Money Management | Vol. 35 No 21 | November 18, 2021

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Vol. 35 No 21 | November 18, 2021

13

INFOCUS

Crypto for consumers

ESG

24

Gender diversity

RATE THE RATERS

TPD insurance inside super

Industry hard to sell to new entrants

BY CHRIS DASTOOR

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How do raters feel about being rated?

IN the second part of this year’s Rate the Raters survey, Money Management invited the research houses to respond to some of the issues that have been raised by financial planners over the years and shed some light in regard to the ratings ascribed to their products and services by financial planners.

In their responses, research houses shared their views on areas including fund coverage, staffing, pricing, conflicts of interest and regulatory change.

The survey also gauged planners’ sentiment towards the most important metrics to their business when it came to selecting qualitative fund research or ratings providers.

According to 2021 data from the survey, these were website information and tools, the quality of research houses’ fund and fund company research as well as quality of its staff and client services.

At the same time, financial advisers were in agreement that the consulting services offered by the research houses were at the bottom of their wish list, with only 34% of respondents saying this was an ‘essential’ or ‘very important’ criteria in their decision making process.

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Full feature on page 14

28

TOOLBOX

INSTABILITY and over-regulation in the industry have made financial advice a difficult career path to sell, according to Lifespan Financial Planning.

Eugene Ardino, Lifespan chief executive, said he was unsure if the industry was doing a good job at advertising itself.

“Not that we’re advertising there’s anything wrong with it, but I don’t know there’s enough,” Ardino said.

“But on the same token when you’ve got an industry that is as stressed as ours, who’d want to be advertising it?

“The incidence of mental ill health is off the charts in our community, so if you’re one of those people suffering are you really wanting to make an effort to bring more people in?”

Ardino said work needed to be done before it was possible to promote financial advice as a good career path to get into.

“There are issues in terms of we’re maybe not selling the industry as a career path well, but it’s a pretty difficult career path to sell because it’s incredibly unstable,” Ardino said.

“The rules change all the time, interpretations change all the time, and penalties for making mistakes are very tough.

If you’re a young person looking for a career, there’s probably lots of other things out there that are more stable.

“There’s a lot of re-building to do before we can expect to see a high influx of new entrants which is a real shame.”

The loss of experienced Continued on page 3

ESG imbalance between client and adviser

BY LAURA DEW

THERE is an imbalance between advisers and clients over who brings up the topic of environmental, social and governance (ESG) investing.

Speaking to Money Management, Dave Rae, adviser at Federation Financial and a member of the Responsible Investment Association of Australasia (RIAA) certification panel, said advisers should not use ESG only if the client demanded it.

He said: “According to the RIAA, 86% of Australians expect the adviser to ask them about ESG. It is not the case that the client will necessarily raise the issue, they are waiting for the adviser to bring it up.

Continued on page 3

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November 18, 2021 Money Management | 3

News

How sustainable are thematic ETF returns?

BY JASSMYN GOH

DESPITE thematic exchange traded funds (ETF) enjoying great growth recently, questions have been raised about whether there is sustainable buying interest for these kinds of funds, according to a panel.

Speaking on Money Management's ETF webinar, The Perth Mint’s listed products and investment research manager, Jordan Eliseo, said thematic ETFs offered people to express a bet on a particular area of the market they were interested in.

“However, I do wonder just how sticky that money is going to prove to be or if it is very momentum focused and it’ll pile in while a particular sector of the market is outperforming and then it’ll all run away when it’s underperforming,” he said.

“If you look at the ETF market in Australia, whilst there’s over 200 products on the market the demand is very, very, concentrated. So only 10% of the products have basically 60% of the assets under management.

“So, one does wonder whether or not these thematic products will have sort of sustainable buying interest.”

Eliseo noted that as almost by definition, thematics were kind of active management as

investors were getting exposure to just a specific part of the market.

“You’re kind of engaging in a sort of form of stock selection through the ETF. There’s nothing bad with doing that, by the way, but it kind of goes against one of the core ethos’ that’s growing the ETF industry as a whole, which is low-cost exposure to the asset class as a whole,” he said.

Also on the panel, Phillips Wealth Partners director – senior financial adviser, Craig Phillips, said thematic investing resonated with investors who were tapping into the economic changes they could see and hear taking place around them every day.

“Investors can use these thematic or sector ETFs to gain a targeted exposure to compliment their core portfolio allocation,” he said.

“So as far as benefits of thematics relate to the timing of entry and exit points as it is typically less crucial. The more cyclical sensitive investment strategies and having a thematic aspect to the portfolio can improve the sort of portfolio returns because they’re typically lower correlation to the major regional or sector benchmarks.”

Industry hard to sell to new entrants Continued from page 1 advisers would also be an issue as newer entrants would be unable to take on the workload, without even taking into consideration there was not a sufficient supply of new entrants.

According to the Financial Adviser Standards and Ethics Authority (FASEA), there were 590 new entrants who had commenced their professional year since January 2019, as of September 2021.

Ardino said mature businesses had a higher capacity to be able to take on smaller clients at a loss because they had more profitable businesses.

“Newer entrants are going to struggle… newer advisers are looking to grow businesses from scratch or from lower or moderate bases and they’re really choosey about their clients,” Ardino said.

“It’s hard; the fixed costs of advice keep going up and the risks involved are very unforgiving if you make a mistake.

“The real focus is on making sure all your compliance is in order to an incredibly high degree and that costs money to do it properly.”

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However, Philips noted there were risks involved in investing in thematics.

“There’s the risk that the trend will take longer than expected to be established, there’s a lot of money in more concentrated area of these themes, or the risk that the actual theme doesn’t materialise at all,” he said.

ESG imbalance between client and adviser Continued from page 1 “There was a reluctance from advisers in the past because they didn’t have enough knowledge about it but now clients expect it.”

The RIAA research also found 90% of consumers felt it was important their advisers provided responsible or ethical options and 87% felt comfortable discussing their values with their adviser.

However, this contradicted research

by Research Affiliates that advisers’ use of ESG strategies was driven by client demand. In its global report, it found client demand was the primary motivation for 63% of advisers who used ESG strategies.

The study also found advisers lacked a written policy on ESG and preferred to discuss it face-to-face.

Rae said: “That doesn’t surprise me,

ESG is not an area where advisers have done well and a structured approach would be valuable so they know what they are going to bring up with clients and have a clear policy on it”.

A written policy would also help to ensure that advisers went through the same ESG process with each client rather than waiting to hear their preferences.

He also said clients were seeking more quantitative data on how their investment was contributing in a positive way, which could be difficult to provide as there wasn’t a standardised approach to reporting.

“Integrity of data is a problem, you won’t ever get 100% accurate reporting.

The non-financial metrics are a good starting point and they will improve over time thanks to regulation coming out of the European Union,” Rae said.

11/11/2021 1:12:23 PM

4 | Money Management November 18, 2021

Editorial

jassmyn.goh@moneymanagement.com.au

THE NEED TO SOLVE THE PY CONUNDRUM

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

Despite new entrants being needed to continue the advice profession, especially with advisers leaving in droves, practices are finding compliance around the professional year a burden and this issue must be solved before 2026.

THE GOVERNMENT and the financial advice industry need to work together to find a solution for an impending problem – the lack of new entrants.

While we know that financial adviser numbers have been steadily dropping over the last few years thanks to regulation and increased red tape, the full extent of this will not be felt until 2026. In 2026 financial advisers who do not have a Financial Adviser Standards and Ethics Authority (FASEA) approved degree qualification will be unable to continue as advisers.

Some advisers, of course, have already passed the FASEA exam but only intend to stay on as advisers until 2026 as they do not want to go through a degree.

It’s also no secret that the advice gap is growing and Australians are increasingly in need of financial advice.

In the past, like any other industry, the advice industry relied on new entrants to continue the profession.

However, now it has two problems – the advice

Associate Editor - Research: Oksana Patron Tel: 0439 137 814 oksana.patron@moneymanagement.com.au Features Editor: Laura Dew Tel: 0438 836 560 laura.dew@moneymanagement.com.au News Editor: Chris Dastoor Tel: 0439 076 518 chris.dastoor@moneymanagement.com.au Journalist: Liam Cormican Tel: 0438 789 214 liam.cormican@moneymanagement.com.au ADVERTISING Account Manager: Damien Quinn Tel: 0416 428 190 damien.quinn@moneymanagement.com.au Account Manager: Amy Barnett Tel: 0438 879 685 amy.barnett@moneymanagement.com.au Junior Account Manager: Karan Bagai Tel: 0438 905 121 karan.bagai@moneymanagement.com.au

profession isn’t enticing enough to encourage people to join given the regulatory burden and the professional year (PY) itself is an extra compliance burden on advisory firms.

The time commitment, investment, checks, and supervising requirements means the PY year has been deemed by some as offering “limited value” to advice practices.

If this is the case then the industry is at an impasse – it needs new entrants but finds the

process of having PY advisers a compliance burden for them.

The Government and industry need to work together to solve this issue to make the compliance and process easier for practices to take on PY advisers.

Otherwise, come 2026 the number of unadvised Australians will only exponentially grow despite so many desperately needing advice.

Jassmyn Goh Editor

WHAT’S ON RG 146 Superannuation Virtual Workshop

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Editor: Jassmyn Goh Tel: 0438 957 266 jassmyn.goh@moneymanagement.com.au

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6 | Money Management November 18, 2021

News

FASEA Standard 3 industry consultation a genuine process: AFA

BY JASSMYN GOH

THE Association of Financial Advisers (AFA) has said it believes the education authority’s consultation on amending Standard 3 of its code of ethics is a genuine process.

This followed earlier comments that the Financial Adviser Ethics and Standards Authority’s (FASEA’s) consultation paper suggested it had preferred the second option it provided the industry with on changes to Standard 3.

AFA general manager for policy and professionalism, Phil Anderson, said he believed the consultation was a genuine exercise and encouraged advisers and those in the financial advice industry to make submissions.

“Most of us would favour the first option and FASEA have provided alternatives for others to express their view on,” he said.

“There’s four weeks of consultation so we should get an

outcome before the end of the year because they’ll no longer have power in 2022. They’ll need to register a change to the legislative instrument and get that legislative instrument registered by the end of the year.”

The first option given by FASEA to amend Standard 3 was: “You must only advise, refer or act where you do not have a conflict of interest or duty, being that which could reasonably be expected to induce you to act other than in the client’s best interest”.

Anderson said the AFA wanted FASEA to be clear that this would apply when there was a material conflict and not for incidental or peripheral conflict.

“In terms of the guidance, want to be very clear that it says, for example, that life insurance commission’s don’t invalidate that point about reasonable and inducing someone to act in a way that’s inconsistent with the best interests of the client,” he said.

“It’s good that they are looking at making a change, and if option one is the outcome then at least it’s a much better outcome than Standard 3 as it is now as any conflict is a breach of the standard.”

Anderson noted that even if Standard 3 was enacted as it was currently worded there was room in the guidance to do what was currently permitted by law, which was to be paid a commission for life insurance advice as long as the advice was consistent with the best interest of the client.

Pengana ethical fund scores big with Tesla

BY LAURA DEW

TESLA has been a “huge winner” for Pengana’s international ethical fund despite questions about its environmental, social and governance (ESG) scores.

Speaking on a webinar, Bradley Amoils, manager of the Pengana Axiom International Ethical fund, said Tesla was a top 10 holding for the fund.

“Tesla has been a huge winner for us, the combination of operating criteria such as delivering on cost, on target, at the times required and having financial measures of cashflow, balance sheet improvements which were commensurate with that, it really made it a stock we could embrace,” he said.

“It has been a very successful holding for us and one where we see significant upside in the medium-term.”

In the past year, shares in Tesla had gone up 175% versus returns of 32.4% by the S&P 500.

From an ESG perspective, however, ratings agency S&P said the electric vehicle manufacturing company scored well on low carbon strategy but low on ‘social’ areas such as human capital development and labour practices. It was a constituent in the S&P 500 ESG Index but only received an overall score of 22/100.

US-based asset manager Axiom took over the fund earlier this year after the departure of the two internal

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previous managers, Stephen Glass and Jordan Cvetanovski, who left to set up their own boutique firm.

At the time, the fund maintained its existing ethical framework and was overlaid with Axiom’s ESG framework. This involved the utilisation of a negative screening process to avoid investment in companies that derived significant operating revenues from direct and material business involvement in these sectors.

The second high-performing stock which Amoils highlighted was Moderna, producer of a vaccine against COVID-19, which rose by 219% over the past year to 9 November, 2021.

“Moderna has been a holding for three or four quarters now and we bought it at the start of the year when expectations about the vaccine rollout were very moderate and people did not realise the potential of the company and their earnings power,” Amoils said.

