Financial Standard vol19 n06

www.financialstandard.com.au

6 April 2021 | Volume 19 Number 06

09

14

22

Maree Pallisco EY

Platforms

ESG

11

Events:

21

Products

32

Technical Services Forum 2021

LGIAsuper, MetLife Hyperion

Kate Anderson Centrepoint Alliance

Opinion:

Feature:

Featurette:

Profile:

The platform of everything.

Where innovation never sleeps.

www.financialstandard.com.au

09

14

22

Maree Pallisco EY

Platforms

ESG

11

Events:

21

Products

32

Technical Services Forum

LGIAsuper, MetLife Hyperion

Kate Anderson Centrepoint Alliance

Opinion:

Geared Aussie equities funds out of favour Kanika Sood

ong-only Australian equities funds that levL erage to enhance their returns are falling out of favour, as investors anticipate an end to the bull market.

So far this year, Maple-Brown Abbott has wound up its 19-year-old geared Australian equities fund which had $13 million in assets, while Colonial Super Retirement Fund has swapped two geared funds with non-geared strategies.

Last October Perpetual axed two geared options in its superannuation offering, citing “low level of interest from members”.

In the three years to December 2020, geared Australian equities unit trusts from Ausbil, Fiducian and Pendal saw their assets dwindle by 16%, 22% and 59% respectively.

Managed fund research and rating house Morningstar covers 83 large cap Australian equities funds. Of the 83, only three use leverage.

“I think they are becoming less popular [at this point in the cycle] because most people would accept that sharemarkets have had a very good run, and the risk of a decline is increasing,” says Morningstar Australasia senior analyst – manager research Ross MacMillan.

“The long end of the bond market is starting to shift up a little bit [which] signals that we may see some further movement in interest rates.”

Locally, these strategies tend to come from the bigger fund managers like Perpetual and First Sentier, and they mostly focus on large caps.

Gearing is usually at 50-55% of the fund’s assets. It is done at a fund-wide level, and the fees are charged on gross assets, which are higher after the gearing.

The interest rate that the borrowing incurs usually comes out of the dividends.

But such funds can still have higher dividends than ungeared funds, as the leverage will increase the volume of dividend-paying stocks in the portfolio, says MacMillan.

He says fund managers have stayed away from offering the strategies, as their losses are magnified when the equity markets are falling.

“Traditionally in the Australian market, individuals have leveraged themselves into the sharemarket [via margin loans from retail brokers] than the product being leveraged,” he said.

For example, the recently wound up MapleBrown Abbott fund returned 34.6% to the benchmark’s 13.7% in its final months, but fell

significantly behind the benchmark in earlier periods including -21.5% in the year ending December to the benchmark’s 1.4%.

The volatility may deter pre-retiree or retiree investors. But the magnified upside potential may be attractive to younger investors.

“I think they are probably more popular among the younger demographic that is prepared to accept the volatility that is inherent in a geared strategy,” MacMillan said.

Hamilton Wealth Partners managing partner Will Hamilton, who advises sophisticated clients, says his firm does not use leveraged, longonly Aussie equities funds.

“First of all, it’s the nature of our client base.

Even if we were to have something [equity exposure with leverage], I would want to control it centrally,” Hamilton says.

The sentiment carries to institutions.

Raewyn Williams, an after-tax investing expert formerly of Parametric, says she cannot think of one superannuation fund that uses geared long-only equities strategies.

“It is a shrinking institutional market for geared strategies,” Williams said.

“Gearing Australian equities portfolios is really uncommon and not something I have seen for a long-time. There is a little bit of futures that most of them use to get into the market [and] futures are a type of leverage.”

Williams added that geared strategies, if used by superannuation funds, tend to be classified as alternatives (5-10% of the total assets) instead of Australian equities (25-30%).

For investors with higher marginal tax rates, gearing in a fund may be attractive.

“It’s particularly good for those on high marginal rates of tax when they don’t need the cashflow from their investment. They want the capital value compounding at a higher rate than the market and access to high levels of franking credits,” Rainmaker head of investment research John Dyall says, adding much of the income produced by these investments is used in the payment of interest on the borrowings within the fund.

“As with all equities products held in a taxable environment, check the portfolio turnover.

“This will give you an idea of the amount of realised capital gains tax that might get distributed. Look for low turnover funds as any realised capital gains are likely to be at a discounted capital gains tax rate.” fs

6 April 2021 | Volume 19 Number 06 www.financialstandard.com.au 20 January 2020 | Volume 18 Number 01

Feature:

Featurette:

Profile:

Fee consent instrument out Elizabeth McArthur

John Dyall

head of investment research Rainmaker Information

ASIC has released three legislative instruments to regulate advice fee consents and lack of independence disclosures, as part of the government’s response to the Royal Commission.

The first of the three sets the requirements that written consent from a fee recipient must be obtained by financial advisers before they can charge any advice fees as part of an ongoing fee arrangement.

The second means ASIC will require Australian financial services licensees or authorised representatives to provide clients with disclosures on lack of independence where they would breach section 923A of the Corporations Act or if they have used words such as “independence”, “impartial” or “unbiased in marketing material.

And finally, written consent will also be required to be obtained from a member of a super fund before deducting any financial advice fees from a member’s account under a non-ongoing fee arrangement.

To assist licensees, ASIC has provided example Continued on page 4

ASIC praises super trustees Eliza Bavin

The corporate regulator said it took several actions to check on the support provided by superannuation trustees to their members during COVID-19, including reviewing how trustees communicated to members about issues related to COVID-19, and the provision of intra-fund advice.

The regulator said most funds showed positive outcomes, however brought attention to a limited number of funds who did not provide accurate information to members.

“ASIC found that trustees were quick to resolve any issues we raised with them about their public COVID-19 communications,” it said.

“This included issues concerning a significant number of website projection tools that estimated retirement balances and highlighted the impact of accessing superannuation early.

“We also found that intra-fund advice provided during this time was consistent with previous assessments of the quality of intra-fund advice Continued on page 4

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News

www.financialstandard.com.au 6 April 2021 | Volume 19 Number 06

AMP names new chief

Editorial

Annabelle Dickson

A

Jamie Williamson

Editor

To do something that is very risky or dangerous.

That is the definition of tempting fate, and that is exactly what I did with this editorial – the first iteration, that is.

What you’re reading right here is the second iteration of this fortnight’s editorial, with the first having been thrown on the scrap heap at the 11th hour.

That’s because the first editorial was, rather cockily, all about the story Financial Standard never wrote; the biggest of the fortnight.

Of course, I am talking of the much-hyped resignation of AMP chief executive Francesco De Ferrari.

First reported by the Australian Financial Review on March 25, our calls to AMP were met with ‘no comment’ while we patiently waited for the ASX announcement confirming the news.

We bided our time and prepared a story, recapping his time at AMP, and waited for the confirmation. But, again, it never came.

Instead, several hours later, the opposite; a one-sentence statement affirming De Ferrari as chief executive. This was followed the next day by two sentences, again maintaining he remains in his role.

That is, until April 1 when AMP announced De Ferrari would leave the business and ANZ deputy chief executive Alexis George would take over.

Was the board hoping people would be more preoccupied with preparing for the Easter long weekend to care? Is there some hidden meaning in the decision to announce it on April Fool’s Day? Did AMP know of the first version of my editorial and deliberately thwart me?

I suppose it’s far more likely that the AFR’s source just got a little too excited and let the cat out of the bag before De Ferrari was done negotiating his golden handshake with the board.

Exactly why De Ferrari is going after just over two years is unclear and it certainly seems he is leaving before the job he was employed to do is finished. Yes, AMP has been reshaped to a degree but there is still plenty that remains undone.

It was only a day after rumours of De Ferrari’s planned exit first began that AMP confirmed the 30-day exclusivity period on its talks with Ares Management for 60% of AMP Capital’s private markets business had lapsed. This, after plans for Ares to acquire 100% of AMP crumbled in February.

Was this failure to get either deal over the line reason for his departure or just the final straw?

It does certainly seem that we’re seeing less of a jump and more of a push. But, when all is said and done, it makes sense; it’s not often that a company’s reputation is degraded further while helmed by someone whose specific purpose was to restore it.

Perhaps we’ll never know what really went down, but what we do know is that it’s not easy being an AMP shareholder. Here’s hoping that Alexis George can deliver for them. fs

The quote

Leading AMP, a business that is part of the fabric of Australia and New Zealand, is a privilege.

fter much speculation, AMP has confirmed chief executive Francesco De Ferrari will step down following the group’s portfolio review and named his successor.

Alexis George has been at ANZ for over seven years as deputy chief executive and group executive wealth Australia, overseeing the sale of the business in 2018. She previously worked at ING, BNP Paribas and PricewaterhouseCoopers.

“While there is no optimal time for transition, the Board and I agreed that for AMP to deliver on the next phase of its ambitious transformation, at this juncture long-term certainty of leadership is critical for our business, our employees and our clients,” De Ferrari said.

“Leading AMP, a business that is part of the fabric of Australia and New Zealand, is a privilege. I wish Alexis and AMP only the best and you can count on me to continue cheering for its success from the sidelines.”

De Ferrari will remain in his role until the third quarter at which point George will take over.

George will receive a sign-on award of AMP shares worth $4.091 and $732,500 in cash followed by a salary of $1.715 million per annum.

George is eligible for a short-term incentive op-

portunity equivalent to 100% of the salary and up to 200% subject to performance hurdles.

AMP chair Debra Hazelton thanked De Ferrari for his two-year tenure at AMP and said the completion of the portfolio review marks an appropriate time for a new chief executive to lead AMP. “Francesco has led AMP through an extraordinary period, responding to unprecedented external challenges, all while successfully executing a complex transformation program,” she said.

“In Alexis George, we have a great leader and strong fit for the future of our company. On any measure, she has outstanding industry experience in wealth management and banking, and is committed to continue the transformation of AMP’s business, and importantly, our organisation’s culture.”

During his time as chief, AMP offloaded its life insurance business to UK’s Resolution Life, its global equities unit to Fiera Capital, and announced proposed plans for Ares Management to assume the management control of the private markets business.

AMP leaders faced claims of sexual harassment and sparked an exodus of executives leaving the company. fs

Aware to restructure advice offering, redundancies likely Elizabeth McArthur

One of Australia’s largest superannuation funds, Aware Super, is restructuring its financial advice team in a move which will result in redundancies.

The $130 billion fund said it has observed a trend away from ongoing advice contracts and towards on-demand advice, prompting the move.

“We are currently in consultation regarding the structure of our financial advice team going forward. Regrettably this will result in some roles being made redundant. Out of respect for everyone involved in the process we’ve been reluctant to be drawn on these details in public, but it’s important that people understand the facts as they actually are,” Aware group executive, advice and financial planning Sarah Forman said.

Aware integrated the StatePlus AFSL into the fund in 2019 when it was still known as First State Super. At the start of 2020 First State had 232 financial advisers, according to Rainmaker analysis of the ASIC Financial Adviser Register.

As of the latest ASIC FAR data it has 244, although 53 advisers did leave the AFSL in that period, reflecting no redundancies yet.

“The changes impact the broader financial advice team which includes planning, customer service and specialist roles. Until this consultation period is finalised we cannot confirm the final impact of the changes,” Forman said.

“As part of this we are also working hard to investigate potential redeployment opportunities for impacted team members.”

The Australian Financial Review previously reported that 90 financial advisers would be made redundant, but Forman disputed that figure.

“The number of impacted roles quoted in previous media reports is wrong and we expect the impact on planning roles to be significantly less by the conclusion of the consultation period,” she said.

“In reality, the trend away from ongoing advice contracts and towards on-demand advice has been a steady one, and with that in mind it’s clear that the old model simply isn’t sustainable.

“As a profit-to-member fund we’re doing the right thing by managing this proactively – including through the ongoing review of our advice business and where our offices are located to ensure it reflects member demand.”

In the past year, Forman said Aware’s new digital advice offering has grown from zero to 35,000 interactions.

“While we’ve expanded our intra-fund advice to make it available to more members, it’s also worth highlighting that this is still high-quality advice based on the individual needs and circumstances of that member,” she said.

“It’s a completely appropriate level of advice for many of our members, and we’re currently recording satisfaction rates above 95% so it’s clearly working for them. That’s why we have invested in this area in particular – it’s a great solution for many of our members and by growing this team we can make the service more available to more of our members.” fs

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News

www.financialstandard.com.au 6 April 2021 | Volume 19 Number 06

AMP, Ares deal hangs in the air

01: Philip Kewin

outgoing chief executive Association of Financial Advisers

Annabelle Dickson

AMP has concluded its exclusivity period with Ares Management raising uncertainty as to whether the acquisition of AMP Capital’s private markets business will go ahead.

As previously announced, both firms are pursuing a joint venture where Ares will assume the management control of the private markets businesses which includes equity, infrastructure debt, real estate and other minority investments, while AMP will retain a 40% stake.

The 30-day exclusivity period in the heads of agreement with no certainty that the transaction will proceed.

The news follows speculation last week that AMP chief executive Francesco De Ferrari was to resign. AMP was forced to enter a trading halt before confirming that he remains in the lead role.

After that announcement, Allan Gray portfolio manager Simon Mawhinney told Financial Standard that he believes AMP Capital will separate from AMP with or without Ares. He added that if the Ares deal doesn’t succeed, 100% of AMP Capital should be distributed in specie to current AMP shareholders.

The private markets transaction, if it goes ahead, is valued at $2.25 billion with Ares outlaying $1.35 billion for its stake.

AMP will retain $0.9 billion of assets which includes seed and sponsor investments, surplus capital and future performance from existing funds.

The joint venture aims to accelerate the growth of the AMP Capital private markets, capitalising on Ares’ current capabilities in real estate and private equity. Ares will appoint six board members and AMP will nominate four.

The news of the joint venture came after Ares previously made a non-indicative proposal to acquire 100% of the AMP Capital for $1.85 per share, totalling around $6.35 billion. But then Ares later dropped its proposal.

In addition, AMP is “actively exploring” sale opportunities for its global equities and fixed income segments.

De Ferrari previously said AMP’s scale is unable to compete with global players.

“Ultimately it is a scale game. We will be looking for opportunities to find a better solution for shareholders. We have a great product, we simply do not have the scale to grow this business globally,” De Ferrari said.

On the same day AMP Capital announced it had handed over management of a New Zealand REIT, receiving $179 million for doing so. fs

Advice association chief executive resigns Jamie Williamson

T

The quote

I am extremely proud of my achievements at the AFA.

he chief executive of the Association of Financial Advisers has stepped down after four years in the role.

Phil Kewin 01 has led the AFA since 2017, having succeeded Brad Fox as chief executive in March of that year.

He said the time is right to hand over the reins, as a new wave of reform heads the advice industry’s way.

General manager, policy and professionalism Phil Anderson has been appointed chief executive in an acting capacity while the AFA board searches for a permanent replacement.

“I am extremely proud of my achievements at the AFA, in particular the way we have represented advisers during what is undoubtedly the most challenging period the profession has ever experienced,” Kewin said.

“I would like to thank the AFA team for continuing to deliver outcomes that any large team would be proud of; our volunteer brigade of Communities of Practice, for continuing to build the AFA Community; our AFA Partners for their unwavering support

Kanika Sood

An ASX-listed multi-boutique is paying about $8 million for a 40% net income share of a Londonbased private markets manager.

Pacific Current Group (PAC) has received approval from UK’s Financial Conduct Authority (FCA) to invest in Astarte Capital Partners, after entering a purchase agreement on December 24.

PAC is paying GBP4.4 million (about $7.97 million) for a 40% share of Astarte’s net income. About 35% of the consideration will be deferred until July 2021.

It will have a minority shareholding via buying out non-management Astarte shareholders.

PAC has over 12 boutique partners that

Outstanding performance through the economic cycle Independently rated

for advice, and of course, our AFA members who continue to demonstrate endurance and resilience in unprecedented times, to deliver great outcomes for their clients.”

Also commenting on the departure, AFA president Michael Nowak said Kewin has advanced the AFA’s reputation, resulting in a larger member base and stronger relationships with government.

Kewin’s tireless and ongoing engagement with stakeholders has been instrumental in gaining extensions to the FASEA exam and degree equivalent requirements, he said.

“Similarly, he facilitated our collaboration with the Financial Planning Association, Financial Services Council and other industry stakeholders, via forums such as the AFA/FPA Joint Associations Life Insurance Task Force and Choice and Access to Life Insurance (CALI), which have positioned us well with the federal government and the opposition as they prepare to consider the future of life insurance commissions under the Life Insurance Framework review,” Nowak said. fs

Multi-boutique adds partner

Market leading investment solutions $12 billion AUM

3

1800 818 818 | latrobefinancial.com

had $112.8 billion in combined funds under management as at December 2020 end.

But about 77% of its FUM is from global equities manager GQG Partners, which swelled to $45 billion in 2020.

GQG started the December quarter with $77.7 billion in total FUM and ended the calendar year with $86.9 billion.

GQG recently appointed Ashneel Naidu as director of business development, reporting to director of wholesale markets Daniel Bullock.

Joining from Vanguard, Naidu will work with wholesale asset consultants, licensees and independent wealth firms. fs

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News

www.financialstandard.com.au 6 April 2021 | Volume 19 Number 06

01: Alex Dunnin

Fee consent instrument out

executive director of research Rainmaker Information

Continued from page 1 written consent forms for both ongoing and nonongoing arrangements. Additional information for super trustees is to be provided in the coming months, ASIC said.

All three new instruments are directly in response to Commissioner Kenneth Hayne’s recommendations from the Royal Commission.

“ASIC said that the instruments were designed to strike a balance between minimizing regulatory burden for the advice and superannuation industries and ensuring customers receive the information that is relevant to them,” the regulator said.

“ASIC does not have powers to provide exemptions from the new advice fee consents and independence disclosure requirements or to modify how the requirements apply. ASIC can only specify requirements for the advice fee consents and the form of the disclosure of lack of independence.”

The industry had been able to participate in consultation with ASIC on advice fee consents and lack of independence disclosures since March 2020.

