services companies transition away from paying grandfathered conflicted remuneration. But, crucially, it seems unlikely that ASIC will focus more on process than on who, ultimately, ends up being the beneficiary of the ending of grandfathering and the bottom line is that the financial advisers who lose the grandfathered payments will have little say in the matter, but that the financial product manufacturers will. This is because the underlying legislation, the Treasury Laws Amendment (Ending Grandfathered Conflicted Remuneration) Bill “allows for regulations to be made that provide a scheme under which benefits that would otherwise have been paid as conflicted remuneration are rebated to affected retail clients”. But, just as importantly, the explanatory memorandum accompanying the bill makes clear that it is product issuers who will be responsible for those schemes and, to a large degree, how they work.

APRA QUARTERLY SUPERANNUATION PERFORMANCE (JUNE 2019)

Little wonder, then, that the major financial adviser bodies such as the Financial Planning Association (FPA) have been at pains to point to the need for product providers to be closely scrutinised around their implementation of the rebating process. The FPA more than four months ago used a submission to the Treasury to urge that it [Treasury] “carefully design the mechanism to achieve and monitor rebating in order for it to minimise disruption and unnecessary administrative costs”. The FPA’s submission noted that the Government’s announcement to end grandfathered commissions included a commitment for any previously grandfathered commissions that remained in contracts beyond 1 January, 2021 to be rebated to applicable clients where the applicable client could be reasonably be identified. It also noted that the draft legislation released by the Treasury included an ability to make regulations to achieve this but not details about the mechanism itself. “The FPA supports this commitment but notes that product providers must bear primary responsibility for the rebating arrangements. The burden of

managing rebating arrangements cannot fall on consumers, who do not have a choice in how these arrangements are made, nor on financial advisers, who will already be dealing with a loss of commission revenue and adjustments to their business models,” the submission said. It said any additional cost to financial advisers through the rebating process was likely to be passed on to clients in the form of higher advice fees. The submission said it was important that product providers had an obligation to rebate commissions and to appropriately migrate consumers from legacy products to modern, fit-forpurpose products. “Treasury will need to carefully design the mechanism to achieve and monitor rebating in order for it to minimise disruption and unnecessary administrative costs. The FPA strongly urges Treasury to consult with the financial services industry over the proposed rebating regulations as soon as possible. “However, that consultation has not occurred, and the industry is now faced with the processes which will be followed by ASIC as it looks at the steps being taken by the product providers between

1 July, this year and the 2021 deadline for the ending of grandfathered remuneration.” According to ASIC, its investigation will consist of: • Surveying entities known to pay grandfathered conflicted remuneration to Australian Financial Services Licensees or their representatives, requiring entities to provide data for a 12-month period initially and subsequently on a quarterly basis for the review period; and • Detailed engagement and analysis. The regulator is then scheduled to analyse the results of its survey and report to the Treasury by 30 June, 2021. In other words, grandfathering has been brought to an end, ASIC will have monitored the process but, as yet, no specific methodology or process has been outlined. In reality, of course, grandfathered remuneration is estimated to now represent less than 10% of revenue for most, average advisers and many of the largest product manufacturers have already begun winding back the remaining grandfathered arrangements. The question is, though, what proof is there that consumers will be the ultimate beneficiary?

$2.9t

$33.9b

$20.2b

in total superannuation assets

in contributions in June quarter

in total benefit payments in June quarter

Source: APRA

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5/09/2019 2:17:22 PM

September 12, 2019 Money Management | 13

AREITS

WHERE ARE THE PROPERTY WINNERS AND LOSERS? It is well-known that Australians love talking about property, writes Oksana Patron, so how has the AREIT market performed and which sectors should they look at in the future? PROPERTY HAS BEEN undoubtedly one of the most hotly-debated asset class for Australians for many years. So the big question is how the market has performed over the last 12 months, what has changed and, most importantly, where should investors go from here to maximise their investments across the commercial real estate space? Should investors keep putting their money into shiny office buildings in the central business districts (CBDs) or maybe they should look further into suburban markets where new logistics centres are springing up around the

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main Australian cities? According to fund managers, the market looked incredibly healthy for investors engaged in the real estate investment trusts (REITs) over the last few months as the whole sector performed quite strongly, helped by an ongoing reduction in bond yields and stability offered through its sustainable income streams. “The world is in uncertainty so things were making the market a bit jittery whereas REITs typically have a far more predictable or sustainable income streams so they are appealing from that perspective,” Stuart Cartledge, managing director at Phoenix

Portfolios, said. According to Chris Bedingfield, principal and portfolio manager at Quay Global Investors, what investors experienced recently was just the continuation of the trend which had clearly favoured office and industrial over retail, and this trend had been just exacerbated now. “It’s really just a continuation of the trend that’s been going on for several years now. I don’t think that’s going to be anything too different. There has been a lot of money that has been raised in the marketplace because some of these companies are taking advantage of

the very, very strong share prices.” At the same time, not all segments of the real estate sector delivered similarly strong performance, with the consensus being the office and industrial markets were doing much better than retail or residential. Some fund managers said the sector was looking expensive and because of that investors should focus even more on actively managing their portfolios in order to avoid paying for securities which might be overvalued in this period of time. Continued on page 15

4/09/2019 2:52:40 PM

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This publication is intended for the general information of licensed financial advisers, is dated July 2019, is given in good faith and is derived from sources believed to be accurate as at this date, which may be subject to change. It should not be considered to be a comprehensive statement on any matter and should not be relied on as such. The general information does not take into account the personal investment objectives, financial situation or needs of any person. Investors should always consider these factors, the appropriateness of the information, and the relevant Zurich Investments Product Disclosure Statement available from their financial adviser or Zurich Investments before making any financial decisions about any Zurich Investments fund. Past performance is not a reliable indicator of future performance. Zurich Investment funds are issued by Zurich Investment Management Limited ABN 56 063 278 400, AFSL 232 511, GIIN XYY9MQ.00000.SP.03 5 Blue Street, North Sydney NSW 2060 DFOY-014796-2019

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4/09/2019 2:55:16 PM

September 12, 2019 Money Management | 15

AREITS

Continued from page 13 “There has been strong buying and interest in the market in the office and industrial sectors. But we think that they are looking a little bit overdone in terms of valuations,” Zurich Australia’s senior investment strategist, Patrick Noble, said. “I don’t think these trends are looking to change anytime soon but we are just cautious whether these trends are your friend. We think valuations or the relative value in the market is definitely not worth where the trends are at the moment, particularly in retail, and some retail investors should probably have a look and see what they think versus where the momentum really is.”

RETAIL So the main question remains: at this point in time is retail a value opportunity or a value trap? The short answer to which would be the retail sector, which represents roughly 50% of the REIT sector by market capitalisation, was a trap over the last few months. But this is only one part of the equation, the experts said. According to managers, the other key reason was that people believed in what they had seen was a structural change, which was further underpinned by changing consumer trends and a continued shift towards online shopping.

Also, there was an expectation that the retail valuation will come under further pressure, but at the same time, investors were forgetting that the growth numbers were just a part of the economic cycle, they said. On top of that, the shift towards the online consumption left landlords with a necessity to reconfigure the space, which when combined with less favourite macroeconomic trends, added extra pressure. “We think people are ignoring that retail has cycles and the stocks look cheap,” Noble said. “This comes back to my point about how retail is reflecting a realistic situation which is the economy is not that great,” Quay’s Bedingfield stressed. “Obviously bond yields have come down a lot over the last 12 months, and I think for those initiating or those who are not sophisticated investors it’s easy to say – because interest rates are so

low I should buy real estate but that isn’t really a right way to look at it. The way we look and the way we think you should look at it is what is the bond market telling you about the wider economy?” Also, the negative sentiment across the retail sector was more of a global tendency, with the majority of developed markets seeing retail as a massive underperformer over the last few months. This held true for markets such as the UK, Europe and the US. “It’s happening globally in the UK and in Europe – it’s been a massive underperformer, if you look at retail in the US, retail property has been a massive underperformer, so it’s struggling in the developed markets but there are pockets of outperformance as well,” Bedingfield noted.

OFFICE/ INDUSTRIAL On the other hand, managers were more optimistic when it came to office and industrial

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assets, which were supported by the recent financial results announcements from the leading groups which proved they had delivered a sound growth. The industrial sector was one of the winners benefitting greatly from the recent change in consumers’ preference towards the online shopping and thanks to which the sector saw improvement in rental growth. “The other thing that probably has assisted industrials to some extent has been space that used to be industrial has been converted to residential particularly in areas like South Sydney,” Cartledge said. As far as the office space was concerned, one future risk was the current condition of the financial sector which has survived another yet difficult period, coming under extra pressure from the fallout of the Royal Commission. This might be the bad news for investors as Continued on page 16

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ZURICH INVESTMENTS AUSTRALIAN PROPERTY SECURITIES FUND

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4/09/2019 2:52:48 PM

16 | Money Management September 12, 2019

AREITS

Continued from page 15 the financial sector may be forced to ‘start trimming’ in order to grow its profits again. Bedingfield said: “Roughly 5,000 people occupy a building of 60,000 to 70,000 sqm so for the bank to lay off 5,000 people that’s an equivalent of the new office building, being delivered to the market.” So where investors should look for gains? One manager, that operates in the unlisted property market, said investors should not limit their options to big shiny core CBD buildings and look further at the fringe and suburban markets with high-quality tenants. “Our most recent acquisition for example was in Mascot in Sydney,” Hamish Wehl, head of retail funds management at Cromwell, said. “What attracted us to Mascot is the market rents in Mascot are substantially lower than those in the city and we can’t just help to see it given its proximity and given its good transport connectivity. “We don’t necessary try to buy these big shiny core CBD buildings, we are happy to buy CBD fringe buildings and suburban buildings with high-quality tenants that can still deliver a secure income stream to investors.”

Moreover, the other key tailwind towards unlisted property funds was growth in the selfmanaged super funds (SMSFs) space which currently have about $715 billion in net assets and of that $171 billion is within cash and term deposits. “Given that huge cash balance is generating a small return, unlisted property funds becomes attractive” Hamish said.

OUTLOOK - BE CAREFUL AND PROCEED WITH CAUTION Although the commercial real estate sector managed to attract investors in the last few months thanks to its defensive characteristics, moving forward the sector might look somewhat expensive at the aggregate level. Noble warned that investors coming to that market, appealed by its defensive characteristics, need to remember what they are paying for these assets.

“I guess in terms of what we’re doing – you know, gearing is not an issue like it was a decade ago, supply is picking up particularly in the office market so again, there’s a strong demand for office that we’ve seen particularly in Sydney and Melbourne where supply is coming along and if economic conditions do weaken then that could make those type of office stocks weak moving forward. “We understand that people will need that type of investment in their portfolios so what we are trying to do is to make sure that we’ve got good valuations in there hence why we tend to be underweight in industrials and the office sector at the moment, and overweight retail. And we have some residentials in the portfolio as well but we’ve been sellers of that,” Noble said. Bedingfield said his approach is to start from the point of view of looking for good total returns and

PROPERTY INVESTING, BEYOND THE FAMILY HOME. Award winning, two years running.

trying to find the companies that will give those total returns no matter where they are based. However, having said that, he added: “It’s really the companies and investment opportunities that come first. But when you look around the world, we probably tend to have more in the North America than we do anywhere else because that’s where the economy is the strongest at the moment, but that really is just a function of our stockpicking process, rather than wanting to allocate to one country”. Bedingfield warned that there was still a lot of hype in one sector and much pessimism in another and therefore investors should be super cautious when it comes to picking stocks. “You’ve got to be so careful. Because when you look at the index and its total – there is going to be big differentiation of returns going forward. There’s going to be some big winners but there is going to be some big losers.”

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ZURICH INVESTMENTS AUSTRALIAN PROPERTY SECURITIES FUND

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4/09/2019 2:52:57 PM

September 12, 2019 Money Management | 17

FE Crown Ratings

WHICH FUND MANAGERS RECEIVED DOUBLE-DIGIT FIVE CROWNS? Three fund managers have received multiple five Crown upgrades for their funds, writes Laura Dew, with IPAC Asset Management emerging victorious with 12 five Crown ratings. THREE ASSET MANAGEMENT firms have seen significant upgrades to their funds with many being moved up to the highestpossible five Crown rating. Five Crowns were awarded to funds which were in the top 10% based on alpha, volatility and consistently strong performance. IPAC Asset Management, which is owned by AMP, received the most five Crown ratings of any Australian company at 12 funds, nine of which were upgrades. These came from a variety of sectors with the SIS International Share Strategy being awarded a five Crown rating for the first time. Diversified Investment Strategy 4, North Professional High Growth, North Multi Manager Active Growth, MMP High Growth, Select Index Balanced, Life Choices Index 85, North Guardian Volatility Growth and Life Choices Active 100 funds were all upgraded from four Crowns to five.

Finally, the Select Index Growth, Select Index High Growth and Summit Select Index Growth funds retained their five Crowns from the previous survey. Stephen Flegg, portfolio manager, multi-asset group, at AMP Capital, said: “We have stuck to the funds’ principle objectives and have an established client base. “The biggest driver of returns has come from portfolio construction, where diversification is the most important principle, followed by dynamic asset allocation and managers’ stock selection. “The first half of 2019 was particularly good for our growth funds and our index funds have also done well.” Macquarie Asset Management also had 11 funds with five Crown ratings but fewer were upgraded with nine having retained their rating from the previous survey.

Following IPAC was Zurich Financial Services which saw five of its funds given a five Crown rating. The funds selected were all versions of its Global Growth strategy. These were Global Growth Share, Unhedged Global Growth Share, Unhedged Global Growth Share Scheme, Global Growth Share Scheme and Concentrated Global Growth. Apart from the Concentrated Global Growth fund, which retained its previous five Crown rating, all were upgraded from three Crowns. Matthew Drennan, head of savings and investment at Zurich, said: “The funds select quality stocks with accelerated earnings that can be sustained, they tick all three of the boxes of alpha, low volatility and consistent performance. “However, the funds are more defensive than they have been in the past as valuations are looking stretched and some areas have

been bid up aggressively.” Lastly, specialist property manager Resolution Capital had three funds which received a five Crown rating. These were Resolution Global Property Securities, Global Property Securities Unhedged and Global Property Securities Hedged, which were all upgraded from four Crowns. A spokesperson for Resolution said: “Our investment approach is deliberately unconventional and the results are a testament to the approach and the commitment of the team to deliver consistent outperformance for our clients. “The portfolio typically contains 45 to 50 high-quality listed global real estate securities, which meet our stringent selection criteria. The investment strategy also focuses on avoiding permanent impairment of capital, in line with the objective of long-term real wealth creation for clients.

UPGRADE SUCCESS FOR AUSSIE SMALL-CAP FUNDS FUNDS with a small-cap bias were the big winners in the latest quantitative FE/Fundinfo Crown Ratings, with five smallcap funds being upgraded to five Crowns, the highestpossible rating. The latest rebalance of the ratings has provided a boost for those companies sitting in the ACS Equity – Australian Small/Mid Cap sector with several funds receiving an upgrade to five Crowns. Smallco Investment, Ophir Opportunities and Celeste Australian Small Companies all moved up from two Crowns in February to five Crowns, while the Australian Ethical Emerging Companies and OC Micro-Cap

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moved from three Crowns to five. Five Crowns were awarded to funds which were in the top 10% based on alpha, volatility and consistently strong performance. In total, there were 17 funds in this sector awarded a five Crown rating. Small caps have performed well recently, particularly those with a micro-cap slant, and the ACS Equity – Australia Small/Mid Cap sector has delivered 36% over three years versus returns of 31% by the wider Australian equity sector. Paul Biddle, portfolio manager of the Celeste Australian Small Companies fund, said: “We tend to stick to our knitting and invest in good quality, strong business franchises with clean accounting.