He said, at one point, Moderna was one of the fund’s largest holdings but that the team had since moderated its allocation to the biotech stock and it now sat outside of its top ten holdings.

The Pengana Axiom International Ethical fund had returned 29% over one year to 30 September, 2021, according to FE Analytics, versus returns of 27% by the global equity sector within the Australian core strategies universe.

Failed MySuper members not moving funds

BY CHRIS DASTOOR

DATA from the Australian Prudential Regulation Authority (APRA) has found only a small proportion of superannuation members in products that failed the Your Future, Your Super performance test have moved funds.

This was despite having received the required communication that notified members that their product was “officially” underperforming.

From the one million member accounts in products that failed the test, around 68,000 closed, which accounted for 7% of total accounts in the failed products or 4.2% ($2.2 billion) of assets.

APRA urged super members to actively engage with their super to maximise their retirement futures, especially those whose MySuper products failed the recent performance test.

The results of the first annual performance test of MySuper products was released on 31 August with 13 of the 76 MySuper products assessed having failed.

APRA executive board member, Margaret Cole, said members had every right to consider whether they could get better outcomes elsewhere.

“The trustees of APRAregulated superannuation funds have a legal duty to act in the best financial interests of their members, and APRA is working hard to ensure they fulfil that obligation,” Cole said.

“That’s not a reason for members to sit back and avoid taking steps to act in their own best financial interests by ensuring they are in a high performing super product.

“Research shows that the difference in outcomes between a top product and an underperforming one can amount to hundreds of thousands of dollars over a working life.”

10/11/2021 5:30:04 PM

November 18, 2021 Money Management | 7

News

How risk advisers can give general advice

BY CHRIS DASTOOR

WITH the final Financial Adviser Standards and Ethics Authority (FASEA) exam this month, risk advisers could still turn to general advice if they do not want to continue the education requirements, according to Australian Advisory.

Australian Advisory principal, Mark Dorling, said risk advisers needed to be aware there were other options if they did not pass the exam or did not want to do it.

“We’re having a lot of conversations [with advisers] who still didn’t know what they wanted to do, that’s a bit alarming for me,” Dorling said.

“If you’re an old risk writer you don’t need to go through all the education standards and up-skilling you can do general advice.”

Studying and operating a business at the same time while doing the exam and the tertiary requirements could be a big ask for a lot of advisers, which meant this could be an attractive option for those that did not want to study.

“An adviser studying is not making money for the business,” Dorling said.

“If you’ve passed the FASEA exam and you want to go through, a full advice adviser can still do general advice for clients that don’t require the hand-holding.

“Or, if you’re a general advice adviser and you have a client that you know needs more then you can refer that to a full advice adviser.”

Dorling said the restrictions to general advice were outlined in the Australian Securities and Investments Commission (ASIC) regulatory guide 244.

“There’s three major things we can’t do with a client under general advice: we can’t offer a personal opinion, we can’t give a recommendation, and we can’t take personal circumstances into account,” Dorling said.

“We can only give statement of facts, which is like something in the adviser guide or a product disclosure statement from product providers.

“We can’t look at assets, liabilities, dreams, aspirations and things that; we don’t have SOAs [statements of advice], the client just tells us what level of cover they want.”

Gen Z disengaged from superannuation

BY LIAM CORMICAN

RESEARCH from NGS Super shows a disconnect between the increasing investment appetite of Generation Z Australians and their propensity to pursue superannuation opportunities.

According to the research, almost one-third of Gen Z Australians said the pandemic encouraged them to save more, 31% said it prompted them to explore investment options such as shares in cryptocurrency, and a third were keen for advice on how to invest.

Despite these positive demand indications, two-in-five said they did not care which super fund they were with while only 15% wanted to invest more into their superannuation.

NGS Super said this disconnect between investment appetite and interest in super could lead to a generation of Australians who would live and work for longer than ever before but may still not be as financially secure as they should be in retirement.

Laura Wright, chief executive at NGS Super said: “The pandemic has made Gen Z hungry for more financial advice and investment options, but they’re looking for short-term satisfaction and we’re increasingly seeing this generation make investment decisions based on limited information via social media”.

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“Gen Z is entering the workforce in droves and we’re facing a critical moment in time to educate and engage with Gen Zs about their super to help them build a more financially secure and sustainable future.

“It might not be surprising that our Gen Z workers are focusing on shorter-term investments rather than their super, but it is concerning how much they are potentially sacrificing for their future. Super can be a very powerful tool in a young person’s investment toolkit, and it’s being disregarded.”

Employers, financial advisers, and super funds were the least popular sources of financial information for Gen Z. Free financial advice from parents was the most popular source of information for 56%, closely followed by friends at 36%.

‘Finfluencers’ (financial influencers) were the fifth most relied on source of financial advice, with one-infour Gen Zs sourcing their information primarily from YouTube (59.9%) and Instagram (55.6%).

A further 60% of Gen Z were not aware they could access free advice from their fund.

“Our younger generations were disproportionally impacted financially by the pandemic, with as many as three-in-10 Gen Z Australians taking up the early release scheme and cashing out their retirement savings,” Wright said.

Gender overlooked in ESG GENDER diversity is an overlooked element of environmental, social and governance (ESG) investing and will become a bigger part of responsible investing in the future.

A report from Research Affiliates found that climate change was the most important ESG theme to investors, with gender diversity ranking last.

Moya Yip, Active Super head of responsible investment, said climate change was the biggest priority for fund members but expected gender diversity to become a bigger priority in the near future.

“For us, climate change risk is the number one risk facing our members and it’s the one we get the most member inquiries about and feedback,” Yip said.

“But I find it interesting that gender diversity is at the bottom, but I think that is going to change over time. Black Lives Matter has been an American thing, but if we look at what has happened in the US, managers over there have picked up their game to look at diversity and inclusion.

“It’s quite interesting to see and the more spotlight that’s placed on it, the more people will focus on it and do something about it.”

In its ‘Turning the tide - Impact 2020/21’ report, Active Super voted in 35 companies it invested in to improve board representation of women.

“Good governance is having greater gender and other diversity in leadership,” Yip said.

“Both in senior management and board level because in the long run it leads to better outperformance and valuation of security.

“We advocate for greater diversity, inside our policy we have a sustainable responsible investment policy.

“We want to show that by the way we vote; we have voting guidelines where we want to see action.”

11/11/2021 9:07:55 AM

8 | Money Management November 18, 2021

News

Has increased inhousing overlooked director switching?

BY JASSMYN GOH

THE complexity that comes with superannuation funds merging and bringing investment activity inhouse could have led to the potential conflict of interest risk that has led to the corporate regulator finding switching behaviour.

The Australian Securities and Investments Commission (ASIC) recently found failure in super funds identifying conflicts of interests with directors and executives regarding personal investment switching based on their knowledge.

Australian Institute of Superannuation Trustees (AIST) chief executive, Eva Scheerlinck, said as funds became larger to an extent that they were inhousing a lot of their investment activities there was more immediate knowledge of what was happening in markets.

“This is something that perhaps in some funds has been overlooked as a potential risk. It is something that all funds need to be very aware of and make sure that they have strong policies that are well understood by everyone in the business so that they don’t contravene their obligations

there in relation to insider trading or anything else,” she said.

“I’d rather see the actual report from the ASIC before making any comment about whether anyone has done anything wrong or not.

“The industry had a lot of regulatory change in recent years coupled with a lot of growth. You would hope that this would not be something that would have been overlooked as part of that process of insourcing investment functions.

“I was surprised to read about the findings but

ASIC urged to review life insurers’ use of blanket exclusions

it will certainly make this an area of immediate focus for months.”

Scheerlinck said AIST was reviewing its governance code for members in the first half of 2022 which had been delayed due to the introduction of the Financial Accountability Regime (FAR) to avoid duplication.

“This will be a good area for us to also include in our review, under the investment governance frameworks of funds in terms of us, and perhaps looking at including that as a reporting requirement to AIST that they’re across it and that these resources are being appropriately managed,” she said.

“There’s not a lot of duplication with FAR. So, it’s a good opportunity for us to now have a look at how the ASX [Australian Securities Exchange] corporate governance framework has changed over the last couple of years.

“This would include what the expectations are at an international level are in terms of good corporate governance within the pension fund sector and, again, lift the governance standard expectations for profit to member super funds.”

IFM consortium to acquire Sydney Airport

BY LAURA DEW

THE Australian Securities and Investments Commission (ASIC) has been urged to investigate those life insurers which use blanket exclusions based on people’s mental health.

A report from Public Interest Advocacy Centre (PIAC) found the use of blanket mental health exclusions was inconsistent with insurers’ obligations and may therefore be unlawful.

Problems reported with policies including refusals to offer insurance, offers with a broad mental health exclusion or insurance without a mental health exclusion but with an unreasonably high premium loading.

“In PIAC’s experience, these issues arise most significantly in the life insurance market. The routine denial of cover or use of extremely broad mental health exclusions is particularly prevalent in relation to income protection and TPD [total and permanent disability] insurance,” the report said.

“This occurs for people who disclose a history of a diagnosed

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mental health condition, as well as people who disclose symptoms of a mental health condition but have never been diagnosed.”

Virgin Money, Medibank and HCF policies were namechecked by the body as containing standard policy terms which excluded benefits for mental health disorder or mental illnesses It noted that ASIC had “not played an active role” in enforcing discrimination laws against insurers and urged it to conduct a review.

“ASIC should conduct a review to determine whether blanket exclusions for mental health conditions continue to be used in life insurance policies.

The Life Insurance Code of Practice should include a commitment not to design and sell products which incorporate a blanket mental health exclusion in the general terms of the policy,” it said.

“ASIC should investigate, as recommended by the Productivity Commission, life insurance industry practices relating to the provision of services to those with mental health conditions.”

BY CHRIS DASTOOR

AN IFM-led consortium has entered into a scheme implementation deed to acquire 100% of Sydney Airport.

Sydney Aviation Alliance (SAA), which included IFM Australian Infrastructure Fund, IFM Global Infrastructure Fund, AustralianSuper, QSuper and Global Infrastructure Partners comprised the consortium that would take over.

The consortium previously had two proposals rejected, but was granted due diligence on the third proposal.

Under the scheme, Sydney Airport security holders would receive the following considerations • UniSuper would transfer its existing interest of 15.01% in Sydney Airport for an equivalent interest in the holding structure of the consortium; and • All other security holders would receive $8.75 cash per stapled security.

The scheme valued Sydney Airport at approximately $23.6 billion and represented an uplift in equity value of approximately $1.3 billion to the price of $8.25 on the business day prior to the announcement.

The Sydney Airport boards unanimously recommended that security holders vote in favour of the scheme.

Meetings about the scheme were expected to be held in the Q1 of 2022.

10/11/2021 12:39:15 PM

November 18, 2021 Money Management | 9

News

Advice industry associations reply to calls for suicide research

BY LIAM CORMICAN

THREE industry associations weighed in on whether they should provide funding for research into whether regulatory change had any effect on suicide in the financial advice industry.

The responses came after a leading suicide expert called for further research to be conducted in the space, as reported in a recent Money Management article.

The Financial Planning Association of Australia (FPA) declined to comment on the question of whether it would provide funding for research into the issue, but pointed to Deakin University’s ‘Australian Financial Advisers Wellbeing Report 2021’.

The report found financial advisers had a 64% higher chance of being in a moderate mental health risk group, a 51% higher chance of being in a high mental health risk group and a 11% higher chance of being in a very high mental health risk group, compared to the average Australian.

On the same question of whether the industry bodies should provide funding for research into advice industry suicides, the Association of Financial Advisers’ (AFA) chief executive, Helen Morgan-Banda, said “this is a serious, industry-wide issue and further research could be of benefit for advisers and the industry as a whole industry”.

The response from a Financial Service Council (FSC) spokesperson was that the organisation was “sensitive to the issues facing the advice community and [had] been

Standard 3 amendment likely to be only change by FASEA

actively promoting the value of the sector in meeting consumer needs and supporting their financial decisions”.

Morgan-Banda from the AFA said it had been particularly concerned for the mental wellbeing of its members over the past two years, following the Royal Commission and the “tsunami of regulatory reforms” which had significantly increased personal and organisational compliance requirements.

“Recent studies such as the one conducted

by Deakin, e-lab and Dr Adam Fraser sponsored by AIA, have looked directly at the mental wellbeing of advisers. This research assists in us all gaining a deeper understanding of why greater levels of suicide have been recorded in the industry over the past two years,” Morgan-Banda said.

“They have also helped shed light on the seriousness of the issue of mental health amongst advisers and has been a big part of AFA’s focus of late in terms of supporting advisers through various support mechanisms.”

Do women feel like they belong in the financial advice industry?