ASIC also released a response to submissions on advice fee consents and independence disclosures, highlighting feedback from the industry.

It acknowledged that the main issues raised by respondents in relation to fee consents were the duplication of information, complexity of information requirements, privacy concerns when passing on consent and the level of prescription in the written consent. fs

ASIC praises super trustees Continued from page 1 provided by superannuation funds.”

ASIC said while most websites contained accurate information about legislative and economic changes, many lacked detail about how members’ insurance through their superannuation might be affected if they chose to access their super early, or if their employment status changed because of COVID-19.

The regulator did not name the funds which gave inaccurate projections of the impact of the ERS scheme but said it expected trustees to Additionally, ASIC said its ERS surveillance for intra-fund advice covered 27 trustees, with 11 indicating they intended to rely on ASIC’s temporary no-action position.

It said the surveillance found that actual instances of advice provided under the no-action position were very limited.

“We did not identify any evidence of trustees inappropriately using intra-fund advice to discourage members from applying for the ERS,” ASIC said.

It added that as part of checking the support trustees provided to members in relation to insurance issues, ASIC requested samples of insurance related intra-fund advice.

“Of the 18 files collected, eight were assessed as complying with the best interests’ duty and related obligations,” ASIC said.

“The remaining files were assessed as noncompliant because of issues with procedures and record keeping.” fs

Rainmaker reveals 2021 AAA super products Jamie Williamson

O

The quote

Members in a AAArated fund can be confident their fund will deliver on its promises.

f the 692 superannuation products reviewed by Rainmaker, 29% have received a AAA Rating for 2021, with 11 offerings added to the list.

Rainmaker looked at 692 products from 178 superannuation funds for its annual assessment.

In analysing the offerings, the research house looks at the quality of a products investments, fees, insurance, communications and more.

Funds are benchmarked against 3500 investment choices, 2000 fee options and 15,000 group insurance choices.

The ratings also now consider risk-adjusted performance in the main default investment choices.

This year saw 149 products from not-for-profit funds and 49 from retail funds make the cut.

Last year NFP funds accounts for 154 products and retail funds came in with 47.

Of these, 198 products have received a AAA Rating, including 187 that retained their ratings from last year.

The balance is the 11 offerings added to the list this year. These are AMG Super’s Emplus Personal Super; Australian Catholic Superannuation and Retirement Fund’s RetireSmart; Colonial First State Rollover and Superan-

nuation Fund; Military Super; Commonwealth Super Corporation retirement income; GESB West State Super; GuildSuper; Russell Investments’ Nationwide Super Personal Division; Spaceship; Suncorp Brighter Super for Business; and Bendigo SmartOptions Super – Employer.

“Members in a AAA-rated fund can be confident their fund will deliver on its promises,” Rainmaker executive director of research Alex Dunnin01 said.

“To achieve the AAA Rating, superannuation products are independently assessed to ensure they meet high standards across investments, fees, insurance, communications and more.”

The number of funds to receive the top rating was down slightly this year from 201 products in 2020. This was the result of increased merger activity throughout last year, including that of First State Super and VicSuper to create Aware Super, WA Super and Aware, and Sunsuper and the IAG & NRMA Superannuation Plan.

The past year has been a difficult time for many super fund members, he added.

“Times like this call for super funds to hold true to their promise and focus on their core job - delivering for their members,” Dunnin said.

“Members need to know they are in funds they can trust.” fs

Not-so-Zuper: Super disruptor folds Having failed to reach sufficient scale, the millennial superannuation fund will close its doors on May 1.

Closed to new members as of March 10, existing Zuper members have now received word that the offering will cease to exist from April 30 – just shy of three years since its launch.

Notifying members, Zuper’s trustee Diversa said it is has been determined it is in the best interests of members to close Zuper.

“There has been a significant increase in the amount of regulatory change introduced by the federal government and regulatory bodies over the last few years,” Diversa said.

“These changes have increased the complexity and cost of administering superannuation funds resulting in potentially poor outcomes to members where there is insufficient scale.”

If members do not act before April 30, all Zuper accounts will be transferred into LESF and Macmahon Super.

Zuper is a sub-plan of OneSuper, which remains open. OneSuper was formerly known as Smartsave Members Choice Superannuation Plan.

It was previously a sub-plan of LESF Super which merged with OneSuper in July last year.

At the time, Diversa – which was also trustee for LESF – said it was unlikely LESF and its sub-plans would reach sufficient scale to be viable in the medium to long term, with the merger intended to provide economies of scale.

Founded in early 2017, Zuper first launched in June 2018. At the time, its founders took on executive roles: Jessica Ellerm served as chief executive, Jon Holloway was chief product officer and Eran Thomson was chief creative officer.

All three have since departed, with Zuper acquired by RevTech Media.

Recent research by Rainmaker found disruptor super products, like Zuper promised to be, accounted for about $2.5 billion in superannuation assets in June 2020.

While it may seem small, this was up 44% since June 2018 – a growth rate seven times faster than that of the overall superannuation market. Still, such products only hold about 2% of millennials’ super.

Most of the growth comes from Future Super, which has now amassed more than $1 billion in funds under management.

At the time of its last annual report in 2019, prior to the merger with OneSuper, Zuper had just $6.7 million in FUM. fs

News

www.financialstandard.com.au 6 April 2021 | Volume 19 Number 06

Vanguard targeted in bond fund scam

01: Andrew Fraser

chair Sunsuper

Kanika Sood

The asset manager said scammers are buying advertisements on search engines for terms relating to “bond or high yield investments”. When a person clicks on the ad link, they are taken to a fake investment comparison website with a name like “Investment Compare”. “[The scammers] collect personal information including identification and bank details, followed by in-person contact and provision of a fake Vanguard prospectus designed to convince victims to purchase non-existent investment products,” Vanguard said in a statement.

Previously Citi and IFM Investors had fake prospectuses of bond funds circulated in their names. The Australian Securities and Investment Commission had to issue a warning to investors.

“In this low-rate environment, these scammers are taking advantage of investors seeking higher yields through a fake investment bond offering eye-catching – but ultimately unrealistic - yields.

Echoing ASIC’s February warning: if it feels too good to be true, it probably is,” Vanguard head of corporate affairs Robin Bowerman said.

“We are urging anyone considering investing in a new investment to conduct proper due diligence prior to transferring funds, including contacting the asset manager they are looking to invest with directly via their listed phone number or website.

“Anyone impacted should immediately report this criminal offence to police, contact their bank to stop payments being taken, and alert major credit bureaus such as Equifax and Experion to place a stop on their credit profile to prevent others opening accounts with their personal information.” fs

Risk premium inflows stagnant The latest data from Plan For Life showed total inflows increased 0.5% to $16.3 billion with just a 0.9% increase in inflows to individual lump sum premiums.

Only ClearView (4.6%), Zurich (4.4%), TAL (2.4%) and MLC (1.8%) recording increases in their inflows, while the remainder reported minimal or negative growth. The biggest losers were AMP (-4.4%) and AIA Australia (-1.5%).

Individual risk income premium inflows increased 1.7% over the year with ClearView recording the largest growth at 15.6%. It was followed by Zurich (4.8%), TAL (3.3%) and AIA Australia (2.9%). AMP recorded the largest outflow at 6.2%.

Group risk premium inflows decreased 0.6% over the year as a result of the Protecting Your Super and Putting Members’ Interests First legislation.

Despite this, AIA Australia recorded 27.3% growth followed by QInsure at 3.8%. BT/Westpac recorded a negative result of 96.2%.

“It should be noted that individual company growth can be significantly impacted by super fund insurance mandate movements, with BT/ Asgard Super moving from Westpac to AIA, Qantas Super from MLC to MetLife, Telstra Super from TAL to MLC, EnergySuper from MLC to OnePath and AFLPA from AMP to OnePath all occurring over 2020,” Plan for Life said. fs

5

Australia Post Super explores merger with Sunsuper Annabelle Dickson

T

The quote

It demonstrates our commitment to offering a high-quality solution to employers of the size and national reach of Australia Post.

he Australia Post Superannuation Scheme (APSS) has signed a non-binding heads of agreement to explore a merger with Sunsuper.

The $8 billion APSS has been closed to new Australia Post employees since 2012 and has around 30,000 members.

APSS Trustee’s independent chair Mark Birrell said the decision to explore a merger is to empower its members with more choice and services.

“The merger will only proceed to completion if a comprehensive due diligence review confirms that it’s in the best interests of our members. Members’ super benefits will be protected,” Birrell said.

The merged fund will provide Australia Post with a corporate plan within its structure and maintain APSS’s defined benefits scheme funded by Australia Post.

APSS members’ accumulation balances are to be transferred to a similar investment product within the merged fund.

Sunsuper and QSuper also recently confirmed that they will merge by September after first exploring the merger in 2019.

The merged fund will create one of Austral-

ia’s largest superannuation funds with around $200 billion in assets. If the merger with APSS goes ahead, it will surpass AustralianSuper’s $203 billion and come out as the largest superannuation fund in Australia with $208 billion.

Currently, Sunsuper has some $80.6 billion in assets under management and 1.4 million members, while QSuper has about $120 billion and 600,000 members.

Sunsuper chair Andrew Fraser01 said APSS members would benefit from a wide range of investment options, in-house administration and low fees.

“The APSS looks to join us at an exciting time for our fund. It demonstrates our commitment to offering a high-quality solution to employers of the size and national reach of Australia Post, a focus that will continue in a Sunsuper and QSuper merged fund,” Fraser said.

The APSS noted that Australia Post Group has other default superannuation arrangements in place which will be unaffected by the merger discussions.

The latest development follows Sunsuper’s merger with CBH Super, AustSafe Super, Kinetic Super and IAG & NRMA Super. fs

Active funds quell passive flows Karren Vergara

Active fund managers still have a stronghold of the funds management landscape over passive strategies, overseeing US$2 out of every US$3.

Calastone’s latest research found that in Australia, inflows to active funds surged in 2020, totalling US$3.7 billion in new capital, compared to US$943 million to passive funds.

This is in sharp contrast to Australia’s UK, European and US peers, and some Asian countries. The findings suggest that the Australian active fund management industry may have a more successful defence against the growing movement toward index strategies, the Tidal Forces report found, after analysing hundreds of millions of trades on the Calastone global network.

Equity funds focused on Aussie stocks took in US$1.8 billion in new capital over the last two years – but only from domestic investors.

Australian-focused funds are “unloved” by foreign investors partly because of complex tax treatments. Foreign investors are also content with holding Aussie assets via a global fund.

In terms of ESG trends, Australia’s financial services industry is more muted on sustainability issues compared to the UK and Europe. This is because access to information is more restricted, and the home-market bias leaves investors

with fewer assets that would meet global ESG standards, Calastone found.

“ESG strategies have been a significant contributor to the success of active global equity funds. This makes sense because fund managers are not interested in where companies are but how they behave. They accounted for two fifths of the inflows to active global funds in the last two years,” the report read, noting that British investors are by far the most enthusiastic adopters.

However, passive ESG funds are also on the rise even though they are more expensive than conventional index trackers. Australians lag behind when it comes to adopting passive ESG funds, while Asian investors have shown no interest at all.

Looking at the broader funds management sector, Calastone head of global markets Edward Glyn said: “The long bull market has favoured passive funds – savers are quite happy to ride a rising index and take the simple market return. But passive investors are all-in on market bubbles and market crashes alike.”

Glyn warned that the rise of mega-caps like Apple and Amazon has increased absolute risk for passive investors, even if a fund continues to mirror the market perfectly.

Calastone’s new Fund Flow Index (FFI) will launch in Australia later this year and will provide detailed quarterly insight into Australian investor behaviour. fs

6

News

www.financialstandard.com.au 6 April 2021 | Volume 19 Number 06

HGL acquires fund manager

01: Vasyl Nair

acting chief executive Mine Super

Elizabeth McArthur

ASX-listed HGL has acquired fund manager Supervised Investments Australia.

Supervised Investments already had an investment agreement with HGL for The Supervised Fund but operated under its own AFSL. Supervised Investments has been brought into the HGL group as a wholly owned and managed fund manager.

HGL said it will be rebranded under the HGL banner in due course.

The acquisition was funded by the issue of three million HGL shares, with the move approved by shareholders at the HGL annual general meeting on 24 February 2021.

The acquisition represents HGL’s re-entry into funds management.

In an announcement to the ASX, HGL said Supervised Investments has over $10 million in funds under management.

The company added that this would provide a “small base” and capability from which to grow and to derive both base management fees and investment performance fees.

“It is intended that the investment /funds management division will grow to become a core contributor to future profitability of HGL,” HGL said.

In 2019, Supervised Investments’ chief executive Michael Ohlsson resigned following a decision by the fund manager to pull out of global debt markets.

Ohlsson said at the time Supervised Investments Australia had decided to discontinue managing assets in the global debt markets to focus on international equities.

Ohlsson has remained with the firm as a consultant alongside investment manager, Joseph Constable. fs

TelstraSuper opens doors to friends Jamie Williamson

TelstraSuper is expanding its membership, opening its doors to friends of members.

Effective this month, existing TelstraSuper members may refer their friends to join the $22 billion corporate fund.

The process is simple, the corporate fund told Financial Standard, with a referral tool on the TelstraSuper website for members to invite friends; the member simply needs to provide their full name, date of birth and member number for validation purposes.

Despite the move, and the fact it already holds a public offer licence, TelstraSuper confirmed it has no plans to become a public offer fund.

A spokesperson said the fund only uses that status to respond to situations where members request for family, and now friends, to join the fund.

“Our focus is to deliver the best possible retirement outcomes for our members,” a spokesperson said.

Also commenting, TelstraSuper chief executive Chris Davies said: “Research consistently shows us that the fund rates particularly highly when it comes to trust and quality service, so it’s no surprise our members want to share us with their friends as well as family,” fs

Industry fund chief steps down to lead administrator Karren Vergara

A

The quote

From the beginning it was our strategy to provide the kind of configurability, functionality and user experience that would attract other funds to the platform.

n $11.5 billion superannuation fund’s chief executive will exit to lead a fintech, which is in the process of merging with the former Sargon Capital, now Certane Group.

Mine Super chief Harry Mitchell will step down after nearly five years at the helm. He will be replaced by group deputy chief executive Vasyl Nair01 for the interim.

Nair is expected to lead the super fund until 30 June 2022 while the super fund’s board searches for a replacement.

Nair joined Mine Super almost five years ago and previously held its chief risk officer and chief strategy officer roles.

Mitchell will take on the role of managing director of Recreo, Mine Super’s superannuation and investment administration platform. Mine Super has held a majority stake in Recreo since 2015.

Recreo chief executive Andrew Bain will remain in this position.

Recreo, with $12 billion funds under administration, will merge with corporate and superannuation trustee Certane Group. The latter provides trustee services to 27 Australian superannuation funds.

Certane has undergone several iterations. It was originally part of Sargon until it was bought

to become Certes Corporation, led by Marcus Price, who took on the group’s chief executive and managing director roles.

OneVue sold Diversa Trustees and its related company CCSL to Sargon in 2018 for over $37 million, moving sub-plans such as Future Super, GROW Super, Mason Stevens Super, ING Super Fund and Grosvenor Pirie under a new parent company.

Sargon was sold to Pacific Infrastructure Partners in May 2020, headed by Teddy Wasserman and Matthew Kibble, for an undisclosed price. Sargon was briefly known as Certes before the new owners settled on Certane.

Commenting on the merger, Mine Super chair Grahame Kelly said Recreo’s platform will become more widely used and further investment would deliver additional features which would be attractive to other funds.

“From the beginning it was our strategy to provide the kind of configurability, functionality and user experience that would attract other funds to the platform. We have built a complete solution that delivers efficiencies, improves compliance and transparency, and frees up fund managers and promoters to focus on growth and their members,” he said.

The merger is due to complete by the end of May. fs

COVID-19 spurs robo-advice demand The global pandemic has not only changed the way consumers buy goods and services, but also spurred stronger demand for robo-advice to help improve their financial wellbeing, a new survey finds.

Software firm Oracle’s Money and Machines 2021 report reveals that more consumers are shunning professional finance advisers, citing a lack of trust and varying degrees of competence from humans that fall short of their expectations.

The majority of consumers (67%) trust robots more than humans to help manage their personal finances, the global survey of 9000 respondents found (about 500 participants were Australian).

Three quarters of consumers currently use robo-advice to help manage their finances to free up time (33%), reduce unnecessary spending (31%) and increase on-time payments (25%). Robots are also helping many invest in the stock market.

An overwhelming number of participants (82%) predict robots will replace financial advisers by 2026. Nearly half (42%) are of the opinion that the change has already taken place or will do so in the next five years.

Consumers, however, still depend on humans when it comes to major purchases or significant lifestyle events such as buying a house and car, and planning for retirement.

Commenting on the findings, author and SO MONEY podcast host Farnoosh Torabi said: “Robots are well-positioned to assist – they are great with numbers and don’t have the same

emotional connection with money. This doesn’t mean finance professionals are going away or being replaced entirely, but the research suggests they should focus on developing additional soft skills as their role evolves.”

In a separate survey by Schroders, which asked how the coronavirus has forced Americans to overhaul their way of life, saving for the future has become their third priority.

The Schroders US Retirement survey found that health and fitness (53%) became a top priority, followed by spending time with the family (39%) and figuring out what to watch on Netflix and other streaming services (38%).

Schroders head of intermediary distribution for North America Joel Schiffman said the good news is people are focused on saving for the future even during COVID. “But the question remains, ‘Will they have enough for retirement?’ The way to improve retirement readiness is through better knowledge, guidance and investment choices.”

Nearly half of the respondents had no idea how their assets for retirement were allocated, which included 59% of women and 51% of non-retired investors between the ages of 60-67.

