16 minute read
to detect unexpected events like COVID
New CommSec trading tool
CommSec said it has seen a 200% increase in investors seeking executional information around how trading works as younger people show increased interest in wholesale trading.
CommSec said first time traders contributed to around 10% of total trades since February 2020, compared with 4% prior to COVID-19.
Additionally, the data found the number of firsttime traders more than doubled since February last year, up to 18% from 8% pre-pandemic.
CommSec said most new customers (83%) were under 44 years old, marking a 17% increase compared with pre-COVID trends.
In response to more investors entering the market, CommSec has launched CommSec Learn, a series of free learning topics with videos and exercises designed to help investors expand their knowledge.
CommSec executive general manager Richard Burns said the bank saw an increase in consumption of its educational materials when COVID hit.
“There was a thirst for learning, however, it was interestingly leaning towards more executional topics with fewer clicks on the important basics such as planning or strategizing,” Burns said.
“As such, we felt there was an opportunity to help build those important investment foundations and assist investors in hopefully achieving long term success.”
Burns said CommSec Learn aims to be an easy way for investors to grow their skills and knowledge, at their own pace, to make informed investment decisions.
He added that the tool is not intended to offer personal advice or recommendations, rather it was designed to help investors get a better understanding of their investments and the factors that can affect their performance.
“It’s helpful to think of investing as just the beginning of your share market journey. It’s important to regularly monitor the markets and your portfolio, and understand your risk appetite,” Burns said. fs
Invest Blue offers clients SMAs
Cornerstone portfolios will be made available on BT Panorama for Invest Blue clients.
Invest Blue has partnered with BT, in conjunction with Ironbark and Russell Investment Management, to develop a managed account solution for the advice firm’s client base.
The new suite of five managed portfolios, administered on BT Panorama, has been developed exclusively for Invest Blue’s 4000 clients.
The separately managed accounts are issued by Ironbark as the responsible entity, with Russell Investment Management as investment manager.
BT head of distribution Chris Mather said: “With the Invest Blue investment committee, Russell Investments and Ironbark all working in sync on a contemporary platform, BT Panorama, we’ve been able to deliver a tailored solution for Invest Blue’s advisers and clients.”
“BT’s focus on continually improving the digital features on the platform helps advice businesses realise the full extent of the benefits of managed accounts, in terms of efficiency and ease of use for their advisers and clients.” fs 01: Tom Reiher managing director MMC
The quote
MMC acquires super fund administrator
Karren Vergara
Aboutique superannuation administrator has been acquired by Kiwi firm MMC in a move to expand its presence in Australia.
MMC is now the owner of Brisbanebased IFAA Group after it first bought a stake in March 2020 of nearly 50%. The total consideration for both acquisitions were not disclosed.
IFAA owns Superannuation Compliance Services (SCS), a specialist consultancy on superannuation risk management, compliance, audit and training, and Independent Professional Services (IPS), an executive management, admin and company secretarial service provider.
The group has made several senior leadership changes following the transition of ownership.
For IFAA, Andrew Griffioen was promoted to chief executive in May 2020 after serving as head of strategy.
Clinton Nicholas was appointed chief information officer, while Cathy Connellan was named the general manager of client services.
Adam Somerville recently re-joined IFAA as manager of financial services.
For SCS, Karen Waldon-White was appointed chief executive in mid-2020 after serving as general manager for over six years.
MMC co-founder and managing director Tom Reiher01 said the significant stake made in IFAA last year was intended to be a long-term entry point into Australia.
IFAA Group co-founder and managing director Neil Harvey said that changes in the superannuation services market over the last few years saw the firm seek out a partner to “ensure that we could demonstrate underlying financial strength to potential clients and a continuation of the high-quality services our group provides”. fs
Banks return $1.2bn for bad advice
Eliza Bavin
Six of Australia’s largest banks have paid or offered a total of $1.24 billion in compensation to customers, according to new ASIC figures.
The funds have been returned to customers who suffered loss or detriment due to fees for no service misconduct or non-compliant advice.
AMP, ANZ, Commonwealth Bank, Macquarie, NAB and Westpac undertook the review and remediation programs to compensate affected customers as a result of two major ASIC reviews.