BY JASSMYN GOH

BY CHRIS DASTOOR

POTENTIAL changes to the education authority’s code of ethics standards, except Standard 3, are unlikely given the authority will transition to Treasury next year.

Association of Financial Advisers (AFA) general manager for policy and professionalism, Phil Anderson, said given the Financial Standards and Ethics Authority (FASEA) existed until the end of 2021, any changes before the end of December would potentially impact exam being held next year.

FASEA announced it was considering amending the wording of Standard 3 of the code of ethics. However, Anderson said there was not any more time to amend other standards.

“We’ve run out of time, Standard 3 is the only one where they have said they intend to consult on changes,” he said.

Anderson said there still needed to be changes to other standards or changes to guidance around the standards.

“We still have issues with Standard 4 and the expectations that they seem to put in place around existing clients giving consent, again, after the start of the new regime, and particularly when it comes to life insurance clients,” he said.

“There are also issues with Standard 7 and the definition of ‘fair value for money’. How is that to be defined when it really needs to be assessed in the eyes of the client? So, there’s still some things that we would like to have looked at and whether the solution is through the standard, or through the guidance.

“The other thing that is most commonly spoken about is scoped advice and the extent to which you need to complete a full fact find and the ability to provide limited advice in the context of the references to likely future circumstances.”

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FINANCIAL advice needs to appeal to women and make them feel safe, otherwise there will be a struggle to attract talent and gender diversity in the industry, according to a panel.

Speaking at an Association of Financial Advisers (AFA) webinar, Angela Godfrey, director of Angela Godfrey and Associates Change Management, said it was important for firms to maintain strong culture to attract and retain talent.

This meant the industry faced the issue of how to encourage women to feel like they belong as part of the industry. Despite making up over half of the workforce in professional services, they only made up 20% of adviser roles.

AFA Inspire committee member, Georgia Mara, said she joined the organisation to help support women in the industry.

“The reason I joined the AFA Inspire team was to help support women who have had experiences where they’ve not necessarily felt as though they have a

sexual harassment claim to make but they’ve been made to feel ridiculed, isolated, uncomfortable within the workplace,” she said.

“For my experiences, I really internalised the messages I received throughout my career, specifically from certain men about the way that I look or the way I present myself.

“It has taken me a lot of time to rebuild a lot of confidence that was lost after some specific events.”

She said AFA Inspire built a community for women and men to talk anonymously about their experiences.

“It’s taken me years [to get over] and even today there will be moments where I get that feeling of imposter syndrome,” she said.

“Like I don’t deserve to be here, I’m not smart enough to be here because I’m just a blonde girl and I’m just here because someone wanted to look at me.

“That message that I heard years ago that I’m still that person and it takes a lot of time and a lot of self-reflection to get over that.

10/11/2021 2:29:57 PM

10 | Money Management November 18, 2021

News

Most adviser losses from largest groups

BY OKSANA PATRON

THE number of advisers in Australia dropped by 59 for the week to 4 November from 18,823 recorded the previous week, according to data analysed by Wealth Data.

The losses were driven by AMP Group, CBA Group and soonto-be-closed Commonwealth Financial Planning (CFP) which saw a departure of 12, 10 and nine advisers, respectively.

Additionally, AMP Financial Planning which currently had 635 advisers on its record slipped back to second spot while SMSF Advisers Network regained the top spot as the largest single financial planning group in the country.

The week also saw 35 licensee owners who had net gains of 42 advisers, while 35 licensee owners posted a net loss of 102 advisers.

Also, six provisional advisers were appointed this week while around 65 experienced advisers

dropped off the Australian Securities and Investments Commission (ASIC’s) Financial Adviser Register (FAR).

As far as losses year to date were concerned, very little changed as large groups continued to dominate the losses.

Synchron, Easton, NTAA, AMP and IOOF all lost over 100 advisers each.

Wealth Data director, Colin

Williams, said: “To put the losses at the five groups into context, the losses in percentage terms range from (-18.25%) at Easton to (-25.3%) at IOOF with an average of (-21.91%).

“For all adviser groups over the same period the losses are (-9.08%). If we remove the bottom five from the results, the net loss of all advisers would be (-4.55%).”

Lithium firm sees over 9,500% gains in three years

BY LAURA DEW

WHILE much focus is given to the mining of coal, the two best-performing miners of the last three years have been focused on lithium – used for batteries and electric vehicles.

Over the three years to 3 November, 2021, the best-performing stock in the ASX Metals and Mining index was Liontown Resources, a company engaged in the exploration of lithium. This returned 9,584% over three years.

The second was Vulcan Energy which described itself as “producing the world’s first, premium, battery-quality lithium chemicals with zero carbon footprint”.

This returned 5,655% compared to returns by the ASX 200 of 39% over the same period.

This compared to returns by Australia’s largest miners, BHP and RIO, of 35% and 48% respectively.

Other popular lithium producers included Mineral Resources, Pilbara Minerals and Piedmont Lithium, although none had seen such extreme gains.

Piedmont Lithium was up 553%, Pilbara Minerals was up 190% and Mineral Resources was up 187%.

One way that Australian investors could access lithium was via an exchange traded fund (ETF) with

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ETF Securities having launched a Battery and Lithium ETF. This invested in mining and technology companies that produced metals used for the production of lithium batteries and offered investors exposure to the shift to renewable energies.

The fund returned 118% over three years to 3 November, 2021, compared to returns of 48.7% by the commodity and energy sector within FE Analytics’ Australian core strategies universe.

Commenting on the rise of lithium, Joel Fleming, portfolio manager at Yarra Capital Management, said: “While the digitisation thematic has unquestionably created a myriad of new industries and company champions over the last decade, we see ESG [environmental, social and governance] as the next great acceleration, with significant spend required to address a range of environmental issues in particular.

“The recent strength in the lithium sector is a case in point, with the electrification theme well understood and production shifting to battery powered vehicles to support strong medium term demand forecasts. The major listed lithium companies were all microcaps in the recent past as this broad thematic continued to build.”

Crypto ETF breaks ASX records BETASHARES Crypto Innovators exchange traded fund (ETF) traded almost $40 million in its first day of trading in the Australian Securities Exchange (ASX), setting a record.

The ETF set a new first day record for trading value, beating the previous record of $8 million set in March, with trades of $39.7 million.

The fund provided exposure to a portfolio of global companies at the forefront of the crypto economy including pure-play crypto companies and diversified companies with crypto-focused business lines.

Alex Vynokur, BetaShares chief executive, said: “Investor demand for exposure to the digital assets theme is considerable as evidenced by the record investor interest in the BetaShares Crypto Innovators ETF. “We are excited to lead efforts to provide Australian investors with a regulated, cost effective, transparent and convenient access to the digital assets space.

“However, we would also like to stress the importance of diversification and as such, investments in digital assets should be considered as part of a broadly diversified portfolio.”

In light of the record demand and following a recent report from the Australian Securities and Investments Commission (ASIC), the firm was also planning to two dedicated spot-based ETF investing in Bitcoin and Ethereum.

These would offer investors access to cryptocurrency in a “familiar, transparent and investor-friendly way”.

“We are looking forward to building out a range of ETFs providing Australian investors a broad range of exposures to the digital assets ecosystem, including the expected launch of the 1BTC and 1ETH ETFs, which will provide access to the performance of the spot prices of Bitcoin and Ethereum,” Vynokur said.

10/11/2021 10:13:13 AM

November 18, 2021 Money Management | 11

News

Regulation not conducive to provide financial advice at scale: abrdn

BY CHRIS DASTOOR

THE UK’s Retail Distribution Review (RDR) has given a teaser for what the advice landscape in Australia could look like in five years, but only if the regulatory landscape becomes conducive to technological innovation, according to abrdn.

The firm, formerly known as Aberdeen Standard Investments in Australia, was still one of the biggest financial services firms in the UK. Brett Jollie, abrdn Australia managing director, said Australia had a lot to learn from the UK’s experience of the RDR. “A lot of what we’re seeing now, technology has been rolled out as a real solution over there more effectively than we’re seeing here,” Jollie said.

“It’s a challenging area right now; the regulations in Australia are not conducive to providing limits of personal advice at scale through technology.

“That is a burden hindrance to building out the technology solutions in this country. We need regulatory change, I think the Government recognises this, they’ve committed to reviewing

the sector.

“That’s one of the biggest differences we’re seeing between the UK experience. We are the largest platform provider in the UK, we run our own advice groups, we’ve rolled out technology to support not only our own advice groups, but thirdparty group and it’s been rolled out very successfully.”

Jollie said part of the firms’ integrated growth strategy for Australia was the development of independent digital investment solutions.

“This is bringing technology to Australia that we’ve developed in-house in the UK… our technology is utilised by over 50% of UK advisers,” Jollie said.

“This is technology to support advisers in the UK… they’re probably about five years ahead of us, so we’re bring that experience to the market.”

However, Jolie said the firm was still working through the uncertainties around regulation.

“It’s a problem for advisers because advisers are taking a very conservative approach to adopting these technology solutions,” Jolie said.

“They do exist, it’s just unclear to them whether they can demonstrate satisfying the legal and regulatory obligations, particularly best interest duty.

“It’s something we’ve identified as an issue but certainly we can learn from the UK experience.”

AMP exits life insurance with Resolution Life divestment

BY JASSMYN GOH

AMP Limited will divest its 19.13% equity interest in Resolution Life Australasia (RLA) for $524 million, completing the firm’s exit from its former life insurance and mature business, AMP Life.

AMP Life was sold to Resolution Life in 2020 for $3 billion including the equity interest.

An AMP announcement said the divestment was agreed to ahead of the expiry of the 18-month standstill period agreed as part of the 2020 sale. The divestment was expected to complete during the first half of 2022, subject to regulatory approvals.

AMP chief executive, Alexis George, said: “This divestment brings to a close our long and proud involvement in life insurance in Australia and New Zealand. It enables us to realise capital to further strengthen our balance sheet ahead of our demerger and continue supporting our businesses.

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“The separation of our businesses is progressing well and will continue until mid-next year as planned.

We will continue to provide transitional services to RLA, as agreed, and will have a shared customer and adviser connection into the future.”

AMP and Resolution Life had agreed to settle postcompletion adjustments and certain claims between the parties, subject to various limitations and exclusions, which resulted in a net payment of $141 million to RLA from AMP. AMP partly provisioned for these items but following the acceleration of this settlement will record an additional one-off expense of approximately $65 million in FY21.

AMP noted the divestment would strengthen its available capital by around $459 million and this would provide flexibility ahead of its planned demerger of AMP Capital’s private markets business in the first half of 2022.

‘War for talent’ in advice industry A “war for talent” will mean organisations need to prioritise culture to attract staff as the adviser industry shrinks in half by 2023, according to a panel.

Speaking at an Association of Financial Advisers (AFA) webinar, Angela Godfrey, director of Angela Godfrey and Associates Change Management, said in 2018 there was 27,000 advisers and with predictions of 13,000 by 2023 it would be a “war for talent”.

“It is going to be a war for talent so you must work at creating a really good culture because culture is king,” Godfrey said.

“It means you’re going to attract new talent and retain them and the other important thing is, it has to come from the top.”

Jasmine Tocock, Netwealth training and relationship manager and Inspire – Victoria co-chair, said more women had joined the industry but there had been a catch.

“I’m definitely seeing a trend of more support staff being females rather than males, particularly in just a couple of firms that I’ve worked in,” Tocock said.

“That’s not necessarily discriminating with males going up to be planners it just seems to be a trend since I’ve been in the industry.”

According to data from the AFA, women only made up 20% of financial planner roles.

Apart from working inside in the industry, there was also the unconscious bias that planners could have towards clients.

“It’s not just the financial planning industry itself that seems to have this unconscious bias, it’s also towards the clients and how financial planning is selling to the clients,” Tocock said.

“In [statement of advice] SoA templates most assume the first client is a male and the second is a female and even going as far when doing insurance and selection occupations under female as homemaker.”

10/11/2021 11:25:51 AM

12 | Money Management November 18, 2021

News

Super performance tests increase the value of advice

BY LIAM CORMICAN

THE “blunt” nature of the superannuation performance test means the role of financial advisers in educating their clients is becoming more and more important, according to Vision Super.

Speaking at a Financial Services Institute of Australasia (FINSIA) webinar, Emma Robertson, Vision Super head of investment operations, said the super fund had been conflicted by their continual repetition of the phrase “past performance is no guarantee of future performance” and a “blunt” performance test based entirely on past performance.

“So, we do need an education and advice piece around understanding how members can properly assess the capabilities of the funds and compare it,” Robertson said.

She said the super industry needed education, robust and transparent data and independent advice.

But one of the challenges facing super at

them moment, Robertson said, was that it was difficult to source “truly independent advice”.