“Not knowing how your assets are allocated, or holding one-quarter or more of your retirement savings in cash, indicate there may be a need for a greater understanding of how a diversified portfolio could maximise growth while managing risk,” he said. fs

EARN CPD POINTS

Wednesday 5 May 2021 8:30am to 3:00pm Four Seasons Hotel 199 George Street Sydney NSW 2000

EXCHANGE TRADED PRODUCTS This CPD-accredited event seeks to inform advisers and investment professionals about the benefits of using ETPs, including Listed Investment Companies, Listed Investment Trusts, mFunds, Exchange Traded Funds (ETFs) and Active ETFs. The appeal of ETPs has continued over the last year, with FUM sitting at $150 billion after record growth, as at 28 February 2021.

The forum will explore how this evolving industry is answering the needs of today’s financial planning and wealth management community.

Visit financialstandard.com.au/etp_forum or call 1300 884 434 BOOK YOUR SEATS

Scan the QR code to book

8

News

www.financialstandard.com.au 6 April 2021 | Volume 19 Number 06

ASIC drops Caddick charges ASIC has dropped all 38 charges it was pursuing against missing woman and self-proclaimed financial adviser Melissa Caddick.

The regulator was pursuing criminal charges against Caddick, who has been missing since November last year.

The charges included 19 counts of pretending to have a financial services licence and 18 counts of dishonest conduct in relation to financial products or services. Caddick was also charged with not holding an Australian financial services licence when she was required to.

On March 30 at Downing Centre Local Court in Sydney, ASIC withdrew all these charges.

The news comes after police confirmed that a running shoe containing human remains found washed up on Bournda Beach in NSW had been forensically identified as belonging to Caddick.

The 49-year-old wife and mother was last seen at her Dover Heights home during the evening of Wednesday, 11 November 2020.

Police have since presumed Caddick dead and investigations in the circumstances surrounding her disappearance are ongoing.

ASIC had found evidence that Caddick was misappropriating investor funds through her company Maliver and was posing as a financial adviser even though she did not have an AFSL. The day Caddick went missing, ASIC raided her home to search for evidence.

ASIC clarified that it had to withdraw the charges against Caddick, as a matter of law, to enable the civil proceedings to go ahead.

However, the regulator reserves its rights to reinstate the charges at a later stage.

According to the affidavit, ASIC considers it is in the best interests of Maliver investors who lost significant sums of money to resolve civil proceedings as quickly as possibly so that they can receive funds from the winding up. fs

Garry Laurence starts boutique Former Perpetual Investment global equities portfolio manager Garry Laurence has started a new boutique which is currently raising for its first fund.

Laurence spent 13 years at Perpetual and left in July last year, as Perpetual handed over the management of its global equities funds to US-based value manager Barrow Hanley after acquiring a 75% stake in the latter.

Laurence received an AFSL for his new boutique last month and is now raising for a “founder class” of units in his global equities strategy.

The boutique is called Profeta Investments, after an old family name that means “profit” in Spanish.

The fund is slated for a broader launch to wholesale investors on May 1.

It will hold five-40 stocks, and allow ASX-listed companies, derivatives and up to 30% in short positions. But the fund doesn’t plan to gear and will have a net exposure of between 50-100%.

“We will look for quality growing companies with strong balance sheets and buy when they are mispriced by the market,” Laurence told Financial Standard, adding that owner-managed companies are a big focus for the strategy. fs

01: Karen Chester

deputy chair ASIC

Mayfair found to have misled Elizabeth McArthur

A

The quote

They need to make sure they accurately describe their products when advertising.

SIC’s court action against Mayfair 101 has been successful, with the Federal Court finding its advertisements for debenture products were misleading.

The court found Mayfair Wealth Partners trading as Mayfair Platinum, Online Investments trading as Mayfair 101, M101 Nominees and M101 Holdings engaged in misleading and deceptive conduct and made false or misleading representations.

The judgement concluded that Mayfair misled investors to believe its debenture products were comparable to and of a similar risk profile to bank term deposits. In reality the debenture products were much high risks.

Investors were also misled to believe their principal investments would be repaid in full on maturity when investors might not receive capital repayments on maturity, or at all, because Mayfair could extend the time for repayment indefinitely.

Mayfair’s debenture products were advertised as being designed for investors seeking certainty and confidence in their investments and therefore carried no risk of default. This was not true. The court concluded there was a risk that investors could lose some or all their initial investments.

The Federal Court found Mayfair made false and misleading statements about the M Core Fixed Income Notes, advertising them as fully secured financial products when funds were ac-

tually lent to a related party and not secured, used to pay deposits on properties and used to purchase assets that were not secured.

The judge, Justice Anderson, found the term deposit representation was: “Misleading or deceptive and created a false and misleading impression that the Mayfair products were comparable to, and of similar risk profile to, bank term deposits… In light of the evidence relied on by ASIC, the Mayfair products are not comparable to, or a proper alternative to, bank term deposits.”

“ASIC’s success in court today demonstrates firms need to do the right thing by their investors, even when they are wholesale investors,” ASIC deputy chair Karen Chester01 said.

“They need to make sure they accurately describe their products when advertising. The court has shown that Mayfair 101 engaged in misleading and deceptive conduct by claiming its products were comparable to bank term deposits, when they were not.”

Mayfair founder James Mawhinney responded to the court’s finding by saying that it was “not feasible” for Mayfair to defend itself against the “infinitely well-funded” ASIC. “ASIC will seek to issue penalties against three Mayfair 101 Group companies. Those penalties will have the effect of diluting the returns available to Mayfair 101’s investors resulting from the envisaged restructure and asset realisation. A further dilution is likely if liquidators and lawyers are involved,” Mayfair said in a press release. fs

HUB24 hits fund managers with higher fees Kanika Sood

Fund managers that use HUB24 received updated contracts, listing a significant increase in their “reporting fees”.

HUB24 charges fund managers a reporting fee if they want to see which financial advisers and/or dealer groups are investing in their funds. For the last six years, HUB24 has charged about $3000 per fund manager for this reporting service.

Effective April 1, the platform increased the reporting fees from a minimum of $3000 to a minimum of $5000 per fund manager. The first three funds subscribed to the service will cost $5000 in total but subsequent funds will cost $1000 each for the reporting. The total fee is capped at $30,000 annually, according to updated contracts seen by Financial Standard.

A spokesperson for HUB24 confirmed the fee increase.

“The cost for providing and delivering the reporting service has increased over time, we have been providing this service since 2015 and this is the first fee increase since then,” the spokesperson said.

HUB24 hosts over 1000 managed funds from over 200 fund managers, according to their website.

The company confirmed the new fee schedule applies to all managed fund providers (ETFs don’t usually pay to be hosted on platforms), irrespective of their FUM or number of strategies they host on HUB24.

If a fund manager opts out of the reporting service, they will not be able to see the names of the clients investing in their funds via HUB24 even though their strategies will remain available on the platform, the company confirmed.

“The purpose of the reporting service is to provide fund managers with insights including which adviser groups their inflows/outflows are coming from. They will not be able to see this information unless they subscribe to the reporting service…The reporting service is voluntary for fund managers to elect to use or not to use and does not impact their availability on the investment menu of the platform,” the HUB24 spokesperson said.

A fund manager distribution staff member who did not want to be named said the increase in the fee is not too bad, and they will still continue to use the service.

“Most fund managers would want to pay for the reporting service regardless of the increase in price, because HUB24’s market share is going up. If it was AMP that was increasing the fee, that’s something you would question but with HUB24 it’s a no brainer because their market share is increasing,” they said.

“If we don’t subscribe to the reporting service, we will see one line in the report saying the money came via HUB24 but we won’t be able to see who the underlying investor is. It certainly doesn’t stop you from doing business, but it helps to know who the client is.” fs

Opinion

www.financialstandard.com.au 6 April 2021 | Volume 19 Number 06

9

01: Maree Pallisco

partner – national superannuation leader EY

Why super funds need to rethink member engagement or the first time since compulsory superanF nuation was introduced in 1992, the country has had a real conversation about super.

To the industry’s dismay, as part of its COVID-19 response, in March 2020 the government decided to allow Australians access to their superannuation accounts - to the tune of $20,000 per person. As a result, $38 billion was suddenly withdrawn from the system. Overnight, super became a hot topic during Friday night Zoom drinks and on talk-back radio. But one critical stakeholder group was strangely silent.

At the time, Google searches for “super draw down” jumped to their highest ever level of interest. But when people Googled “Should I draw down my super?” not a single super fund made it above the first-page fold. Instead, comparison sites and the ATO topped the list. This highlights an important point: many individuals simply do not realise they can talk to their super fund about their super.

The early release of super was the biggest single member engagement event in the last 12 months - an opportunity largely missed by an industry focussed on fulfilling the flood of drawdown requests.

But now, as a result of the government’s Your Super Your Future reforms and the findings of the Retirement Income Review, the fund-member relationship is changing - and the industry needs to rethink how it will engage with members in the future.

Future reforms change the game Future superannuation reforms will introduce new moments when members will be prompted to consider whether they are with the right fund.

At the same time, the government is making it easier for members to choose who manages their superannuation and retirement savings through a new, interactive, online YourSuper comparison tool. By law, funds that fail the new performance test will have to tell their members and refer them to the comparison tool.

Arguably, members’ best interests are not solely served by financial best interests. Just as an increasing number of consumers are willing to pay a premium for products with a sustainable supply chain; as demonstrated by research; would some members choose to trade a small reduction in returns for the comfort of knowing their beliefs are being supported?

So there’s never been a more important time to get fund brands engaging with members.

Super funds have long debated whether a hands-off or hands-on approach produces bet-

ter outcomes for members and the fund. Now the industry is facing a possible ban on advertising, funds need to consider what else they can do to differentiate themselves and raise brand awareness to stand out from the crowd, retain and attract members.

How can funds engage with members?

Listen: Super funds may be listening to their members because they know what people are telling their contact centres and complaints channels. But how do funds know what people are saying about their retirement concerns, their super, their strong feelings about responsible investment or a super fund’s brand?

Funds can get a far more accurate idea of member sentiment, pain points and needs using a low-cost brand tracker to trawl through social media, blogs and niche web forums. It’s worth bearing in mind, social media is just the canary in the coal mine. If 100 people on Twitter are moaning about your clunky web site, another 35,000 are probably thinking the same thing.

This is not to suggest super funds need to hire large social media teams to actively listen and respond to community feedback 24/7. Super is a long-term product and members won’t want to engage every day.

But, to better understand what is in their members’ best interests, funds should take the time to keep up with member expectations.

This is what successful brands do all the time. When a UK bank’s brand tracker picked up complaints from multiple social media platforms that people couldn’t get through to the contact centre on Friday night, they put on more agents during peak calling hours.

Often, when brands listen carefully - and especially when they overlay different datasets they learn something they didn’t know.

For example, by matching different datasets, in this case consumer sales and weather data, a global ice-cream brand discovered that - contrary to all the assumptions in its marketing playbook - more people buy ice cream when it’s raining than when it’s sunny. The brand has now aligned its media spend to coincide with bad weather, leading to an uptick in sales.

Search trends (free, public information) are also an important listening channel for super funds. We now know that share of search is a predictive measure of share of voice - and eventually of market share. About six months after brands top share of search, this translates into share of market.

The quote

This is not about offering financial advice, but rather ensuring members understand how super works and what their options relating to it are in key life moments.

Be available: The fact that funds don’t pop up when members ask Google for super-related answers is a big deal. The (erroneous) impression this creates for members is that they can’t go to their super funds with super questions.

As a first step to becoming visible in their members’ lives, funds need to correct this misconception.

Do the current communication mechanisms allow for proactive communication and make it easy for members to ask questions or talk to a fund?

We know many Australians either don’t understand super or don’t care about it until they near retirement. Younger people in particular are not keen to engage with an organisation that looks after their money until they stop work. As well as educating members and bridging what ASIC calls the “unmet advice gap”, funds will need to find a way to support their needs.

The answer may be to transition from an organisation that looks after your money to one that partners with you to support your financial wellbeing. That means showing up in the moments that matter - both good (first job, marriage, kids) and bad (redundancy, bankruptcy). This is not about offering financial advice, but rather ensuring members understand how super works and what their options relating to it are in key life moments.

Be trusted: Do members believe their funds are there to help them achieve a better retirement income? Would members turn to funds to assist them in solving higher-order problems?

Around 80% of people experiencing financial difficulty aren’t comfortable asking for help. But super funds - which unlike banks aren’t owed money by members - could position themselves as non-judgemental, trusted advisers Australians could turn to when they’re not sure of their financial options. Yet, right now, only six in 10 Australians trust super funds to act in their best interest. What can the industry do to build trust?

Consumers are drawn to brands that make them a better version of themselves - organisations that help their customers grow, thrive and prosper. Could funds build member engagement around that type of value proposition?

For super funds, 2021 should be the year of the pivot. The year funds join the public conversation, get to know their members and decide how best to support them. We need Australians to become more informed about and involved with their retirement savings. Super funds should be leading this conversation. fs

10

News

www.financialstandard.com.au 6 April 2021 | Volume 19 Number 06

CPU to add local trust arm Computershare (ASX:CPU) will spend about $986 million to acquire the assets of Wells Fargo Corporate Trust Services, which has over 26,000 mandates.

The US$750 million purchase is expected to be at least 15% management EPS accretive on a pro forma FY21 basis including full run-rate synergies, Computershare said. It expects the acquisition to generate 15% plus return on invested capital by FY25. FY21 guidance is unchanged.

Computershare will pay for the acquisition via US$634 million in equity and US$372 million debt.

Wells Fargo’s corporate trust business includes over 26,000 mandates across securities issuances, and US$62 billion in client deposits and money market funds, and 2000 employees.

It advances Computershare’s existing US and Canadian corporate trust business.

The acquisition is expected to close in second quarter of FY22.

“We are delighted to announce the acquisition of Wells Fargo Corporate Trust Services. It is a clear fit with our successful Canadian corporate trust operations and existing US operations. CTS provide scale with a top four market position, a platform for ongoing growth and increased leverage to long term growth trends and interest rates,” Computershare chief executive Stuart Irving said.

“The acquisition allows us to integrate CTS’s deep client relationships and market expertise to deliver additional recurring fee revenue. We also see the potential for improved returns and margin expansion through new product development and innovative technologies, Computershare’s core competencies…” fs

01: Scott Bennett

head of quantitative research and client solutions, Australia & New Zealand Northern Trust Asset Management

Northern Trust Asset Management’s stellar year Kanika Sood

N

The quote

Every mandate we have had in the last two years has been ESG [or] sustainability focused.

Client book valuations dip How much financial advisers can expect to sell a book of clients for has decreased over the last two years, according to a new valuation report.

Radar Results has released its March 2021 price guide, highlighting a downward trend in the earning capacity for super and investment advice.

Recurring revenue multiples for investment and super clients (aged 80 years and over) declined to 0.8x-1x from 1x-1.2x compared to September 2019 figures.

For clients aged 65 to 79 years old, revenue multiples dropped to 1.7x-2.2x from 1.8x-2.3x.

For clients aged 64 years old and younger, earnings also decreased 2.2x-2.7x from 2.3x-2.8x.

Radar Results founder John Birt said financial advisers who have sold their clients and moved them off their AFSL can sell their AFSL, a process in which the buyer will acquire the company that owns the asset or the AFSL. “Directors and shareholders are replaced, and usually, the existing Responsible Manager (RM) will remain in place unless the purchaser has an RM. Sometimes ASIC would like two RMs to be on an AFSL, adding more security,” he said.

The value of the AFSL will be determined by the approved services that are provided.”

A “vanilla type” AFSL, which includes superannuation, risk insurance and financial advice, is valued at $20,000. fs

orthern Trust Asset Management’s local business swelled its client assets by 70% last year as it added four new institutional mandates.

Last year, it saw a significant uplift in its inflows as passive giant Vanguard reversed out of the local institutional market, and as superannuation funds looked past passive investing.

“There has been a lot of institutional demand on the back of some traditional, passive providers stepping out. [Many super funds have a] passive book of business and they are looking at how they can manage it better,” Northern Trust Asset Management’s head of quantitative research and client solutions, Australia and New Zealand Scott Bennett 01 said.

“Every mandate we have had in the last two years has been ESG [or] sustainability focused,” he said.

Bennett said he expects the trend towards its style of factor-based, systematic and quantitative strategies to continue among local superannuation investors. He said the business had not been affected by APRA’s new performance benchmarking.

“What we are seeing is there is a greater focus on the risk they are taking, and that the risk they are taking is rewarded,” Bennett said.

The firm declined to disclose total funds under management for Northern Trust Asset Management in Australia and New Zealand.

Bennett said the business added 70% to its total client assets and three more mandates last year, in addition to the Vanguard-ANZ In-

vestments mandate first reported by Financial Standard in October.

Bennett said its 17 strategies’ capacity is not an issue for the business.

“There is a lot of breadth in our offering to the market. Systematic, quantitative strategies by very nature have much larger capacity [because] they hold large number of very small active positions in looking for active alpha,” he said, comparing it to fundamental managers who hold big positions in fewer stocks.

Other factor-based funds management businesses in Australia include Dimensional and Robeco. But Bennett said the competition in factor-based strategies is much broader than that.

“We think in the current landscape, basically everyone is working very hard to deliver solutions that meet multiple objectives; return, risk, cost and ESG. There is currently a much larger cohort of providers from the perspective of asset owners and the increased interest in our solutions has come from all aspects of the total portfolio.”

Looking forward, Bennett said the most demand is coming from its fixed income strategies, where he thinks institutional investors will look for additional sources of return beyond making calls on duration alone.

“The goal is to service our existing client base as best as we can. We will [expand] retail offering, opportunistically, where we can,” he said, adding ETFs or other listed funds were not a medium-term priority for the local business despite Northern Trust’s ETF presence in the US. fs

Australians bullish on 2021 recovery Karren Vergara

Australians are bullish about the recovery of the local economy and the positive effect that will have on their portfolios, a survey canvassing investors across the Asia Pacific shows.

More than half of the investors canvassed in PIMCO’s quarterly investor sentiment finds renewed optimism among Australians, who expect economic growth to continue over the next 12 months.

About two thirds (63%) of Australians surveyed during December 2020 expect to achieve better-than-average returns over the next year (up from 46% on Q3 2020), while 57% expect to outperform the benchmark index (up from 40% on Q3 2020).