The reviews were launched by the regulator in 2015 to look into the extent of failure by the institutions to deliver ongoing advice services to financial advice customers who were paying fees to receive those services.
Additionally, the reviews looked into how effectively the institutions supervised their financial advisers to identify and deal with non-compliant advice.
NAB leads the ranks in compensation for fee for no service misconduct paying, or offering, $437.5 million to over 636,000 customers.
This is followed by Westpac on close to $200 million, CBA on $168 million, AMP on $153 million, ANZ with $80 million and Macquarie with $4.2 million.
NAB tips the scale again for non-compliant advice, repaying 1956 customers over $66 million.
ANZ follows on $43 million, Westpac on $42 million, AMP on $33 million and CBA on $9 million. Macquarie was not included.
In October 2016 ASIC released findings describing systemic failures in the advice divisions of AMP, ANZ, CBA and NAB, as well as some of their product issuers.
It said these included the failure to ensure provision of ongoing advice services to customers who paid fees to receive those services (fees for no service), the failure of advisers to provide those services, and the failure of product issuers to switch off advice fees of customers who did not have a financial adviser.
In March 2017 ASIC released finding from its review highlighting how the institutions identified and dealt with non-compliant advice by their advisers between 1 January 2009 and 30 June 2015 and the implementation of a framework for the large-scale review and remediation of customers who received non-compliant advice in the same period.
ASIC said it continues to monitor the ongoing implementation of the institutions’ customer review and remediation programs. fs
Products
01: Angela Ashton 02: Angus Benbow
Evergreen launches stress testing tool Evergreen Consultants has launched a portfolio stress-testing tool within GreenVUE, Evergreen’s proprietary portfolio analytics system.
GreenVUE will allow financial advisers to visualise their investment portfolio’s risk and return characteristics, given multi-factor analysis of portfolios in a range of events and market influences.
Evergreen founder and director Angela Ashton01 said while it is human nature to focus on the expected return, the risk being taken to generate that return does not always get the attention it deserves.
“There is no way to invest without risk, but the best way to guard against risk is constantly to measure it and assess it - and to manage it,” Ashton said.
“One of the most common tools that institutional investment managers use to manage their risk is portfolio stress-testing.”
Evergreen senior analyst David Cohen said financial advisers find it difficult to properly stress test portfolios because they have not had access to the right tools.
“Adequately assessing the range of risks being run by an investment portfolio and estimating outcomes under a range of different scenarios can be a very complex procedure, but it is something that directly benefits the advice process,” he said.
“It is not only an essential part of client reporting, it is a crucial element of managed account compliance. We think this is a unique tool in the adviser marketplace.”
The GreenVUE tool will allow advisers to run portfolios through re-simulations of the global financial crisis, the Euro-debt crisis, the US credit rating downgrade, oil shocks and US recession, rising global interest rates, trade conflict and the COVID-19 pandemic.
“The tool assesses how today’s portfolios would perform if these historical events - and the markets’ reaction to them - were repeated, in terms of the total return, maximum drawdown and volatility that could be expected,” Cohen said.
Cohen added that Evergreen’s adviser clients would typically use the information that GreenVUE gives them in their individual investment committee discussions as part of model portfolio reviews.
“It will act as a risk management tool in the first instance, as we can use it to test where we think Portfolio positioning is in terms of our model portfolios, and what market impacts we could expect on the portfolios in stress environments,” Cohen said.
“These will also play a role in model compliance reporting to platforms who ask for stress testing in their capacity as responsible entity (RE) of the models,” Cohen adds.
Centrepoint to roll out advice tech Centrepoint Alliance has formed an agreement with UK-based financial advice technology provider Intelliflo to distribute the service across the Australian market.
The ASX-listed advice group’s adviser network will be some of the first in Australia to access Intelliflo, which currently supports over 2500 firms
On the retirement product, Magellan said, it is still awaiting regulatory approval.
In an update on its newly-launched principal investments business, Magellan said Barrenjoey has now hired about 150 people and has begun onboarding clients. Barrenjoey recently hired David Gonski as chair and will start to go live with the markets business from the second quarter.
Magellan’s results did not hold any big surprises, primarily as FUM and performance were already disclosed in filings.