Kristian Fok, CBUS Super chief investment officer, said the performance test had a ‘perverse’ effect in that it promoted short term decision making even though products were assessed over an eight-year time horizon.

“So, you can do the maths, and if you happen to have a really strong period that rolls off, you know what you have to achieve, for instance, if you’re on the edge,” he said.

“I think if you’ve had consistent

performance year by year, and you’ve got a margin, then you’re probably going to think about things a bit differently.

“So, you’re going to have these sort of haves and have nots in terms of the ability to execute.”

Georgie Dudley, JANA head of business strategy and innovation, added that the need to hold the industry to account, highlighted by the performance test, should be balanced with the effect it had on members.

“One of the things that we do find a bit challenging with the framework is that it puts a lot of pressure back on a member to then try and look at ‘well is the forward-looking potential performance of a fund consistent with that historical analysis?’,” Dudley said.

“Ultimately past performance is no guide to future performance, we can all agree to that, but I think at the same time, we can’t completely throw that out the window in terms of saying we don’t care about performance because as an industry I think we have to hold ourselves to a higher bar.”

Fiducian buys PCCU’s financial planning business

US companies warm to ESG theme

BY OKSANA PATRON

AFTER lagging behind Europe on environmental, social and governance (ESG) matters, the US has “warmed up” to the theme and developing companies in this space, according to Pengana.

Speaking on a webinar, Ted Franks, portfolio manager on the Pengana WHEB Sustainable Impact fund, said he found more opportunities in the US than before.

The fund now had over half of its exposure in North America and 20% in Europe.

At this month’s United Nations Climate Change Conference (COP26), US President Biden announced US$555 billion ($746 billion) in clean energy tax credits and incentives but did not lay out short-term targets for emission reductions.

“Traditionally, Europe has been stronger on impact and ESG companies so the universe has been overweight to Europe and they can tell a better long-term story about being driven by sustainability,” Franks said.

“What has happened now is the US has warmed up enormously

FIDUCIAN Financial Services has acquired People’s Choice Credit Union’s (PCCU’s) $1.1 billion financial planning business.

The acquisition was expected to strengthen distribution in South Australia and Northern Territory, lift funds under advice to $5 billion and grow its national adviser network to 92, the company said in the announcement made to the Australian Securities Exchange (ASX).

Total funds under management, administration and advice (FUMAA) was expected to increase to $12.3 billion post-acquisition.

Fiducian said it would pay $12.6 million from internal cash resources with 70% being up front and the rest after 12 months for a recurring revenue of $7.6 million. Additionally, the company said it already had processes in place to ensure that completion “involving the transition of clients, staff and contracts, can occur in the coming months consistent with the agreement signed today”.

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BY LAURA DEW

particularly with the listing of special purpose acquisition companies (SPACs). Quite a lot of interesting sustainability companies have come to market in the last year and a half.”

SPACs were defined as a company without any commercial operations that were formed to raise capital through an initial public offering for the purpose of acquiring or merging with an existing company.

However, not all of these SPAC opportunities were viable options for investment, Franks said.

“Most of these have been grossly overvalued and have struggled to raise finance,” he said. “The pickings of the right companies through SPACs has been thin and we are quite skeptical about it but that is where the new, interesting companies are coming from that we wouldn’t have had access to before.

“It’s a flowering of US venture capital, whether from Silicon Valley or the industrial complex, these interesting companies are available in public markets and that’s definitely of interest to us.”

11/11/2021 11:42:46 AM

November 18, 2021 Money Management | 13

InFocus

BRINGING CRYPTO INTO THE MAINSTREAM After years under the regulatory radar, Laura Dew writes, cryptocurrency has finally hit the mainstream with a succession of announcements aimed at making retail access easier.

WHILE CRYPTOCURRENCIES HAVE seen sharp gains in recent years, they have managed to avoid the glare of the regulator and have not been widely used by retail investors.

But the volume of people accessing it in unregulated ways, often seeking advice from social media and lured by the potential for huge gains, has led the corporate regulator to take a closer look and consider approving retail products.

A report from the Australian Securities and Investments Commission (ASIC) into cryptocurrency, which released its findings at the end of October, gave the green light for firms to launch products in the space.

While this came with numerous caveats, it was the signal exchange traded fund (ETF) providers had been waiting for with BetaShares and VanEck both announcing plans to launch spotbased Bitcoin ETFs. This would put Australia ahead of the United States which was still awaiting regulatory approval for these type of products from the Securities and Exchange Commission (SEC).

BetaShares had already launched its Crypto Innovators ETF on the Australian Securities Exchange (ASX) which broke records by trading almost $40 million on its first day. Rather than investing directly in the asset, this invested in pure-play crypto companies and diversified

ADVISER ESG SURVEY

companies with crypto-focused business lines.

Luke Marshall, senior partner at KDM Financial, said around one-in-10 of his clients asked about cryptocurrency but that advisers were hamstrung as the asset was an unregulated product.

“It is something we are looking at but the frustrating thing is that we legally can’t do anything about it. We can talk about it in a general sense for education purposes but we can’t give specific recommendations,” he said.

“Now BetaShares have that product, that’s at least one product out there that we can talk

about and hopefully it won’t be too long until that is on platforms.”

However, Dave Rae, whose firm Federation Financial had an older client base than KDM, said he had not received any enquiries and expected it would be the preserve of those in their 20 to 30s.

Another move aimed at retail investors was an announcement by Commonwealth Bank (CBA) that it would be making the top 10 currencies available on its app. The bank said it had noted a “large number of clients” were already accessing the asset via crypto exchanges.

Marshall said the decision by

CBA was an “ingenious” way for the big four bank to target younger consumers after it ended its Dollarmites program in October. The decision to hold only the top 10 currencies meant investors would avoid the volatile ‘Wild West’ currency options.

“It is an ingenious move by CBA to attract younger clients.

Younger, Gen Z clients feel disenfranchised with finance, they can’t afford a property and feel locked out of the share market so they are sitting on the sidelines but now they have the opportunity in cryptocurrency,” Marshall said.

However, others warned investors may be falling guilty to ‘herd mentality’ and chasing market trends.

Dale Gillham, Wealth Within chief analyst, said: “Until recently, trading cryptocurrencies was considered very high risk, as it was largely unregulated, which encouraged dodgy practices by some providers.

“However, the news from CBA and the intentions of ASIC to regulate this market does add some respectability, which will reduce some of the risks Australians have been subjected to when trading cryptocurrencies.

“That said, many investors fail to learn from the mistakes of the past and cryptocurrencies are just the latest vehicle investors are jumping into in the hope of making some quick gains.”

67%

28%

76%

Use ESG products

Believe ESG is not important to the firm’s value proposition

Do not have a written ESG policy

Source: 2021 Research Affiliates ESG Survey Report

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14 | Money Management November 18, 2021

Rate the Raters

HOW DO RATERS FEEL ABOUT BEING RATED? Oksana Patron examines how research houses feel about the ratings ascribed to them by financial planners and how they addressed the potential conflict of interest areas.

THE SECOND PART of Money Management’s ‘Rate the Raters’ survey has traditionally asked financial planners to rate research houses on a range of measures.

This year, Money Management has invited the research houses to share some insights of their own and address some of the most contentious issues that have been raised consistently by financial planners over recent years.

All the main providers of independent research in Australia

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were contacted for this exercise and asked to shed light in regard to the ratings ascribed by financial planners to their services and were asked whether they saw any particular areas that required further improvement.

One of the concerns was around the quality of qualitative research offered by research providers and transparency over how their coverage was being decided. Money Management asked research houses to explain their processes.

Lonsec said it employed a team of over 60 analysts who undertook regular meetings with close to 200 fund managers and superannuation funds. It noted that it would rate “any fund that is prepared to undertake” its ratings process.

According to the firm, the execution of the best interest duty depended on how well financial planners understood the product that they were recommending and whether they were able to explain it to their clients.

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Rate the Raters

“We believe that qualitative research permits a deeper understanding of the product, far beyond the numbers. We have a simple menu-based pricing structure for the process of the rating. The rating is, in no way, influenced by that payment,” Lonsec said.

Over the last five years, Lonsec saw over 180 downgrades while 66 funds were redeemed or screened out as they were considered not appropriate for investment.

Its competitor, Zenith, said its process included both qualitative and quantitative screens and the funds were rated on their investment merits and “not on external factors such as adviser demand or product funds under management [FUM]”.

Money Management's owner, data provider FE fundinfo, recently acquired Zenith, subject to regulatory approval.

“The screening process filters out sub-investment grade products so that we only invite quality products into the research phase,” the firm said.

This enabled Zenith to identify new products, lesser known names, and offer advisers “an unbiased and continually refreshed list of investment opportunities”, the firm said.

Zenith had a minimum of two analysts allocated to a product review and said it aimed to have analyst continuity from year to year to help ensure “a deeper dive into the fund” and remove any potential for bias.

Morningstar, on the other hand, stressed its commitment to the principle of independence, meaning the research house did not accept payment to produce qualitative research and ratings.

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“We produce analysis for the benefit of investors and their advisers, not asset managers. As a result, Morningstar will deliver their genuine opinion of an investment strategy and associated investment vehicles and will not hesitate to give a negative view when warranted. We believe this position supports the highest quality research,” the firm said.

The research house said its research coverage was driven by adviser and individual investor demand and the products were rated based on their assessment of whether it may be useful to investors.

Also, the coverage committee canvassed different parts of the Morningstar business to understand client demand for a particular product and to consider the fund flows into the given product.

Asked about their pricing with regards to added value, Morningstar said its value was in providing assistance to advisers in developing recommendations for their clients while mitigating risk.

“Our business model is subscription based, we do not accept fees from investment managers to deliver research or ratings; meaning that our fee is user based and recognises the extensive data that must be analysed in a fashion that supports the quality of our research without being encumbered by potential conflicts of interest,” the firm said.

SQM Research said it charged “a competitive flat fee for its adviser subscriptions with affordable plugin options such as direct equities research and property data”.

“Fund rating fees charged to managers are also flat, cost effective, and generally known by the industry,” SQM Research owner, Louis Christopher, said.

COVERAGE On the assertion of limited coverage of managed funds and low interest in new investment managers, Christopher said he believed his business was known for its “strong coverage of up-and-coming managers”.

He said approximately a half of all SQM’s rated funds had a FUM of between $20 million to $100 million, and the firm’s current fund coverage was around 350 ratings.

Lonsec said it currently covered almost 1,400 funds, exchange traded funds (ETFs), listed investment companies (LICs), and listed investment trusts (LITs). It rated approximately 200, or two-thirds, of registered fund managers in Australia.

However, the firm stressed, many new investment managers chose not to be rated by Lonsec, as a result of their inability to demonstrate experience or a track record.

“New managers coming into the market from overseas often have well established teams, with track records in other markets. Those issues can be taken into consideration as part of the ratings process,” Lonsec said in a statement, confirming that there was a significant interest among these funds in the Australian market.

Zenith said that its investment universe encompassed thousands of funds globally, however the company stated it was not in the business of “trying to rate every fund” but instead was aimed to provide a high conviction approved list.

“New investment opportunities are continually coming to market and we act swiftly to review new products. Our ratings of listed investment companies and

Continued on page 16

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Rate the Raters

Continued from page 15 exchange traded funds reflects this trend. We have increased coverage significantly to meet increasing adviser demand for more product structures,” it said.

At the same time, Morningstar said its goal was to cover a broad spectrum of investments that would meet investors’ portfolio construction needs. From an equities research perspective, Morningstar said it covered “virtually all of the Australian Securities Exchange (ASX) 100, the vast majority of the ASX 200 and a handful of ex-ASX 200 stocks with a bias towards high quality companies”.

“We may also look for opportunities to extend our coverage in an industry we already cover to leverage our knowledge,” Morningstar said.

“There is some meaningful work required in the initiation, and we would want to satisfy ourselves that the company in question will present meaningful investment opportunities for our clients through the cycle.”

From a fund research perspective, Morningstar said, it produced a “prospects” document every six months that outlined the new and prospective managers that were under consideration to be added to the coverage.

“One of our inputs is our assessment of whether an investment manager brings a differentiated offering that will be of benefit to investors, this includes new investment manager offerings,” it said.

CONFLICTS OF INTEREST The other concern often raised by advisers was the fact that research houses were often expanding into consulting/ portfolio solutions space which made them effectively act as product manufacturers and raised the question of conflict of interest.

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SQM Research dismissed this claim and said it would continue to “strictly and very deliberately stick to our vision of being a pure research and data organisation for this very reason”.

Answering the same question, Lonsec said it provided model or paper portfolios to assist advisers with their investment decisions for many years. The research house also said this view was supported by its analytics which indicated that there were many advisers who followed its models.