The period saw the number of investors who sold risky assets in exchange for cash-like investments fall from 21% to 14%.

More investors said it is best to do nothing, maintain an existing strategy and wait for the recovery, while those who prefer to time the market and buy cheap assets has remained steady.

Men, the survey found, are driving the bullish behaviour. The proportion of women expecting to increase their allocation to cash, property and real estate has grown since last quarter

while men expect their allocations to such asset classes to remain steady.

PIMCO canvassed 2500 investors aged 25 and older with US$100,000 of investible assets from the Asia Pacific. It found that Australians are the most prevalent in investing in property – 55% compared to the APAC average of 32%. Australians are also more likely to own their homes (86%) compared to the APAC average (75%).

“Our previous survey suggested that the pandemic had hit Australian investors’ portfolios more severely than others in the APAC region, so it is pleasing to see the surge in optimism in these latest results,” PIMCO head of client management for APAC ex-Japan Adrian Stewart said.

“However, consistent with results last time, this recent survey identified some inconsistencies in investor sentiment, such as a level of confidence in investment returns that is unlikely to be reflected in all investors’ portfolios. An understanding of the cognitive and emotional biases that underlie investor behavior can help advisers to ensure their clients make rational investment decisions and better manage their investment expectations.” fs

Technical Services Forum | Events

www.financialstandard.com.au 6 April 2021 | Volume 19 Number 06

01: Laura Salsbury

11

02: Angelique Faes

Financial Standard Technical Services Forum Estate planning was the theme of the year’s first Financial Standard Technical Services Forum, held in Sydney. The speakers presented two solutions.

Australians will inherit about $3.5 trillion over the next 20 years, with individual recipients getting an average of $320,000, according to McCrindle data from 2017 and Griffith University research.

It’s a challenge that was addressed at the Financial Standard Technical Services Forum, which is now partnered by Generation Life.

Providing possible solutions, Generation Life senior distribution manager Laura Salsbury01 walked the audience through investment bonds, while Class senior analyst Angelique Faes 02 discussed the firm’s trust accounting and administration solutions.

Speaking in the first session of the event, Salsbury said investment bonds can be good alternatives to Wills, which may be challenged in court, and trusts, which 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 a maximum of 30% which can be offset. Transferring ownership of an investment bond, for example to children, is also a non-CGT event. Investors can withdraw their funds at any time, she said.

Further, they are treated as non-estate assets (under the Insurance Contracts Act 1984) and may 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.

The firm has also launched a tax-optimised series, which targets after-tax returns for nine popular managed funds like the Magellan Global

The words most used by accountants to describe their experience of trust management are ‘time consuming’, ‘disjointed’, ‘inefficient’ and ‘error prone’.

Angelique Faes

Fund, diversified funds from Vanguard and the BlackRock Concentrated Industrial Share Fund.

Salsbury said the tax-optimised structure can increase the after-tax performance of the above funds between 40bps to 290bps. “…Our tax optimiser series, we actually do it [offsetting losses against income gains] at a stock level and…we can actually sell the parcels that have the highest cost, and certainly eliminate the impact of the tax,” she said.

As an example, the Magellan Global Fund delivered 15% p.a. between 1 June 2010 and 31 May 2020. In a tax optimised investment bond structure, it would have returned 15.9% which is 0.9% p.a. higher.

The Vanguard Balanced Portfolio, which would have delivered 6.8% p.a. over period traditionally, would have returned 7.2% (or 40bps higher) in after-tax performance.

The next session, Class’s Faes focused on trusts and how accountants and advisers can simplify their administration.

There are one million trusts in Australia, of which about 530,000 are investment trusts, according to Class analysis of 2016-17 data from Australian Taxation Office.

They are the second-largest investment vehicle after superannuation. About 82% are discretionary trusts, 14% are used as fixed trusts and 4% are hybrid or other types, according to a study commissioned by Class in November 2019.

“Trusts are nothing new. For years, they have been the vehicle of choice for a wide range of tasks. The benefits they offer for managing income and capital flow, as well as tax effectiveness, are widely accepted. So, it’s no surprise that there are already approximately one million trusts operating in Australia,” Faes said.

Class Trust is a solution used by accountants, financial planners and trust administrators.

The firm last year acquired NowInfinity whose

features include a documentation suite, corporate messenger and trust register.

The firm started Class Trust, after running its Class Super product aimed at SMSF professionals. Faes said Class surveyed over 100 accountants about their experience in administering and accounting for a trust structure.

“The words most used by accountants to describe their experience of trust management are ‘time consuming’, ‘disjointed’, ‘inefficient’ and ‘error prone’. These comments, along with the data from our survey, really speak to an inefficient approach, but also a lack of technology support,” she said.

As examples of these, she cited gathering asset-class specific information (such as dividend statements) for trusts, accounting for corporate actions, and having updated information available before end of the financial year to assist with distribution decisions under the Trustee Resolution.

“The reconciliation of income and capital gains is mostly done manually on excel spreadsheets and, this part alone, could easily take up a whole day for a trust with a decent investment portfolio,” she said. “…And really the challenge doesn’t stop there.

Clients are now seeking out practitioners who offer a proactive and engaged relationship rather than a functional, reactive approach to accounting tasks.

Never has this been clearer than during COVID-19, with accountants reporting that the current climate has seen clients turning to them for support in ever greater numbers.”

Class’s solution to problems like above has been to launch Class Trust. Faes stressed that the solution saves time (50% WIP [work-in-progress], according to Class analysis of pilot clients), and reduces risk of errors.

“As Class Trust was only recently launched there are also obviously many more great features in the pipeline, so please continue to watch this space,” she said. fs

In association with

12

News

www.financialstandard.com.au 6 April 2021 | Volume 19 Number 06

AMP Capital hands over REIT reins

01: Vic Jokovic

chief executive Chi-X Australia

Annabelle Dickson

AMP Capital has sold the management rights of a New Zealand listed real estate investment trust (REIT) for a one-off payment of $197 million.

AMP Capital held a 50% stake in Precinct Properties New Zealand via its management company AMP Haumi Management and has managed Precinct since its listing in 1997.

Under AMP, Precinct has delivered over NZ$1.5 billion in developments. It will now however, internalise its management for the next stage of its growth. “…AMP Capital has assessed that the internalisation of these management rights offered the strongest value to both Precinct and AHML as well as representing a natural evolution for the management arrangements for Precinct, which has become an increasingly standalone business,” AMP said in a statement.

Following the implementation, AMP is expecting $80 million in profit from the transaction and will stop receiving management fees from Precinct, which AMP said will not impact ongoing earnings.

The sale of the management rights has been excluded from the proposition transaction between AMP and Ares.

The news comes as AMP also announced today that its 30-day exclusivity period with Ares Management has ceased with no certainty that the transaction for AMP Capital private markets will go ahead.

Further to this, AMP Capital is currently fighting to keep its $5 billion AMP Capital Diversified Property Fund following a takeover proposal from Dexus.

The fund’s independent board committee recommended the merger go ahead however AMP Capital head of real estate Kylie O’Connor wants the fund to stay with AMP. fs

Kelly O’Dwyer joins EQT board The former minister for revenue and financial services Kelly O’Dwyer is joining Equity Trustees’ board as a non-executive director.

O’Dwyer joins the board as Jim Minto steps down after four years. Minto was also the deputy chair of the EQT board.

She will also join Equity Trustee’s board risk committee. Catherine Robson will chair the board risk committee and join as a member of the board audit committee.

O’Dwyer spent nine years as the Liberal party member for Higgins and was appointed the minister for revenue and financial services in July 2016 during which time the Royal Commission into financial services and banking held its hearings.

Less than two years later in September 2018 she was moved to the jobs, industrial relations and women portfolios.

She left politics in January 2019, citing personal reasons. Prior to her government career, she worked in law and finance.

She is currently a non-executive director at ASXlisted Home Consortium.

“Kelly’s track record in leadership and senior roles at the highest level of government is well recorded,” said Equity Trustees chair Carol Schwartz. fs

Cboe acquires Chi-X Elizabeth McArthur

C

The quote

Over the past decade, Chi-X Australia has built an enviable reputation as an innovative market operator...

boe Global Markets has entered into a definitive agreement to acquire Chi-X Asia Pacific, Australia’s most significant competitor exchange to the ASX. The transaction is expected to close in the second or third quarter of 2021, subject to regulatory review and approval.

Cboe said the acquisition would provide it with a single point of entry into two key capital markets – Australia and Japan.

The company added that it has plans to expand its global equities business into Asia Pacific.

“Over the past decade, Chi-X Australia has built an enviable reputation as an innovative market operator with superior market expertise, customer service and a pioneering spirit that strongly aligns with Cboe’s legacy of product and market innovation,” Chi-X Australia chief executive Vic Jokovic 01 said.

“We are excited to draw upon Cboe’s core strengths as a leading global exchange operator to further enhance the competitive landscape in the Australian markets with new innovation and market solutions to better meet customer needs.”

Speaking to Financial Standard last year, Jokovic predicted Chi-X would be acquired within a year to 18 months.

“We are on the radar, as a smart exchange business in an environment that’s a particu-

larly great one with our massive superannuation funds,” Jokovic said at the time.

“Australia is a growing market with a good regulator that works with the operators. We’ve got high margins charged by the ASX so there’s the ability to come back and pare that back further.”

Terms of the deal were not disclosed, with Cboe noting the purchase price is not material from a financial perspective and is expected to be nominally accretive to the company’s adjusted earnings in 2021.

Chi-X Asia Pacific had a net revenue for the year of 2020 of approximately $26 million, reflecting 26% growth on the previous year.

“With the planned acquisition of Chi-X Asia Pacific, we continue to execute on our growth strategy by broadening our geographic and asset class presence, while enabling the further extension of our product offerings to our global network of customers,” Cboe chair, president and chief executive Ed Tilly said.

“In a short number of years, the Chi-X Asia Pacific team has built their business into one of the largest market operators in Asia Pacific.

We look forward to working with them to accelerate the company’s further growth, building on our shared cultures of innovation and customer-first approach as we aim to bring greater choice to investors in Asia Pacific.” fs

Sydney boutique to buy slice of Investec local assets Kanika Sood

A Sydney private debt manager will acquire a portion of South African Investec’s local debt portfolio, as the latter exits Australia.

Metrics Credit Partners has reached an agreement to buy Investec’s local corporate and acquisition finance (CAF) loan portfolio.

The acquired portfolio includes leveraged finance and fund finance loans to corporates and funds across business services, entertainment, retail, childcare, healthcare, mining services and financial services in Australia.

MCP will have $6.5 billion in total assets under management after the transaction.

The transaction does not include Investec’s resource finance, and project and infrastructure finance loan portfolios.

“We are pleased with this development as it will ensure local corporates continue to be served by a highly regarded local lender,” said Investec Australia chief executive and country head Milton Samios.

“It is a high-quality portfolio, which is a testament

to the Investec approach to credit selection and risk management as well as to the Investec Corporate and Acquisition Finance Team (CAF), led by Simon Beissel, which has built this business over the past 10 years.”

Metrics managing partner Andrew Lockhart said: “This is a great outcome for investors because it will add to the diversity and liquidity across our funds and lead to an uplift in expected total returns. The credit quality of this portfolio is sound and provides a great opportunity to expand our relationship with Australian corporate borrowers.”

In December, Investec said it would withdraw from the Australian market after 23 years to focus on core markets of the UK and South Africa. It employed 98 staff.

The corporate advisory business will be spun out as a successor entity owned by the senior leadership team. Investec Australia recently sold its property funds management business, and in 2014 sold its professional finance business to Bank of Queensland. fs

News

www.financialstandard.com.au 6 April 2021 | Volume 19 Number 06

13

Executive appointments 01: Amara Haqqani

Dealer group GM exits IOOF has confirmed the role of general manager of alliances and distribution for one of its major licensees has been made redundant.

Jason Kriss was general manager of alliances and distribution at Bridges Financial Services, a role he held for some time.

A spokesperson for IOOF confirmed Kriss’ departure, while also confirming the role has been made redundant.

Kriss originally joined the licensee in 2002, having previously worked in business development for a credit union.

In a LinkedIn post, Kriss thanked IOOF and Bridges for what he described as an “immensely rewarding” 19-year tenure.

“Importantly, I trust my Bridges tenure has been a mutually rewarding one. I have enjoyed playing a role growing our respective practices across the country, along with growing the customers within our alliance partners that sought advice,” he said.

He remains a firm believer that financial advice makes a difference, he added.

Kriss’ departure comes as part of the IOOF’s wider restructure, making way for MLC Wealth and its associated licensees.

Fund manager COO resigns, chair named Cromwell Property Group’s operations chief Jodie Clark left the post at the end of March.

Clark has been with the company for over 17 years, starting out as an operations manager and moving on to become transactions manager and a principal licensee.

Acting Cromwell chief executive Michael Wilde said Clark has played an instrumental role in Cromwell’s growth and expansion into the European and Asian markets.

“On behalf of everyone at Cromwell, I’d like to acknowledge and thank Jodie for her significant contribution to the business,” he said.

“In her many roles, Jodie has spent considerable time bringing our team together, across all our geographies, offices and business units. We wish her all the best in her future endeavours.”

The ASX-listed firm also announced that Gary Weiss is its new chair, taking over Jane Tongs who has been with Cromwell since 2014 and recently retired. Tongs has also retired from her role as chair at Netwealth.

Weiss sits on a number of boards, including Estia Health, Ardent Leisure and Ariadne.

Also joining Weiss is Eng-Peng Ooi as deputy chair and senior independent director. He also sits on several boards and spent 30 years in senior roles at Lendlease.

Bennelong hires for new role Bennelong Funds Management has hired for the newly created role of chief client strategy officer.

Amara Haqqani01 steps into the position. She will be based in Sydney and report directly to Bennelong chief executive Craig Bingham.

Haqqani was previously a senior policy

HESTA appoints board director The industry superannuation fund has added a new director to its board, as former Ramsay Health Care chief executive Daniel Sims retires.

Alan Morrison was appointed to HESTA’s trustee board of directors this month.

He will also sit on the audit and risk committees.

Morrison represents the Australian Private Hospitals Association, where he is currently a director and treasurer.

Morrison has had a 16-year-long career in the health sector, including as the chief executive of sportsmed hospital and orthopaedics. He was a chartered accountant and worked with KPMG for over 10 years in UK and Australia.

Daniel Sims was the chief executive of Ramsay Health Care’s Australian operations.

He joined HESTA’s board in January 2016 as a nominee of Australian Private Hospitals Association.

manager, retirement income and investments at the Financial Services Council and spent four years at Challenger working on retirement income policy and boutiques and investments compliance.

She has been a strategic product consultant and product adviser with Bennelong for a few months before stepping into the chief client strategy officer role. Prior to that, Haqqani was director, insights and strategy at actuarial consulting firm Milliman.

“The traditional client profile is changing, and we’re working in a more nuanced and complex environment. It’s critical that we adapt and build solutions to meet those changing clients’ needs to ensure we remain relevant to our clients into the future,” Bingham said.

“Amara’s extensive experience and passion for customer-centricity is the perfect fit for Bennelong in our ongoing commitment to put our clients at the heart of everything we do.”

Haqqani added: “Following a number of years focusing on superannuation members and their retirement income needs, I am now broadening my scope to all types of financial services clients.”

“I’m looking forward to using my experience across product, policy and risk management to further develop Bennelong’s offering.”

Harvey Kalman to leave Equity Trustees Equity Trustees’ Harvey Kalman 02 will leave the firm after over two decades.

Kalman headed Equity Trustees’ corporate trustee business until last September, when he moved to an international role.

His new role was head of business development, fund services and managing director for UK and Europe. Russell Beasley took his old role, as the executive general manager of corporate trustee services.

“After 21 years of service building the corporate trustee services business and broadening to include offshore offices in Ireland and the United Kingdom, Harvey Kalman will be stepping down from his role with us at Australia’s leading trustee company, where he leads the overseas arm of the business,” Beasley said in a March 19 email.

The change takes effect on July 2.

“Given the long and productive relationship Harvey has had with Equity Trustees in building our successful corporate and fund services business, options are being explored for Harvey to maintain a connection with Equity Trustees,” Beasley said.

Beasley will continue to lead the team of fund services specialists based in Melbourne and Sydney, and a growing client base of investment managers, the firm said.

It said it is currently considering arrangements for the overseas offices.

“We warmly thank Harvey for just over two decades of incredible service building a successful Corporate Trustee Services business, including taking the business into the UK and Ireland, and

02: Harvey Kalman

wish him all the best for the future,” said Equity Trustees managing director Mick O’Brien.

Equity Trustees reported $48.3 million revenue for the six months ending December 2020, largely in line with the revenue for the same period the previous year. Net profit was $9.8 million, down 14.5% over previous corresponding period.

KKR names local real estate head The global investment firm has appointed the former LOGOS Group chief executive as managing director and head of Australia and New Zealand real estate, as it expands its strategy across the Asia region.

Tom Lee was chief executive of logistics property group LOGOS for over two and a half years before moving to an advisory position.

Prior to this, Lee spent over eight years at BlackRock in several roles including managing director head of real estate Europe, the Middle East and Africa and chief executive of MGPA in Europe.

He was previously at Lendlease where he was chief financial officer retail & communities in Europe and commercial manager for new business in Sydney.

In his new role, Lee will be responsible for KKR’s real estate platform across Australia and New Zealand and expanding KKR’s real estate strategies across the Asia region. He will also join the KKR Asia Real Estate Investment Committee.

“KKR is one of the most respected real estate investors in the world and the flexible approach as a solution provider enhances our role as a partner of choice within real estate and the broader corporate sector,” Lee said.

“I look forward to working alongside John, Scott and the firm’s talented investment professionals as we carry out KKR’s strategy in Australia, New Zealand and across Asia Pacific.”

Pengana portfolio managers depart Jordan Cvetanovski and Steven Glass who cofounded Pengana Capital’s international equities business have left the firm with immediate effect.

Pengana has appointed James McDonald as the interim deputy chief investment officer of the international equities strategies.