“Our broad investment process hasn’t changed over the three years, we run a concentrated portfolio with 30-35 stocks which has proven to be a value-add strategy in the long term.” He said there were opportunities in small-cap stocks more so than large caps as they were less covered by analysts. “If you can find those small-cap companies that can grow into big companies then you can make big gains. But you have to have a disciplined process to make sure you avoid those companies that disappear or those which are too complex. There are a lot more pitfalls,” he said. George Chirakis, chief executive

of Ophir Asset Management, said the Ophir Opportunities fund was positioned in companies that could ‘grow no matter what’, particularly those which invested offshore. “The fund continues to successfully identify and invest in companies undergoing a period of structural growth and able to grow independently of the economic cycle. “If you are a long-term investor, it is always a good time to invest in small cap companies although we think that right now is a very exciting time. For example, we have never seen so many Aussie small cap companies successfully expand their business offshore and take market share from established players.”

5/09/2019 5:43:08 PM

18 | Money Management September 12, 2019

FE Crown Ratings

WHICH FUND HOUSES HAD THE MOST 5 CROWNS STRIPPED? MORNINGSTAR Investment Management, IOOF Investment Management, Colonial First State, Pengana Capital, Colonial First State Global Asset Management (CFS GAM), and Australian Unity had the most five Crowns downgraded in FE/ Fundinfo’s latest Crown Ratings rebalance in August. Morningstar lost the most five Crown ratings at seven funds, followed by IOOF at five, CFS at four, and Pengana, CFS GAM, and Australian Unity all at three. The sector that lost the most amount of five Crowns was mixed asset – growth (at eight funds), followed by global equities (five funds), mixed asset – aggressive (three funds), mixed asset balanced (three funds), and property – global, property Australia listed, and mid-cap global equities, mixed asset – moderate, fixed interest Australian bond, and global hedged equities (one fund each). While Morningstar did not respond to Money Management regarding its results, the data found all but one of its downgraded funds were mixed asset funds. The fund that was downgraded the most was Morningstar Multi Asset Real Return as it lost four Crowns down to one. Over the three years to 30 June, 2019 the fund performed in the bottom quartile against its mixedasset – aggressive sector peers and was the third worst performer. The fund returned 23.8% over this period, compared to the sector

average of 32.4% and the best performing fund at 42.3%. The fund’s factsheet said: “The risk of permanently losing capital is now significant, leading us to adopt an increasingly cautious position across the portfolio”. It noted it was holding more cash than usual with an allocation at 23.2%, compared to the sector average of 4.56%, and said it preferred to hold UK, Japanese, and emerging market equities. Most of CFS’ five Crown fund downgrades were mixed asset funds, including CFS FirstChoice Wholesale Multi-Index Balanced, CFS Mezzanine FirstChoice MultiIndex Moderate, Milliman Managed Risk Multi-Index High Growth, and CFS Stewart Investors Wholesale Worldwide Leaders. Commenting on the Multi-Index Balanced and Multi-Index Moderate funds, CFS general manager for investments, Scott Tully, said the funds achieved strong, double digit returns over the six months to 30 June, 2019 but “the underlying tilt to value through the funds’ allocations to Realindex Global Share resulted in performance that lagged global indices but this is unsurprising given the strength of US and technology stocks during that period”. “An overweight to emerging markets is retained in the funds with the expectation that these markets offer the potential for relatively stronger returns in the future.” Similarly, four of the five IOOF funds that had a five Crown downgrade were mixed asset funds.

The funds were IOOF MultiMix Moderate (balanced), IOOF MultiMix Conservative (moderate), IOOF MultiSeries 70 (growth), Foundation Assertive (growth), and bond fund IOOF Income. While the multi-asset growth fund, Foundation Assertive, outperformed the sector over the three years to 30 June, 2019, and was placed in the top quartile its volatility was at 7.32 compared to the sector average of 5.7, and its maximum drawdown loss was at 10.7%, compared to the sector average loss of 8.6%. The MultiSeries 70 has had inconsistent returns placing in the second quartile over three years, top quartile over one year, and third quartile over the six months. IOOF declined to comment on its fund’s performance but its factsheet FE/Fundinfo Crown Fund Ratings are a quantitative rating determined using FE’s performance scorecard process which analyses a fund’s performance over the last three years. The score is made up of three components – alpha, relative volatility, and a consistently good performance. The funds examined were within the Australian Core Strategies universe and had at least a threeyear track record. The funds are assigned ratings based on their total scores, according to the following distribution: • The top 10% – five FE Crowns; • The next 15% – four FE Crowns; • The next 25% – three FE Crowns; • The next 25% – two FE Crowns; and • The bottom 25% – one FE Crown.

said the Australian shares portfolio underperformed its benchmark, partly due to small caps underperforming the broader market. Both IOOF funds only lost one Crown down to four. All of Pengana’s five Crown downgrades were for funds within the global equity and global small and mid-cap sectors. The funds in question were Pengana International Ethical Opportunity (down to two Crowns), Pengana High Conviction Equities (down to one Crown), and Pengana Global Small Companies (down to four Crowns). While Pengana declined to comment, its factsheet for its International Ethical Opportunity fund cited cash as the single largest performance headwind during Q2. It also noted that its underweight exposure to the IT sector was a relative performance headwind. The fund’s cash allocation was at 11% and the high conviction equities fund was at 17.2% compared to the global equity sector average allocation of 4%. Over the three years to 30 June, 2019, the International Equity Opportunity fund returned 40.6%, compared to the sector average of 42.5%. The High Conviction Equities fund returned just 20.3%. The high conviction fund’s volatility was also almost double the sector’s (9.58) at 18.06. In terms of maximum drawdown, it captured 20.2% of the downside compared to 13% for the sector average.

EQUITY NEWCOMERS MISS OUT ON TOP CROWNS ONLY ONE newly Crown-rated fund was an equity fund, FE/Fundinfo Crown Fund Ratings data has shown. Thirty funds entered the Crown ratings for the first time after reaching a three-year performance track record. Five of these funds received the top rating (five Crowns), seven received four Crowns, three received three Crowns, 11 received two crowns, and four received one Crown.

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The funds that received five Crowns were Pendal Active High Growth, Challenger Guaranteed Income 4.00 cents p.a. 30/9/22, Manning Private Debt, AMP Capital’s MyNorth Index Growth, and Findex Advice Services’ Custom Portfolio Solutions – Global Growth. The Findex fund was the only equity fund to receive five crowns, three received four Crowns, one received three Crowns, six

received two Crowns, and three received one Crown. Equities this year have been marred by fears surrounding the trade war and general macro political uncertainty, and the data suggests this might have impacted equity fund performance. According to the BlackRock Investment Institute’s latest investment outlook, government bonds were viewed as key

stabilisers against the rising macro uncertainty. Two of the funds that received five Crowns were fixed interest funds, and the remaining two mixed asset funds. Three of the funds that only received one Crown were equity funds, and the other that received one Crown was QIC GFI Inflation Plus – a fixed interest fund. By Jassmyn Goh

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FE Crown Ratings

FUND NAME

CROWN RATING

Advance Global Property Allan Gray Australia Equity AllianceBernstein Global Equities Alphinity Global Equity Alphinity Sustainable Share AMP Capital Global Growth Opportunities AMP Capital Specialist Property and Infrastructure AMP Experts' Choice Growth Apostle Dundas Global Equity Ardea Real Outcome AU Wingate Spectrum Australian Ethical Emerging Companies Bell Global Emerging Companies Bentham Global Income BlackRock Global Listed Infrastructure BlackRock Scientific Diversified Growth BlackRock Scientific Diversified Stable Wholesale BlackRock Scientific Wholesale Diversified Growth BlackRock Tactical Growth BT Enhanced Cash BT Wholesale Multi-manager High Growth CC Marsico Global Celeste Australian Small Companies CFS Colonial First State Wholesale Australian Small Companies CFS Generation WS Global Share CFS Wholesale Global Credit Charter Hall Maxim Property Securities ClearView CFML Colonial Infrastructure Crescent Wealth Property Cromwell Phoenix Opportunities Custom Portfolio Solutions - Global Growth DDH Preferred Income Dimensional Australian Value Trust DirectMoney Personal Loan Elstree Enhanced Income Fidelity Future Leaders Fidelity Global Emerging Markets Fiducian Growth Firstmac High Livez Growth Index High Growth Index Hyperion Global Growth Companies Intermede Global Equities

5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5

Invesco Senior Secured Loans IOOF Balanced Investor Trust IOOF MultiMix Balanced Growth IOOF MultiMix Growth IPAC Diversified Investment Strategy 4 IPAC Life Choices Active 100 IPAC Life Choices Index 85 IPAC MMP High Growth IPAC North Guardian Volatility Growth IPAC North Multi Manager Active Growth IPAC North Professional High Growth IPAC Select Index Balanced IPAC Select Index Growth IPAC Select Index High Growth IPAC SIS - International Share Strategy No 2 IPAC Summit Select Index Growth Janus Henderson Diversified Credit Janus Henderson Global Research Growth JPMorgan Emerging Markets Opportunities Legg Mason Martin Currie Global Long-Term Unconstrained Legg Mason Martin Currie Tactical Allocation Legg Mason Western Asset Cash Plus Macquarie Active Plus Equities Macquarie Australian Equities Macquarie Australian Shares Macquarie Australian Small Companies Macquarie Balanced Growth Macquarie Life Growth Macquarie Property Securities Macquarie Small Companies Macquarie True Index Global Infrastructure Securities Macquarie Wholesale Australian Equities Magellan Global Magellan High Conviction Magellan Infrastructure Unhedged Manning Private Debt Mason Stevens Credit Mercer Global Unlisted Infrastructure Mercer High Growth Mercer Income Plus MLC Wholesale Horizon 6 Share Portfolio Montgomery Global Mutual MIF MyNorth Index Growth

5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5

Nanuk New World OC Micro-Cap Ophir Opportunities Partners Group Global Multi Asset Pendal Active High Growth Pendal Enhanced Cash Pendal MicroCap Opportunities Pendal MidCap Perennial Value Smaller Companies Trust Perpetual Credit Income Pimco Dynamic Bond Pimco Income Platinum European Platinum Japan PM Capital Global Companies Principal Global Property Securities Realindex Aus Small Co Realindex Emerging Markets Resolution Capita Global Property Securities Hedged II Resolution Capita Global Property Securities Unhedged II Resolution Global Property Securities Russell Australian Cash Enhanced Schroder Australian Equity Schroder Balanced SGH Emerging Companies SGH Tiger Smallco Investment Specialist Property Spectrum Strategic Income Spheria Opportunities SPW Global Income State Street Passive Balanced Trust Strategic Cash Plus T. Rowe Price Global Equity U Ethical Enhanced Cash Trust U Ethical Growth Portfolio UBS Cash-Plus Fund UBS Income Solution Fund Vanguard Wholesale High Growth Index Walter Scott Global Equity Zurich Investments Concentrated Global Growth Zurich Investments Global Growth Share Zurich Investments Global Growth Share Scheme Zurich Investments Unhedged Global Growth Share Zurich Investments Unhedged Global Growth Share Scheme

5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5

Aberdeen Standard Australian Equities Advance Asian Equity Advance Property Securities Multi Blend Allan Gray Australia Stable Alpha Property Securities AMP Capital Ethical Leaders Balanced AMP Capital High Growth AMP Capital Listed Property Trusts AMP Capital Managed Treasury AMP Capital Property Securities AMP Capital Specialist Australian Small Companies AMP Capital Specialist Core International Share AMP Capital Wholesale Global Equity Growth AMP Experts' Choice Balanced AMP Experts' Choice Small Companies AMP Generations Index Growth Antipodes Global Long Only ANZ Cash Plus Ardea Australian Inflation Linked Bond Ardea Premier Australian Inflation Linked Bond Arrowstreet Global Equity AtlasTrend Online Shopping Spree AU Pro D High Growth Ausbil Balanced Ausbil MicroCap AXA Wholesale Australian Equity Value Balanced Index Barrow Hanley Global Equity Trust Bell Global Equities Bentham High Yield Bentham Syndicated Loan BlackRock Balanced BlackRock Enhanced Australian Bond BlackRock Fission Indexed International Equity BlackRock International Alpha Tilts BlackRock Scientific Australian Equity

4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4

BT 1970s Lifestage BT 1980s Lifestage BT 1990s Lifestage BT 2000s Lifestage BT Wholesale Multi-manager Balanced BT Wholesale Multi-manager Growth BT Wholesale Partner Australian Shares Growth 1 Capital Group Global Equity (AU) Carnegie Worldwide Equity Trust CFS FirstChoice Acadian Wholesale Australian Equity CFS FirstChoice Wholesale Geared Growth Plus CFS Mezzanine FirstChoice Multi-Index Moderate CFS Wholesale Premium Cash Enhanced CI Asian Tiger ClearView CFML RARE Emerging Markets Cooper Investors Global Equities Unhedged DDH Selector Australian Equities Dimensional Australian Core Equity Trust Dimensional Australian Large Company Trust Dimensional Global Sustainability Trust Dimensional World Allocation 70/30 Trust Dimensional World Equity Trust Evans And Partners International Fairview Equity Partners Emerging Companies Fidelity Asia Fidelity China Fidelity Global Demographics Fidelity Global Equities Fidelity India Fiducian Balanced Foundation Assertive Franklin Global Growth Future Directions Growth Future Directions High Growth Ganes Focused Value GCI Diversified Income

4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4

Greencape Broadcap Greencape High Conviction Invesco Wholesale Australian Share Invesco Wholesale Senior Secured Income IOOF Cash Management Trust D IOOF MultiMix Cash Enhanced IOOF MultiMix Diversified Fixed Interest IOOF MultiMix Moderate IOOF MultiSeries 70 IOOF Profile 45 IOOF Profile 75 IOOF Profile 85 IPAC Diversified Investment Strategy 2 IPAC Diversified Investment Strategy 3 IPAC Life Choices Active 70 IPAC Life Choices Active 85 IPAC Life Choices Index 50 IPAC MMP Balance IPAC MMP Growth IPAC North Guardian Volatility Balanced IPAC North Guardian Volatility Moderately Defensive IPAC North Multi Manager Active Balanced IPAC North Professional Balanced IPAC North Professional Growth IPAC Pathways 95 IPAC Select Index Moderately Defensive IPAC Summit Select Active Growth IPAC Summit Select Index Balance Ironbark Royal London Concentrated Global Share Janus Henderson Cash Enhanced Institutional Janus Henderson Global Fixed Interest Total Return Legg Mason Martin Currie Emerging Markets Legg Mason Martin Currie Select Opportunities Legg Mason Western Asset Australian Bond Loftus Peak Global Disruption Loomis Sayles Credit Opportunities

4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4

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20 | Money Management September 12, 2019