“Further assisting advisers and the dealer groups that they may be part of, with their approved product lists (APL) management and investment committee work, is a natural extension of this capability,” the firm said.

“Those two parts of our business research/consulting operate independently within Lonsec. We have a strict compliance framework in place to avoid any potential conflicts from arising.”

Zenith also stressed that consulting, understood as managed accounts portfolios management, and research were two separate business functions.

“Consulting has no vote in the ratings determination of a product.

Research has no vote on inclusion of a fund in managed accounts,” Zenith said.

“Consulting and external clients are notified and can act on ratings changes at the same time, for example consulting cannot

‘front run’. We have a compliance committee that monitors all consulting trading and ratings change disclosures and all staff are subject to open and closed periods for asset class reviews underway at any point in time.”

Morningstar said a broader range of the advice market now more than ever needed assistance, not just in investment selection, but in the combination of those investments in portfolios that would meet a client’s best interest.

“Whilst Morningstar is a research house first and foremost, we recognise that the needs of the market would benefit from our portfolio consulting and management capability,” it said.

REGULATORY CHANGE Commenting on to what degree the recent regulatory changes focused on commissions, including the end of the grandfathered commissions, and the collapse of the vertically integrated business models impacted the independent research, the research houses pointed to the following issues.

Christopher warned the move taken by some of the researchers to enter product creation such as running their own models presented a significant potential conflict for those organisations which was, according to him, the single largest issue today affecting independent research.

“The past events surrounding the downfall of van Eyk provide us

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November 18, 2021 Money Management | 17

Rate the Raters

all with an example on how badly this can end. As stated above, SQM Research will never walk down this path under my leadership,” he said.

“While no question the end of grandfathered commissions has meant many planners have left the industry, the collapse of bankowned vertically integrated business models has also offered opportunities for smart operators to go out on their own.

“In this light, SQM has had the strategy of offering relatively low-cost research options for the independent financial advisers (IFA) market in particular, while increasingly being able to offer full-service capabilities to larger networks without the above mentioned conflict issues.”

Morningstar was of a similar opinion and said the advice and investment industry had changed significantly, particularly since the Hayne Royal Commission.

“From a research house perspective, it has meant that research commercial engagements have somewhat shifted from large enterprise arrangements to smaller IFA businesses and smaller AFSLs [Australian financial services licences],” it said.

“Nevertheless, Morningstar’s focus remains the same, to assist advisers in their pursuit to assist clients achieve their personal goals through high quality independent investment research, end-to-end advice technology and managed portfolios.”

ADVISER FEEDBACK The findings from the second part of Money Management’s 2021 ‘Rate the Raters’ survey showed that ease of use of research houses’ information and tools, along with the breadth of information and easiness of integration with planning tools, was one of the most

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important metrics.

About 94% of advisers participating in the survey said this was either ‘essential’ or a ‘very important’ criterion to their business when choosing a qualitative fund research and ratings provider.

Advisers most appreciated Lonsec’s and Morningstar’s tools as 93% and 71% of participants, respectively, having said the website and information tools from these two researchers were either ‘excellent’ or ‘good’.

Similarly, advisers decided that the researchers’ ability of funds and fund company research, which included coverage breadth and depth, reporting formats, timelessness and responsiveness, among others, was the second most important criteria.

Over two-thirds of the respondents appreciated Morningstar’s and Zenith’s ability in this regard, while Lonsec managed to attract positive ratings from over 93% of advisers.

The researchers’ core strength, which was rated by 74% of respondents as either ‘essential’ or ‘very important’ metrics, saw 92.9% of those who voted in the study ascribed their highest ratings to Mornigstar’s which was followed by Lonsec.

Subsequently, more than half of those participating in the study gave their highest ratings for corporate strength to Zenith and 20% appreciated SQM Research in this regard.

The next two metrics that were either an ‘essential’ or a ‘very important’ criteria were staff and client services offered by researchers.

When it came to rating the research houses’ staff, advisers took into account factors such as staff quality, experience and turnover. High ratings were

“The past events surrounding the downfall of van Eyk provide us all with an example on how badly this can end.”

– Louis Christopher, SQM Research rewarded for client services focused on quality of presentation skills and proactive communication.

Under one-third of advisers who rated SQM Research in the study assigned the highest ratings for its staff and one-third rewarded the research house with the highest ratings for its client services.

Following this, approximately two-thirds of those who rated Zenith were of the opinion that the quality of its staff was either ‘excellent’ or ‘good’ and 61% said the same about Zenith’s client services.

Morningstar and Lonsec saw 82% and 87% of respondents, respectively, who were content with the quality of their staff and 71% and 80% who said the same about their client services.

This year, advisers were in agreement that the consulting services offered by the research houses were at the bottom of their wish list when it came to choosing an external research partner.

According to the survey, only 34% of respondents were of the opinion this was an ‘essential’ or ‘very important’ criteria in their decision-making process and, at the same time, around 15% described it as being a criteria that was ‘not important’.

Also, advisers were of the opinion that model portfolios offered by the research houses were not their top priority compared to other metrics.

According to the survey, the highest number of advisers ascribed this category the lowest ranking as ‘not important’.

11/11/2021 1:28:54 PM

18 | Money Management November 18, 2021

Asian equities

TOO BIG TO IGNORE Investors could be forgiven for overlooking Asia-ex Japan in their portfolios, Geoff Bazzan writes, but its forecast growth and consumption opportunities make it too important to ignore.

AT JUST AROUND 10% of the global benchmark, investors could be forgiven for overlooking the Asia ex-Japan region when constructing their portfolio of global shares and instead focus on the United States and Europe, which account for around 60% and 17%, respectively.

What is missing from this picture is that Asia is anything but small on virtually all other metrics. Accounting for 29% of global gross domestic product (GDP) (see Chart 1), the region is expected to remain the engine room of global growth as it recovers from the pandemic and

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to comprise some 50% of global activity by 2050, broadly in line with its share of global population.

Of course, these numbers include a de minimis allocation to China which, despite being the second-largest equity capital market in the world, accounts for less than 4% of the global MSCI All Country benchmark.

This means Asia is far more significant to the global economy than implied by its current index weight. In fact, there are more listed companies with a market value over US$1 billion ($1.3 billion) across the Asia ex-Japan

region than can be found in either the United States or Europe.

According to Factset, there are 3,387 of that size in Asia ex-Japan compared to 2,324 in the US and 1,487 in Europe.

In other words, Asia is simply too big to ignore.

From the perspective of an Australian-domiciled investor, even more interesting than the long tail of listed companies on offer is the range of potential industry and economic exposures Asia provides. Across the 11 constituent (benchmark) markets in Asia, investors are able to gain exposure to a myriad of industry

sectors and companies simply not found in the domestic market.

From leading-edge semiconductor manufacturing and design to the full chain of automobile manufacture and supply (both NEV and conventional), and underpenetrated consumer segments and nascent financial sector exposures, Asia offers a much wider and more diverse suite of investment options than are present in our local market.

WHY ASIA? There are many facets to investing in Asia. Perhaps the

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November 18, 2021 Money Management | 19

Asian equities most important long-term structural dynamic investors should consider are aligned to the vast opportunity afforded by the power of the rising middle-class populations across the region. A recent report by McKinsey and Company summarised it succinctly, when they noted that “Asia is the world’s consumption growth engine – miss Asia and you could miss half of the global picture, a US$10 trillion consumption growth opportunity over the next decade”.

The authors note that in 2000, the consuming class consisted of just 15% of the region’s population.

By 2030, it is estimated that some 70% of Asia’s population, or three billion people, will join the consuming class. Further, the composition of the consuming classes within Asia is likely to shift as incomes rise.

The inexorable shift in consumption patterns across the world’s growth engine from China in the North to ASEAN in the South and India in the West is likely to remain an enduring investment thematic for many years to come. Chart 2 shows the proportion of consumers by country compared to some non-Asian countries.

This opportunity is further supported by the relatively strong position of household balance sheets across the region. With household debt in most countries within Asia ex-Japan well below developed market norms, the potential for consumption growth to resume to the positive trend of pre-pandemic levels is well supported (see Chart 3, overleaf).

A SHINING EXAMPLE There are many examples of how this dynamic will manifest itself across the region, however none are perhaps as pervasive as India, the region’s, and indeed the world’s, most populated nation.

Within India, its largest company (and portfolio holding) Reliance Industries is a powerful example of this opportunity.

Reliance Industries is India’s largest private sector company and the country’s largest

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Chart 1: Asia ex Japan’s GDP vs MSCI Asia ex Japan weight as a % of AC World over time

Source: Jefferies, MSCI, IMF

benchmark constituent, with its aggregate turnover accounting for almost 3% of India’s GDP and some 9% of the country’s total merchandise exports.

Historically, the business had its origins in chemicals and refining, operating one of the world’s most efficient and integrated refining and petrochemicals plants. The company has continued to invest in its legacy businesses, as well investing heavily in new energy technologies with an ambitious target of being carbon neutral by 2035.

Reliance under its chair and chief executive, Mukesh Ambani, has also embarked on a remarkable transition over the last decade. Specifically, Reliance has established market-leading positions in India’s burgeoning retail and mobile telecoms sectors. From a standing start just a few years ago, both businesses had grown to account for almost 40% of consolidated group earnings before interest, taxes, depreciation (EBITDA) as at the end of 2019 and are set to account for an even higher share in the years to come.

Such a collection of highquality, market-leading businesses under the one roof has led one leading research house to refer to the company as

Chart 2: Share of the global middle class by region (in percent)

Source: Brookings Institution

“India’s Exxon, AT&T and Amazon rolled into one”.

With over 12,700 stores across more than 7,000 towns and cities and over 33 million square feet of floor space, Reliance Retail is by far the largest retail business in India. Comprising a multi-channel strategy across five consumption baskets straddling both the physical and online realm, it represents a unique exposure to one of the most exciting retail markets in the world.

Despite growing exponentially over the past decade, organised retail in India is estimated to be just 11% of the total retail expenditure at US$88 billion.

Allied to the growth in income across the country, organised retail is forecast to grow at 19% a year over the next five years to

reach US$231 billion by 2025.

As impressive as the growth in Reliance Retail has been, it is Reliance’s telecom subsidiary Jio Infocomm (Jio) that has attracted the most attention and excitement.

Since launching its pan-India digital 4G network in 2016, Jio had amassed 429.5 million subscribers as at September 2021, making it the fastest growing digital services company globally.

Since entering the market, Jio has drastically transformed the Indian mobile landscape via its deeply discounted mass market offering and is the only operator outside of China to achieve 400 million subscribers in a single market.

Although India is the Continued on page 20

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20 | Money Management November 18, 2021

Asian equities

Chart 3: Private consumption growth

Continued from page 19 second-largest mobile market in the world, with over one billion subscribers, it remains relatively underpenetrated among smartphone users, with some 300 million 2G feature phone users expected to migrate to 4G services over the next 12 to 18 months.

Such a huge opportunity is even greater in rural India where access to the internet is estimated to be 35%. With Jio launching with generous data and voice plans for as little as INR 49 per month (that is, less than US$1), it is no wonder the company has transformed India’s 4G data usage, which has grown by a factor of 53 since Jio was launched in 2016. With India having some of the lowest real data and voice costs anywhere in the world, we expect recently announced tariff increases of as much as 40% are only just the beginning.

UNDERLYING FINANCIAL STRENGTH Much is made of the volatility within Asian markets and the need for caution with respect to varying levels of governance, regulation and government intervention. What is less talked about is the underlying financial strength a vast number of Asian corporates possess.

In terms of balance sheet strength, Asia is extremely well positioned relative to most other markets and indeed its own history. For many management teams across the region, the 1997 Asian Financial Crisis provided a powerful lesson that is deeply entrenched in the corporate memory of many management teams across the region.

As well as providing a valuable

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Source: Jefferies, MSCI, IMF

buffer to the potential impacts of rising interest rates, the rude health of Asian balance sheets also affords a solid foundation to support our expectation of growing dividends across the region.

We have long observed the potential for Asian corporates to increase their dividend payout ratios and enhance shareholder returns through more efficient capital management structures.

With a payout ratio well behind the rest of the world and a more robust financial footing, we see strong grounds for an increase in returns to shareholders over the years to come.

VALUATION OPPORTUNITIES In many respects, the Asia ex-Japan region should represent a bigger proportion of the global benchmark than it does based on its significance to the global economy, its large middle-class population, the strength of its corporate balance sheets and the myriad of industry sectors and companies.

There is one final reason why investors should consider an allocation to Asia: the wide range of deeply undervalued investment opportunities on offer across the region. Although headline valuation multiples do not convey such a strong message, valuation dispersion remains at extreme levels in Asia, just as it does globally.