The duo had worked on the funds since 2015.

“Jordan and Steven have no intention to, and will not, disturb existing client relationships of the International Equity Strategy funds. They are confident that with their individual track records of success they will enjoy new opportunities,” the two said in a joint statement.

“Jordan and Steven thank Pengana, its staff, customers, and investor platforms for their support over the past five years and wish them well.”

Pengana said it will announce permanent arrangements for the investment management team soon, which will include McDonald and his team, plus a “highly credentialed external” investment management team.

The firm said the strategies will continue to be managed as usual. fs

Feature | Platforms

www.financialstandard.com.au 6 April 2021 | Volume 19 Number 06

THE NEW FRONTIER Platforms have been at the forefront of the advice evolution. Equipped with the latest technology, they have pioneered adviser efficiency and now they are on their own path of evolution, Annabelle Dickson writes.

H. Armstrong Roberts/ClassicStock

14

Platforms | Feature

www.financialstandard.com.au 6 April 2021 | Volume 19 Number 06

I

15

01: Tim Townsend

02: Andrew Alcock

03: Ben Marshan

partner TownsendCobain

chief executive HUB24

head of policy, strategy and innovation The Financial Planning Association of Australia

n the 1990s TownsendCobain partner Tim Townsend01 was shocked when a client turned up to a meeting and dumped a pile of envelopes on his desk.

“I give up,” the client told Townsend.

Townsend soon came to understand that his client was receiving mail from every fund manager or investment that he was placed into.

“It was a really fantastic insight to what I had condemned this human to,” Townsend explains.

But it got worse. It was not just the paper burden Townsend had to endure as a financial adviser but also the guilt he would get when it came to do a review.

“For some clients I thought: ‘I really should lighten this manager, not sell it out entirely, but I should lighten it and move a bit of money across’,” he says.

The process was to fill in withdrawal forms from the fund, organise for the money to be paid by cheque and then do the paperwork to reinvest that small amount of money into another fund.

“I was really tempted not to. And then I would feel guilty about the fact that I hadn’t done it even though it wasn’t an earth-shattering thing,” Townsend admits.

“Back then, the mechanics of running direct portfolios impinged upon the advice process and the understanding of the managers themselves or the clients themselves.”

The role of technology in financial advice firms has developed exponentially since Townsend’s interaction with his client as he, among many other firms, introduced platforms into their operations and consequently revolutionised the delivery of advice.

“Before platforms, the idea was that advisers would go directly to the fund managers and fill in all the paperwork to make an application to each of the managers,” Townsend says.

Now the $720 billion investment platform industry is tilting on its head as it continues to offer advisers more solutions to problems.

“Platforms assist advisers in having centralised administration, buying and selling solutions, client reporting including tax, portfolio and balance reporting and customer relationship management,” says HUB24 chief executive Andrew Alcock02 .

“The opportunities are endless.”

The benefits speak for themselves: taking away the administrative and compliance-based tasks to free up time for advisers, provide a more accurate and thorough service, enabling them to take on more new clients.

The Financial Planning Association of Australia head of policy, strategy and innovation Ben Marshan03 agrees and believes the implementation of technology, like platforms, allows advisers to better provide their services because they provide more flexibility.

“They can integrate with their other software, help streamline data collection, provide live reporting and straight through processing,” he says.

These functions, he says, provides the opportunity where a client has agreed to a recommendation and to be processed automatically by the platform from that agreement.

But it is the way that an advice firm uses the tools on the platform, Alcock says, that sets apart an efficient practice from one that may be lagging behind.

“Platforms are the hub of an adviser’s back office so instead of manually doing everything on paper, it is done through one vehicle with one set of reporting,” Alcock says.

“It’s about transactions, administration, record keeping and making an adviser’s practice more efficient but also giving access to customers so they can see their portfolio on a platform.”

As such, competition in the industry is heating up and even edged out an entrant, IFM Investors and Regal-backed Spitfire. In August last year, Spitfire went into administration after less than three years in market.

It is clear the platform industry has no room for laggards and the results from the Investment Trends 2020 Platform Benchmarking & Competitive Analysis Report highlight the competitiveness.

HUB24 ranked first for platform functionality with a total score of 89%, marginally beating Netwealth which scored 88.9%.

Rounding out the top five are Praemium (84.8%), BT Panorama (82.4%) and Macquarie Wrap (76.5%).

Investment Trends associate research director King Loong Choi said that platforms are responding to adviser feedback to add better digital tools, particularly as a result of COVID-19.

“The platform industry continues to drive innovation and functionality improvements from the back-end to front-end, which is especially vital as financial advisers and their clients adjust to a social distanced way of living,” Choi said.

The Goldilocks era The industry has seen an exodus of financial institutions abandon their wealth management arms and completely upend the vertically integrated model.

As such, this exodus has paved the way for non-bank aligned platforms to further disrupt the status quo of platforms.

Praemium chief executive Michael Ohanessian04 refers to this group, largely HUB24 and Netwealth, as the “Goldilocks” platforms.

These are the platforms, according to Ohanessian, that have built the functionality advisers expect, have some legacy but not enough to prevent innovation.

“Being a Goldilocks platform with the strongest technology capability, we know that there is a bit of a changing of the guard possibly going to happen. And we believe Praemium is well placed to partake in that,” he says.

Ohanessian argues that the big institutions have a lot of legacy technology and products that its clients have invested in over time.

The numbers

$720bn The total funds sitting on platforms in Australia as at December 2020 end.

“The big end of town is struggling with net outflows. It’s hard to automate and innovate when you’ve got that legacy,” he says.

“They continue to lose market share, both in terms of assets on platform, but also in terms of advisers who are willing to be tied to the institutions.”

Meanwhile, Macquarie Group head of wealth product and technology Michelle Weber 05 says she also sees Macquarie Wrap as being uniquely positioned with its $97.3 billion FUA. “We combine the experience and scale of an established independent platform with the strength and confidence that comes with Macquarie’s balance sheet,” Weber says.

“I think it’s a really powerful combination, and a real key point of difference that we can combine this experience with scale and security and technology to create great outcomes for the clients and advisers.”

Yet, Ohanessian warns that Goldilocks platforms should not remain complacent as the industry can continue to be disrupted.

He refers to new entrants as “baby bears” because they don’t have the legacy of the institutions or the status of the “Goldilocks” platforms but do have the benefit of adopting new technology.

“It is just going to take time and money for the new start ups to be able to compete with the platforms that are already well established,” he says.

Despite this, data from Rainmaker Information reveals the large institutions still hold the market share.

BT remains the largest ownership group in the platform market with $139 billion in funds under administration (FUA), making up 19% of the platform market at the end of December 2020.

It is followed by AMP and Colonial First State with $126 billion and $104 billion respectively.

Meanwhile, Netwealth is the largest of the “Goldilocks” with $46 billion in FUA, followed

by HUB24 at $22 billion and Praemium at $8 billion, prior to any acquisition activity.

Generating scale Over the last 12 months, there has been a flurry of merger and acquisition activity for the “Goldilocks” platforms taking over smaller platforms that were not able to generate the scale to remain competitive.

Praemium acquired Powerwrap in a $55.6 million off-market conditional takeover priced at about 26.55 cents per share.

The acquisition, Ohanessian says, is completing a full circle for Praemium due to the company’s deep history together.

Staff from Praemium set out to build Powerwrap around 12 years ago and Praemium supplied the new platform with its technology and portfolio reporting.

“When we finally did the deal last year, in my mind it is completing a loop, because it never made sense for Praemium and Powerwrap to be competing with each other as the software that

Obtain online client consent with integrated Record of Advice on BT Panorama. With BT Panorama you can take your business with you.

bt.com.au/btpanorama

*Investment Trends Platform Competitive Analysis and Benchmarking Report, December 2020. ©Westpac Banking Corporation.

For the third year running, BT Panorama has been awarded ‘Best Mobile Platform’, ‘Best Client Portal’ and ‘Best Online Business Management’, in the Investment Trends Platform Competitive Analysis and Benchmarking Report*.

2020 Platform Competitive Analysis and Benchmarking Report Best Client Portal

WINNER

BT Panorama

2020 Platform Competitive Analysis and Benchmarking Report Best Mobile Platform

WINNER

BT Panorama

2020 Platform Competitive Analysis and Benchmarking Report Online Business Management

WINNER

BT Panorama

18

Feature | Platforms

www.financialstandard.com.au 6 April 2021 | Volume 19 Number 06

04: Michael Ohanessian

05: Michelle Weber

06: Matt Heine

chief executive Praemium

head of wealth product and technology Macquarie Group

joint managing director Netwealth

underpins Powerwrap is Praemium software,” Ohanessian says.

“It is the Praemium portfolio system, the corporate actions and all the reporting and all the capabilities that we have. Bringing it together was always a sensible thing.”

However, Ohanessian explains Powerwrap suffered from its balance sheet and lack of capital. As a result, Praemium has been investing heavily in the platform to build out its proposition for the private wealth market.

“The impact we think, will be profound. I think the market is going to really appreciate what we can bring to the table,” he says.

By the end of 2020, HUB24 had completed its acquisition of Ord Minett’s Portfolio Administration Service and divested its financial advice licensee, Paragem, in a move that saw HUB24 become a substantial shareholder in Easton Investments.

And at the beginning of March, HUB24 completed its $60 million acquisition of Xplore Wealth, which added $15 billion to its FUA, bringing it to an estimated $38.5 billion.

“We will now spend time looking at Xplore’s product and client base as well as our own product and take the enhanced overall product offering to that broader group of clients,” Alcock says.

The acquisition, he says, extends HUB24’s capability to the high-net-worth segment including bonds and international managed funds as well as off-platform administration.

“This is very exciting to us because we’re building a capability that allows us to enter those parts of the market with scale very, very quickly,” Alcock says.

Netwealth has also been busy, taking a 25% stake in data solutions fintech Xeppo.

Xeppo’s technology specialises in data reconciliation to support wealth management, accounting and mortgage industries resulting in users to better manage client relationships, new business and monitor compliance.

“One of the key reasons why we invested in Xeppo is it has the capability to basically pull data from a whole range of external sources, and then combine it to give clients really rich experiences around their financial worlds,” Netwealth joint managing director Matt Heine 06 says.

Moreover, BT Panorama is currently amid what BT’s managing director for platforms, investments and operations Kathy Vincent 07 believes is one of the largest platform migrations in Australian history.

BT is moving around 150,000 advice clients from its legacy platform BT Wrap across to Panorama with completion expected by June 30.

Currently over 38,000 BT Wrap accounts have transitioned to Panorama, worth approximately $11 billion.

“That will take us to be the leading contemporary platform in the market by a large order

of magnitude with a bit under $90 billion on the BT Panorama platform,” Vincent says.

The migration, Vincent says, creates opportunities for Panorama to potentially migrate other platforms in the future.

But for now, the focus for Panorama is to attract new advice practices off the back of increasing its FUA 36% over the 12 months to 31 December 2020 to $35.8 billion.

“We see strong growth and flows from the external market in terms of attracting new advisers on to BT Panorama, as well as customer flows ongoing,” Vincent says.

“We want to be the provider of choice for advisers to provide a really efficient way of managing their clients’ money.”

The rise of adviser tech The evolution of platforms is being driven by the use of data and artificial intelligence (AI) to assist advisers in creating an efficient practice and the industry has responded by launching an array of functions.

Macquarie Wrap recently added a digital portfolio manager tool that allows advisers to produce investment advice in under 60 seconds which is then electronically sent to the client to accept.

“The adviser can send the electronic version of the advice to the client who can then digitally accept it. Then the implementation is automated onto the platform which benefits advisers in terms of efficiency and risk,” Weber says.

Praemium and CFS FirstChoice also launched tools for advisers to electronically send documents to clients for digital acceptance.

Meanwhile, HUB24 and MLC MasterKey developed electronic identity verification services to automate KYC checks and super withdrawals.

BT Panorama in February 2021 launched a chatbot called Blue that provides 24/7 support and step-by-step guides to advisers and their clients who are in need of immediate responses to less complex enquiries.

“The chatbot is in effect learning on the job and in just one week over 900 people accessed Blue,” Vincent says.

Artificial intelligence (AI) is the backbone of Blue as it understands different vernacular while providing BT with the insights of what their clients are seeking information on.

“This is an example where data is enabling much better accessibility and service for clients,” Vincent says.

Ohanessian believes Praemium pioneered AI in the platform industry two years ago with its Insights functionality which is able to tell an adviser if one of their clients was going to lose their investment account on the platform.

“The beauty of the functionality is that it’s about 85% accurate and that’s incredibly powerful for an adviser because once the adviser is given this intel, the worst case is they make a phone call,” Ohanessian says.

This is an example where data is enabling much better accessibility and service for clients.

Kathy Vincent

“It’s a really powerful way to help advisers with client retention as it is expensive to take on new clients, so client retention is the most profitable thing an adviser can do.”

Just as COVID-19 was ramping up, WealthO2 launched an adviser calendar integration where clients could book appointments through their online portal.

“It’s grown since then with a lot of advisers adopting the whole calendar integration which has changed interaction with clients from an annual long face to face to a more regular but quicker individual chats,” WealthO2 managing director Shannon Bernasconi08 says.

BT’s Vincent says she saw a substantial spike in advisers taking advantage of existing digital tools on the platform.

“There was a significant lift in the use of the digital tools, particularly the digital consent capability and a real uptake in terms of taking advantage of online assets and the digital nature of the Panorama platform,” Vincent says.

But one of the biggest changes to platforms is the implementation of non-custodial asset reporting which Praemium, HUB24 and Netwealth offer.

In September 2020, Netwealth launched its off-platform administration reporting solution called XWrap.

“That’s had fantastic take off and is being really well received as advisers obviously capture and report on more than just the custodial assets that a client might hold,” Heine says.

AMP director of wrap product Shaune Egan09 says MyNorth is in the process of developing this functionality with SuperConcepts.

While the move to a completely digital delivery of advice is a while away, HUB24 recently launched a “simpler product”, HUB24 Access, which is powered by Aberdeen Standard Investments’ bionic advice solution.

Alcock says the product is for advisers that have clients with less complex advice needs and are seeking a lower price point.

“It’s almost a hybrid model, it’s not totally digital and it’s not totally personal,” Alcock explains.

HUB24 Access is not a straight robo-advice solution but the FPA’s Marshan believes there is a future for it in the industry.

“There are clear signs that digital advice is gaining momentum due to the rising cost of providing advice and changing consumer behaviour means consumers are expecting digital enabled advice solutions,” Marshan says.

However, engaging clients digitally and delivering a digital engagement strategy has challenged the industry.

“We have found that there are lot of advisers trying to meet the needs of their clients but don’t have the tools or the services necessary to do that,” Heine says.

The average advice firm, Heine explains, typically uses between 12 and 15 different technology solutions to manage the front office.

Platforms | Feature

www.financialstandard.com.au 6 April 2021 | Volume 19 Number 06

07: Kathy Vincent

08: Shannon Bernasconi

09: Shaune Egan

managing director for platforms, investments & operations BT

managing director WealthO2

director of wrap product AMP

“There is huge complexity and significant costs to the practice and a lot of overlapping features with can lead to a disjointed client experience at times,” Heine says.

But for Townsend, it came down to one thing when selecting just one platform for his clients.

“It was about making sure that TownsendCobain’s advice philosophy was able to be supported on it,” he says.

Managed accounts The strength and prowess of platforms can be pinpointed to the development and popularity of managed accounts.

Praemium’s Ohanessian says the platform was the first to introduce managed accounts into the Australian market in 2005 with a partnership with BlackRock and since then, it’s taken off.

“The zeitgeist has changed in the last five years with a stampede of advisers moving to managed accounts because they realise that it’s a much more efficient structure,” he says.

“Some advisers have felt that doing the stock research and portfolio management has been an important part of the advice service.”

However, Ohanessian questions whether clients appreciate the effort at the expense of engagement and strategic investment management.

As such, managed accounts continue to be a key driver of growth across all platforms with a significant spike in the adoption of managed accounts, but also the number of inquiries post the COVID challenges in 2020.

“A big part of that was really around trying to deliver advice in traditional advice framework, through periods of extreme volatility and disruption is extremely challenging,” Heine says.

During the COVID-19 volatility, Heine saw advisers using managed accounts were able to regularly meet with their investment committees, using the most current data and then make rapid decisions within client portfolios.

“As the market fell apart advisers using managed accounts, particularly private labels, were able to de-risk client portfolios rapidly. As markets improved, they were able to take advantage of opportunities equally as quickly,” Heine says.

AMP’s Egan agrees and saw a drastic increase in the number of active users on MyNorth from

38,000 at the end of 2019 to 50,000 at the end of 2020.

This has led to 10 times growth in MyNorth’s managed portfolios FUA in just the last two years.

“It is because of the transparency in a managed account where the client can see what’s driving the performance. With managed funds, it’s not always possible for a client to monitor the unit price,” Egan says.

Ultimately it is the choice that advisers have over their clients’ portfolios that Vincent says is the main attraction.

“An adviser can construct the client portfolio with managed accounts, direct equities or managed funds. Having that choice on the platform is really important,” she says.

“But having that additional flexibility to choose the type of managed portfolios for practices is an essential capability, and an area that we are really focused on in terms of innovation.”

The future of platforms Looking forward, the growth of platforms and their increased use of data to make advice practices more efficient is inevitable.

Heine is certain, in fact, that data is a significant part of Netwealth’s future.

“We are absolutely focused on making sure we have the broadest set of data in the industry, which we do” he says.

“But also using data to drive product innovation adviser and efficiency and insights, as well as fantastic client experiences.”

According to WealthO2’s Bernasconi, the future of platforms lies in lowering the headline rate while managing increased technology, scalability and efficiency for the adviser.

“There is a correlation between the ability to manage the platform more efficiently and the lowering of headline margin in terms of administration costs that are charged by the platform,” she says.

As the margins have lowered and the costs of platform have decreased, Bernasconi believes some of the legacy platforms can’t afford lower margins on the headline rate and ultimately charge more in other areas.