FE Crown Ratings MacKay Shields Unconstrained Bond Macquarie Australian Enhanced Plus Equities Macquarie Core Australian Fixed Interest Macquarie Core Plus Australian Fixed Interest Macquarie Global Infrastructure Trust II A Macquarie Global Infrastructure Trust II B Macquarie International Equities Macquarie International Infrastructure Securities Unhedged Macquarie Wholesale Property Securities Maple-Brown Abbott Asia Pacific Trust Mercer Australian Shares for Tax Exempt Investors Mercer Global Listed Property Mercer Global Sovereign Bond Mercer Growth Mercer Moderate Growth MFS Concentrated Global Equity Trust Wholesale MFS Emerging Markets Equity Trust MFS Global Equity Trust Milliman Mgd Risk M-Index High Gro MLC Wholesale Global Property MLC Wholesale Global Share MLC Wholesale Horizon 5 Growth Portfolio MLC Wholesale Horizon 7 Accelerated Growth Portfolio Morningstar Australian Bonds MyNorth Index Balanced MyNorth Index High Growth Nikko AM Growth

4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4

OnePath ANZ Private International Fixed Interest OnePath Wholesale Global Emerging Markets Share Onepath Wholesale High Growth Trust Pendal American Share Pendal Enhanced Credit Pendal Focus Australian Share Pendal Global Emerging Markets Opportunities-WS Pendal Property Securities Pengana Global Small Companies Perpetual Global Share Perpetual Private Real Estate Perpetual Select Investments Growth Perpetual Wholesale International Share Perpetual Wholesale Split Growth Pimco Capital Securities PIMCO Global Bond PIMCO Global RealReturn Wholesale Platinum Unhedged PM Capital Long Term Investment Premium Asia Income QIC Australian Fixed Interest Quay Global Real Estate RARE Emerging Markets RARE Infrastructure Value Unhedged Realindex Australian Share Resolution Core Plus Property Securities Russell International Bond

4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4

Schroder Asia Pacific Schroder Global Emerging Markets Schroder Wholesale Australian Equity Smallco Broadcap Smarter Money Smarter Money Higher Income Solaris Australian Equity (Total Return) Solaris Core Australian Equity Solaris High Alpha Australian Equity SSgA SPDR MSCI World Quality Mix Standish Global Bond State Street Global Index Plus Trust State Street International Equities Index Trust Strategic Australian Equity Suncorp Horizon Managed Investment Policy Growth THB US Micro Cap The Trust Company Diversified Property U Ethical Australian Equities Portfolio U Ethical Enhanced Cash Portfolio UBS Property Securities Fund VanEck MSCI World ex Australia Quality ETF Vanguard Cash Plus Index Vanguard Wholesale Growth Index WaveStone Australian Share Yarra Global Small Companies Zurich Investments Managed Growth Zurich Investments Unhedged International Share Pool Zurich Money Maker Series Managed

4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4

4D Global Infrastructure Aberdeen Standard Active Index Income Aberdeen Standard Australian Fixed Income Aberdeen Standard Ex-20 Australian Equities Advance Balanced Multi Blend Advance Cash Management Trust Advance Growth Multi Blend Advance High Growth Multi Blend Advance International Shares Core Advance International Shares Multi Blend AllianceBernstein Dynamic Global Fixed Income AllianceBernstein Managed Volatility Equities Alpha Australian Small Companies Alphinity Australian Equity Alphinity Australian Share Alphinity Concentrated Australian Share AMP Capital Balanced Growth AMP Capital Blue Chip AMP Capital Enhanced Index International Share AMP Capital Enhanced Index Share AMP Capital Equity AMP Capital Ethical Leaders International Share AMP Capital Global Property Securities AMP Capital Small Australian Companies AMP Capital Specialist Australian Share AMP Capital Sustainable Share AMP Capital Wholesale Australian Bond AMP Experts' Choice International Shares AMP Experts' Choice Short Term Money Market AMP FLI AMP Balanced Enhanced Index AMP FLI AMP Property Securities AMP FLI Responsible Investment Leaders Growth AMP Generations Australian Equities AMP Generations Index Balanced AMP Generations International Equities Antares Australian Equities Professional Antares Elite Opportunities Professional Antares High Growth Shares AtlasTrend Big Data Big AU Pro D Balanced AU Pro D Growth AU Property Securities Income Units AU Property Securities Ordinary Units Australian Ethical Balanced AXA Generations Balanced AXA Generations Growth AXA IM Sustainable Equity AXA Managed Investment Plan International Portfolio Bennelong Australian Equities Bennelong Twenty20 Australian Equities Bentham Global Income NZD Bentham Syndicated Loan NZD BetaShares AMP Capital Global Property Securities BetaShares Managed Risk Global Share BlackRock Cash BlackRock Scientific Diversified Stable BlackRock Wholesale International Bond BT 1950s Lifestage BT 1960s Lifestage

3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3

BT Classic Investment BT Diversified Share BT Investor Choice Westpac All Australian Growth Share BT Investor Choice Westpac Australian Tax Effective Share BT Multi-manager Balanced BT Multi-manager Growth BT Multi-manager High Growth BT Personal Portfolio Service Investment Westpac Tax Effective BT Technology BT Wholesale Multi-manager Australian Share BT Wholesale Multi-manager International Share BT Wholesale Partner International Shares Core 1 CFS Colonial First State Wholesale Australian Bond CFS Colonial First State Wholesale Balanced CFS Colonial First State Wholesale Conservative CFS Colonial First State Wholesale Diversified CFS Colonial First State Wholesale Equity Income CFS Colonial First State Wholesale Geared Global Property Securities CFS Colonial First State Wholesale Global Credit Income CFS Colonial First State Wholesale Global Property Securities CFS Colonial First State Wholesale High Growth CFS Colonial First State Wholesale Imputation CFS Colonial First State Wholesale Strategic Cash CFS FirstChoice Acadian Wholesale Geared Global Equity CFS FirstChoice Wholesale Asian Share CFS FirstChoice Wholesale Australian Share CFS FirstChoice Wholesale Australian Small Companies CFS FirstChoice Wholesale Geared Global Share CFS FirstChoice Wholesale Global Infrastructure Securities CFS FirstChoice Wholesale Global Property Securities CFS FirstChoice Wholesale Growth CFS FirstChoice Wholesale Multi-Index Balanced CFS Realindex Enhanced Equal Weighted Global Share CFS Stewart Investors Wholesale Global Emerging Markets Leaders CFS Wholesale Global Emerging Markets Sustainability CFS Wholesale Global Health & Biotechnology ChinaAMC China Opportunities ClearView CFML Fixed Interest ClearView CFML Listed Property Colchester Global Government Bond DDH Australian Shares DDH Cash IDPS DDH Fixed Interest Dimensional Australian Core Imputation Trust Dimensional Australian Small Company Trust Dimensional Emerging Markets Trust Dimensional Five Year Diversified Fixed Interest Trust Dimensional Global Core Equity Trust Dimensional Global Large Company Trust Dimensional Global Real Estate Trust Dimensional Global Small Company Trust Dimensional Short Term Fixed Interest Trust Dimensional World Allocation 50/50 Trust Eley Griffiths Small Companies Fidelity Australian Opportunities Fiducian Australian Shares Fiducian Diversified Social Aspirations Fiducian Global Smaller Companies and Emerging Markets

3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3

Fiducian International Shares Fiducian Property Securities Fiducian Ultra Growth FirstChoice Wholesale Balanced FirstChoice Wholesale Global Share FirstChoice Wholesale High Growth Flinders Emerging Companies Foundation Balanced Franklin Templeton Australian Equity Future Directions Balanced Future Directions International Bond Global Corporate Bond Trust Wholesale Grant Samuel Tribeca Australian Smaller Companies High Growth Wholesale Hyperion Small Growth Companies (apps closed) Insync Global Capital Aware Invesco Wholesale Diversified Growth Invesco Wholesale Global Property Securities Hedged IOOF Cash Management Trust IOOF MultiMix Australian Shares IOOF MultiMix Conservative IOOF MultiMix International Shares IOOF Profile 55 IOOF Profile 65 IOOF Profile 95 IOOF Profile Australian Shares IOOF Profile International Shares IPAC Classic Portfolio 2 IPAC Classic Portfolio 3 IPAC Life Choices Active 50 IPAC Life Choices Index 70 IPAC MMP Australian Share Sector IPAC MMP International Share Sector IPAC MMP Secure IPAC MMP Secure Growth IPAC North Multi Manager Active Defensive IPAC North Multi Manager Active Moderately Defensive IPAC North Professional Moderately Conservative IPAC Pathways 70 IPAC Pathways 85 IPAC Pathways Australian Shares IPAC Pathways International Shares Unhedged IPAC SIS - Australian Share Strategy No 1 IPAC SIS - International Fixed Interest Strategy No 2 IPAC SIS - International Share Strategy No 1 IPAC SIS Inflation Plus 4 IPAC SIS Inflation Plus 6 IPAC SIS Inflation Plus 7 IPAC Summit Select Active Balanced IPAC Summit Select Active Defensive IPAC Summit Select Active Moderately Defensive IPAC Summit Select Index Defensive IPAC Summit Select Index Moderately Defensive Ironbark Copper Rock Global All Cap Share Ironbark Global Ex Australia Property Ironbark Global Property Securities Ironbark Paladin Property Securities iShares Australian Listed Property Index Jamieson Coote Bonds Active

3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3

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3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3

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September 12, 2019 Money Management | 21

FE Crown Ratings Janus Henderson Australian Fixed Interest Institutional Janus Henderson Global Equity JPMorgan Global Research Enhanced Index Equity L1 Capital Australian Equities Lazard Global Listed Infrastructure Legg Mason Martin Currie Core Equity Legg Mason Martin Currie Diversified Growth Legg Mason QS Investors Global Equity Macquarie Australian Diversified Income Macquarie Australian Fixed Interest Macquarie Australian Pure Indexed Equities Macquarie Diversified Treasury AA Macquarie Dynamic Bond Macquarie Enhanced Australian Fixed Interest Macquarie Enhanced Property Securities Macquarie Global Income Opportunities Macquarie Global Multi-Sector Fixed Income Macquarie Hedged Index Global Infrastructure Securities Macquarie Income Opportunities Macquarie Inflation Linked Bond Macquarie Multi-Asset Opportunities Macquarie Term Cash Macquarie Treasury Macquarie True Index Emerging Markets Macquarie True Index Global Real Estate Securities Macquarie True Index Sovereign Bond Macquarie Yield Enhanced Australian Shares Magellan Infrastructure Maple-Brown Abbott Asian Investment Trust Maple-Brown Abbott Australian Equity Trust Maple-Brown Abbott Diversified Investment Trust Mercer Australian Inflation Plus Mercer Australian Shares Mercer Australian Shares Plus Mercer Australian Small Companies Mercer Cash Term Deposit Units Mercer Conservative Growth Mercer Defensive Mercer Emerging Markets Shares Mercer Global Small Companies Shares Mercer International Shares Mercer Socially Responsible Australian Shares MFS Blended Research Global Equity Trust Milliman Managed Risk Global Shr Milliman Mgd Risk Australian Shr MLC Navigator Access Pre Select High Growth (Access Class) MLC Pre Select Growth MLC Pre Select High Growth

3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3

MLC Wholesale Australian Share MLC Wholesale Australian Share Index MLC Wholesale Diversified Debt MLC Wholesale Horizon 4 Balanced Portfolio Morningstar Global Inflation Linked Securities Hedged Morningstar High Growth Mutual Cash Term Deposits and Bank Bills MyNorth Index Moderately Defensive Netwealth Active 90/10 High Growth OC Dynamic Equity OC Premium Small Companies OnePath ANZ Fixed Income OnePath OA Inv Pfolio Optimix Enhanced Cash Trust Onepath Wholesale Balanced Trust Onepath Wholesale Diversified Fixed Interest Trust Onepath Wholesale Managed Growth Trust Optimix Enhanced Cash Trust Optimix Wholesale Australian Fixed Interest Trust Optimix Wholesale Balanced Trust Optimix Wholesale Enhanced Cash Trust B Optimix Wholesale Global Share Trust Optimix Wholesale Global Smaller Companies Share Trust Optimix Wholesale Growth Trust Optimix Wholesale High Growth Trust Optimix Wholesale Moderate Trust Packer & Co Investigator Trust PanAgora Dynamic Global Equity (Ex Tobacco) Pendal Active Balanced Pendal Active Growth Pendal Australian Equity Pendal Australian Share Pendal Ethical Share Pendal European Share Pendal Global Property Securities Pendal Government Bond Pendal Imputation Pendal Property Investment Pendal Stable Cash Plus Pendal Sustainable Australian Share Pengana Emerging Companies Perpetual Balanced Growth No 2 Perpetual Private International Share Perpetual Select Investments Balanced Perpetual Wholesale Balanced Growth Perpetual Wholesale Diversified Growth PIMCO Australian Bond PIMCO Diversified Fixed Interest Platinum International Health Care

3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3

Plato Australian Shares Core Premium Asia Principal Global Credit Opportunities RARE Infrastructure Income Realindex Global Share Realindex Global Share (Screened) Redpoint Global Infrastructure Resolution Capita Core Plus Property Securities II Robeco Emerging Conservative Equity Russell Australian Bond Russell Australian Bond Income Russell Australian Opportunities Russell Australian Shares Russell Balanced Russell Emerging Markets Russell Global Opportunities Russell Growth Russell High Growth Russell International Property Securities Russell International Shares Russell Investments Portfolio Series - Growth Schroder Equity Opportunities Schroder Fixed Income Schroder Global Core SGH LaSalle Global Listed Property Securities Specialist Global Shares Spheria Australian Smaller Companies State Street Australian Equities Index Trust Suncorp Horizon Managed Investment Policy Managed Suncorp RSA Money Accumulator SAMA Manage Accumulation Shares Suncorp Vested Investment Plan VIP Growth T. Rowe Price Asia Ex Japan UBS Australian Bond Fund UBS Australian Small Companies Fund UBS Global Credit Fund UBS International Bond Fund UBS International Share Fund Vanguard Managed Payout Vanguard Wholesale Balanced Index Westpac Simple Super Managed Investment Westpac Variable Income Plan Growth Plus Westpac Variable Income Plan Managed Growth Yarra Enhanced Income Zurich Investments Equity Income Pool Zurich Investments Global Thematic Share Zurich Investments Unhedged International Share

Aberdeen Standard Actively Hedged International Equities Aberdeen Standard Asian Opportunities Aberdeen Standard Australian Small Companies Aberdeen Standard Diversified Fixed Income Aberdeen Standard Inflation Linked Bond Aberdeen Standard International Equity Aberdeen Standard Multi-Asset Real Return Aberdeen Standard Select Investment Actively Hedged International Equities Acadian Sus Wholesale Glb Equity Advance Australian Fixed Interest Multi Blend Advance Australian Shares ARS Advance Australian Shares Multi Blend Advance Moderate Multi Blend Affluence LIC Alpha Global Opportunities Alpha Infrastructure Altrinsic Global Equities Trust AMP Capital Conservative AMP Capital Corporate Bond AMP Capital Ethical Leaders Australian Share AMP Capital Global Infrastructure Securities Hedged AMP Capital Global Infrastructure Securities Unhedged AMP Capital Income Generator AMP Capital International Bond AMP Capital Premium Growth AMP Capital Specialist Diversified Fixed Income AMP Capital Wholesale Cash Management Trust AMP Dynamic Balanced AMP Experts' Choice Conservative AMP Experts' Choice Diversified Interest Income AMP Flex Lifetime Investments S2 Resolution Capital Core Plus Property Securities AMP Generations Cash Management AMP Generations Index Moderately Defensive AMS Balanced AMS Moderately Conservative Antares Income

