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www.fsprivatewealth.com.au Volume 10 Issue 02 | 2021
How the HNW view of advice is changing
Alternative to Wills Investment bonds are the second-most effective investment solution after superannuation, and a good alternative to Wills, according to Generation Life senior distribution manager Laura Salsbury. Speaking at Financial Standard’s first Technical Services Forum for the year, Salsbury said investment bonds can be good alternatives to Wills, which may be challenged in court and trusts, and can be expensive to establish and run. “Investment bonds are becoming very mainstream in the adviser community,” she said. “They’re very simple to set up and easy to maintain. Certainly no headaches, no tax returns [and] anyone can be a beneficiary.” Investment bonds don’t incur capital gains tax. Instead, they are taxed at maximum 30%. Transferring ownership of an investment bond, for example to children, is also a non-CGT event. Investors can also withdraw their funds at any time. Further, they are treated as non-estate assets (under the Insurance Contracts Act 1984) and can be cordoned off from future claims made by creditors (under the Bankruptcy Act 1996). Salsbury said Wills are commonly contested under family provisions legislation, and it can take up to 12 months or more for a case to be heard. Of the Wills that are contested, 86% of claims are brought by the immediate family and 74% of total contested Wills are successful, she said citing CoreData. With investment bonds, when the investor dies, the beneficiaries can receive the payout in as little as two weeks. She said Generation Life receives about 41% share of inflows into investment bonds. fs
FS Private Wealth
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Elizabeth McArthur
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The quote
The last 12 months saw a large shift in the perceptions of advice among HNW investors.
ew research from Investment Trends has revealed that highnet-worth (HNW) investors in Australia have changed their view of professional financial advice since the pandemic. Investment Trends found that there are 485,000 HNW investors in Australia as of September 2020, defined as those with over $1 million in investable assets outside their home, business and non-SMSF super. Among this group, there has been a sharp increase in the number of HNWs that are open to receiving professional financial advice. More than half of HNWs, 56%, are now open to receiving advice while 12 months ago only 40% were. “The size of the Australian HNW population remains resilient despite tough market conditions at home and abroad. While the uncertain investing climate had minimal impact on market size, it has profoundly impacted the attitudes and preferences of HNW investors towards investing and advice,”
Investment Trends associate research director King Loong Choi said. “The last 12 months saw a large shift in the perceptions of advice among HNW investors, with a sharp increase in ‘validators’ who are open to receiving financial advice (56%, up from 40% in 2019) and a corresponding fall in ‘self-directed’ HNWs who prefer making decisions on their own (34%, down from 49%).” However, the research found that this shift in attitude has not led to greater uptake of advice. Over the last 12 months, the use of financial advisers (19%) full-service stockbrokers (15%), wealth managers (7%) and private banks (5%) among HNWs has largely remained static. “The disjoint between the positive views towards advice providers and the current muted uptake of advice highlights how advice providers need to rethink their value proposition and delivery model,” Choi said. “The uncertainties caused by the pandemic have prompted many HNWs to reconsider how they view advice. fs
NZ overhauls regulation of advice Jamie Williamson
The way in which financial advice is regulated in New Zealand has changed, with a host of new requirements introduced and robo-advice now subjected to the same rules as advice delivered in person. From 15 March 2021, all providers of financial advice to retail clients must comply with a new regulatory regime, including new licensing requirements, a Code of Conduct and new disclosure obligations. New Zealand has traditionally had three financial adviser types: Registered Financial Adviser (RFA), Authorised Financial Adviser (AFA) and Qualifying Financial Entities (QFE) adviser. These has all been removed, with all advisers now required to meet the same standards and subject to a new Code of Conduct. Now, individuals must either hold a Financial
Advice Provider (FAP) licence or be operating under a FAP licence as a financial adviser or nominated representative. Those providing advice can currently do so under a transitional licence, valid for two years from March 15, or a full licence. Those with a transitional licence will need to obtain a full licence by 16 March 2023. The code, called the Code of Professional Conduct for Financial Advice Services, outlines the expected behaviour of those providing financial advice. The code comprises nine standards across ethical behaviour, conduct and client care and competence, knowledge and skill. Standards include the need to always act with integrity and to ensure clients understand the advice being provided. People providing financial advice must also always ensure the protection of client information against loss and unauthorised access, use, modification or disclosure. fs
THE JOURNAL OF FAMILY OFFICE INVESTMENT•