This includes badged platforms, shelf platform administration or managed account fees, cash platform fees, and platform in-house product costs.

Award-winning* technology that goes wherever you do.

With BT Panorama you can take your business with you. bt.com.au/btpanorama *Investment Trends Platform Competitive Analysis and Benchmarking Report, December 2020. ©Westpac Banking Corporation.

Platforms actually empower clients to make more informed decisions Tim Townsend

19

“I think there will be more emphasis on these hidden other fee structures that are definitely being layered to compensate for those legacies that don’t necessarily have the luxury of the modern technology stack and operating environments,” she says.

An example, Bernasconi says, is in the low interest rate environment clients are paying the platforms to hold cash in their accounts.

“Platforms were actually charging more than 100 basis points for that cash to be sitting on the platform. And that cash wasn’t actually earning interest, so clients were actually losing money,” she says.

Despite this, Townsend says if he increases cash it is generally in a term deposit rather than a cash account but says it is a misconception that there shouldn’t be fees on the cash account because of low returns.

“If the markets have just gone down 40% and you’ve put more money in the cash account to protect it, you’ve just done a wonderful job for your client,” he explains.

But the bottom line, Bernasconi says, is that for the first time in the history of financial services, the adviser has the control with choice of licensee and choice of platform.

“Advisers need to make these choices wisely based on their ability to service their clients, be compliant as well as making a profit,” she says.

Similarly, Alcock says advisers will have one preferred platform provider based on a great solution and how it meets the needs of individual clients but may also use multiple platforms.

“An adviser can’t just move every client into one solution to meet their Best Interests’ Duty and that’s why there are multiple platforms,” he says.

“That’s why there’s choice across our platform and others. It’s very conceivable that the clients are better served elsewhere and an adviser needs to make that decision.”

The value proposition of platforms has been proven to advisers and their clients and, for Townsend, it is one of the most dramatic changes that has occurred in his time as an adviser.

“Platforms actually empower clients to make more informed decisions,” Townsend says.

“They are not hindered by the administrative burden of implementing decisions.”fs

20

News

www.financialstandard.com.au 6 April 2021 | Volume 19 Number 06

REA Group Mortgage Choice REA Group has entered into an agreement with Mortgage Choice to acquire 100% of outstanding shares for $1.95 cash per share in a deal worth $244 million.

Mortgage Choice has a loan book of $54 billion, settlements of $11 billion in 2020 and in the six months to December 2020 it reported net revenue of $22.2 million and net profit of $4.1 million.

The board of Mortgage Choice has unanimously recommended that shareholders vote in favour of the REA Group acquisition in the absence of a superior proposal.

Mortgage Choice chief executive Susan Mitchell confirmed the transaction would not alter Mortgage Choice’s financial advice business, FinChoice.

“The REA Group transaction does not alter FinChoice’s position. Independent of the acquisition, FinChoice has been working with Centrepoint Alliance to outsource back-office operations,” Mitchell said.

REA said the transaction will allow it to significantly expand its offering.

“The acquisition of Mortgage Choice represents an exciting opportunity for REA to create a leading broking business. It builds on our success to date, accelerating our financial services strategy while leveraging our existing strengths and capabilities,” REA Group chief executive Owen Wilson said.

Mortgage Choice chair Vicki Allen added: “This is a fantastic milestone for Mortgage Choice. Joining the REA network creates a significant opportunity to leverage its deep digital capabilities and expertise, combined with access to a large and engaged consumer audience.”

The transaction is expected to be funded by an increase in REA’s syndicated debt facilities. Its existing $170 million syndicated debt facility, due to expire in December 2021, is expected to be partially refinanced. fs

ANZ, CBA settle class action Annabelle Dickson

ANZ and Commonwealth Bank (CBA) have both reached an agreement to settle a class action in the US related to the trading of bank bill swap (BBSW) products in 2016.

The class action commenced in 2016 in the United States District Court for the Southern District of New York against ANZ, CBA, NAB and Westpac and other global banks.

The class action alleged the banks conspired to fix the prices of BBSW-based derivatives.

Both ANZ and CBA said the settlement does not admit their liability and is also subject to the negotiation and execution of a Deed of Settlement and Court approval.

“CBA previously raised a provision in relation to this matter in the 2021 financial year and the financial impact of the settlement is not material. The terms of the settlement are currently confidential,” CBA said in a statement.

Similarly, ANZ noted the financial impact of the settlement is not material. fs

01: Susan Gosling

non-executive director Mercer Investment

Mercer adds investment, superannuation experts Jamie Williamson

M

The quote

I look forward to working with Alice, Susan and Jim as we de­liver on our growth strategy.

ercer has made three appointments to the boards of its investments and superannuation businesses, including the former head of investments at MLC Asset Management and a former chair of the Association of Superannuation Funds of Australia.

On April 1, Susan Gosling01 joined Mercer Investments as a non-executive director. Prior to her retirement in 2019, Gosling served as head of investments at MLC Asset Management.

Gosling spent 17 years at MLC and remains as a member of MLC’s private equity investment committee. She is also deputy chair of non-profit Taldumande Youth Services.

Joining the board alongside Gosling is Alice Williams, who is currently chair of the investment committee for Defence Health and chair of the audit committee for Djerriwarrh Investments.

“We are very fortunate to have two esteemed industry leaders join our board of directors,” Mercer Investments chair Ross Butler said.

“They bolster the capabilities of our board - Susan is a recognised innovator, leader and mentor in our sector with a strong background in strategy and governance, and Alice has deep expertise in audit, risk, investment and remuneration.”

Meanwhile, Jim Minto joined the board of Mercer Superannuation. Minto is currently the

chair of Swiss Re and Partners Life, and sits on the boards of the National Disability Insurance Agency and Dai-ichi Life Asia Pacific.

Minto recently departed Equity Trustees where he held the role of deputy chair. He is also a former chair of the Association of Superannuation Funds of Australia chair.

Prior to his retirement Minto was managing director of TAL and was chief executive of TOWER Australia prior to its acquisition by TAL. “We are delighted that someone of Jim’s calibre and expertise will be joining us. He adds valuable skills and knowledge across financial services, leadership and governance to our board,” Mercer Superannuation chair Jan Swinhoe said.

“His contribution will strengthen our ability to provide our clients and our members with improved retirement outcomes, and strengthen our competitive position in the market.”

Commenting on all three appointments, Mercer Australia chief executive David Bryant said: “Amidst the change and challenges that the superannuation and investment sectors continue to experience, what remains true is our purpose to make a positive difference in people’s lives, and our boards play a key role in keeping us focused on this vision. I look forward to working with Alice, Susan and Jim as we deliver on our growth strategy.” fs

Number of net-zero asset managers triples Elizabeth McArthur

A total of 73 asset managers, representing US$32 trillion in AUM, have signed up to the Investor Group on Climate Change’s net-zero by 2050 project.

The initiative launched in December 2020, and since then 43 additional asset managers have made new, enhanced commitments to support the goal of net zero greenhouse gas emissions by 2050 or sooner.

There are now so many asset managers with a goal of achieving net-zero that the group accounts for more than a third of all the assets under management in the world.

Macquarie Asset Management recently got on board with the net-zero goal.

“Last year we reconfirmed our commitment to tackling climate change by announcing we would manage our portfolio in line with global net zero emissions by 2040,” Macquarie Asset Management chief executive Ben Way said.

“Today, we are proud to continue this journey as we join the Net Zero Asset Managers initiative to work with our industry colleagues to accelerate the transition to a low carbon future.

We recognise the need for action is urgent. As a global asset manager, we have a responsibility and opportunity to invest to deliver positive and sustainable impact for everyone.”

The new signatories include: Algebris Investments, Allianz

Global Investors, APG Asset Management , Aviva Investors, BlackRock, Boston Common Asset Management, Boston Trust Walden, Brookfield Asset Management, Capricorn Investment Group, Cardano Holding Limited, Danske Bank Asset Management, Developing World Markets, FullCycle , Invesco Limited, J Safra Sarasin Sustainable Asset Management, JGP Gestão de Crédito & JGP Gestão de Recursos, Jupiter Asset Management, Newton Investment Management, Nissay Asset Management Corporation, NN Investment Partners, Nykredit Wealth Management, Pemberton Capital Advisors, Rathbones Greenbank Investments, Royal London Asset Management, RockCreek, SAM Investment Holdings, SEB Investment Management, Stafford Capital Partners, Standard Life Aberdeen, Storebrand Asset Management, Terra Alpha Investments, Tikehau Capital, and The Vanguard Group.

“The acceleration of the asset management industry’s response to climate change is critical to delivering on the aims of the Paris Agreement and protecting the global financial system from systemic physical and transitional risks,” IGCC chief executive Emma Herd said.

“The expansion of participation in the Net Zero Assets Managers Initiative sends a further signal to the Australian and New Zealand markets that global capital is swinging behind a net zero emissions and resilient future.” fs

News

www.financialstandard.com.au 6 April 2021 | Volume 19 Number 06

21

Products 01: Bert Rebelo

LGIAsuper tweaks offering Ahead of its merger with Energy Super, LGIAsuper has made several changes to its insurance offering and announced the closure of its Lifecycle product.

Having maintained its level of insurance premiums charged to members since July 2015, LGIA said an increase in claims has forced fees to increase.

“Due to recent government changes to insurance in superannuation and an increasing number of insurance claims, we need to make sure that the insurance premiums charged to members are sustainable to ensure you can continue to rely on your insurance in your time of need,” LGIA said.

“As a profit-to-members fund we work hard to ensure that our members are sufficiently protected and that the premiums charged are competitive and fair. We only charge what it costs us to provide insurance cover and we do not make any profit from the insurance provided to our members.”

The fund said it paid over $35 million in claims to around 460 members and their families the last financial year.

LGIA is also changing the names of its occupational risk ratings. Standard risk rating will now be called ‘blue collar’, low risk will now be referred to as ‘white collar’ and professional will remain the same.

Under the changes the cost of death only cover will decrease while TPD cover will increase.

From 1 May 2021, members declared blue collar will see their TPD cover premium increase from $1.32 to $1.52 weekly per unit.

White collar members will have their TPD insurance premium increased from $1.02 to $1.17 weekly per unit of cover.

Lastly, professional members TPD insurance premiums will increase from $0.87 to $1.00 weekly per unit.

Death only premiums will decrease from $0.67 to $0.65 for blue collar, from $0.51 to $0.49 for white collar and from $0.43 to $0.42 for professional weekly per unit.

LGIA will also remove the insurance fee of 1% charges on all death, TPD and income protection premiums from 1 May 2021.

Additionally, the industry fund said it will close its MySuper Lifecycle investment option and instead offer a single diversified investment option, MySuper.

LGIA said the option will not invest in-line with members age but will still be managed on members behalf and be continually reviewed and adjusted.

New fund launches on Chi-X The 360 Capital Active Value Equity Fund (TAVF) has launched on the Chi-X Australia stock exchange due to growing demand from Australian retail investors.

TAVF aims to provide investors with income and capital returns from a diverse portfolio of listed equity assets.

Hyperion ETF goes live on ASX The Hyperion Global Growth Fund (HYGG) is the investment manager’s first active ETF and provides access to the $1 billion Hyperion Global Growth Companies Strategy.

The fund invests between 80% to 100% in global equities and was established in 2014 for wholesale investors after a decade of research.

The listed fund will have the same fee structure as the unlisted fund which is 0.70% per annum management fee and a 20% performance fee above the benchmark (MSCI World Accumulation Index).

The Hyperion Australian Growth Companies Fund delivered the highest return in the large-cap segment of 18.9% per annum in Rainmaker’s latest wholesale managed funds report.

Over one year, the fund has returned 40.6% against the benchmark performance of 8.2%.

The fund holds a 40% weighting in technology stocks including Square, Amazon, PayPal and ServiceNow. It also benefited from its holding in Tesla.

The investment manager said the current low interest rate environment combined with increasing growth of passive investing is creating a “once-in-ageneration” cycle in active value investing.

360 Capital said the fund is positioned to capitalise on the lack of truly active, aligned, and independent equity investing on exchange within Australia and New Zealand.

Head of equities at 360 Capital Dennison Hambling said he was pleased the transition of TAVF to Chi-X has been completed.

“We will continue to scale up the fund as opportunities arise and are optimistic about the current market conditions,” Hambling said.

“In recent weeks we have seen a major market rotation from growth to value stocks. Our activist investment approach is perfectly positioned to capitalise on this event and deliver strong returns for Australian investors.”

360 Capital has a total FUM of $544 million, which was up 22.6% over the six months to 31 December 2020.

Northern Trust launches green strategy Northern Trust Asset Management has established a sustainable world green transition index strategy for Australian and New Zealand investors, as it builds out its sustainable investment offering.

The NT World Green Transition Index fund is founded on climate change considerations and offers a combination of exclusions which deems the fund free from fossil fuel reserves and significantly decarbonised.

The fund, which was recently certified by the Responsible Investment Association Australasia, focuses on companies that have a strong climate strategy and are benefiting from the shift to green energy.

Head of Northern Trust Asset Management in Australia and New Zealand Bert Rebelo 01 said the firm believes there is an economic upside to a low-carbon transition and therefore is committed to helping investors capture the benefits.

“The strength and uniqueness of this strategy is how it incorporates the opportunities of climate change alongside the hedging of risks, thereby increasing exposure to companies with either green revenues (such as alternative energy or energy efficiency) or a strong long-term climate policy and robust carbon reduction targets,” Rebelo said.

The fund was developed with Cambridge Associates and is open-ended and available to Australian and New Zealand institutional investors.

Northern Trust Asset Management head of quantitative research and client solutions for Australia and New Zealand Scott Bennett said investors should be compensated for risks they take in all market environments.

“This strategy enables the incorporation of climate change considerations into a rules-based equity solution and revolves around five distinct climateaware components to intelligently aim to hedge the risks, and, importantly, incorporate the investment opportunities of tomorrow’s world,” Bennett said.

02: Michelle Lopez

ASI rejigs Aussie equities fund Aberdeen Standard Investments will relaunch its Australian equities fund, taking it from ESG to tighter SRI criteria.

The $40 million fund managed by Michelle Lopez02 has so far used ESG criteria (which the firm says is embedded in all its strategies). Now, it will start using socially responsible investment (SRI) criteria, effective April 19.

Speaking with Financial Standard, Lopez said the change in the fund’s investible companies will be “material” but the firm declined to provide names of stocks, or the portion of the current portfolio that will be excluded from the new SRI strategy.

The new strategy will screen out the bottom 10% of the universe, use active exclusions from ASI research, use negative screening for particular revenue streams, and target carbon intensity of least 20% lower than its benchmark, the S&P / ASX200 Accumulation Index.

Lopez said the fund will invest in stocks it sees as “improvers” that may be screened out of ESGdata providers like MSCI. As an example, she cited healthcare and tech stocks that ASI thinks are not being properly captured by MSCI. “ESG isn’t just about risk mitigation we are [heading] to the next step which is alpha generation,” she said.

Aberdeen’s Australian equities team manages about $1 billion, of which the majority is in its small caps strategy. It also has two other large cap strategies and a mid-cap strategy.

The shift to SRI is only for this fund, and is driven by client demand, the firm said.

MetLife announces suite of product changes MetLife has made a range of product changes, attempting to address concerns about rising premiums.

The insurer will now offer a three-year rate guarantee for all lump sum retail products.

For the first three years of a new retail policy, MetLife will guarantee there will be no unexpected increases to the base rates of a client’s premium.

However, premiums may increase due to indexation (if applicable), customer-requested increases, age-based increases, a reduction in specific discounts and any change to tax or government stamp duty change.

Retail policies will now also include MetLife’s 360Health offering – a tool designed to offer wellness solutions and information for clients.

MetLife will also implement automatic buy back options so that clients remain continuously covered with no action required from the adviser or client, and a life events increase feature for business clients that will allow sum insured increases of up to $4 million, compared to $2 million offered by most other insurers.

MetLife chief retail insurance officer Meray El-Khoury said the product changes would help enhance the value of life insurance for advisers and the clients they serve. fs

22

Featurette | ESG

www.financialstandard.com.au 6 April 2021 | Volume 19 Number 06

An intoxicating dilemma Australian supermarket giant Woolworths is wriggling its way around ESG screens through a demerger of its $10 billion hotels and liquor business. But with Dan Murphy’s under fire for plans to open a superstore near dry communities, alcohol remains a quandary for investors. Elizabeth McArthur writes.

Alcohol is big business in Australia, and it’s dominated by the same duopoly that controls supermarkets – Woolworths and Coles.

Roy Morgan research from May 2020 found that more than 40% of all sales of packaged alcohol happened at a supermarket through retailers like BWS (Woolworths), Liquorland (Coles), Aldi or IGA. A further 35% of sales happened at standalone retailers owned by supermarkets – Dan Murphy’s, First Choice and Vintage Cellars.

Independent retailers, even including larger chains like Cellarbrations, only accounted for 10% of packaged alcohol sales.

The dominance of the supermarket giants does not look set to end any time soon. Ibis World research predicts Coles and Woollies owned “big-box” alcohol retailers like Dan Murphy’s will continue driving revenue (and alcohol consumption). According to Ibis World, COVID-19 managed to bolster growth for liquor – there was an 11.7% increase in sales in 2020-2021.

But despite the money being raked in by alcohol companies, many investors don’t want to touch them.

A lot of Australia’s superannuation funds explicitly screen out companies that derive more than a certain percentage of their revenue from alcohol sales, at least in their socially responsible investment or ethical investing options.

These funds include Australian Catholic Superannuation and Retirement Fund, Aware Super, Sunsuper, UniSuper and Future Super.

Future Super co-founder and managing director Adam Verwey01 tells Financial Standard that even if someone invested in the fund consumes alcohol personally, their choice to invest in an ethical super fund suggests they don’t want their money to be invested in anything that causes societal harm.

“It’s usual for ethical investment funds to exclude companies that earn most or all of their revenue from the production of alcohol. Where there’s the difference is usually around the sale of alcohol. Many ethical funds allow a tolerance here so that a company is not excluded if it earns 5% or 20% from the sale of alcohol,” Verwey says.