2 2 2 2 2 2 2

ANZ Fixed Interest Trust APN Asian REIT APN Property For Income 2 Armytage Australian Equity Income AtlasTrend Splurging Baby Boomers AU A-REIT AU Balanced Growth Portfolio AU Property Securities Growth Units Ausbil Australian Active Equity Ausbil Australian Emerging Leaders Australian Ethical Advocacy Australian Ethical Diversified Shares Australian Ethical Fixed Interest Australian Ethical Income Australian Ethical International Shares AXA Generations High Growth AXA Generations Moderately Defensive AXA Managed Investment Plan Australian Shares Portfolio Balanced Balanced Wholesale Barwon Global Listed Private Equity Bendigo Diversified Fixed Interest Bendigo Global Share Bennelong Concentrated Australian Equities Bennelong ex-20 Australian Equities BetaShares Managed Risk Australian Share BlackRock Fixed Income Global Opportunities Aust BMO LGM Global Emerging Markets BT 1940s Lifestage BT Classic Investment BT Split Growth BT International BT Investor Choice Westpac All Australian Tax Effective Share BT Investor Choice Westpac Australian Bond BT Investor Choice Westpac Balanced Growth BT Investor Choice Westpac Dynamic Growth BT Personal Portfolio Service Investment Westpac Australian Property

2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2

BT Personal Portfolio Service Investment Westpac Diversified Growth BT RREEF Global Property Securities BT Smaller Companies BT Wholesale Multi-manager Conservative BT Wholesale Multi-manager Fixed Interest Candriam Sustainable Global Equity Capital Global Small Cap CFS Acadian Australian Equity High Yield-Class A CFS Acadian Global Managed Volatility Equity-Class A CFS Asian Growth CFS Colonial First State Wholesale Concentrated Australian Share CFS Colonial First State Wholesale Diversified Fixed Interest CFS Colonial First State Wholesale Global Listed Infrastructure Securities CFS Colonial First State Wholesale Property Securities CFS FC Baillie Gifford W LT Global Growth CFS FC WS Inv FirstChoice Wholesale Diversified CFS FirstChoice Wholesale Defensive CFS FirstChoice Wholesale Emerging Markets CFS FirstChoice Wholesale Fixed Interest CFS FirstChoice Wholesale Investments FirstRate Wholesale Term Deposit - 10 year CFS FirstChoice Wholesale Investments FirstRate Wholesale Term Deposit - 15 year CFS FirstChoice Wholesale Investments FirstRate Wholesale Term Deposit - 2 year CFS FirstChoice Wholesale Investments FirstRate Wholesale Term Deposit - 3 year CFS FirstChoice Wholesale Investments FirstRate Wholesale Term Deposit - 5 year CFS FirstChoice Wholesale Investments FirstRate Wholesale Term Deposit - 7 year CFS FirstChoice Wholesale Lower Volatility Australian Share CFS FirstChoice Wholesale Moderate CFS FirstChoice Wholesale Multi-Index Conservative CFS FirstChoice Wholesale Multi-Index Growth CFS FirstChoice Wholesale Property Securities

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2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2

3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3

2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2

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FE Crown Ratings CFS MIF Future Leaders CFS Stewart Investors Global Emerging Markets CFS T. Rowe Price Wholesale Australian Equity CFS Wholesale Australian Share CFS Wholesale Global Corporate Bond CFS Wholesale Institutional Cash CFS Wholesale Premium Cash ClearView CFML Cash ClearView Managed Investments Australian Shares Growth Clime Australian Equities Commonwealth Easy Saver Plus - Balanced Commonwealth Easy Saver Plus - Managed Growth (LM units) Commonwealth Easy Saver Plus - Managed Growth (PM units) Commonwealth Lifelink Plus (Series 2 & 3) & Lifelink (LL3) Managed Growth Commonwealth Lifewise Series 4 & 5 Managed Growth Conservative Wholesale Crescent Wealth Cash Cromwell Phoenix Property Securities DDH Aggressive Growth DDH Balanced Growth Defensive Index Defensive Wholesale Dimensional Global Value Trust Dimensional Two Year Diversified Fixed Interest Trust Diversified Fixed Income DNR Australian Equities High Conviction Ellerston Australian Small Companies Ellerston Global Mid Small Unhedged EQT Core International Equity EQT Flagship Fidelity Australian Equities Fiducian Australian Smaller Company Shares Fiducian Capital Safe Fiducian Capital Stable Fiducian India Forager International Shares Freehold Australian Property Future Directions Australian Bond Future Directions Conservative Future Directions Emerging Markets Growth Growth Wholesale IML Australian Share IML Australian Small Companies IML Future Leaders IML Small Caps Infrastructure Partners Investment Core Invesco Wholesale Australian Smaller Companies IOOF Balanced (Fee Option 1) IOOF Balanced (Fee Option 2) IOOF Income IOOF MultiMix Capital Stable IOOF Profile Diversified Fixed Interest IPAC Classic Enhanced Growth Portfolio IPAC Diversified Investment Strategy 1 IPAC Diversified Investment Strategy 5 IPAC Life Choices Alternative Balanced IPAC Life Choices Income Generator IPAC Life Choices Premium Growth IPAC North Multi Manager Active High Growth IPAC North Professional Alternative Balanced IPAC North Professional Conservative IPAC Pathways 30 IPAC Pathways Australian Property Securities IPAC Pathways Value IPAC Select Index Defensive IPAC Summit Select Active High Growth IPAC Summit Select Alternative Balanced IPAC Summit Select Income Generator IPAC Summit Select Index High Growth Ironbark Karara Australian Share

2 2 2 2 2 2 2 2 2 2 2 2 2

8IP Australian Small Companies Aberdeen Standard Emerging Opportunities Aberdeen Standard Multi Asset Income Adelaide Cash Management Trust Advance Defensive Multi Blend Advance Defensive Yield Multi-Blend Advance International Fixed Interest Multi Blend Affluence Investment Affluence Small Company Alluvium Global Alpha Australian Blue Chip Alpha Diversified Income Alpha Enhanced Yield

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Ironbark Karara Australian Small Companies Janus Henderson Cash Janus Henderson Tactical Income JPMorgan Global Bond Lazard Australian Equity Lazard Global Equity Franchise Lazard Global Small Caps Lazard Select Australian Equity Legg Mason Martin Currie Diversified Income Lincoln Australian Growth Macquarie Capital Stable Macquarie Hedged Index Global Real Estate Securities Macquarie International Infrastructure Securities Macquarie Life Capital Stable Macquarie Life Global Equities Macquarie Polaris Global Equity Macquarie True Index Cash Maple-Brown Abbott Australia Plus Asia Trust Maple-Brown Abbott Australian Share Maple-Brown Abbott Responsible Investment Maple-Brown Abbott Sharemarket MCG K2 Advisors Endowment Strategy Mercer Australian Sovereign Bond Mercer Cash-Cash Units Mercer Diversified Shares Mercer Global Listed Infrastructure Mercer Passive Australian Listed Property Mercer Passive Global Listed Property Microequities Global Value Microcap MLC National Australia Investment Trust Monthly Income MLC National Australia Investment Trust Monthly Income NEF MLC Navigator Access Pre Select Growth (Access Class) MLC Pre Select Balanced MLC Wholesale Horizon 1 Bond Portfolio MLC Wholesale Horizon 3 Conservative Growth Portfolio MLC Wholesale IncomeBuilderTM MLC Wholesale Property Securities Morningstar Balanced Morningstar Cash Morningstar Global Property Securities (Hedged) Morningstar Growth Morningstar Growth Real Return Morningstar High Growth Real Return Morningstar International Bonds (Hedged) Morningstar International Shares Unhedged Mutual 50 Leaders Australian Shares MyNorth Dynamic Balanced MyNorth Index Defensive Netwealth Active 50/50 Balanced Nikko AM Australian Share Income Nikko AM Balanced Nikko AM Conservative Northcape Capital Global Emerging Markets OC Cash Management OnePath ANZ Enhanced Yield OnePath ANZ Private Global Equities Trust OnePath OA Inv Pfolio OptiMix Global Emerging Markets Share Trust EF Onepath Wholesale EmergCompanies Trust Onepath Wholesale Sustainable Investments Australian Share Trust Optimix Wholesale Australian Share Trust Optimix Wholesale Conservative Trust Pan-Tribal Global Equity Paradice Global Small Cap Pendal Active Moderate Pendal Balanced Returns Pendal Core Global Share Pendal International Share Trust Pendal Japanese Share Pendal Managed Cash Pendal Monthly Income Plus

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Altius Bond Altius Sustainable Bond AMP AMP FLI Monthly Income Trust No 2 AMP Capital Dynamic Markets AMP Capital Equity Income Generator AMP Capital Multi-Asset AMP Capital Wholesale Global Equity Value AMP Experts' Choice Australian Shares AMP FLI AMP Conservative Enhanced Index AMP FLI AMP Monthly Income Trust No 1 AMP FLI Responsible Investment Leaders Conservative AMP Generations Diversified Credit AMP Generations Platinum International Equity

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Pendal Smaller Companies Pengana International Pengana International Ethical Opportunity Perennial Value Australian Shares Trust Perennial Value Shares Wholesale Trust Perpetual Charitable and Community Investor Perpetual Charitable Endowment Perpetual Exact Market Cash Perpetual Private Australian Share Perpetual Select Investments Conservative Perpetual Select Investments Diversified Perpetual Select Investments Geared High Growth Perpetual Wholesale Concentrated Equity Perpetual Wholesale Conservative Growth Perpetual Wholesale Smaller Companies Perpetual Wholesale Smaller Companies 2 PIMCO Global Credit Platinum Asia Platinum Global Platinum International Platinum International Brands Plato Australian Shares Income Plato Global Shares Income Platypus Australian Equities Trust Platypus Systematic Growth Premium China Presima Global Property Securities Concentrated Prime Value Imputation QIC Bond Plus Realm High Income Russell Australian Cash Russell Conservative Russell Diversified 50 Russell Global Listed Infrastructure Russell Investments Portfolio Series - Balanced Schroder Global Blend Schroder Global Quality Schroder Real Return CPI Plus 3.5% Schroder Real Return CPI Plus 5% SGH Australia Plus SGH ICE Spheria Australian Microcap Spire Copper Rock Capital Global Smaller Companies State Street Global Equity Strategic Fixed Interest Strategic Global Property Strategic International Equity Suncorp Personal Investment Plan Capital Stable Suncorp Vested Investment Plan VIP Fixed Interest T. Rowe Price Australian Equity The Supervised The Trust Company Bond Touchstone Index Unaware U Ethical Australian Equities Trust UBS Balanced Investment Fund UBS Clarion Global Property Securities Fund UBS Diversified Fixed Income Fund UBS Microcap Fund UBS Tactical Beta Fund - Balanced UBS Tactical Beta Fund - Growth Value Growth Vanguard Cash Reserve Vanguard Global Minimum Volatility Vanguard Global Quantitative Equity Vanguard Wholesale Conservative Index Westpac Australian Property Securities Zurich Investment Plan Balanced Zurich Investment Plan Managed Share Zurich Investments Australian Property Securities Zurich Investments Emerging Markets Equity Scheme Zurich Investments Small Companies Scheme Zurich Money Maker Series Property

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Antares Dividend Builder Professional Antares Listed Property ANZ Equity Imputation Trust ANZ Equity Trust No 1 ANZ Investment Bond Capital Guaranteed ANZ OA Inv Pfolio Onepath Conservative ANZ OA Inv Pfolio OnePath Global Property Securities ANZ Wholesale Select Leaders Trust APN AREIT APN Property For Income APSEC Atlantic Pacific Australian Equity AQR Global Risk Premium Trust Armytage Strategic Opportunities

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FE Crown Ratings Atrium Evolution Series - Diversified AEF 5 Atrium Evolution Series - Diversified AEF 7 Atrium Evolution Series - Diversified AEF 9 Australian Equity Income (CNA) Australian Ethical Australian Shares Australian Share AXA Generations Alternative Balanced AXA Generations Defensive AXA Guaranteed Investment Bond AXA Managed Investment Plan Fixed Interest Portfolio AXA Managed Investment Plan Guaranteed Portfolio AXA Managed Investment Plan Managed Portfolio AXA Managed Investment Plan MultiManager Secure BetaShares Australian Dividend Harvester BetaShares S&P 500 Yield Maximiser BlackRock Australian Share BlackRock Australian Share Plus BlackRock Concentrated Industrial Share BlackRock Enhanced Cash BlackRock Equity BlackRock Global Allocation BlackRock Global Multi Asset Income BT Cash Management Trust BT Classic Investment BT Balanced Returns BT Classic Investment BT Tax Effective Income BT Income Plus BT Investor Choice Westpac Australian Property Securities BT Investor Choice Westpac Conservative Growth BT Investor Choice Westpac Moderate Growth BT Multi-manager Fixed Interest BT Personal Portfolio Service Investment Westpac Moderate Growth BT Westpac Cash Management Trust Capital World Dividend Growers (AU) CFS Cash Management Trust CFS Colonial First State Australian Share Growth CFS Colonial First State Multi-Asset Real Return Class A CFS Colonial First State Wholesale Target Return Income CFS FirstChoice WS Investments FirstRate Wholesale Saver CFS MIF Developing Companies CFS Premier Cash Management Trust CFS Stewart Investors Wholesale Worldwide Leaders CFS Stewart Investors Wholesale Worldwide Sustainability CFS Wholesale Global Bond CFS Wholesale Global Technology & Communications CI Australian Equities CI Brunswick ClearView Managed Investments Diversified Balanced ClearView Managed Investments Diversified Growth ClearView Managed Investments Diversified Stable ClearView Rollover Bond Managed Clime Australian Value Commonwealth Easy Saver Plus - Capital Guaranteed Commonwealth Easy Saver Plus - Capital Secure Commonwealth Easy Saver Plus - Guaranteed Cash Commonwealth Lifewise Series 4 & 5 Capital Guaranteed Commonwealth Lifewise Series 4 & 5 Capital Secure Conservative Crescent Wealth Australian Equity Crescent Wealth International Equities DDH Conservative Growth Dimensional Global Bond Trust DMG Diversified Portfolio Ellerston Australian Share Ellerston Overlay Australian share Epoch Global Equity Shareholder Yield (Unhedged) EQT Australian Equity Income EQT Cash Management EQT Growth EQT Wholesale Flagship ETFS S&P 500 High Yield Low Volatility ETF Fidante Credit Suisse Global Private Equity Fiducian Technology FirstChoice Wholesale Conservative Forager Australian Shares Foundation Conservative Franklin Global Aggregate Bond Franklin Templeton Multisector Bond Freehold A-REITs & Listed Infrastructure GAM FCM ILS Yield Gleneagle Income Plus Hyperion Australian Growth Companies IFP Global Franchise IML Concentrated Australian Share IML Equity Income IML Industrial Share IOOF Capital Secure Trust IOOF Growth Shares IOOF MultiMix Wholesale Australian Property Trust Ordinary IOOF Property Income Plus IOOF Value Shares