However, they were slightly better than sell-side analysts’ expectations.
“MFG 1H21 adjusted profit beat MS by 8% and consensus by 4% on lower costs. Whilst this is positive, we expect a mildly positive neutral share price reaction given revenues and dividend were in line with consensus, and there is no update on the delayed retirement income strategy launch,” Morgan Stanley analysts said in a note.
“Result looks broadly in line with consensus, though 4% miss to UBSe on NPAT largely reflecting volatile items and lower tax rate,” UBS analysts said.
BetaShares to introduce new fund The exchange-traded fund (ETF) provider is set to launch a cloud-computing ETF later this month as it continues to build out its technology offering.
The BetaShares Cloud Computing ETF (CLDD) will invest in companies that have taken advantage of the accelerated shift to flexible working arrangements, video conferencing, online shopping and digital media consumption.
The ETF will track an index of listed cloud computing companies involved in computing services, servers, storage, databases, networking, software and analytics. Such companies include Xero, Shopify, DropBox and Zoom.
BetaShares chief executive Alex Vynokur said CLDD is a pure-play exposure to the theme.
“Its methodology ensures that only companies whose primary focus is on cloud-based services are included in the portfolio, and excludes large, diversified tech companies whose global cloud services represent only a small part of their business,” he said.
The cloud-based computing sector is on a steady growth trajectory with revenues forecast to increase 17.5% to US$832 billion by 2025.
The index that CLDD will track has returned 34.4% since its inception in 2013.
“Thematic ETFs are an appealing vehicle for this, as they allow investors to easily obtain exposure to a theme and invest in a way that can transcend geographic regions and sectors,” Vynokur said.
“We are excited to give Australian investors the ability to access the growth potential of cloud computing in a convenient and cost-effective way. Even with the significant take-up experienced to date, we believe the megatrend in cloud computing has only just begun.”
CLDD is expected to commence trading on the ASX at the end of February 2021. fs
Sydney firm launches new fund Sydney-based firm Healthcare Ventures is raising for a new fund that will invest in innovative Australian companies.
The funds’ partnership and fund manager board includes: healthcare investor and director Roger Allen, Australasian Institute of Digital Health chief executive officer Louise Schaper, Healthcare Ventures managing partner Darren Heathcote and Tobacco Free Portfolios chief executive Bronwyn King.
The new fund will pay close attention to healthcare innovations in fields such as artificial intelligence, augmented reality/virtual reality, large scale data, advanced diagnostics, health IOT and telehealth, the firm said.
The fund’s first close is expected in the first half of 2021. and over 25,000 users with assets under advice of £444 billion.
Centrepoint Alliance’s advice software provider subsidiary Enzumo will work closely with Intelliflo to roll out the offering.
Intelliflo’s Intelligent Office software platform will come up against IRESS as it offers client relationship management, financial planning, client reporting, portfolio valuation and adviser-led automated advice.
Centrepoint Alliance chief executive Angus Benbow02 said the agreement comes as the firm has been receiving enquiries from advisers who prioritise technology and are looking to join the licence.
“In addition to teaming up with Intelliflo, Centrepoint Alliance has been making significant investments in technology including the acquisition of Enzumo, the introduction of an online adviser portal, Centrepoint Connect, and the development of the Centrepoint Practice Dashboard tool,” he said.
“We believe Intelliflo’s technology will greatly benefit financial advisers, and we are delighted to be working with them so that the Centrepoint Alliance community will be one of the first to access the benefits of Intelliflo’s open architecture.”
Investment manager Invesco acquired Intelliflo in 2018 to build out its presence in the UK.
Intelliflo chief executive Nick Eatock said the partnership has been invaluable in formulating its offering in Australia.
“Our engagement with Centrepoint Alliance has been building for some time. We greatly value the opportunity to work together and believe this marks the beginning of a new era of advice tech for Australia.”
Magellan performance fees dip 70% Magellan reported a small increase in its net profits, despite a 70% drop in performance fees and a stronger Australian dollar.
Net profit after tax for the six months ending December 2020 was $202 million, up 3% from the same period in 2019.
Total average FUM was $100.9 billion (9% higher), resulting in management fees of $311.4 million (8% higher) and performance fees of $12.4 million (down 70%).