Seeing profits from alcohol sale rise consistently, this may have been a consideration for Woollies in its latest move.

The company will spin off its alcohol and hotels business – including Dan Murphy’s and BWS – into an entirely separate entity called Endeavour Group.

The plans have been on foot since 2019 and the demerger is due to be completed in June 2021.

Woolworths Group chair Gordon Cairns says a simplified Woolworths will focus on food and every day needs in its supermarket business, while Endeavour will “accelerate its own growth aspirations”.

Endeavour will be chaired by Peter Hearl, who is also on the boards of Santos and Telstra, and Steve Donohue, who has had a long career with Woolworths and is currently managing director of Endeavour, will become chief executive.

Woolworths has pokies and alcohol. ESG investors would prefer both to go.

Mathan Somasundaram

Deep Data Analytics founder and chief executive Mathan Somasundaram 02 says this spin-off is a good move for Woolworths, essentially creating two attractive companies while keeping ESG investors happy.

“Woolworths has pokies and alcohol.

ESG investors would prefer both to go,” Somasundaram says.

“It will make Woolworths a better ESG player post-divestment. It’s a win win. They are offloading a good asset at a good part of the cycle when they are a best in the sector.”

He added that as we are in a reflation cycle, supermarkets are some of the businesses likely to benefit from margin expansion.

“Woolworths is a preferred pick in our models and it’s the preferred supermarket exposure compared to Coles and Metcash as well. The Endeavour spin-off is attractive and should be a hot deal. I suspect Woolworths, like Telstra on divestment, is getting more investor interest because of that,” Somasundaram says.

Somasundaram predicts many investors will end up owning both Woolworths and Endeavour.

Theoretically, a super fund could have exposure to both in its balanced fund and exclude Endeavour from its SRI option while still including Woollies.

As far as Verwey at Future Super is concerned, the bar is just not high enough in this regard.

“The decisions companies make to spin off business units are almost entirely driven by financial considerations, not ethical ones,” he says.

ESG | Featurette

www.financialstandard.com.au 6 April 2021 | Volume 19 Number 06

01: Adam Verwey

managaing director Future Super

“We expect our companies to demonstrate responsible practices. We have seen more and more people walk away from companies they see as being damaging or not living up to their brand purpose. It’s challenging for a company like Woolworths to convince us that they are a company committed to having a positive impact while they are operating poker machines and liquor stores.”

Verwey explains alcohol and gambling revenues have been easy reasons for ethical and ESG investors to avoid companies like Woolworths and Coles, spinning off these businesses might take away the ethical issue for certain investors but it doesn’t change the impact alcohol companies have in the real world.

Woolworths-owned Dan Murphy’s has been under fire recently for plans to open a superstore within walking distance of three dry communities outside Darwin in the Northern Territory.

Plans to open this store near the Bagot, Kulaluk and Minmarama Park communities have been afoot for five years and have come under enormous scrutiny. A Change.org petition to stop the store opening has 153,474 signatures.

Late in 2020, the Director of Liquor Licensing in the NT approved Woolworths’ application to open the store after Endeavour agreed to shift the store’s location to about 1.4 kilometres further away.

“It is most unfortunate that the Applicant did not engage in consulting the local community prior to committing to this site because it would, in our view, have come to the realisation that this was not an appropriate position for any liquor store, let alone one the size of Dan Murphy’s,” the NT Liquor Commission said in its decision.

Plans to shift the store further away have not done much to allay people’s concerns about the impacts it could have and opposition to the plan is still fierce.

The Aboriginal Medical Services Alliance Northern Territory and the Northern Territory Council of Social Service have spoken out against the planned store, with the size of the planned Dan Murphy’s store – described as a superstore – part of the issue.

“Darwin does not need one of the largest bottle shops in the country. We have been working hard to tackle the many harms from alcohol and we are beginning to see improvements in health and wellbeing. This store will undermine all this hard work,” Northern Territory Council of Social Services chief executive Deborah Di Natale said when plans for the store were revealed.

“One of Australia’s most powerful corporations is stopping at nothing to make a profit at the expense of people’s health, wellbeing and safety.

The directors of Woolworths know the harm that this store will bring to Darwin.”

It’s a sentiment that mining billionaire and Mindaroo Foundation founder Andrew Forrest agrees with. He recently dedicated his Boyer Lecture to the issue.

Forrest argued in the lecture in favour of a cashless debit card for Centrelink recipients, one that could have the ability to limit how much an individual receiving Centrelink payments can spend on alcohol.

“Cash makes anyone easy prey for grog floggers and drug dealers,” Forrest said.

“The problem is not a lack of cash, the problem is a lack of opportunity. Woolworths knows this better than anyone, that’s why despite massive community opposition it is trying to plant another dirty, big grog shop – Dan Murphy’s – near large, dry Indigenous communities in the Territory.”

“Abundance of cash, be it from government or mining companies, has led our Indigenous brothers and sisters to the highest rates of incarceration, non-school attendance, and alcohol-fueled violence in the country where I once peacefully grew up.”

Forrest believes that drugs and alcohol are at the heart of the life expectancy gap between indigenous and non-indigenous Australians.

A cashless debit card for Centrelink recipients is an extremely controversial proposal – one that has been criticised as racist or paternalistic, particularly when proposed that it be applied only to certain communities.

Forrest argued during the lecture that his views on alcohol were shaped by the death of his childhood friend Ian Black.

National Congress of Australia’s First Peoples, Aboriginal Peak Organisations of the Northern Territory, the Australian Council of Social Service, the Northern Territory Council of Social Service and the Human Rights Law Centre have all condemned the cashless debit card, saying it will perpetuate and ingrain discrimination against Aboriginal and Torres Strait Islander people.

“The cashless debit card has fundamentally undermined the self-determination of Aboriginal and Torres Strait Islander peoples. The card shames and stigmatises our peoples for their disadvantage, robs them of their financial freedom, and exacerbates pre-existing social challenges such as financial harassment. National Congress also advocates for the cashless debit card to operate on an ‘opt-in, opt-out’ basis,” National Congress of Australia’s First Peoples co-chair Jackie Huggins says.

Many of those against the cashless debit card would rather see corporations take some responsibility for the social issues caused by the products they sell. It’s this call for corporate responsibility that has super funds under pressure.

According to Rainmaker analysis, Australia’s largest super funds have significant stakes in Woolworths and Coles.

For example AustralianSuper has a $1.2 billion holding in Woollies and $70 million in Coles.

Woolworths appears amongst the top 10 holdings in Australian equities for most super funds.

Endeavour Drinks and Woolworths are failing to acknowledge the significant public harm and health risk to people in Darwin.

Olga Havnen

23

02: Mathan Somasundaram

founder and chief executive Deep Data Analytics

Hostplus has a $187.6 million holding and 2.4% of all HESTA’s Australian equities portfolio is invested in the company.

Super fund investments in Coles are slightly smaller. For example Energy Super has $34 million invested in the company, Hostplus has $113 million and Mercy Super has $4.6 million.

The NT’s largest Indigenous health service Danila Dilba is opposed to the cashless debit card and very strongly opposed to Dan Murphy’s opening its superstore, even mounting legal action to attempt to block the store opening.

On Radio National, Danila Dilba chief executive Olga Havnen 03 said she has met with Endeavour Drinks but not with Woolworths, and Woolworths is the corporate entity she feels is responsible.

“Endeavour Drinks and Woolworths are failing to acknowledge the significant public harm and health risk to people in Darwin,” she says.

“48% of all road fatalities in the NT are alcoholrelated and the level of alcohol consumption per capita in the NT is even higher than what you have in Russia and the Ukraine.”

A panel is currently hearing community concerns on the Dan Murphy’s superstore, with findings expected to be delivered in April.

“I want to remind Woolworths, their directors and their shareholders that their corporate social responsibility does not end at the checkout. It is time for this company to have a good hard think about ethical business practices and what do they think they have in terms of a social license to operate,” Havnen said.

It’s an opinion that Australian Centre for Corporate Responsibility James Fitzgerald agrees with.

“Here we see the Fresh Food People prepared to suck on the scabs of Aboriginal misery for the sake of a dollar,” he says.

“The NT already has the highest level of risky drinking and alcohol harm in Australia. Aboriginal communities that have declared themselves to be alcohol-free in that environment should be applauded, encouraged and supported, not undermined and exploited.”

Fitzgerald says Woolworths’ actions reflect poorly on its management.

“This is an excellent example of business treating its social responsibilities like a game without consequences. Australians are rightly appalled,” he says.

But the question remains – once Endeavour is spun off, will Woolworths have any responsibility?

And will investors in Endeavour – who know they are investing in pokies and alcohol – care as much about corporate social responsibility as Woolworths investors do?

That remains to be seen. Somasundaram says investors will cherry pick what they want from Woolworths’ assets under this model of simplification.

“Some will hold onto all the pieces,” he says.

He still thinks Endeavour will be a “hot deal” - but only for those willing to put certain ESG issues aside. fs

24

International

www.financialstandard.com.au 6 April 2021 | Volume 19 Number 06

Westpac reviews NZ operations

01: David Clark

minister of commerce and consumer affairs

Annabelle Dickson

Westpac has revealed it is in the early stages of reviewing the feasibility of its 160-year-old New Zealand division as capital requirements ramp up.

Westpac noted the NZ business continues to perform well but the regulatory requirements in New Zealand have become too stringent. “… given the changing capital requirements in New Zealand and the RBNZ requirement to structurally separate Westpac’s NZ business operations from its operations in Australia, it is now appropriate to assess the best structure for these businesses going forward,” the bank said in a statement.

The move follows yesterday’s announcement that the Reserve Bank of New Zealand (RBNZ) instructed Westpac New Zealand (WNZL) to hold additional liquid assets and commission independent reports into its risk governance and liquidity risk management.

“We have experienced ongoing compliance issues with Westpac NZ over recent years, most recently involving material failures to report liquidity correctly, in line with the Reserve Bank’s liquidity requirements,” RBNZ deputy governor Geoff Bascand said.

“Furthermore, the bank has continued to operate outside of its own risk settings for technology for a number of years.”

The RBNZ has instructed that the first independent report assess Westpac’s risk governance and practices that are applied by the board and executive management.

The second report concerns the effectiveness of the actions that WNZL has taken to improve liquidity risk and risk culture following breaches RBNZ and APRA identified last year and.

Westpac said it will consider the impact of the independent reviews on its decision to demerge. fs

Nuveen drives ESG capabilities Eliza Bavin

Westchester Group Investment Management, a TIAA and Nuveen company, has appointed Cristina Hastings Newsome as head of sustainability.

Hastings Newsome will aim to drive Westchester’s global sustainability efforts, supporting the team’s approach to sensitively managing farmland investments.

Based in London, she will support Westchester’s response to rising investor demand for carbon neutral portfolios, providing scalable, natural solutions to counter climate change through farmland investments.

Hastings Newsome will also support Westchester’s ESG committee to lead innovation and implementation on a broader range of ESG themes across the farmland portfolio, including providing supportive working conditions and resource efficiency.

Hastings Newsome brings more than 18 years’ experience, joining from Louis Dreyfus Company (LDC) in Switzerland where she was global sustainability lead.

She has also previously held roles at AstraZeneca, Proteus and Accenture. fs

New Zealand overhauls regulation of advice Jamie Williamson

T The quote

The new regime will give consumers greater confidence to seek advice.

he 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 March 15, 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.

Those providing advice must also adhere to new disclosure requirements. Advisers must provide retail clients with information including the type of licence they hold; the services they can provide, range of products they can advise on and limitations of their licence; fees and costs; and any commissions or other incentives or conflicts of interest that could impact the advice.

They must also disclose their disciplinary history, including certain criminal convictions and civil proceedings; and, in the case of financial advisers, they must disclose any bankruptcy proceedings within four years of having been discharged.

New Zealand’s minister of commerce and consumer affairs David Clark 01 said: “Financial advice plays an important role in helping New Zealanders achieve significant milestones in their life, such as saving for a first home or planning for retirement. And we know that those who get financial advice achieve better financial outcomes.”

“The new regime will give consumers greater confidence to seek advice that will help with their financial goals, providing them with greater trust in the quality of that advice.”

The reforms have been in the works for several years now, with legislation first introduced to Parliament in 2017. In mid-2019 the Financial Advisers Act 2008 was repealed, and the Financial Services Legislation Amendment Act was introduced. fs

New York pension funds surpass climate goals New York City pension funds will more than double their investments in climate change solutions to more than US$6 billion, surpassing the September 2018 goal to double the then-US$2 billion allocation within three years.

New York mayor Bill de Blasio made the announcement alongside the city’s comptroller Scott M. Stringer and pension fund trustees on March 23. The comptroller serves as the investment advisor to, and custodian and a trustee of, the New York City Pension Funds.

The announcement builds on the US$4 billion divestment from securities related to fossil fuel companies by three of the city’s five pension funds.

“The climate crisis must be met head-on and from all fronts. This multi-billion investment in green tech and divestment from fossil fuels is a winning combination for our

planet, our city and our pensioners,” de Blasio said.

“Our pension trustees are meeting the moment by doubling investments and securing a greener future for New York City.”

The city’s original goal was to double investments in climate change solutions such as wind, solar power, energy efficient technologies, and more from approximately $2 billion or 1% of assets at the time to approximately $4 billion or 2% of assets by 2021 end.

“New York City is standing up for our people, our pension beneficiaries, and the only Earth we have because the future is on the side of big ideas in clean energy — not big polluters. Investing in climate change solutions is in the fiduciary interest of our beneficiaries and together we’re leading the charge to build a cleaner and greener future for all,” Stringer said. fs

Between the lines

www.financialstandard.com.au 6 April 2021 | Volume 19 Number 06

Industry fund appoints Multiplex

01: Jon Forster

senior portfolio manager Impax Asset Management

Annabelle Dickson

The investment manager of $59 billion industry fund Cbus has appointed Multiplex to construct a $300 million commercial property development in Adelaide.

Cbus Property partnered with the South Australian government to develop a building at 83 Pirie Street in Adelaide’s central business district will have over 30,000 square metres of office space and three levels of car parking to accommodate 110 cars.

Multiplex will construct the building, which will have a multi-purpose wellness centre for yoga, physical fitness services, conferences, and events.

The completion is scheduled by late 2022.

Cbus Property chief executive Adrian Pozzo said the new development will serve up to 3000 office workers and will boost the company’s investment portfolio.

“Responding to a future Adelaide workforce with a focus on sustainability, wellness, connection to the public community, nature and productivity, 83 Pirie is an incredibly exciting project that will optimise the site’s potential and create a new landmark for the city, as well as reinvigorate the city’s office precinct,” Pozzo said.

The property is targeting 5.5 star NABERS Energy and 4 star NABERS Water ratings and a 6 star Green Star Base Building rating.

Multiplex Victoria and South Australia regional manager Graham Cottam said the company is thrilled by be appointed by Cbus Property to complete the project. fs

25

Cbus awards $240m ESG mandate Elizabeth McArthur

I The quote

This investment supports... our commitment of a 45% reduction in absolute carbon emissions by 2030.

mpax Asset Management has been awarded the mandate in a move focused on investing in opportunities arising from the transition away from fossil fuels.

Cbus recently announced its commitment to achieving net zero carbon emissions across its portfolio by 2050, with an interim target of a 45% reduction by 2030.

Impax is a UK-based specialist provider of environmentally focused investment strategies.

This mandate sits within Cbus’ climate change solutions allocation.

“The mandate is clearly aligned with the Cbus Climate Change Roadmap, this investment supports both our need to invest in solutions and our commitment of a 45% reduction in absolute carbon emissions by 2030,” Cbus head of equity portfolio construction James Crawford said.

“It demonstrates our commitment to making

great financial returns for our members and investing sustainably.”

He added that the Impax strategy will invest in globally listed companies with exposure to products and services enabling mitigation of climate change.

“All portfolio companies are aligned with the Paris Agreement and are positioned to provide significant net CO2 savings,” Crawford said.

“The strategy to invest in companies that will help provide solutions as well as investing in companies that will adapt to climate change has a clear link to Cbus’ goal to safeguard member savings from climate related risks.”

Impax senior portfolio manager Jon Forster01 said Impax is looking forward to partnering with Cbus on the mandate.

“Asset owners are increasingly prioritising climate change mitigation and considering climate risk in their investment decisions,” he said. fs

Rainmaker Mandate top 20

Latest alternatives investment mandate appointments

Appointed by

Asset consultant

Investment manager

Mandate type

Australian Catholic Superannuation and Retirement Fund

Frontier Advisors

IFM Investors Pty Ltd

Other

Australian Catholic Superannuation and Retirement Fund

Frontier Advisors

Triple Three Partners Pty Ltd

Alternative Investments

30

Care Super

JANA Investment Advisers

Antin Infrastructure Partners, S.A.S

Infrastructure

23

Care Super

JANA Investment Advisers

Antin Infrastructure Partners, S.A.S

Infrastructure

10

Care Super

JANA Investment Advisers

LGT Capital Partners

Private Equity

9

Christian Super

JANA Investment Advisers

Other

Other

Christian Super

JANA Investment Advisers

First Sentier Investors

Infrastructure

7

Christian Super

JANA Investment Advisers

LGT Capital Partners

Alternative Investments

4

Christian Super

JANA Investment Advisers

Siguler Guff & Company, LP

Alternative Investments

3

Energy Industries Superannuation Scheme - Pool A

Cambridge Associates; JANA Investment Advisers

LGT Capital Partners

Private Equity

4

Energy Super

JANA Investment Advisers

Franklin Templeton Investments Australia Limited

Private Equity

15

Energy Super

JANA Investment Advisers

Ardea Investment Management Pty Limited

Alternative Investments

Health Employees Superannuation Trust Australia

Frontier Advisors

Russell Investment Management Ltd

Currency Overlay

Hostplus Superannuation Fund

JANA Investment Advisers

Other

International Private Equity

2

Local Government Super

Cambridge Associates; JANA Investment Advisers

Marathon Asset Management (Australia) Limited

Other

6

Local Government Super

Cambridge Associates; JANA Investment Advisers

PGIM, Inc.