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IPAC AMP Capital Income Generator IPAC Classic Portfolio 1 IPAC Classic Value Portfolio IPAC MMP International Share Hedged Sector IPAC Select Income Generator IPAC SIS Inflation Plus 2 Ironbark Copper Rock Emerging Markets Opportunities Janus Henderson Global Equity Income Janus Henderson INTECH Global All Country Managed Volatility ex-Australia JPMorgan Global Strategic Bond Katana Australian Equity Kinetic Emerging Companies Lazard Defensive Australian Equity Lazard Emerging Markets Lazard Emerging Markets Total Return Debt LDI Connect 20 Portfolio LDI Connect 3 Portfolio LDI Connect 7 Portfolio Legg Mason Brandywine Global Opportunistic Fixed Income Legg Mason Martin Currie Equity Income Legg Mason Martin Currie Ethical Values with Income Legg Mason Martin Currie Property Securities Legg Mason Martin Currie Real Income Legg Mason Martin Currie Small Companies Life Settlements Wholesale Lifeplan Wealth Builder Australian Share Strategy Lincoln Australian Income Macquarie Arrowstreet Emerging Markets Macquarie Asia New Stars No 1 Macquarie Walter Scott Emerging Markets Maple-Brown Abbott Global Listed Infrastructure MCP Australian Share Income Mercer Emerging Markets Debt Mercer Global Credit Merlon Australian Share Income Microequities Deep Value Microequities High Income Value Microcap MLC Investment Trust Platinum Global MLC Navigator Access Pre Select Balanced (Access Class) MLC Navigator Access Pre Select Conservative (Access Class) MLC Pre Select Conservative MLC Wholesale Horizon 2 Income Portfolio MLC Wholesale Inflation Plus Assertive Portfolio MLC Wholesale Inflation Plus Conservative Portfolio MLC Wholesale Inflation Plus Moderate Portfolio Morningstar Australian Shares Morningstar Balanced Real Return Morningstar Conservative Morningstar Moderate Morningstar Moderate Real Return Morningstar Multi Asset Real Return Morningstar Multi-Asset All Growth Morphic Global opportunities Nikko AM Australian Share Concentrated Nikko AM Australian Share Concentrated - LT Nikko AM Australian Share Wholesale Novaport Microcap Novaport Smaller Companies OA Inv Pfolio Onepath Cash Shares OA Inv Pfolio Onepath Heine Property Securities OA Inv Pfolio Onepath Tax Effective Income Omega Global Corporate Bond Omega Global Listed Infrastructure Onepath Diversified High Yield Trust Wholesale Units OnePath OA Inv Pfolio Diversified High Yield Trust OnePath OA Inv Pfolio Flexible Term Deposit Plus EF OnePath OA Inv Pfolio OnePath Global Property Securities OnePath OA IP-Altrinsic Global Equities NEF Onepath Wholesale Australian Share Trust Onepath Wholesale Blue Chip Imputation Trust Onepath Wholesale Capital Stable Trust Onepath Wholesale Property Securities Trust Optimal Japan and Asia Trust Optimix Wholesale Property Securities Trust Orbis Global Equity Australia Registered PanAgora Dynamic Global Equity Pendal Active Conservative Pendal Asian Share Pendal Dynamic Global Equity Pendal Fixed Interest Pendal Global Fixed Interest Pendal Sustainable Conservative Pengana Australian Equities Pengana Australian Equities Income Pengana High Conviction Equities Pengana International Ethical Pengana WHEB Sustainable Impact Perennial Value Shares for Income Trust Perennial Value Wealth Defender Australian Shares Trust Perpetual Australian Share

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Perpetual Cash Management Perpetual Diversified Income Perpetual Diversified Real Return Perpetual Economic Diversification Global Equity Perpetual Growth Opportunities Perpetual High Grade Treasury Perpetual Private Fixed Income Perpetual Pure Microcap Perpetual Pure Value Share Perpetual Wholesale Australian Share Perpetual Wholesale Ethical SRI Perpetual Wholesale Income Share Perpetual Wholesale Industrial Share PIMCO Australian Short-Term Bond PIMCO Emerging Markets Bond PIMCO Target Return Platinum International Technology Plato Australian Shares Low Volatility Income PM Capital Asian Companies PM Capital Australian Companies Premium Asia Property Prime Value Emerging Opportunities Prime Value Growth Prime Value Opportunities Profile Accumulation Portfolio Profile Preservation Portfolio QIC GFI Inflation Plus QIC Liquid Alternatives RARE Infrastructure Value Hedged Reitway Global Property Portfolio Russell Global Bond Russell Investments Multi-Asset Growth Strategy Plus Russell Investments Multi-Asset Growth Strategy Retail Russell Investments Multi-Asset Income Strategy Russell Investments Portfolio Series - Conservative Russell Multi-Asset Growth Strategy Sandhurst Strategic Income Sandon Capital Activist Schroder Global Active Value SG Hiscock Premier Property Opportunities SG Hiscock Property SG Hiscock Property Opportunities SG Hiscock Property Opportunities (Closed) SGH 20 SGH LaSalle Global Property Rich SGH Property Income Specialist Australian Shares Specialist Diversified Fixed Interest Specialist Dynamic Allocation State Street Australian Equity State Street Multi-Asset Builder Stonehouse Core Value Portfolio Suncorp Horizon Managed Investment Policy Cash Suncorp Vested Investment Plan VIP Australian Shares T. Rowe Price Dynamic Global Bond TAAM New Asia Talaria Global Equity Foundation Units Talaria Global Equity Wholesale Units Templeton Global Bond Plus Templeton Global Equity Templeton Global Trust The Montgomery The Trust Company Australian Share The Trust Company Imputation The Trust Company Philanthropy Third Link Growth UBS Australian Share Fund UBS Australian Small Companies SIV Fund UBS Defensive Investment Fund UBS HALO Australian Share Fund UBS IQ Morningstar Australia Dividend Yield ETF UBS IQ Morningstar Australia Quality ETF UBS Tactical Beta Fund - Conservative Westpac Simple Super Bank Deposit Westpac Variable Income Plan Cash Guaranteed Westpac Variable Income Plan Managed Stable Wisdom Australian Equities Yarra Australian Equities Yarra Australian Real Assets Securities Yarra Emerging Leaders Yarra Ex-20 Australian Equities Yarra Income Plus Yarra Investment Yarra Leaders Zurich Investment Plan Australian Property Securities Zurich Investment Plan Capital Stable Zurich Investment Plan Cash Zurich Investment Plan Fixed Interest Zurich Investment Plan Government Securities Zurich Investments Emerging Markets Equity Zurich Investments Small Companies

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The tables and data contained in the Investment Centre are intended for use by professional investors and advisers only and are not to be relied upon by any other persons.

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Emerging markets

HAS TRUMP UNDERESTIMATED CHINA? The US/China trade war may be dragging on, writes Laura Dew, but are we really facing the threat of a global currency war and will either side be a winner at the end? THE ONGOING US/CHINA trade war has been a sore subject for emerging markets investors since it began in January 2018, causing volatility and uncertainty in global stockmarkets. There are few markets which have escaped unscathed from the turmoil, both those in Asia and the US. Over the last 12 months to 30 August, the MSCI Emerging Markets index has lost 3.9% in US dollar terms while MSCI Asia Pacific has lost 4.8% and MSCI China has lost 5.1%, according to FE Analytics. In the US, the Dow Jones has remained largely flat over the last year with a rise of only 1.2% while the S&P 500 is up 1.8% over the same period. For US President Donald Trump, he is keen to reach an

agreement with China ahead of his re-election campaign in November 2020 in order to appear successful to the electorate, having built his original presidential campaign around his skills as a ‘master negotiator’ in his business dealings. For communist China, this is not a problem for the President Xi Jinping, meaning they have minimal impetus to reach a deal within a certain period of time. But, despite a December hiatus, it appears there is no resolution in sight between the two countries who are both unwilling to reach an agreement. Tariffs are currently imposed on both countries and a further 10% on $300 billion of Chinese goods was expected to be implemented on 1 September.

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Don Amstad, head of investment specialists APAC at Aberdeen Standard Investments, said: “People were very worried about the trade war last year but this year had generally been more positive. But recently that view has been called into question and much of the optimism has gone out of the market”.

CURRENCY WAR The tension has hotted up in recent weeks with the handling of the Chinese renminbi, which fell below a critical level against the US dollar in August. At the start of month, the Chinese renminbi fell to below seven against the US dollar for the first time in over a decade, having last reached that point in March 2008. The seven number is

seen as a significant marker as this level is not usually breached and the downward move could have been an early indicator of a sharper depreciation, which would have triggered a tightening of financial conditions for the US and emerging markets. This caused volatility in global stockmarkets as the ASX 200 fell by 2.4%, the US Dow Jones down 1.8% and the Hong Kong Hang Seng down 2.8%. In reaction, Trump tweeted that China was a currency manipulator and urged US Treasury Secretary Steven Mnuchin to engage with the International Monetary Fund (IMF) on the matter. The Treasury Department officially classifies a currency manipulator as a country that deliberately influences the

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Emerging markets

exchange rate between their currency and the US dollar to gain unfair competitive advantage in international trade. A weaker renminbi would make Chinese exports more competitive or cheaper to buy with international currencies. No country has officially been named as currency manipulator since 1994. Shane Oliver, chief economist at AMP Capital, said: “While the US will engage with the IMF, it is doubtful the IMF will back them as it recently concluded that the renminbi was around fair value. This won’t necessarily stop the US from using the label as a pre-text to take more measure against China though”. In a statement, the Treasury Department said: “China has a long history of facilitating an undervalued currency through protracted, large-scale intervention in the foreign exchange market. “China has taken concrete steps to devalue its currency while maintaining substantial foreign exchange reserves despite active use of such tools in the past.” The People’s Bank of China (PBOC) defended the move and said the fall in the renminbi was driven by ‘unilateralism and trade protectionism measures and the imposition of tariff increases on China’. The decision by the Treasury to make a public statement symbolised a meaningful departure from the administration’s previous

foreign exchange policy, said UBS head of macro asset allocation strategy Evan Brown. “The Treasury’s currency manipulation announcement is just part of a broader evolution in US dollar policy under the Trump administration. The President has verbally criticised China and Europe for competitive devaluations, demanded commitments not to devalue in trade agreements, and recently tasked aides to find ways to weaken the dollar. This is a meaningful departure from the implicit strong dollar policy or at least a laissez faire one that has governed US FX policy for 25 years. “The executive branch, via the Treasury Department, owns the right to intervene in foreign exchange markets. It is possible, especially in reaction to further dollar strength, that the President could authorise intervention to sell dollars against the offshore yuan, euro and yen. If the Fed were to act in concert with the Treasury, as it has done historically, the Treasury could sell about US$200 billion into foreign currency. Such a move would shift the dollar lower in a knee-jerk fashion, and the signal has the potential to carry a more pronounced depreciation.” Nikko AM senior portfolio manager for multi-asset, Rob Samson, said: “The currency manipulation [accusation] was done by the US in the leastthreatening way, it was more of a

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“We are seeing the emperor has no clothes and the hollowness of Trump’s position is being exposed.” – Don Amstad, Aberdeen Standard Investments slap on the wrist and sounds more egregious than it was.” This argument between the two nations subsequently led to fears the world was heading for a global currency war. But these are unfounded fears according to industry experts who say these threats are merely “hyperbole”. Amstad said: “The ‘currency war’ is just hyperbole. China is like a teenager learning to drive with the keys to a Ferrari. They have made some errors but they have learned from these and their communication with the market is much better. “If you list the criteria to be labelled a ‘currency manipulator’ then China ticks none of the boxes. “A massive depreciation of the renminbi is unlikely as it would cause capital flight but currency can be used as a messaging device and Trump should see it as a warning.” For China, a sharp depreciation of the renminbi would cause domestic outflows which could disrupt financial stability, at a time when China is trying to open up its markets to foreign investors. It would also make goods more expensive for Chinese consumers. Alex Treves, investment

specialist for emerging markets at JP Morgan, said: “We don’t think China is a currency manipulator, you don’t have to look very far to find other countries which actually are manipulating their currencies whereas China’s was a managed move in the context of a strong US dollar. “We don’t think there is a currency war nor will there be one in the future.” “It is ironic that the real concern to the US is lower renminbi and yet China’s intervention is actually aimed at limiting the renminbi’s fall which is a natural outworking of US tariffs on its exports,” Oliver said. “As we saw in 2015, a falling renminbi is not good for emerging markets that compete with China and will put more downward pressure on their currencies which leads to renewed concerns about the US dollar debt servicing costs.”

NEXT STEPS The divide between the two countries, both unwilling to reach a compromise, could lead to Continued on page 26

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Emerging markets

Jan-March 2018: Trump administration announces first set of tariffs. April 2018: China retaliates with tariffs on $3 billion of US goods. May 2018: Initial talks fail to reach a resolution. June 2018: US imposes 25% tariffs on $50 billion of Chinese goods. Sept 2018: US imposes 10% tariffs on $200 billion of good and announces plans to increase this to 25 % at the start of 2019. Sept 2018: China retaliates with tariffs on $60 billion of US goods. Dec 2018: Trump and Chinese president Xi Jinping agree a (temporary) truce. Jan 2019: Trade talks resume. Feb 2019: Trump delays 25% tariffs. April 2019: US Treasury Secretary Steven Mnuchin says talks are making progress. May 2019: Trump imposes 25% tariffs after talks progressing ‘too slowly’. June 2019: China hikes duties on $60 billion of US goods to 25%. 1 August 2019: Trump announces 10% tariffs on $300 billion worth of goods, in addition to the 25% already levied. 5 August 2019: Chinese renminbi crosses crucial seven barrier against the US dollar, Trump declares China is manipulating its currency.

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Continued from page 25 ‘mutually assured destruction’ commented Brown. The next steps from hereon, suggested by Brown, could include a full 25% tariff on all Chinese imports or restricting sales of semiconductors to a wide range of Chinese companies. From China’s side, it could impose limitations on the sale of rare earths to US companies or prevent certain US companies from operating or selling into China. “Any of the above steps would probably inflict meaningful pain not just on the receiving party but on the acting party itself. We view such escalation as unlikely while acknowledging the markets must place some risk premium that they will happen. Domestic political pressures not to back down are present on both sides, as are the risks of miscalculation. “Our base case is that cooler minds prevail, now that the stakes have risen so high, the economic and political costs of further escalation on both sides are significantly larger than the benefits.” Amstad said Trump had been ‘badly advised’ by those around him and was vastly underestimating China’s dominance in this trade war argument, to his detriment as he has so far been unable to secure a successful deal. “China has been cautious to

show its hand and its position is stronger than Trump realises. He has chosen to focus on traded goods between the US and China at the expense of everything else whereas China understands the relationship is more complex than this. They also have a lot more domestic policy options than Trump understands,” he commented. “We are seeing the emperor has no clothes and the hollowness of Trump’s position is being exposed.” He added Trump only had the power to negotiate a deal or impose tariffs on China as any formal deal would need to be approved by Congress. This could pose problems if Trump was not re-elected for a second term in November 2020. Samson, said: “We think getting a deal in 2020 is most realistic but there’s always the risk whether China will wait until the election is over. If Trump loses then a deal could be even later. “Regardless of which party wins the election, there is support from both sides so there will be a hard bargain to drive with China, though maybe a bit less than Trump had been pushing for. “2018 was actually an unusually good time to put pressure on China as the economy was in a difficult shape after financial tightening so the fact it is still going on shows Trump may have underestimated China.”