In addition, with Asia underperforming the rest of the world year to date by a wide margin, there are many companies trading at deep discounts to their intrinsic value that we expect will reward patient shareholders greatly.

As the lingering effects of the pandemic fade further into the rearview mirror, we expect the long-term structural case for the Asia ex-Japan region to continue attracting global portfolio flows and for its benchmark representation to grow as a consequence.

Geoff Bazzan is head of Asia Pacific equities at Maple-Brown Abbott.

10/11/2021 10:11:02 AM

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22 | Money Management November 18, 2021

Alternatives

THE HITCHHIKER’S GUIDE TO ALTERNATIVES Investors may know they need an allocation to alternatives, writes David Lebovitz, Jason DeSena and Pulkit Sharma, but knowing which ones to include is less clear-cut.

IN THE CULT classic 'The Hitchhiker’s Guide to the Galaxy’, the answer to the question of what is the meaning of life is a rather simple –‘42’.

The answer to the question of how to invest in a world of diminishing opportunities for alpha, income and diversification is rather more complicated. Part of the answer lies in alternative assets, which in our view have become essential, not optional, for meeting portfolio objectives. With many investors now convinced of why alternatives are necessary, they are now grappling with how to add alternatives to their portfolios.

This presents unique challenges for outcome-oriented investors, whether they are experienced institutions or firsttime alternatives investors.

Barriers such as a lack of familiarity, limited information and transparency, liquidity concerns, fees, minimum investment requirements, and intra- and inter-asset class correlations are just some of the factors that need to be considered.

Investors may have already dipped their toes in the alternatives pool based on one-off opportunities, or by limiting themselves to one particular asset stream such as real assets, private equity, or hedge funds.

However, without a ‘how-to’ guide that considers the role of alternatives in a more holistic manner, the result may be an incohesive collection of “great investment ideas” rather than a purpose-driven portfolio.

There is already plenty of interest in why alternatives could

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be a sensible allocation to a portfolio but the how is the trickier question to answer. The first step is to determine investment objectives.

WHAT IS YOUR GOAL? The diverse nature of alternatives and variation of this asset class provide a robust investor toolkit.

The breadth of what can be called an alternative is one of its advantages, but it requires added levels of scrutiny to uncover the underlying attributes of each alternatives category, as well as any overlapping risks.

While some alternatives have a distinct and easily defined primary function in a portfolio (e.g., private equity as a source of appreciation-driven returns), other categories can be more opaque and play multiple roles.

We group alternatives according to three main portfolio functions – diversification, income and alpha. We then consider the extent to which each category can deliver on these goals.

Through this lens, investors can sort the universe of alternatives according to their primary (and secondary) attributes and what is most applicable for their portfolios.

Once identified, attention needs to be directed to determining the best way to access them.

BUILDING A BRIDGE Opportunities to invest in private markets are becoming increasingly accessible to non-institutional investors, as asset managers are constructing bridges to cross from public to private markets. A proliferation of

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November 18, 2021 Money Management | 23

Alternatives Strap new investment vehicles are allowing smaller investors to build more diversified portfolios incorporating unique potential alpha sources.

Liquidity, fees and transparency are often cited as reasons why investors avoid private markets. However, three key drivers of excess returns are becoming less of a barrier to smaller institutions and individuals: quality of execution, optimal vehicles and fee structures.

Investors that find these hurdles are still too high may look for public market options. Real estate investment trusts (REITs), for example, can provide a substitute for private real estate.

High yield bonds can provide a substitute for distressed debt.

The inefficiency of small or mid cap equities offers an alpha opportunity similar to core private equity. However, while these options may potentially deliver similar long-term return outcomes, they are typically more highly correlated with public equities, implying their benefits may be less pronounced than those found in private markets.

Increasing accessibility to alternatives for smaller investors is a positive development, but every prudent investor should be mindful that improved access comes with the traditional risks inherent in private market investing. These risks can vary significantly depending on the underlying investment characteristics of the private market asset class.

CORE VS NON-CORE, MANAGER VS ASSET DISPERSION There are two measures of return dispersion that investors should consider when allocating to alternatives: manager dispersion and asset class dispersion. Whether investing in core or non-core alternatives, both types matter.

The very wide dispersion of returns across alternative managers is well recognised in today’s investment arena. But asset class dispersion (the difference in returns between the best and worst

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performing sub-asset classes within a given time period) can also be wide and may be lesser known, and the distribution of returns tends to have fat tails (implying a higher than “normal” probability that extreme high or low returns will occur).

In our view, investors should be laser-focused on manager selection when allocating to non-core alternatives, where manager dispersion is relatively high. Within core alternatives, the primary focus should be on actively managing an allocation across core categories. While manager dispersion within core asset classes is low, there is a high level of return dispersion across core asset classes, which may offer opportunities for diversification and potential return enhancement.

The far greater manager dispersion within non-core versus core alternatives likely reflects the tremendous importance of manager skill in creating value within, for example, private equity, venture capital or non-core real estate. Poor manager selection can seriously jeopardise the capital appreciation outcomes for these investments – the primary objective driving investors’ non-core allocations.

One explanation for this high asset class dispersion is that the underlying drivers of return vary across core assets and are impacted by different economic factors at different stages of the economic cycle. For example, core infrastructure, with its relatively stable cash flow profile, outperformed within core alternatives in 2020 amid COVID19-driven macro uncertainty.

Conversely, periods of broad macroeconomic strength have benefited core private real estate.

This diversity in return drivers, combined with the potential for dislocations at extremes within the economic cycle, may add another potential source of enhanced portfolio returns for investors who actively manage a broad core alternatives allocation.

That may round out the two primary objectives for allocating

to core alternatives: diversifying portfolio equity risk and generating income-driven returns.

MADE TO MEASURE It’s no secret that finding quality data on all alternative asset types can be difficult and makes the application of traditional quantitative methods to evaluate risk and return tricky. An awareness of the pitfalls and what measures are most appropriate for different types of alternatives is essential to an objective assessment.

Data on alternative investments, especially those in the private markets, is limited in terms of historical returns, quality and transparency. Data sets have grown in recent years, enhancing investors’ ability to analyse these asset classes, but as the breadth and depth of data increase, taking its quality into account becomes even more important.

Then there is the issue of the best way to compare return profiles. For example some strategies may be more suited to a time weighted return to calculate investment performance. Others may be best measured using the internal rate of return. The difficult calculation methods means that these two measures cannot be directly compared, and often produce different results, especially when applied to a short investment horizon. Another option may be to use multiples of invested capital to make an apples-toapples comparison. This method states an investment’s current value as a multiple of the initial investment regardless of the length of the investment period.

Measuring volatility is also challenging. Private investments have an inherent ‘smoothing effect’ as returns are often derived from appraisal-based valuations on a time lag. Applying a de-smoothing approach to mitigate the impact of any prior valuations on current valuations is likely to provide a closer representation of these investments’ ‘true’ volatility.

FROM WHY TO HOW Anyone that’s ever found themselves lingering too long over a dessert table or holding up the line

at an ice cream parlor will be familiar with the behavioural trait of ‘overchoice’. This term describes how decisions become increasingly difficult when there is an abundance of options, many potential outcomes and the risks that may result from the wrong choice.

Though investors may be convinced they need the diversification, income and alpha that alternatives can potentially deliver, even the most intrepid investors can be easily overpowered by the array of options. Keep in mind a few simple steps and remember successful alternatives investing starts with a well-defined investment objective, that should always remain the true north of the portfolio: • Screen the universe of alternative investments by function within a portfolio to match investment choices with your desired investment outcomes; • Determine the investment vehicles or structures most appropriate for executing on your investment objectives; • Improve portfolio outcomes by emphasising inclusion of the full opportunity set within core alternatives, and focus on manager selection for non-core alternatives; • Pay attention to the quality of the data being used to make decisions; and • Take into account the nuances of how volatility is calculated and important differences among the various measures of return.

We wish the buyer’s guide to alternatives were as simple an answer as ‘42’ but knowing why to invest in alternatives is far more obvious than knowing how to invest in them. Once understood though, there are a diverse range of opportunities for investors as they construct portfolios to meet their objectives.

David Lebovitz is global market strategist, Jason DeSena is head of analytics, alternatives investment strategy and solutions and Pulkit Sharma is head of alternatives investment strategy and solutions business at J.P. Morgan Asset Management.

10/11/2021 10:10:33 AM

24 | Money Management November 18, 2021

ESG

HOW GENDER DIVERSITY AFFECTS YOUR PORTFOLIO Fiona Manning writes how gender diversity is a key consideration within environmental, social and governance investing as the gender gap causes a drag on the economy.

FORMER UN SECRETARY General Ban Ki-moon said in 2015 that the world will never realise 100% of its goals if 50% of its people cannot realise their full potential.

“When we unleash the power of women,” he said, “we can secure the future for all.”

Closer to home in 2021, I have read the growing discourse amongst Australian financial advisers regarding the mission to develop stronger pathways to a professional community that better represents a more diverse and inclusive modern Australia.

The recent article by

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Fitzpatricks’ chief executive Jodie Blackledge “Enriching the Enricher” in Money Management (26 August) captured part of the challenge – and the essence of the benefits – of greater diversity, in this case attracting more females to the advice sector. It wrote: “I get asked often: How do we attract more women to advice? It is an excellent question, and the truth is I can already see in our network the emergence of a strong female adviser cohort, offering specialised advice to clients who seek a female adviser from a profession where women are traditionally underrepresented.”

Diversity and equal representation of our society across its broad spectrum of social, cultural, political, economic and almost any other measure is important. But as the words of Ban Ki-moon remind us, unleashing the benefits of gender equality, not just for the financial planning profession, but across the entire nation and indeed our global community is massive.

Globally, there is a growing body of evidence showing that diversity more generally – of which gender is just one indicator – improves the likelihood of greater financial returns, generates higher

‘innovation revenues’ and tends to improve environmental, social and governance (ESG) performance.

Gender diversity is really just one step towards achieving greater cognitive diversity on our boards and in our executive teams.

Moreover, as a professional investor, the natural inclination is to avoid the noise of gender politics and focus on the numbers and data: quantifying the investment benefits of gender balance and inclusion. Because gender equality, or lack thereof, affects the performance of my portfolio. It also helps me determine how to construct my portfolio.

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ESG

DEFINING GENDER EQUALITY According to the United Nations Entity for Gender Equality and the Empowerment of Women gender equality “…refers to the equal rights, responsibilities and opportunities of women and men and girls and boys.

Equality does not mean women and men will become the same but that women’s and men’s rights, responsibilities and opportunities will not depend on whether they are born male or female.

Gender equality implies that the interests, needs and priorities of both women and men are taken into consideration, recognising the diversity of different groups of women and men.

Gender equality is not a women’s issue but should concern and fully engage men as well as women. Equality between women and men is seen both as a human rights issue and as a precondition for, and indicator of, sustainable people-centred development.”

Apart from that definition being out-of-touch with the non-binary community, the central premise that a person’s gender, of any variety, should not determine their rights, responsibilities and opportunities is a sound one.

Gender inequality is often characterised by the pay gap between males and females, differences in parental leave and allowances and unequal career opportunities. It is also exemplified through stereotypes, domestic violence, unequal representation in the political economy, lack of legal protections and uneven access to education and medical care. Again, barely scratching the surface.

GENDER EQUALITY AND INVESTORS Why should investors care about gender equality? Because inequality is a massive economic drag, at all levels. According to the World Bank, “…global wealth could increase by $172 trillion,

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and human capital wealth could increase by about one-fifth…” if women and men had the same lifetime earnings.

Intuitively, it makes sense that if broadly half of the world’s population is not granted the same rights, responsibilities and opportunities as the other half there are bound to be productivity losses. In fact the United Nations sees gender equality as such a central way to “end poverty, protect the planet, and ensure that by 2030 all people enjoy peace and prosperity” that one of the 17 Sustainable Development Goals is to “achieve gender equality and empower all women and girls”.

But there are even more direct reasons for investors to care about how gender inequality manifests itself in their own portfolios.

As an example, the Australian Government’s Workplace Gender Equality Agency (WGEA), in partnership with the Bankwest Curtin Economics Centre, released research in July showing that “more women on boards and in senior leadership positions drives better company performance, greater productivity and greater profitability”. And yet only 17% of company chief executives are women and 14% being chair of the board. Food for thought when directors are up for re-election or when looking at the gender make-up of senior management. Also, the report found that: • An increase in the share of female ‘top-tier’ managers by 10 percentage points or more led to a 6.6% increase in the market value of Australian ASX-listed companies; and • In Australian ASX-listed companies, having a female chief executive led to a 5% increase in their market value.

These same companies also had a greater likelihood of outperforming the sector on three or more profitability and performance metrics.