Magellan’s strategies saw $3.7 billion in net inflows in the six months ending December 2020, which is at par with 1H20’s $3.6 million.
However, retail inflows were about 40% lower at $1.4 billion, while institutional net flows grew from $1.2 billion to $2.4 billion.
The global equities strategy attracted $1.7 billion in net flows and the global listed infrastructure attracted $2.1 billion. Airlie, which manages Australian equities, saw outflows of $100 million.
About 85% of Magellan’s total FUM is exposed to currency movements, of which 61% is exposed to the USD.
The Australian dollar’s strength in the period wiped off about $12 million from Magellan’s management fee revenue compared to the previous corresponding period.
The digital push
Global life insurers are testing the boundaries of underwriting innovation to another level. Karren Vergara reports.
The subject of life insurance does not spark interest for many, typically because it’s perceived as boring, complicated and expensive.
Over the last decade, however, the life insurance industry accelerated its efforts to shed this perception by launching new products, lowering costs, and modernising its processes in the name of innovation. Nowhere is this more evident than underwriting.
With a click of a button, FaceQuote guesstimates a person’s age and then calculates a quote for a premium – based on a selfie.
Zurich UK introduced FaceQuote three years ago hoping to reach the masses. This is a way, Zurich says, to make life insurance “fun” in the hope more people will engage with it.
Lapetus Life Event Solutions takes it one step further, launching CHRONOS, an end-to-end underwriting platform that predicts a person’s life expectancy by scanning their face to extract information like body mass index, physiological age and how fast someone is ageing.
Most Australian life insurers are automating their underwriting capabilities by partnering with established providers.
UnderwriteMe has since become the most popular piece of technology used by major players such as MLC Life, Zurich, while boutiques such as NEOS Life and Integrity Life have also partnered with the UK-based firm. Munich Re’s proprietary technology ALLFINANZ meanwhile has been adopted by TAL and ClearView.
While Australia’s life insurance is facing its own challenges – consolidation, lower profit margins and higher claims – its global counterparts paint a different story.
Demand for life insurance overseas remains solid, buoyed by a large cohort of the population that is not insured or underinsured. COVID-19 has also helped spur demand.
Life insurance is a large part of the global economy and the interesting thing is that it is a high-growth area, says according to Sunil Rawat01, the co-founder and chief executive of Omniscience, an artificial intelligence start-up based in Palo Alto, California.
About 200 million new life insurance policies are written every year, he says, with the US market growing about 3% to 4% per year.
Omniscience helps underwriters make complex decisions faster using maths and algorithms that underpins the technology, which according to the firm’s last measure, accelerated life insurance decisions 1000 times or more.
“A blood report would have common things like cholesterol – extra tests like C-reactive protein and other markers and factors that get more and more complex. My BMI could be the same as an obese person’s BMI but could have dropped due to my diet; I could have reduced my medication as a result and be in better health,” he says.
“Where we shine is taking all of these factors that are very complex and make decisions based on those computations.”
Currently, Rawat and his team are looking at 14,000 variables.
Life insurance underwriting has innovative power.
Laila Neuthor
In Germany, the life insurance market is thriving, says Laila Neuthor02, the chief executive and co-founder of we4 Impact.
She is seeing a spike in demand for life insurance products since COVID-19 hit, not only for personal cover for loved ones, but also products that cover mortality or mobility issues like death, loss of income and loss of ability.
“It is surprising, even with the coronavirus, how many more people seem to be aware that illnesses can prevent them from earning their living. They are buying more of those types of products that can protect their family’s financial situation,” she says,
Competition is fierce and innovating across underwriting capabilities can be a differentiator.
“Life insurance underwriting has innovative power and there is the opportunity to reshape the sales process and product development from within the very heart of the life insurance company,” Neuthor says.
One way life insurers can stand out is by having clear lines of communication with their sales force and efficient risk-selection processes. It means not asking unnecessary questions and that medical questions are clear and answerable for non-medical experts, such as brokers and clients, she explains by way of example.
Life insurers that are already digitising their methods are separating from the pack. McKinsey & Company categorise insurers across four phases in their underwriting automation journey (See Figure 1).