As to when the trade war would be over, Eleanor Creagh, Australia market strategist at Saxo Capital Markets, said: “Addressing the trade deficit is just a sideshow for the ongoing decoupling of the Chinese and US economies. “We have always maintained that the tariffs and trade negotiations are just scratching the surface in a far deeper rift which is more akin to Cold War 2.0, and one that cannot be resolved in a ‘trade deal’. This is a long-running economic conflict and battle for tech dominance and hegemony, and the gloves are now off. “Non-tariff retaliation measures from China are also a key risk from this point. China cannot match the US in dollar amount of imports to tariff so we could be looking at other non-tariff retaliatory measures from here. These include rare earth import restrictions, holding goods up in ports, license delays and stoking nationalistic sentiment to divert demand away from US goods.” “China see Trump as an unreliable counterparty. Their big fear is that Trump either signs a deal and then goes back on it with one tweet, that he does not get re-elected or that he cannot get the deal through Congress,” added Amstad. “The level of anger in China towards US and Trump is rising, they want to see Trump hung out to dry.”

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Education

GUIDING THROUGH EDUCATION Table 1: FASEA approved Bachelor degrees

EDUCATION PROVIDER

BACHELOR DEGREE

Central Queensland University www.cqu.edu.au

Bachelor of Property (Financial Planning) Bachelor of Business (Financial Planning) Bachelor of Accounting (Financial Planning) Bachelor of Arts / Bachelor of Business (Financial Planning) Bachelor of Accounting (Financial Planning) Bachelor of Accounting / Bachelor of Business (Financial Planning) Bachelor of Property (Financial Planning) LLB / Bachelor of Business (Financial Planning)

Charles Sturt University www.csu.edu.au

Bachelor of Business (Finance) with Financial Planning Joint Study (v2) Bachelor of Accounting (Financial Planning)

Curtin University of Technology www.curtin.edu.au

Bachelor of Commerce (Accounting & Financial Planning) Bachelor of Commerce Major in Financial Planning v3 Bachelor of Commerce (Finance and Financial Planning)

Deakin University www.deakin.edu.au

Bachelor of Commerce (Major in Financial Planning) (v3)

Griffith University www.griffith.edu.au

Bachelor of Commerce (Financial Planning)

Queensland University of Technology www.qut.edu.au

Bachelor of Business (Financial Planning) 9 Unit Specialisation.

RMIT University www.rmit.edu.au www.open.edu.au

BP314 Bachelor of Business (Financial Planning) BP313 Bachelor of Business (Financial Planning) / Bachelor of Business (Accountancy) Bachelor of Business (Financial Planning) Bachelor of Business (Financial Planning) (v2)

Swinburne University of Technology www.swinburne.edu.au

Bachelor of Business with a major in Financial Planning (Hawthorn Campus and Swinburne Online) Bachelor of Business with a professional major in Accounting and Financial Planning Bachelor of Business (Professional) with a major in Financial Planning Bachelor of Business (Professional) with a professional major in Accounting and Financial Planning

TAFE NSW Higher Education www.tafensw.edu.au

Bachelor of Applied Commerce Majoring in Financial Planning Bachelor of Applied Commerce Accounting and Financial Planning Double Major

University of Canberra www.canberra.edu.au

Bachelor of Commerce (Financial Planning Major) Bachelor of Finance (Financial Planning Major)

University of South Australia www.unisa.edu.au

Bachelor of Business (Financial Planning) Bachelor of Business (Financial Planning) UniSA online (UO)

University of the Sunshine Coast www.usc.edu.au

Bachelor of Commerce (Financial Planning)

University of Wollongong www.uow.edu.au

Bachelor of Commerce (Financial Planning) Bachelor of Mathematics and Finance (Honours) Major in Financial Planning Bachelor of Mathematics and Finance (Honours) (Dean’s Scholar) Major in Financial Planning

Western Sydney University www.westernsydney.edu.au

Bachelor of Accounting (Financial Planning) Bachelor of Accounting (Financial Planning and Taxation) Bachelor of Accounting Financial Planning or Financial Planning and Taxation

Advisers might not be looking forward to fulfilling the Financial Adviser Standards and Ethics Authority education requirements, but just like financial planning itself, effective planning can help mitigate the pain endured from the process, Chris Dastoor writes. YOU CAN’T SAY there isn’t choice – there are now 53 bachelor or higher degrees and 30 bridging courses approved by the Financial Adviser Standards and Ethics Authority (FASEA). For undergraduate bachelor’s degrees there are 26 available around the country, as well as 16 graduate diplomas and 11 master’s degrees. Including an additional 66 historical degrees, there have now been 150 courses approved by FASEA. New entrants into the industry must hold a tertiary qualification, have passed the FASEA exam, complete a professional year, and comply with continuing professional development (CPD) requirements from the start of this year. On 30 August, it was announced by Senator Jane Hume, Assistant Minister for Superannuation, Financial Services and Financial Services Technology, the deadlines had been extended following joint lobbying by the Financial Planning Association (FPA) and the Association of Financial Advisers (AFA). This was a significant move as advisers had previously been under stress to meet the previous deadlines in time. For existing advisers, their deadline to have passed the exam was extended by one year to

Source: FASEA.gov.au

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Education Table 2: FASEA approved post-graduate degrees

1 January, 2022 and the deadline to have received tertiary qualification was extended by two years to 1 January, 2026. FPA chief executive, Dante De Gori, said: “We are pleased that Minister Hume has listened to the feedback from our members and been willing to work with the FPA and AFA jointly to deliver a better outcome for all financial planners and their clients”. The next exams are on 19-23 September with registration having closed before the end of August, but registrations were still open until 8 November, 2019 for the 5-9 December, 2019 exam. The results of the inaugural exam held on 20-24 June, 2019, saw a pass rate of 90%, with 579 advisers across the country having sat the exam. There are numerous preparation courses available, including the Financial Planning Association’s (FPA’s) Return To Learn, Kaplan’s FASEA exam workshop, TAL’s Risk Academy Masterclass, Cram 4 Exam, as well as FASEA’s own exam preparation guide.

FINANCIAL PLANNING One of the major issue advisers face was the cost of taking up the required study, given that tertiary qualification costs easily run well into five figures. Checking with prospective institutions what recognised prior learning (RPL) could be accepted would reduce costs, as well as enquiring about any scholarships available. The most common method of university education fee payment was via the Higher Education Loan Programme (HELP) which is available for students studying in a Commonwealth Supported Place. If you were ineligible for HECS-HELP, FEE-HELP was available typically for private institutions and postgraduate study at public institutions. Mark Olynyk, program director in financial planning at Deakin University, said there were options available to soften the financial blow.

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EDUCATION PROVIDER

POST-GRADUATE DEGREES

Australian Catholic University www.acu.edu.au

Graduate Diploma of Financial Planning Master of Finance

Central Queensland University www.cqu.edu.au

Graduate Diploma in Financial Planning (8 units) Master of Financial Planning

Charles Sturt University www.csu.edu.au

Graduate Diploma in Financial Planning Master of Applied Finance Master of Applied Finance (Financial Planning)

Deakin University www.deakin.edu.au

M669 Graduate Diploma in Financial Planning (8 units) Master of Financial Planning

Griffith University www.griffith.edu.au

Graduate Diploma of Financial Planning (8 units) Master of Financial Planning

Kaplan Higher Education www.kaplanprofessional.edu.au

Master of Financial Planning GDFP19 Graduate Diploma of Financial Planning (8 units)

Queensland University of Technology www.qut.edu.au

BS79 Graduate Diploma in Business (Financial Planning)

Swinburne University of Technology www.swinburne.edu.au

Graduate Diploma of Financial Planning (Hawthorn Campus and Swinburne Online delivery) Master of Financial Planning (Hawthorn Campus and Swinburne Online delivery) Master of Professional Accounting/Master of Financial Planning (Hawthorn Campus and Swinburne Online delivery)

TAFE NSW Higher Education www.tafensw.edu.au

Graduate Diploma of Financial Planning

University of New England www.une.edu.au

Graduate Diploma of Financial Planning

University of NSW www.unsw.edu.au

Master of Financial Planning

University of South Australia www.unisa.edu.au

DGFP Graduate Diploma of Financial Planning XGFP Graduate Diploma of Financial Planning Master of Finance (Financial Planning)

University of Technology Sydney www.uts.edu.au

Graduate Diploma in Financial Planning

Western Sydney University www.westernsydney.edu.au

Graduate Diploma in Financial Planning Graduate Diploma in Stockbroking and Financial Advising Master of Commerce (Financial Planning) Master of Financial Planning Master of Stockbroking and Financial Advising Master of Financial Planning

Source: FASEA.gov.au

“FEE-HELP is like the HECS scheme – the Federal Government covers your tuition fees as a loan, which you pay back through tax once you reach a taxable income threshold,” Olynyk said. “To check eligibility see the Federal Government’s Study Assist website, if you aren’t able to defer tuition fees using FEE-HELP, you can also opt to pay your fees in instalments.” Olynyk said in-house financing from your organisation may also be an option worth checking. “Employers appreciate staff

who demonstrate a keenness to learn more and take on challenges, you should approach your supervisor about financial or in-kind support for your postgraduate study,” Olynyk said. You might also be able to claim it for tax purposes, but it was important to check with the Australian Tax Office (ATO) or a tax agent. “Depending on your circumstances, you may be able to claim education costs on tax. Other expenses associated with study, such as books, internet and

childcare, may also be claimable,” Olynyk said.

MENTAL WELLBEING De Gori said the organisation had worked hard this year to set up programs to support people struggling to cope with the mental challenges. “FPA Wellbeing is a free comprehensive health and wellbeing program providing confidential support by qualified counsellors and psychologists for Continued on page 30

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30 | Money Management September 12, 2019

Education Continued from page 29 FPA members,” De Gori said. “We’re keenly aware of the toll these higher standards are taking on our FPA members, and the profession as a whole. “We wholeheartedly believe the destination will be worth it, but not at any cost. “It’s not easy going back to study when you’re running a business, a family, and volunteering in your community.” The FPA had also recommended FASEA settle its decisions on RPL for all outstanding professional certifications, and reconsider providing credit for experience and training through CPD. “Just in case petitions like ours and from other leaders across the financial services ecosystem are not heeded, we’re urging all financial planners to be ready,” De Gori said.

SPECIALISING Phil Anderson, AFA general manager for policy and professionalism, said they had hoped the completion of the new education requirements would give advisers the opportunity to specialise and pursue study in a particular area. “This might have been possible if FASEA had agreed to graduate diplomas with a limited core subject requirement and then a range of elective options,” Anderson said. “Unfortunately, that is not the case and FASEA has set a requirement for 11 core knowledge areas, which higher education providers have been forced to fit into an eight subject Graduate Diploma. “There is therefore not much flexibility in terms of what you can study now, which has caused a lot of frustration for many advisers who do not wish to study in areas that are not relevant to their area of practice and expertise. “That said, we still think it’s important to take into account the type of financial advice work you want to do and the type of clients you want to work with when deciding on your education pathway.”

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Table 3: FASEA approved previously bridging courses

EDUCATION PROVIDER

BRIDGING COURSE

Curtin University of Technology www.curtin.edu.au

1. FINC20029 Financial Advice and Corporations Law 2. FINC20030 Behavioural Finance and Client Relationships 3. FINC20031 Ethical Financial Planning Practice

Deakin University www.deakin.edu.au

1. MLM717 Financial Services Regulation 2. MAA769 Ethics for Financial Services 3. MAA728 Financial Behaviour and Decision Making

Griffith University www.griffith.edu.au

1. 7815AFE/7269AFE Ethics and Professionalism 2. 7812AFE/7246AFE Behavioural Finance and Wealth Management 3. 7823AFE/7159AFE Principles of Business and Corporations Law

Kaplan Professional www.kaplanprofessional.edu.au

1. FPC001B Economic, Legal and Ethical Context for Financial Planning 2. FPC002B Ethics and Professionalism in Financial Advice 3. FPC007B Client Engagement Skills

Queensland University of Technology www.qut.edu.au

1. AYN/AYQ 457 Financial Planning Principles and Regulation 2. EFN520/EFQ520 Financial Planning Capstone 3. AYN/AYQ 458 Ethics and Professional Relationships

TAFE NSW Higher Education www.tafensw.edu.au

1. FPETH501A Ethics and Professional Standards for Financial Advisers 2. FPBFI501A Behavioural Finance 3. FPLAW501A Commercial and Corporations Law

Swinburne University of Technology www.swinburne.edu.au

1. FIN60009 Ethics, Regulation and Client Management

University of Newcastle www.newcastle.edu.au

1. GSBS6516 Ethics in Financial Services 2. GSBS6517 Behavioural Finance and Client Relationships 3. LEGL6006 Financial Service Regulations and Law

University of New England www.une.edu.au

1. MM467 Professional Ethics 2. FPL550 Behavioural Finance and Investment Portfolio Management 3. LSSU594 Issues in Commercial and Financial Services Law

University of South Australia www.unisa.edu.au

1. BANK 5052 Behavioural Finance Client and Consumer Behaviour 2. BUSS 5446 Ethics and Professionalism 3. COML 5017 Financial Advice Regulatory and Legal Obligations OR 1. BANK 5053 UO Behavioural Finance Client and Consumer Behaviour 2. BUSS 5447 UO Ethics and Professionalism 3. COML 5018 UO Financial Advice Regulatory and Legal Obligations

University of Technology Sydney www.uts.edu.au

1. 25769 Ethics for Financial Planning 2. 25770 Behavioural Finance 3. 25772 Financial Planning: principles and regulation

Western Sydney University www.westernsydney.edu.au

1. 201038 Behavioural Finance for Advisers 2. 201041 Financial Advice (Regulation and Legal Obligations) 3. 201037 Ethics and Professionalism Financial Services

Source: FASEA.gov.au

It’s also worth checking with your education provider if your previous study programs open you up to professional designation programs. “It seems a big ask to suggest that you start your education journey by doing a professional designation like the AFA’s four subject Fellow Chartered Financial Practitioner (FChFP) course, when it only gives you two credits towards a Graduate Diploma,” Anderson said.

“However, it’s important to remember that if you wish to do a masters of financial planning, which offers greater flexibility in

terms of subjects, many masters programs offer four credits for the completion of recognised professional designations.”

Table 4: Key Dates

Exam sitting two (registration closed)

19-23 September 2019

Exam sitting three registration deadline

8 November 2019

Exam sitting three

5-9 December 2019

Deadline to have passed FASEA exam

1 January 2022

Deadline to have completed tertiary qualifications

1 January 2026

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32 | Money Management September 12, 2019

Fixed income

TERM DEPOSITS VS FIXED RATE BONDS: YOU CAN’T ARGUE WITH THE NUMBERS Nikko AM portfolio manager Chris Rands looks at how historic bond performance can help us in the debate between term deposits and fixed rate bonds. TERM DEPOSITS AND fixed rate bonds are often thought of as similar fixed income products. Despite this, fixed rate bonds have far outperformed term deposits over the past 20 years while providing higher levels of income. While the market is constantly concerned about rising rates, the recent experience in the United States shows that for an investor with a longer-term horizon this may be less of a risk than perceived.