”Gender diversity is really just one step towards achieving greater cognitive diversity on our boards and in our executive teams.”

WHERE TO INVEST MY AFFIRMATIVE CAPITAL? Although a relatively new and niche area of investing when compared to the headline ESG theme of climate change, gender equality-related thematic investments are gaining traction.

Names like Artesian, Fidelity, Impax, Lyxor, State Street or UBS are testimony to this growing impact. These all offer some form of fund, strategy or exchangetraded fund that is focused on investments with good gender equality performance and/or investments that support progress towards gender equality.

Current investments too good to give up but not demonstrating or supporting gender equality?

Then engage, vote or collaborate alongside other investors.

In Australia, there are a growing number of gender- and diversityfocused collaborative initiatives – such as the 30% Club, 40:40 Vision and the Financial Services Council (FSC) Diversity Working Group – all of which are focused on improving diversity within Australian corporations, particularly at the more senior levels.

The Australian chapter of the 30% Club had the initial goal of 30% women on all ASX 200 boards.

With that goal achieved in 2019, the group now has its sights set on the ASX 300 boards as well as individual ASX 200 boards that have not reached that 30% target.

The 40:40 Vision, sponsored by industry superannuation heavyweight HESTA, has gone one step further and is asking those same companies to achieve gender balance – taken as 40:40:20 – in executive leadership by 2030, set interim goals on how they will achieve this and to publicise their progress.

Research houses such as Institutional Shareholder Services (ISS) are now also offering proxy voting policy settings that take into account the make-up of the board when formulating voting recommendations for the election or re-election of directors.

Finally, in thinking about equality and representation, why the focus on gender? What about other traits such as race, ethnicity, sexual preference, religion, disability and age?

Various identity traits significantly influence our life experiences and add a breadth of knowledge and perspective to corporations well beyond what could be offered by the historically prevalent ‘pale, male and stale’ boards and executive teams of yesteryear. Perhaps these traits are harder to measure – there are many environments, including the workplace, in which people may feel anxious about revealing such traits. Yes, here in Australia too.

Perhaps gender is just the first step towards greater equality across a wider spectrum of humanity and human experience.

So, to be clear: gender inequality affects at least half of the world’s population. This makes gender one of the largest ‘minority’ issues facing communities. Although gender inequality presents differently in different cultures, the negative impacts are most commonly experienced by women and gender non-binary people. However, gender inequality affects everyone to varying degrees – just ask any client who may be a non-female new parent about their leave entitlements. Or a female retiree about their super balance.

Fiona Manning is portfolio manager at Apostle Funds Management.

10/11/2021 10:10:08 AM

26 | Money Management November 18, 2021

Advice

COACHING CLIENTS TO KEEP CALM – THE ADVISER’S MOST IMPORTANT ROLE Investors are prone to following their emotions, writes Bronwyn Yates. For advisers, coaching calmness is the most significant contribution they can make.

KEEP CALM AND

INVEST

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IF WE HAVE learned anything from facing the challenges of the past 21 months, it’s that the world of investing – and specifically, trading – is more open and accessible to everyday people than ever before.

The GameStop saga earlier this year provided an eye-opening realisation of just how easy it is for the average investor to trade stocks on their own – and just how prone they are to following trends.

Indeed, a surge of small investors using the Robinhood trading app triggered a massive short squeeze that drove GameStop stock 400% higher at one point before it began to fall.

Many of those investors – who shared information through an online trading forum – first gained, then lost, millions of dollars.

We saw a similar behaviour in the Australian market, where Australian Securities and Investments Commission (ASIC) reported 280,000 new and re-activated share traders dived into the market at the peak of market volatility, where daily traded volume by retail traders doubled to $3.3 billion per day . With an average holding period of less than one day, ASIC estimated retail share traders lost over $230 million from trying to ‘play the market’ in this time.

Investors who steer clear of trading apps and instead listen to an adviser’s trusted counsel, have a much better chance of avoiding the pitfalls that investors working

on their own frequently fall into.

Most advisers spend the bulk of their time trying to minimise their clients’ behavioural mistakes, especially when markets become volatile. This makes sense, particularly considering the findings of the most recent Russell Investments ‘Value of an Advisor’ report, which shows that taking on the role of behavioural coach may be the most important role a financial adviser can play. According to the report, preventing behavioural mistakes is responsible for approximately 2% of the 5.2% p.a. of additional value advisers provided to their clients’ portfolios in 2021.

Most advisers know far too well that investors don’t always do what they should. Instead, their behaviour is sometimes directly opposed to what is in their own best interests.

We don’t need a speculative frenzy such as the GameStop saga to understand how badly the average human wants to get in on a good thing, and how easily we are spooked by falling prices. We saw it in early 2020, when the COVID-19 pandemic first hit, and the markets shuddered. There were reports of significant movements from growth to defensive and cash holdings.

Equities recovered steadily throughout the remainder of the year, and the S&P/ASX 300 had recovered losses by May 2021 and continued to hit record high levels in June 2021.

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November 18, 2021 Money Management | 27

Strap Advice

Left to their own devices, many investors buy high, usually at the top of a market cycle and sell low, typically at the bottom of a market cycle. The investor who bailed on the markets in March may have had a hard time finding a new entry point as the markets rose. They may have had to buy back in after the market had already recovered much ground.

As Chart 1 shows, even being out of the market for a few days can have an impact.

Helping your clients avoid pulling out of markets at the wrong time and sticking to their long-term plan is one of the most critical ways that advisers provide substantial value.

THE CYCLE OF INVESTOR EMOTIONS People have real anxiety when it comes to money. It is not so much the actual physical bill that causes the anxiety, it is about what happens when things go wrong. Sometimes that anxiety causes people either to make a bad decision or no decision at all.

We often find the biggest detriment to an investment’s return is not the actual

investment, it is the investor’s behaviour with that investment, especially when volatile markets make them anxious. An adviser who can keep their clients from succumbing to their human instincts to buy high and sell low can be incredibly valuable.

What does this all mean? Clients pay your fee because they are looking for someone to help them reach their goals. One of the key ways they can reach their goals is to stick with their plan during turbulent times. You can be the person who has the courage to fight your clients’ greatest nemesis – themselves.

Although it may mean having a challenging conversation, an adviser cuts through the noise and protects the client from making behavioural mistakes they are classically susceptible to – like buying GameStop on the way up and selling it on the way down, or selling all their stocks to buy bitcoin, or getting into tech stocks in the late ‘90s.

Obviously, this investor behaviour can hurt investor returns. Practically speaking, if an investor’s personal situation really hasn’t changed, then staying the course and riding

through these periods of volatility is the logical course. But for humans, this is difficult. So, what can a good adviser do, since you can’t control the markets?

You can control – or at least help control – this very behaviour.

That means instead of opening a trading account and getting financial advice from Reddit, an investor will have a conversation with his or her adviser who can coach their clients through these challenging conversations. That conversation – just that simple conversation – could save them from making a costly mistake.

“Preventing behavioural mistakes is responsible for approximately 2% of the 5.2% p.a. of additional value advisers provided to their clients’ portfolios in 2021.”

CONCLUSION Russell’s report highlights how individuals can fall prey to making behavioural mistakes, particularly following the upheaval seen last year. The good news is that you, as the adviser, can have a huge impact on investor behaviour and thereby on investment outcomes. In fact, addressing the investment behaviour of your clients may be the greatest value you can provide.

Bronwyn Yates is Russell Investments director, client and business solutions.

Chart 1: The investment impact of missing market days, 10 years ended 30 June 2021

Source: Morningstar

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28 | Money Management November 18, 2021

Toolbox

USING TPD INSURANCE IN SUPERANNUATION Anna Mirzoyan explains the various payment options and considerations when it comes to advising clients on total permanent disability insurance.

WHEN PROVIDING INSURANCE advice to clients, a common strategy considered by financial planners is holding insurance in superannuation where possible. There may be various benefits in holding insurance within super which include better cashflow management, making tax-deductible contributions to super to fund insurance premiums and making personal contributions to super to qualify for Government co-contribution and to fund premiums.

Similarly, there may be risks

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and disadvantages in holding insurance through super, including limitations on terms and type of insurance available, the requirement to meet one of the Superannuation Industry (Supervision) Act (SIS Act) conditions of release before insurance proceeds can be released from super and potential taxation of the payment benefit including insurance proceeds.

While most super products allow holding life, total permanent disability (TPD), and income protection insurance, this article

will explain the payment options and considerations of holding a TPD insurance in superannuation.

CLAIMS PROCESS When holding TPD insurance in super, in the event of a successful claim, insurance proceeds are paid to the super account and allocated to the taxable component.

The client then must meet the SIS Act definition of Permanent Incapacity Condition of Release even if the TPD definition is met for the insurance policy, before accessing insurance proceeds and/or their

preserved superannuation benefits.

Under the SIS Act, a member of a superannuation fund or an approved deposit fund is taken to be suffering permanent incapacity if a trustee of the fund is reasonably satisfied that the member’s ill-health (whether physical or mental) makes it unlikely that the member will engage in gainful employment for which the member is reasonably qualified by education, training or experience.

The trustee will generally ask for medical evidence when determining if the member meets

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November 18, 2021 Money Management | 29

Toolbox

the permanent incapacity condition of release. In some limited circumstances, the trustee may use medical evidence provided to the insurer rather than asking to provide new evidence.

If the trustee is reasonably satisfied that the member meets the permanent incapacity condition of release, the payment options include lump sum payment, commencing an income stream regardless of member age and retaining insurance proceeds in superannuation.

There are pros and cons for each of these options and the best option will depend on clients’ circumstances.

LUMP SUM PAYMENT (INSURANCE PROCEEDS PLUS SUPERANNUATION BALANCE) There may be many reasons why advisers or clients may wish to withdraw the amount as a lump sum. This may include paying off debts, completing modifications to their home or motor vehicle, or to cover medical expenses.

When taking the amount as a lump sum, depending on the clients’ age and the amount being paid, tax may be payable on the amount being withdrawn from the taxable component at a rate of up to 22% (including Medicare levy).

However, the Income Tax Assessment Act (ITAA 1997 Act) allows for a formula-based modification of the tax-free component in recognition of the members’ permanent incapacity before reaching the assumed retirement age of 65.

Applying the formula-based modification allows the trustee of the superannuation account to amend existing tax components. As a result of modification, the trustee will increase the tax-free component by the amount calculated and reduce the taxable component accordingly.

Section 307-145 of the ITAA 1997

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Act refers to the following formula: Amount of benefit × Days to retirement Service days + Days to retirement

where: Days to retirement is the number of days from the day on which the person stopped being capable of being gainfully employed to his or her last retirement day (age 65).

Service days are the number of days in the service period for the lump sum (from the start of the eligible service period to the date the disability benefit is paid).

Amount of the benefit is the amount being withdrawn (insurance proceeds and super balance). The calculated amount is then added to the existing tax-free component reducing the balance of the taxable component.

The following case study demonstrates the use of formulabased modification when a lump sum is being paid by the superannuation trustee.

CASE STUDY David became severely disabled recently. At the time David had $50,000 in super and TPD insurance of $500,000 attached to his super. The insurer assessed and approved David’s application to access TPD insurance and paid the amount to his super account. David wishes to make a lump sum withdrawal to pay off his mortgage.

ASSUMPTIONS: • David’s date of birth: 28 January, 1980; • Super consisted of $5,000 tax-free and $45,000 taxable components before insurance proceeds of $500,000 were added to the taxable component; • Eligible service date: 6 November, 2001; • Date David became

permanently incapacitated: 15 September, 2020; • Benefit paid date: 21 October, 2021; and • Amount of benefit: $550,000 (super + insurance).

Let’s assume the trustee of David’s super has assessed and approved his application to access the entire balance ($550,000) as a lump sum under permanent incapacity condition of release.

The trustee applies modified calculations as follows: $550,000 x (8,902/16,192) = $302,377 This amount is then added to the existing tax-free component of $5,000 increasing the amount held in the tax-free component from $5,000 to $307,377.

The remaining balance of $242,623 is the new amount in the taxable component immediately prior to the payment. This amount is the difference between the amount of the benefit ($550,000) less the new tax-free component of $307,377. As a result of the modification, the amount in David’s taxable component was reduced from $545,000 to $242,623 providing substantial tax savings to David.

When the lump sum of $550,000 is paid to David, the $242,623 is taxed at 22% ($53,377) as David is below preservation age. David receives a net payment of $496,623.

By applying the modification, the amount paid from the taxable component was reduced from $545,000 to $242,623, and the tax withheld by the trustee was reduced from $119,900 ($545,000 at 22%) to $53,377 ($242,623 at 22%).

CONSIDERATIONS • The formula-based modification (also known as tax-free uplift) only applies to clients below age 65. Because of the parameters used in the formula, generally, younger clients benefit more from the modification than clients closer to age 65. If we

•

•

•

•

assume David was 10 years older and his eligible service date was 10 years prior to the date used in the case study, with all other parameters remaining unchanged, the new tax-free amount would have been approximately $183,295 resulting in withholding tax of $80,675 and a net payment of $469,325. The difference in net payment would have been approximately $27,298; The modification is applied to lump sum withdrawals and to rollovers to another superannuation provider. If being rolled over, the modification is applied by the current trustee before the amount is rolled to another provider; When calculating the number of days, advisers may use the ‘Calculate Days’ tool available on the Australian Taxation Office (ATO) website; An earlier eligible service date reduces the tax-free amount.

Be aware of this when consolidating superannuation accounts as the new super fund will pick up earlier eligible service date; and Eligibility for Government payments (e.g. Disability Support Pension) to be considered when making a lump sum withdrawal from super as depending on how the lump sum is spent or invested, the amount may now be assessable under the means test.

COMMENCING AN INCOME STREAM If the trustee of super is satisfied that the member has met the permanent incapacity condition of release, the balance of super (including insurance proceeds) can be used to commence an income stream regardless of members’ age. This pension will Continued on page 30

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30 | Money Management November 18, 2021

Toolbox

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.

Continued from page 29 commence with unrestricted non-preserved benefits and will not have any limitations on the number of pension payments or lump sum commutations. The formula-based modification will not be applied which means the income stream will commence with tax components as they are.

Investment earnings will be tax-free within the pension account regardless of members’ age. However, pension payments or lump sum commutations may not be entirely tax-free. The proportioning rule will be applied to pension payments where each payment will consist of tax-free and taxable amounts.

If the person is below age 60 at the time of receiving the pension payment, the taxable portion of the pension payment will be added to their assessable income and taxed at their marginal tax rate less 15% offset.

Pension payments made after attaining age 60 are tax-free.

CONSIDERATIONS • The new income stream will be subject to the transfer balance cap; • Potential impact on Government benefits must be considered as the amount invested in the income stream will become assessable under the means test; and • Some super providers do not offer an income stream under the permanent incapacity condition of release and as such, the benefit may need to be rolled to another provider in order to commence an income stream.

RETAINING INSURANCE PROCEEDS IN SUPER Meeting the permanent incapacity condition of release is not a compulsory cashing event. This means the balance of super (including insurance proceeds) can remain in the accumulation account after the member satisfies the permanent incapacity condition of release. In this case, the balance will be made unrestricted non-preserved and future lump sum withdrawals will be available from the unrestricted non-preserved component if/when needed.

However, all future contributions and investment earnings from that point on will be added to the preserved component and the member may need to satisfy another condition of release in the future to make these preserved amounts unrestricted non-preserved.

CONSIDERATIONS • This strategy may be beneficial to people wishing to access Government benefits (e.g. Disability Support Pension) as amounts held in the accumulation account are exempt from the means test until they reach Age Pension age; and • Investment earnings will be taxed at up to 15% in super and that rate may be higher when compared with their personal marginal tax rate.

Weighing up and comparing investment earnings tax versus additional Government benefits will be something to discuss with the client to ensure an informed decision is being made.

Anna Mirzoyan is compliance and technical specialist at Lifespan Financial Planning.

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1. Which of the following answers is correct? When accessing the benefit payment as a lump sum under permanent incapacity condition of release, the formula-based modification is applied to: a) TPD insurance proceeds only b) TPD insurance proceeds and super balance c) Super balance before TPD insurance proceeds were paid by the insurer d) Answers a) and c) 2. An income stream commenced following members’ permanent incapacity is limited to the following conditions: a) Pension payments of up to 10% with no lump sum commutations b) Pension payments only c) Can only be established with the current super provider. d) None of the above 3. Which of the following answers is correct?

In applying the formula-based modification, an earlier eligible service date: a) Reduces the tax-free amount b) Reduces the taxable amount c) Makes no difference to calculations d) Generally, provides a better outcome for the member 4. Sean had a car accident recently and is deemed to be permanently incapacitated based on medical evidence. Sean’s TPD insurance was paid to his superannuation account and the trustee of his super has approved Sean’s application to access the benefit amount (including insurance proceeds) under permanent incapacity condition of release. If Sean decides to retain the amount in super, which of the following must be taken into consideration: a) Potential reduction in accessing Government payments and benefits b) Not being able to make lump sum withdrawals when needed c) Investment earnings being taxed at up to 15% d) Investment earnings being taxed at Sean’s marginal tax rate 5. Which of the following answers is incorrect? a) A super income stream commenced under permanent incapacity condition of release is subject to transfer balance cap b) A super income stream commenced under permanent incapacity condition of release is exempt from social security means test. c) Investment earnings are tax-free in a super income stream commenced under permanent incapacity condition of release. d) The taxation of pension payments from a super income stream commenced under permanent incapacity condition of release will depend on members’ age and tax components of the income stream

TO SUBMIT YOUR ANSWERS VISIT https://www.moneymanagement.com.au/ features/tools-guides/ tpd-insurance-inside-superannuation For more information about the CPD Quiz, please email education@moneymanagement.com.au

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November 18, 2021 Money Management | 31

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

Appointments

Move of the WEEK Nick Fels Board director Financial Services Council

The Financial Services Council (FSC) appointed Nick Fels, chief executive of Bell Asset Management, as a board director.

He became chief executive in 2017 and would bring over 30 years of experience to the FSC board with the organisation describing him

as a “highly accomplished business leader”.

He had also held leadership positions at Bell Potter Securities, NAB and UBS. FSC chair, David Bryant, said: “Nick is a welcome addition to the FSC board and his wealth of experience and

The Australian Financial Complaints Authority (AFCA) has appointed Anne Maree Howley as senior ombudsman for superannuation, among seven newly-created ombudsman roles.

Howley previously worked as a financial services lawyer including in-house legal at a super company.

She had also served on several trustee committees.

Senior ombudsman was a new role for the organisation and would work closely with AFCA’s lead ombudsmen. It said about 5,000 complaints annually required the assistance of a formal ombudsmen or adjudicator. All of the roles were internal promotions.

The remaining six roles were Shail Singh in investments and advice, Chris Liamos in general insurance, Andrew Weinmann in life insurance, Brenda Staggs in financial difficulty, Louise McAuliffe in transactions and Neva Skilton in transactions.

Deputy chief ombudsman, June Smith, said: “They’ll bring their specialist technical and professional expertise to bear on

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knowledge of the financial services industry will be valued”.

Fels said: “I am pleased to take on this position as a director and further support the FSC which is playing a vital role in contributing to good public policy for Australia’s financial services sector”.

projects aimed at efficient and consistent decision making, which we know is important to both complainants and financial firms.

“The senior ombudsman will help ensure we deliver an independent, fair and consistent approach to decision making and complaint resolution.”

Former Cbus Super chief executive and AMP Capital deputy CEO, David Atkin, has been appointed as CEO at the Principles for Responsible Investment (PRI).

Atkin’s appointment would be effective from 10 December, 2021, and he would take over from Fiona Reynolds who stepped down from the role in June. Atkin started as PRI in mid-November as an adviser role and Reynolds would stay in an advisory capacity at PRI until early 2022 to ensure a seamless transition. Atkin would relocate from Australia to London in March 2022, the organisation said.

Atkin previously served as CEO at Cbus, ESS Super, and Just Super, and was most recently deputy CEO at AMP Capital. He had also served as a PRI board director

for six years until 2015.

Reynolds said: “I have known David for more than 20 years, and he is a natural leader who is passionate about sustainable investing. He has incredibly strong knowledge and experience of the powerful role investors can play as stewards of capital, and will be an asset to PRI as it continues to grow”.

Dimensional Fund Advisors announced the appointment of Jim Whittington as head of responsible investment, replacing Joe Chi. The firm also named Lacey Huebel as head of responsible investment, North America.

Whittington had worked as a senior portfolio manager and vice president in Dimensional’s London office while contributing to the firm’s Investment Stewardship Committee. Prior to that he had worked in various roles in firms such as J.P. Morgan and Merrill Lynch.

Dimensional co-chief executive and chief investment officer, Gerard O’Reilly, said: “These appointments will further our decades-long

commitment to sustainability.

“For nearly 20 years, we have managed robust co-mingled environmental, social and governance [ESG] investment solutions on behalf of clients.

Longwave Capital Partners appointed ex-IFM Investors investment director Melinda White as portfolio manager.

With more than 20 years of buy-side investment experience across both domestic and global markets, White joined from IFM Investors where she co-led small cap portfolios as investment director, active equities.

Prior to joining IFM, White spent eight years at Fidelity as a senior analyst and held roles at Schroders, Global Value Investors and Investors Mutual.

Longwave Capital Partners, founding partner and chief investment officer, David Wanis, said: “We are now very pleased to attract an additional investment professional of Melinda’s calibre, which will further enhance our capabilities and help underpin our continued success”.

11/11/2021 9:09:04 AM

OUTSIDER OUT

ManagementNovember April 2, 2015 32 | Money Management 18, 2021

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

A fight to the finish

A wheely-good investment OUTSIDER is well aware of the adage that a monkey throwing darts can get better investment returns than the index.

He is also aware of the octopus which correctly predicted the scores of the soccer World Cup. However, he had not heard of the hamster which could pick cryptocurrencies better than human investors.

Mr. Goxx the hamster, named after the Bitcoin exchange Mt Gox, has apparently made investment returns of 20% since June, more than the FTSE 100.

Starting with running in his ‘intention wheel’ which selects which cryptocurrency he’d like to trade, Mr Goxx then runs through two tunnels, one marked ‘buy’ and one marked ‘sell’ to place his trade.

His owners say it started as a ‘lighthearted side project’ during lockdown and stressed that, although the hamster’s trades were posted on Twitter, it was not offering investment advice.

Outsider is well aware that the industry is trying to de-mystify the complexities of investment and make it

easier for retail consumers to understand so maybe they should sign up Mr Goxx for their next campaign? After all, if a hamster can achieve those returns then surely Outsider must have a chance.

OUTSIDER noticed his head was spinning. Was it vertigo? Was it too much whiskey? No, it was to do with a battle of wills at play between PM Capital and WAM Capital for acquiring PM Capital Asian Opportunities fund.

No sooner had Outsider finished writing up one Australian Securities Exchange announcement then another was released by its rival. Poor Outsider could see the steam rising off his typewriter as he tried to keep up with all the changes.

In some cases, his stories had become redundant before he even had a chance to send it off to publish. Such was the pace of the back and forth between the two players, and perhaps the insistence of using a typewriter.

At the time of writing, the latest update was that WAM had stated it had an ‘unconditional offer’ but PM Capital, which wanted a takeover by the PM Capital Global Opportunities fund instead, urged shareholders to reject it.

By the time you read this, who knows what the next development will have been? Nevertheless, Outsider hopes the best firm wins.

Maybe the victor can buy Outsider a new typewriter because he isn’t sure this one will have much life in it by the end of this ordeal?

Though, his younger colleagues will likely beat him to publishing the story once again as his typewriter proves a less worthy opponent than the fair computer keyboard.

The final test AFTER 15 sittings across three years in locations all across the country, Outsider wishes the best for those advisers that have sat the last-ever FASEA exam this month.

The exam will transition next year to the control of ASIC, and although the process under FASEA has been much maligned by advisers over its tenure, Outsider hopes the new boss will take a different approach.

With the last exam before the 1 January, 2022, deadline now completed, Outsider congratulates those who have already passed the exam, whether they were an eager adviser who passed first

OUT OF CONTEXT

"The scene is set, global momentum to tackle China... climate change."

"Much is made lately of unrealised gains being a means of tax avoidance, so I propose selling 10% of my Tesla stock. Do you support this?"

- Scott Morrison getting confused at COP26

- Tesla CEO, Elon Musk

www.moneymanagement.com.au

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time or one who was bold enough to leave it to the last minute.

It’s been quite an odd ride for the over 16,000 advisers who passed the exam in the first 14 sittings, from ‘ambiguous’ questions to remote proctoring because of the COVID-19 pandemic… the exam has certainly tested the resilience of those advisers who committed to remaining in the industry.

The results for the final exam are expected to be released in mid-December and Outsider hopes those advisers waiting for an answer get an early Christmas present from FASEA.

Find us here:

11/11/2021 1:27:23 PM

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A one Crown rating represents a fund that falls into the fourth/ bottom quartile

Two Crowns demonstrates funds that place in the third quartile

Three Crowns demonstrates funds that sit in the second quartile

Four Crowns are given to funds that have placed between 75-90% of their sector peers

Five Crowns are awarded to funds that place in the top 10%

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