HISTORICAL DISTRIBUTION VERSUS TERM DEPOSITS Like term deposits, fixed income funds generally pay regular income to investors, in the form

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of distributions. Distributions are payments made by the fund to investors. Investors using fixed income quite often become focused on capital gains and losses, concerned with the fact that if interest rates rise their investment will incur capital losses because bond prices fall. While this is a valid concern we believe this is too focused on the short-term effect of returns. The predominant driver of returns for fixed income is income. This reflects the fact that when you buy a fixed rate bond and hold it to maturity you can be relatively certain of the final return that you will receive assuming no default. For

example, if you paid $100 for a 3-year bond with a 2% coupon at a 2% yield, you would receive $2 in coupon each year and $100 at maturity. If interest rates were to sell off aggressively in year one, causing capital losses, over the life of the deal the investor would still receive their $2 coupon each year plus the $100 face value – leading to a return of 2% p.a. over the entire three-year period. In fixed income this idea is referred to as ‘pull to par’, where bonds naturally pull back to a price of 100 as they approach maturity. An investor with an investment horizon greater than one year should be far less worried about potential capital changes and

more focused on what they see as an acceptable level of yield. Chart 1 demonstrates this by comparing the one-year total return of fixed rate bonds with their annualised returns over a two-year period. While on a one-year basis negative returns occurred in 1994, 1999 and 2017, over any rolling two-year period there have been no negative returns since 1990.

TOTAL RETURN IN DIFFERENT RATE ENVIRONMENTS The above analysis focused on the income generated from each product based on the idea that through time this will dominate

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Fixed income

Chart 1 - AusBond composite returns

Source: Bloomberg, Nikko AM

returns. However, we can also look at the total one-year returns that are achieved in different interest rate environments. Analysis shows that when interest rates have risen, fixed rate bonds have underperformed term deposits by around 1 – 3% p.a. and when interest rates have fallen (or even stablised) fixed rate bonds outperformed term deposits by anywhere from 1 – 8% p.a. This tells us that if you can time the cycle perfectly, you can capture outperformance by rotating between cash and bonds. However, this is an extremely hard proposition to achieve. Looking through the cycle, a long-term investor who does not believe in market timing would simply have been better off holding bonds.

A COMMON CRITICISM: ‘IT’S JUST A BULL MARKET’ The most common criticism of holding fixed income instead of term deposits is that the above analyses is simply a product of a 30-year bull market. While falling rates have improved fixed rate returns, this overlooks the fact that just because interest rates are low, it doesn’t mean they must rise. Looking forward, investors should understand what could occur under different interest rate environments rather than focus solely on the idea that rates must rise. With this in mind, it is instructive to look at what occurred in the US over the past

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Chart 2 - US bond and term deposit yields

Source: Bloomberg, Nikko AM

four years because when the Australian economy is ready for the RBA to start hiking rates, we think that cash rates above 3% would be restrictive. Hence, the 2.5% increase from the Federal Reserve is similar in magnitude to what we would expect from the RBA should a hiking cycle begin.

WHAT HAPPENED IN THE US? LOOKING BACK OVER THE PAST FOUR YEARS Over the past four years, the US Federal Reserve (Fed) increased their cash rates nine times, taking the cash rate to 2.5%. The below analysis shows the performance of the Bloomberg Barclays United States Aggregate Bond Index (Bloomberg Agg) against US term deposits over this period. For this analysis we will focus on two time periods: one aimed at the performance over the entire hiking period and the second for an investor with perfect hindsight: 1) Performance since the first Fed cash rate hike — December 2015 Bond yields did not immediately sell off as the Fed began hiking; in fact, fixed rate bonds initially rallied ahead of term deposits and never gave up that performance. When the Fed showed signs of pausing in December 2018, fixed rate bond yields rallied leading to the Barclays Agg posting considerable returns in excess of term deposits over the three year period. Over this time period, owning fixed rate bonds

would have seen significant outperformance to term deposits. 2) Performance since the low in bond yields — June 2016 Over this time period, term deposit returns were above the Bloomberg Agg for the majority of the period, as bond yields sold off instantly causing capital losses. However, when the Fed showed signs of pausing in December 2018, fixed rate bonds went on a strong run which saw the entire differential close within six months, leaving the Bloomberg Agg ahead. While term deposits were ahead for a considerable time, this gap rapidly closed once the cash rate stopped rising. While in both cases fixed rate bonds saw capital losses at certain points throughout the period, over the entire timeframe the performance of Bloomberg Agg ended up ahead of a rolling investment in three month term deposits. This should not be too surprising given the yield on the Bloomberg Agg index is higher than the term deposit yield for the entire period. Hence, even when the RBA is ready to begin hiking interest rates, it might not be a sure fire bet that fixed rate bonds will underperform over a longer time period, highlighting the difficulty that is involved with market timing.

THE UNSPOKEN FLIP SIDE: WHAT IF RATES DON’T RISE?

fall? For most of 2018 the Australian market was convinced that the RBA would hike rates, but the subsequent outcome has seen a new cutting cycle with cash rates now at 1%. As a result, bond yields have effectively halved over the past 12 months and this will see term deposit yields continue to fall. For an investor focused on income using term deposits, this will be a tough pill to swallow as their interest rate adjusted lower almost instantly. Those who owned fixed rate bonds last year will be able to maintain a higher yield as their bonds pay higher coupons until they reach maturity. We believe there is far too much focus on the question of what happens if rates rise, with very little willingness from investors to face the opposite question: what happens to my investments if rates fall? While we don’t want investors to overlook the effects of rising rates, we see the market almost 100% concerned about the first question without spending sufficient time thinking through the second. For investors who require income, the consequences of lower rates may be just as detrimental as rising rates, so it is worthwhile thinking about the probability of this risk.

The often unspoken flip side of the rising rates argument is what happens if rates don’t rise but

Chris Rands is fixed income portfolio manager at Nikko AM.

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Regulation

PROTECTING FINANCIAL CONSUMERS Rather than an unwelcome compliance burden, the Design and Distribution Obligations and the ASIC Interventions Power can be a force for a better and more sustainable business, Jonathan Steffanoni writes. CONSUMER PROTECTION HAS been the common thread connecting much of the reform agenda for financial regulation in 2019. The Hayne Royal Commission shone a bright light on the shortcomings of the consumer protection aspects of a financial regulatory framework – a framework that may have been too heavily skewed towards preventing systemic risks, and preventing failure of significant financial institutions – in the shadow of the global financial crisis. But one critical piece of consumer protection reform in the financial services industry was on the agenda before the Hayne Royal Commission. There has been little attention given to the passage of legislation to enact the Murray Inquiry’s recommendations to introduce a targeted and principles-based product design and distribution obligation and providing regulators with a proactive product intervention power. These independent but closelyrelated reforms are important consumer protections which are consistent with the principles in the Hayne reforms. Indeed, the April passage of the Treasury Laws Amendment (Design and Distribution Obligations and Product Intervention Powers) Act represents a significant change to the way in which financial product issuers and distributers operate their business.

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It’s not only important that financial product issuers, distributers, and advisers are aware of the new obligations and possibility of regulatory intervention, but it is a significant opportunity for them to rethink business models to take a more client-centric approach which may prove more sustainable in the long term.

INTERVENTION POWERS The first part of these reforms has already come into force, and ASIC has already commenced exercising powers which are intended to protect consumers by intervening to prevent significant harm to retail investors. The intervention could range from an outright ban on certain products (or methods of distribution) to a requirement that the investor receives financial advice prior to investing. ASIC was granted powers to proactively issue product intervention orders in circumstances where it determines that a financial product presents a risk of significant detriment to retail clients. There are prescribed factors and a process concerning how ASIC must arrive at such a determination, however the reforms do provide ASIC with some discretion on what would constitute significant detriment. Intervention would most likely take the form of placing certain conditions on the product issuer,

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Regulation

such as requiring the retail client receive personal financial advice before the product is issued to them. This power operates independently from the design and distribution obligations and would enable ASIC to proactively intervene to protect consumers from financial harm due to inappropriate financial products being sold to them. ASIC is however required to consult with those likely to be affected by a product intervention order prior to making it. This process is currently underway in relation to derivative products sold to retail investors that have suffered detriment from overthe-counter (OTC) binary options and contracts for difference (CFDs). Previous ASIC research has shown that the significant majority of retail investors in these products suffered losses, prompting ASIC plans to ban and limit distribution of these products to retail investors. These ASIC intervention orders could also impact superannuation funds. The protection of consumers from underperforming default superannuation funds has been the subject of plenty of policy discussion and debate, particularly in the form of the member outcomes obligations and the prospect of the Australian Prudential Regulation Authority (APRA) utilising its revitalised directions power to force consolidation where underperformance in entrenched. Underperforming superannuation products are also potentially the subject to the ASIC intervention power. While underperformance is not the same standard as significant harm, superannuation trustees should remain aware of the possibility of ASIC intervention in serious cases of entrenched underperformance. While some may see these new intervention powers as a threat to the business of product issuers and distributors, financial products which exploit consumers and cause significant financial detriment have

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no place in a properly functioning financial system.

DESIGN & DISTRIBUTION OBLIGATIONS The design and distribution obligations will commence from April 2021 and will require financial product issuers and distributers to make a target market determination for most retail financial products (MySuper products are a notable carve out). Product issuers will then be required to take reasonable steps to ensure that distribution of the financial product is consistent with the target market determination. This obligation is interesting, in that it employs the terminology of marketing theory to achieve a consumer protection. In its conventional meaning, marketing is an approach to business which seeks to supply products to satisfy market or consumer needs rather than pushing products on markets which don’t really have a need for them or exploiting consumer behaviour to artificially create the feeling of need in consumers. It’s a consumer first approach which has similarities with older legal and equitable concepts which also offer a form of paternalistic protection, such as fiduciary duties and unconscionable conduct. These prioritise the best interests of a consumer in arrangements where information asymmetry can place consumers in a position of disadvantage – and potentially at risk of exploitation. In practice, the design and distribution obligations will require that product issuers identify a group of consumers based on measurable attributes (such as age, level of engagement, level of income, amount of investment, or any other relevant indicator) which make the group well suited or in need of the particular product, and require that reasonable steps are taken to ensure distribution is targeted to these groups.

While the initial motive for placing an increased focus on understanding the financial needs of investors more closely might be regulatory, the commercial benefits to those who are most successful in doing so will soon become a strong incentive. – Jonathan Steffanoni, QMV An example of a target market determination may be that a product issuer identifies that a choice cash investment option in a superannuation fund is designed to service the needs of a target market of investors with an investment horizon of less than five years. The distribution conditions would be likely to prohibit activities to promote or distribute this product to younger members with investment horizons well in excess of five years. Another more interesting example could be the targeting of a direct investment option within a superannuation fund (requiring active involvement and higher levels of engagement) to members who demonstrate low levels of engagement. Interestingly, there are also significant similarities between the design and distribution obligations and the superannuation member outcomes and business performance review obligations which commence from 1 January, 2020. Notably, both the member outcomes and design and distribution obligations require trustees or product issuers to focus on market segments or member cohorts which share some common characteristics in terms of their financial needs. A likely impact of the design and distribution obligations on financial product issuers will be the increased need to develop and maintain better consumer profiling and analytics to ensure that target markets remain well understood. They will need to ensure that the distribution of financial products is responsibly targeted to groups of

consumers well suited to the needs which the attributes of the product are designed to address. Data has a role to play here. The further development of the API ecosystem to promote easier sharing of data between consumers and institutions, and extension of the Consumer Data Right may provide product issuers with a much richer data set on which to rely on to understand the needs of their clients and members. While the initial motive for placing an increased focus on understanding the financial needs of investors more closely might be regulatory, the commercial benefits to those who are most successful in doing so will soon become a strong incentive.

GOOD FOR CLIENTS, GOOD FOR BUSINESS Aligning the design and distribution of financial products with the needs of individual or segments of consumers will not only be good for consumers, but good for business for product issuers who get this right. There is an increasing acceptance that sustainable business models are built not merely on the ability to generate short term profits from markets, but rather from the ability of a business to find purpose in satisfying a need in the market efficiently and competently. This also applies to financial institutions and advisers responsible for the design and distribution of financial products. Jonathan Steffanoni is principal consultant, legal and risk at QMV.

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Toolbox

PREPARING FOR AN SMSF AUDIT SuperConcepts’ Graeme Colley explains why self-managed super funds are likely to come under more scrutiny following recent court decisions and how trustees and their clients can be prepared. MANY SELF-MANAGED SUPERANNUATION funds (SMSFs) hold unlisted assets, particularly unlisted trusts and companies which may include any loans the SMSF has made to them. These assets are likely to invite more scrutiny from auditors and the regulator, and don’t be surprised if your client’s SMSF is required to provide further information to them. Recent court decisions have held auditors liable for not investigating the recoverability of investments and determining the appropriate market value. Unlisted investments are now considered high-risk from an audit point of view and the Australian Taxation Office (ATO) is expecting an increase in breaches being reported. So you and your client need to be prepared.

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If you’re an SMSF trustee or director of a corporate trustee, don’t think you’re off the hook either as you have a legal obligation to provide information requested, otherwise you could face penalties. Sometimes however, information gathering can be difficult. For example, you may be invested in a trust/company whose underlying investments are not valued in accordance with superannuation law. This scenario would likely trigger an audit qualification and an Audit Contravention Report (ACR) being sent to the ATO.

WHAT’S THE ISSUE? Each year SMSF’s are required to be audited by a registered SMSF auditor. As part of the audit, fund accounts must be prepared using the market value of assets which

are published by the ATO. Each fund investment needs to be risk-assessed on the available evidence and whether it is appropriate and reliable. This may include obtaining independent verification in many situations. The level of evidence required to substantiate the investment may depend on the proportion of the fund allocated to the investment/loan. For example, a greater level of confidence may be required to confirm whether a loan of $500,000 is recoverable compared to a similar loan with an outstanding balance of $20,000. The trustee of the SMSF is responsible for making sure fund assets are valued correctly as the fund’s auditor or the ATO will be able see whether the recorded value provides reasonable evidence.

A GUIDE FOR VALUING UNLISTED ASSETS If your client’s SMSF has investments in unlisted companies or trusts, here is a guide to help if the market value of assets is not readily available, which is often the case. Unlisted trusts and companies In assessing the valuation of these assets, the types of supporting evidence your fund’s auditor or the regulator will look for include: • Audited financial statements of the unlisted trust or company; • Financial statements including evidence that underlying assets are valued at market value; • Independent valuations of the underlying assets of the trust or company;

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September 12, 2019 Money Management | 37

Toolbox

• A share/unit price based on recent sales or purchases between unrelated parties; and • Written verification from a director or trustee of the trust or company who is not a related party of the SMSF. On the flipside, further information could be requested where: • The trust or company provided unaudited financial statements with no evidence of the underlying assets being at market value; • The fund trustees have provided their assessment of the underlying asset of the unlisted investment; and • Written verification has been provided from the trustee or director of the trust or company who is a related party of the fund.

Example 1 Preet and Olivia have an SMSF with a balance of $300,000. They have invested $240,000 in the ‘Hope Street investment trust’, which was established two years ago and has 18 different unit holders. The trust acquired a vacant block of land and after obtaining council approval, organised construction of an apartment building which is expected to be complete in six to eight months. The trust has provided financial statements which show the land valued at the original purchase price two years ago. The trustee and other interested parties will need to assess if the SMSF financials show the units at market value. There is no record of recent sales of the units available and there is no evidence as to what the building

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could be sold for if it was placed on the market. In addition, it cannot be determined if the unit trust has enough cash to complete construction of the building. Based on the circumstances, the trustee may not be able to confirm the market value of the units with adequate certainty. This may result in the auditor issuing a qualified opinion for the market value of the units. Two years later the building is completed, and an independent valuation is obtained confirming the apartment block is worth $16 million. The financials of the unit trust show that the only other asset besides the building is $2 million in cash. The trustees revalue the units from the original purchase price. They calculate the market value by dividing the total assets of the unit trust by the total number of units issued by the trust. They have a copy of the financials of unit trust and valuation. This would normally be enough to verify the market value of the units.

Example 2 Frank works at a renewable energy start-up and uses his SMSF to buy $50,000 worth of shares as part of an employee share plan. He makes the purchase in April. The company issued a prospectus as part of the share plan which was available to all employees. As the shares were purchased by the SMSF at market value in April, which is adequate evidence to support the 30 June market value for that financial year. One year later, the value of the shares within Frank’s SMSF remain at $50,000. Although Frank obtained a copy of the company’s

financial statements, it is a small business and does not require its financials to be independently audited. No recent share sales or purchases have occurred. Even though the accounts were not qualified by the auditor it may occur in the next year as there is insufficient information to confirm the market value of the shares. Loans to an unrelated trust or company If your client’s SMSF makes a loan to an unrelated trust or company, or even to an unrelated individual, there are things you or your client should know. The loan agreement needs to specify the terms and conditions of the loan including how the interest rate is determined, whether the loan is secured or unsecured and the term of the loan. This is of interest in relation to the purpose of the loan and the business of the borrower. Recoverability of the loan will have an influence of its market value. Evidence could include: • Whether repayments have been made as required by the loan agreement; • Details on the financial position of the borrower confirming the ability to repay the loan (e.g. net asset position, sources of cash); and • Details and value of security held as collateral for the loan (if applicable). On the other hand, unsatisfactory evidence, likely to invite greater scrutiny, would include statements made by the fund trustees or the borrower that provides an assessment of the recoverability of the loan. The evidence needs to go further than that. A copy of the loan agreement

Continued on page 38

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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. Which SMSF assets are likely to invite greater scrutiny from auditors and regulators: a) Shares listed on the ASX Continued from page 37

b) Term deposits with a bank

and evidence that interest has been paid on the loan merely establishes that the loan exists. But it doesn’t provide enough evidence of the loan’s value, whether it is recoverable and the borrower’s financial position concerning future repayments.

c) Commercial property

Example

concerning a fund’s investment:

Liz’s SMSF has made a $300,000 loan to Anthony, a friend and property developer. Two-year loan term with an interest rate of 8% p.a and monthly payments which Anthony always meets. The loan agreement lists Anthony’s home, worth $1.5 million, as security. The SMSF financials show the loan at $300,000 on the balance sheet. A title search for Anthony’s property confirms that Liz’s SMSF has a charge registered against the property. In this scenario it would normally be accepted that the loan is valued correctly. If Anthony was to default on the loan, Liz would be able to take possession of his home and recoup her loan investment. If on the other hand, Liz’s SMSF hadn’t registered a charge over the property, the auditor would probably qualify the audit unless Anthony could demonstrate his assets less any liabilities exceed the loan value.

a) The director of a company

WHAT DOES A QUALIFIED AUDIT REPORT MEAN? Just because an SMSF has received a qualified report from the auditor is not necessarily a reason to panic. The financial and compliance sections of the audit report may be qualified if the auditor has not been able to obtain enough and appropriate evidence concerning the investment. As trustee of your SMSF, you will be contacted by the fund auditor and the ATO notified if a reportable breach has occurred. A qualified audit report does not necessarily mean your client’s SMSF is non-complying and that they are up for penalties. The auditor will notify the ATO if a reportable breach has occurred, may have occurred or where it cannot be identified with enough certainty that the fund has met an audit standard. Both the auditor and ATO will consider the circumstances case-bycase. The ATO may ask your client to supply further information where the investment is material and there is an indication that the value used may not be an appropriate reflection of the market value.

FUTURE PROOFING YOUR UNLISTED ASSETS It’s always sensible to ensure that the advice you provide on any investment undertaken by your client’s SMSF is correctly documented, especially if the trust or company is unlisted or there is a loan to an unrelated party. As you can see, the client will need to provide adequate evidence to establish the existence of the investment and whether it is recoverable. If this information is not available, the SMSF may end up with a qualified opinion and an ACR sent to the ATO. Graeme Colley is executive manager, SMSF technical and private wealth at SuperConcepts.

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d) Unlisted unit trust units 2. Who has the statutory obligation to provide information

b) The member of an SMSF c) The trustee of an SMSF 3. The level of evidence required to substantiate an investment of an SMSF: a) Depends on the proportion of the fund allocated to the investment b) Depends on the type of investment made by the fund c) Depends on the fund breaching the SIS act in the past d) Will be greater for all new investments of the SMSF 4. In Example 1, based on the circumstances the trustee may not be able to confirm the market value with any certainty because: a) The units are not valued at net market value b) There is no information available about recent unit sales c) No evidence exists as to the sale of the building d) The trust does not have enough cash to complete the building 5. If an SMSF makes a loan to an unrelated trust or company the loan agreement should specify: a) Whether the loan is recoverable b) How the interest rate is determined c) The actual interest rate to be charged d) What the loan is to be used for

TO SUBMIT YOUR ANSWERS VISIT https://www.moneymanagement.com.au/ features/tools-guides/preparing-smsf-audit

For more information about the CPD Quiz, please email education@moneymanagement.com.au

4/09/2019 12:13:14 PM

September 12, 2019 Money Management | 39

Send your appointments to chris.dastoor@moneymanagement.com.au

Appointments

Move of the WEEK Masahiko Kobayashi Non-executive director Challenger

Challenger has announced the appointment of Masahiko Kobayashi as a non-executive director, following the expanded strategic relationship with MS&AD Insurance Group Holdings (MS&AD), announced in March. Kobayashi would stand for reelection at Challenger’s 2019 an-

nual general meeting, which was scheduled for 31 October, 2019. He had over 30 years’ experience in general and life insurance, and was currently director and managing executive officer (corporate planning, risk management and finance) of MS Primary. Prior to MS Primary, Kobayashi

held a number of executive and director roles within the MS&AD group, which included roles based in Singapore and the UK. Peter Polson, Challenger chairman, said Kobayashi’s appointment built on the success of their strategic relationship with MS&AD, which commenced over three years ago.

AMP Limited has recruited a former Commonwealth Bank specialist executive as its new dedicated group whistleblowing officer. AMP said it had appointed Anne-Marie Paterson to the role as part of a $100 million investment over two years in strengthening risk governance and controls. Paterson is a senior lawyer who has been recruited by AMP from CBA where she was executive manager and whistleblower investigation officer. Commenting on the appointment, AMP chief risk officer, Jenny Fagg said that risk had been placed at the core of AMP’s culture and further enhancing risk management, governance and compliance continued to be a key initiative under AMP’s new strategy. “We have also made sig-

nificant progress to overhaul our governance and organisational structures to create better independence and oversight of issues. Our activity has focused on improving policies, processes and systems and increasing the use of technology to create efficiencies.”

Tribeca Investment Partners has expanded its Sydney-based team with portfolio management and compliance appointments, Angus Wright and Ken Liu. Wright was appointed to the Australian equities investment team as senior investment analyst. He had over 20 years’ experience including 14 years of funds management in Australia and the UK, and joined after five years as a fundamental equity analyst and portfolio manger at Aitken Investment Management. Prior to that, he co-founded and managed an Asia-Pacific focused thematic equity fund at Sydney-based boutique Searchlight Asset Management. Liu was added as compliance manager, taking over this role from Diana Shang-Knudsen, starting 2 September, 2019.

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Pengana has appointed Bruno Santos to its distribution and marketing team as regional business development manager. Based in Brisbane, he would be responsible for managing relationships with Queensland and Northern Territory advisers. He joined from Russell Investments, where he was regional manager, Queensland. Prior to that he was a key account manager at Affinia Financial Advisers and senior client development manager at AIA Australia.

He had previously worked as head of compliance and company secretary at APP Securities, which was the stockbroking subsidiary of AIMS Financial Group. Adviser platform alternative WealthO2 has appointed Graham Hand as a non-executive director to its board, as the platform passes the $1.5 billion mark for funds under administration. Hand had 40 years’ experience in financial markets, including group treasurer and treasury managing director roles at large banks. He was also on the board of ASX-listed Absolute Equity Performance Fund, a committee member at Lazard Asset Management and fintech startup OpenInvest, and most recently he was co-founder and managing editor of Cuffelinks.

4/09/2019 5:19:40 PM

OUTSIDER

ManagementSeptember April 2, 2015 40 | Money Management 12, 2019

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

Hume has been hanging with the shoeless one OUTSIDER really wonders whether the “barefoot investor”, Scott Pape, is really barefoot given his book sales and the spotter’s fee he is probably owed by a particular superannuation fund. And it is on this basis, that Outsider also wonders whether the still somewhat shiny and new Assistant Minister for Superannuation, Financial Services and Financial Technology, Senator Jane Hume, fully understands just how some people in the financial advice community feel about Pape. You see it has been suggested that by referencing the performance of particular superannuation funds in his barefoot tome, Pape has helped drive inflows into those funds notwithstanding the fact that, as we all know, past performance is no guide to future performance. But Outsider knows never to stand in the way of a minister and a photo opportunity and so notes Hume’s recent tweet that she was hanging with Pape and his “gorgeous wife Liz talking to kids, financial literacy in schools, empowering families and changing lives”.

It will be interesting to see how this tacit ministerial endorsement impacts book sales, not to say the inflows into a particular superannuation fund, and Outsider suspects that any interest the Australian Securities and Investments Commission may have had in the provision of product advice has ended up in a bottom drawer.

Supping tea with the oracle REGULAR readers of Outsider will remember that he recently questioned what, precisely, born again One Nation Senator, Malcolm Roberts, would bring to last month’s Financial Services Council (FSC) Summit in Sydney. Outsider can now answer that question – plenty of quizzical looks and the odd blush. Outsider first noticed the good Senator during a morning tea break when financial services chief executives hob-nobbed, sipped their lattes, nibbled scones, compared notes and hypothesised about the future of AMP. Amid such glorified and senior company, Outsider wondered who Roberts had chosen to button-hole to advance his knowledge of the financial services industry only to find that the Senator was deep in conversation with one of Outsider’s young reporter colleagues, Chris Dastoor. Outsider later asked Dastoor what he had learned from his discussion with Roberts and, allowing for the fact that Dastoor may have been trying to maintain the exclusivity of his contacts, he discovered that Roberts believed Australian politics was in a mess. Accurate? Yes. But no news there.

An idea with very little currency OUTSIDER has never exactly been quick to embrace new technologies and still hankers after his old Olivetti portable typewriter when it comes time to bash out a newsflash for Money Management's always hungry readership. The only problem with Outsider using the Olivetti is that his young colleagues complain loudly about having to re-key everything into their confounded laptops – the young can be very intolerant. Which brings Outsider to the decision of

OUT OF CONTEXT www.moneymanagement.com.au

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the founder of social media platform Twitter, Jack Dorsey, who has apparently declared that unlike the founder of Facebook, Mark Zuckerberg, he has no interest in creating a digital currency. It seems that Zuckerberg’s outfit has launched a ‘new global currency’ called Libra and it had been speculated Dorsey might embrace the launch of a “Twitcoin’. Given the nature of social media and its generally loose grip of the facts, Outsider believes Dorsey’s decision to do nothing actually equates to doing a public service.

"He seems to want to run head-long into the arms of Donald Trump."

"I don't wait to be told by politicians as to what we're supposed to do."

- UK Labour leader Jeremy Corbyn on Boris Johnson's recent decisions.

- Mike Kane, chief executive of Boral, on Treasurer Josh Frydenberg's call to rein in share buybacks and dividends.

Find us here:

5/09/2019 1:17:53 PM

FOUR SEASONS, SYDNEY WEDNESDAY, 23RD OCTOBER Wednesday 23rd October

Recognise those who inspire

FINALISTS ANNOUNCED SOON! Money Management and Super Review will recognise the determination, commitment and amazing achievements of women in financial services with its 7th Annual Women in Financial Services Awards. Our goal is to raise the profile of women within the industry, and recognise the people that helped made that happen, regardless of their gender. Learn more about the Awards dinner at www.wifsawards.com.au Alternatively, scan the QR code below with your tablet/phone camera to visit our event page.

CATEGORIES Achievement Awards • BDM of the Year • Financial Planner of the Year • Innovator of the Year • Investment Professional of the Year • Marketing and Communications Professional of the Year

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Executive of the Year • Life Insurance Executive of the Year • Superannuation Executive of the Year

Advocacy Awards • Pro-bono Contributor of the Year • Mentor of the Year • Employer of the Year • Advocate of the Year Overall awards • Rising Star • Woman of the Year *

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*WINNER WILL BE PICKED BY MONEY MANAGEMENT AND SUPER REVIEW AND ANNOUNCED AT THE WOMEN IN FINANCIAL SERVICES AWARDS NIGHT 2019 ON 23RD OCTOBER

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30/08/2019 1:05:08 PM

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This document has been prepared by Praemium Australia Limited (ABN 92 117 611 784, AFS Licence No. 297956) (‘Praemium’, ‘we’, ‘our’, ‘us’). The document is for general information purposes only and intended to assist financial advisers in obtaining further information about our products and services. The information in this document is general nature and has been prepared without taking into account the objectives, financial situation or needs of any particular person and should not be construed as financial product advice. Praemium offers a range of services and products including Managed Account and SMSF reporting services, the Praemium SMA and the Praemium SuperSMA. Before deciding whether to acquire, dispose of or hold an investment in any Praemium product, investors should obtain and consider the relevant PDS or other disclosure document. Features and benefits vary between products, and not all of our products include all features referenced in this document. While we have taken all due care in preparing this document, Praemium and its related bodies corporate and associates will not be liable for any loss, harm or damage suffered by any person arising out of or related to its content, except to the extent of any liability implied by law which cannot be excluded. Praemium Australia Limited is the Responsible Entity of the “Separately Managed Accounts” registered Managed Investment Scheme (ARSN 114 818 530) and issuer of the Praemium SMA PDS. Diversa Trustees Limited (ABN 49 006 421 638, AFSL 235153, RSE Licence No. L0000635) is the Trustee of the Praemium SuperSMA and issuer of the Praemium SuperSMA PDS. Praemium Australia Limited is the Sponsor of the Praemium SuperSMA.For more information about Praemium and the products and services we provide, please refer to our website www.praemium. com.au, and refer to the relevant PDS or disclosure document.

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28/08/2019 10:45:08 AM

Money Management | Vol. 33 No 15 | September 12, 2019

Articles inside

How to Spot Elder Financial Abuse