Hedge Fund

100

Maritime Super

JANA Investment Advisers; Quentin Ayers

HRL Morrison & Co (Australia) Pty Ltd

Infrastructure

71

MTAA Superannuation Fund

Whitehelm Capital

Macquarie Investment Management Australia Limited

International Infrastructure

29

State Super (NSW)

Frontier Advisors

New South Wales Treasury Corporation

Private Equity

Sunsuper Superannuation Fund

Aksia; JANA; Mercer; StepStone Group

StepStone Pty Ltd

Infrastructure

Amount ($m) 4

26

124

454 Source: Rainmaker Information

26

Managed funds

www.financialstandard.com.au 6 April 2021 | Volume 19 Number 06 PERIOD ENDING – 31 JANUARY 2021

Size 1 year 3 years 5 years

Size 1 year 3 years 5 years

Fund name

Fund name

Managed Funds

$m

% p.a. Rank

% p.a. Rank

% p.a. Rank

AUSTRALIAN EQUITIES

$m

% p.a. Rank

% p.a. Rank

% p.a. Rank

COMBINED PROPERTY

Hyperion Australian Growth Companies Fund

1,969

25.3

1

19.9

1

15.7

4

Australian Unity Diversified Property Fund

289

13.8

1

13.3

1

16.4

1

Bennelong Australian Equities Fund

673

19.1

2

18.2

2

16.7

3

Lend Lease Aust Prime Property Industrial

1,107

9.9

2

12.1

2

11.2

3

Australian Unity Platypus Aust Equities

201

9.1

11

16.0

3

15.2

5

Investa Commercial Property Fund

6,027

4.2

3

11.0

3

12.4

2

Australian Ethical Australian Shares Fund

427

14.5

4

14.6

4

14.0

6

UBS Property Securities Fund

244

-9.6

16

9.6

4

9.5

6

1,309

14.7

3

14.2

5

16.8

2

Pendal Property Securities Fund

450

-8.3

13

9.3

5

8.8

8

Russell Australian Shares Fund

122

-6.3

77

12.1

6

18.8

1

Resolution Capital Real Assets Fund

Alphinity Sustainable Share Fund

280

1.0

24

11.8

7

12.8

10

Bennelong Concentrated Aust Equities

Ausbil Active Sustainable Equity Fund

15

-6.9

11

8.4

6

8.7

9

5,666

2.5

5

8.2

7

11.2

4

Quay Global Real Estate Fund

231

-14.6

39

7.8

8

6.0

25

Australian Unity Property Income Fund

269

-5.4

10

7.6

9

9.0

7

Ironbark Paladin Property Securities Fund

307

-8.2

12

7.2

10

7.7

12

Lend Lease Aust Prime Property Commercial

44

10.0

10

11.8

8

Greencape Broadcap Fund

995

5.2

14

10.9

9

13.7

7

Australian Ethical Diversified Shares Fund

216

1.2

19

9.3

10

10.9

29

Sector average

492

-1.5

6.5

10.0

Sector average

1,231

-10.7

4.2

6.0

S&P ASX 200 Accum Index

-3.1

7.0

10.0

S&P ASX200 A-REIT Index

-14.0

5.1

5.9

INTERNATIONAL EQUITIES

FIXED INTEREST

Loftus Peak Global Disruption Fund

147

39.5

1

24.7

1

Schroder Fixed Income Fund

1,069

16.8

6

21.0

2

AMP Capital Wholesale Australian Bond Fund

56

10.6

15

20.9

3

19.0

4,879

23.7

3

20.7

4

490

20.6

5

18.5

5

Nikko AM Global Share Fund

134

12.9

12

18.0

Capital Group New Perspective Fund

903

15.9

7

17.7

11

10.1

16

16.7

216

36.2

2

16.7

9

54

-3.4

71

16.7

10

BetaShares Global Sustainability Leaders ETF Zurich Concentrated Global Growth T. Rowe Price Global Equity Fund Franklin Global Growth Fund

Legg Mason Martin Currie Global LT Fund Forager International Shares Fund Evans and Partners International Fund Sector average

2,098

3.4

6

6.3

1

4.9

7

979

2.7

17

6.1

2

5.0

6

3.4

7

6.1

3

5.2

2

3

Dimensional Global Bond Trust

1,790

20.5

1

QIC Australian Fixed Interest Fund

1,487

3.0

12

6.0

4

4.8

10

19.5

2

Macquarie Australian Fixed Interest Fund

236

2.2

27

6.0

5

4.9

8

6

16.8

6

Pendal Government Bond Fund

900

1.9

33

6.0

6

4.5

20

7

17.1

5

Perpetual Wholesale Active Fixed Interest Fund

197

2.1

28

6.0

7

8

14.9

9

Pendal Sustainable Aust. Fixed Interest Fund

313

3.4

8

6.0

8

17.5

4

Nikko AM Australian Bond Fund

223

2.1

30

5.9

9

4.8

11

14.5

16

iShares Government Inflation ETF

253

2.1

31

5.8

10

4.1

33

860

2.5

9.8

11.8

Sector average

972

1.9

4.7

4.1

MSCI World ex AU - Index

1.2

10.9

12.2

Bloomberg Barclays Australia (5-7 Y) Index

2.3

5.6

4.2

Source: Rainmaker Information

Note: The performance figures for diversified funds are net of fees, performance figures for sector specific funds are adjusted for fees.

With $154k in super, I am an outlier a nearly 40-year-old female with over Ian am $154,000 in superannuation. That makes me outlier.

Karren Vergara

senior journalist Financial Standard

Measure after measure corroborates woeful facts that as a woman, I am expected to retire with about 45% less than men and that my balance should currently sit at $60,000.

After 22 years in the workforce, my super balance has never received an additional cent in contributions.

I recently came back from maternity leave after one year. During my 20s, I took months off to travel and had sporadic but protracted periods of unemployment in between jobs that string together to leave an indelible hole in my bank and super account. I’ve taken hard-toswallow pay cuts to switch industries. I’ve silently sat through salary negotiations, fearful to ask for more or the same amount my male counterparts earn.

Topping it all off, I had multiple superannuation accounts running simultaneously with insurance cover I did not know I was entitled to - which I probably would not have been able to claim.

How I managed to more than double my nest egg compared to the average balance is nothing short of a superannuation-gender gap miracle.

Entering the workforce at 16, I remember

being bewildered with filling out my first-ever superannuation-application form.

When it came to the investments section, there was an option to “default”. I didn’t like the sound of that, so I opted to split my contributions across asset classes to add up to 100%.

I distinctly recall that Australian shares was at the top of the list by happenstance and allocated a nice, neat figure of 40% to it, followed by international shares, which also received 40%.

With my year 10 commerce education in tow, I knew leaving my cash in the bank would guarantee interest, so I allocated the remaining 20% to the cash option.

That was a fun exercise, I thought to myself, and oddly gratifying to have a vague level of control for something I had no language or enough understanding for.

So, for every job I started and super fund application form I had to fill out thereafter, I never deviated from my personal investment strategy.

At the onset of the Global Financial Crisis, I was working for an investment bank when the financial world started to implode. As stock markets and capital markets crumbled, a sage colleague told me that he moved all his superannuation to cash. I did the same thing.

In mid-2009, as signs of recovery began to

flicker, he told me that he went back to equities.

I did the same thing. When the coronavirus pandemic hit and ravaged the markets, I moved everything to cash. Four months later, I reverted to my 40-40-20 split.

You could hardly say that I was ‘engaged’ with my super. Even after years of studying and working in accounting, the concept of 9.5% superannuation did not leave the confines of my employment contract.

The critical importance of superannuation to me now is the by-product of occupational hazardry. The fact that I will retire with a hefty nest egg propped up by an overreliance on equities and unsolicited intra-fund advice is underwritten purely by kismet.

To think what could have been if I knew my way around the superannuation system back then would solve the current superannuation-financial literacy gap that is much-decried about.

Quantifying the financial literacy and socioeconomic capital opportunity costs is distressing, and, at worst growing.

I wish that all hard-working, low-income earning women who leave the workforce to have kids; don’t have the confidence to ask for a pay rise; or cannot work but want to work because they are experiencing domestic violence have the same luck. fs

Super funds

www.financialstandard.com.au 6 April 2021 | Volume 19 Number 06 PERIOD ENDING – 31 JANUARY 2021

Workplace Super Products

1 year

3 years

% p.a. Rank

5 years

SS

% p.a. Rank % p.a. Rank Quality*

MYSUPER / DEFAULT INVESTMENT OPTIONS

27

* SelectingSuper [SS] quality assessment

1 year

3 years

% p.a. Rank

5 years

SS

% p.a. Rank % p.a. Rank Quality*

PROPERTY INVESTMENT OPTIONS

Australian Ethical Super Employer - Balanced (accumulation)

4.0

2

8.0

1

8.2

19

AAA

Prime Super (Prime Division) - Property

-4.2

13

9.6

1

15.6

1

AAA

UniSuper - Balanced

3.2

10

7.7

2

8.8

7

AAA

AMG Corporate Super - AMG Listed Property

-5.9

15

7.2

2

6.7

7

AAA

TASPLAN - OnTrack Build

1.7

26

7.4

3

AAA

Telstra Super Corporate Plus - Property

1.0

2

6.9

3

8.6

2

AAA

Virgin Money SED - LifeStage Tracker 1979-1983

1.0

41

7.1

4

AAA

TASPLAN - Property

1.2

1

5.6

4

AAA

GuildSuper - MySuper Lifecycle Growing

3.3

9

7.1

5

8.2

22

AAA

CareSuper - Direct Property

-0.4

5

5.6

5

7.9

3

AAA

ANZ Staff Super - Balanced Growth

3.4

7

7.0

6

9.4

1

AAA

Sunsuper Super Savings - Property

0.1

4

5.0

6

7.1

5

AAA

QSuper Accumulation - Lifetime Aspire 1

2.3

18

6.9

7

8.2

20

AAA

Sunsuper Super Savings - Australian Property Index

-12.1

23

4.9

7

5.5

14

AAA

AustralianSuper - Balanced

2.9

12

6.9

8

9.2

2

AAA

Rest Super - Property

-2.4

7

4.9

8

7.2

4

AAA

Cbus Industry Super - Growth (Cbus MySuper)

3.7

4

6.8

9

8.9

6

AAA

Aware Super Employer - Property

-8.1

18

4.9

9

6.6

10

AAA

Vision Super Saver - Balanced Growth

4.1

1

6.7

10

8.6

10

AAA

HOSTPLUS - Property

0.3

3

4.7

10

6.7

8

AAA

Rainmaker MySuper/Default Option Index

1.6

5.9

7.9

Rainmaker Property Index

AUSTRALIAN EQUITIES INVESTMENT OPTIONS

-9.1

3.1

5.2

FIXED INTEREST INVESTMENT OPTIONS

UniSuper - Australian Shares

2.3

5

9.4

1

11.0

3

AAA

Australian Catholic Super Employer - Bonds

3.5

3

5.7

1

4.5

1

AAA

Vision Super Saver - Just Shares

8.6

1

8.9

2

12.3

1

AAA

GESB West State Super - Mix Your Plan Fixed Interest

2.6

12

5.3

2

4.1

4

AAA

Prime Super (Prime Division) - Australian Shares

3.9

3

8.5

3

11.2

2

AAA

AMG Corporate Super - AMG Australian Fixed Interest

3.7

1

5.1

3

4.1

5

AAA

ESSSuper Beneficiary Account - Shares Only

4.1

2

8.1

4

10.4

5

AAA

Mine Super - Bonds

1.7

23

4.7

4

3.9

7

AAA

CBA Group Super Accumulate Plus - Australian Shares

1.3

7

7.8

5

9.8

14

AAA

UniSuper - Australian Bond

1.1

32

4.6

5

3.5

13

AAA

Maritime Super - Australian Shares

2.7

4

7.4

6

9.8

12

AAA

Intrust Core Super - Bonds (Fixed Interest)

2.6

11

4.5

6

4.0

6

AAA

Aware Super Employer - Australian Equities

-1.5

21

7.3

7

9.9

10

AAA

Aware Super Employer - Australian Fixed Interest

1.3

29

4.4

7

3.4

15

AAA

Sunsuper Super Savings - Australian Shares Index

-2.2

27

7.2

8

9.9

9

AAA

GESB Super - Mix Your Plan Fixed Interest

2.0

21

4.3

8

3.3

23

AAA

TASPLAN - Australian Shares

-0.8

15

7.2

9

AAA

Vision Super Saver - Diversified Bonds

2.6

13

4.3

9

3.8

9

AAA

AustralianSuper - Australian Shares

-2.7

42

7.1

AAA

QSuper Accumulation - Diversified Bonds

3.3

5

4.3

10

3.5

11

AAA

Rainmaker Australian Equities Index

-1.6

Rainmaker Australian Fixed Interest Index

1.6

10

6.3

9.7

19

9.2

INTERNATIONAL EQUITIES INVESTMENT OPTIONS UniSuper - Global Environmental Opportunities

3.7

2.9

AUSTRALIAN CASH INVESTMENT OPTIONS

49.1

2

23.1

1

21.1

1

AAA

ANZ Staff Super Employee Section - Cash

1.0

1

1.5

1

1.6

4

AAA

UniSuper - Global Companies in Asia

6.6

29

12.6

2

13.8

3

AAA

AMG Corporate Super - Vanguard Cash Plus Fund

0.7

4

1.5

2

1.7

1

AAA

AustralianSuper - International Shares

10.6

9

11.9

3

13.1

7

AAA

GESB West State Super - Cash

0.4

17

1.4

3

1.6

2

AAA

LUCRF Super - International Shares (Active)

10.8

8

11.6

4

12.1

13

AAA

AMG Corporate Super - AMG Cash

0.8

2

1.4

4

1.6

5

AAA

Equip MyFuture - Overseas Shares

13.6

4

11.5

5

13.4

5

AAA

Intrust Core Super - Cash

0.5

10

1.3

5

1.6

6

AAA

UniSuper - International Shares

13.4

5

11.3

6

13.4

6

AAA

NGS Super - Cash & Term Deposits

0.6

6

1.3

6

1.5

7

AAA

Intrust Core Super - International Shares

10.4

11

10.3

7

12.8

8

AAA

Prime Super (Prime Division) - Cash

0.5

9

1.3

7

1.6

3

AAA

Vision Super Saver - International Equities

15.5

3

10.1

8

13.8

4

AAA

Rest Super - Cash

0.7

3

1.3

8

1.4

13

AAA

Media Super - Passive International Shares

1.1

54

10.0

9

10.6

30

AAA

Sunsuper Super Savings - Cash

0.4

14

1.2

9

1.4

12

AAA

10.0

14

9.8

10

AAA

Media Super - Cash

0.4

19

1.2

10

1.4

16

AAA

Rainmaker Cash Index

0.2

TASPLAN - International Shares Rainmaker International Equities Index

5.8

7.6

10.6

0.9

Note: Tables include Australia’s top performing superannuation products that also have a AAA SelectingSuper Quality Assessment rating.

Investment options are sorted by their three year net performance results. All performance figures are net of maximum fees.

1.2 Source: Rainmaker Information www.rainmakerlive.com.au

2021 Rainmaker Information AAA Quality Ratings announced View the full list of AAA rated superannuation products at www.rainmaker.com.au

28

Economics

www.financialstandard.com.au 6 April 2021 | Volume 19 Number 06

The do-nothing Fed

Monthly Indicators

Ben Ong

Retail Sales (%m/m)

-1.05

0.47

-4.06

7.11

Retail Sales (%y/y)

8.77

10.58

9.60

13.33

7.05

Sales of New Motor Vehicles (%y/y)

5.05

11.06

13.55

12.39

-1.50

H

o-hum. So much for speculations over the Fed’s thoughts and actions, Powell and Co. did what financial markets expected – nothing – at their March FOMC meeting.

“The Committee decided to keep the target range for the federal funds rate at 0 to 1/4 percent” and “will continue to increase its holdings of Treasury securities by at least $80 billion per month and of agency mortgage‑backed securities by at least $40 billion per month.”

This is really no surprise, especially if one’s been paying heed to chair Jerome Powell words uttered over the past weeks. Now put on paper, the Fed’s outlook is just as Jay said it would be.

Growth is expected to be stronger (supported

by US President Joe Biden’s coronavirus stimulus). In its ‘Summary of Economic Projections’, Fed participants – board members and presidents – revised up their GDP growth projections to 6.5% this year (from 4.2% projected in December 2020); 3.3% in 2022 (from 3.2%); before tapering to 2.2% in 2023 (from 2.4%) – still above the US Congressional Budget Office’s (CBO) estimate of America’s potential growth rate of 2.0%.

The unemployment rate would be lower. It’s now seen at 4.5% this year (from 5.0% projected in December 2020); 3.9% in 2022 (from 4.2%); and, 3.5% in 2023 (from 3.7%).

The latest Fed projections give verity to the Fed chief’s prior pronouncements that any uptick in inflation would be temporary.

The Fed expects the PCE price index – the central bank’s favoured inflation measure – to grow by 2.4% in 2021 (from 1.8% projected in December 2020) before slowing to 2.0% in 2022 (from 1.9%) and lifting ever so gently to 2.1% in 2023 (from 2.0%).

Overlay these inflation forecasts with the Fed’s change of strategy towards average inflation targeting -- the Fed is switching from a point target of 2% inflation to achieving “achieve inflation that averages 2% over time” – announced on 27 August 2020 at Jackson Hole and voila, we get the rationale for the “dot plot” that shows the FOMC participants’ assessments of appropriate monetary policy.

And that is, that the fed funds rate would remain at 0 – 0.25% until at least the year 2023 if things turn out as projected … which things never do.

Case in point, in its December 2019 dot plot – before China alerted the World Health Organisation (WHO) of coronavirus infections in Wuhan (on December 31) – shows the Fed’s median forecasts for the fed funds rate to remain steady at 1.75% in 2020 before rising to 2.0% in 2021 and 2022.

The uncertainty of it all is underscored by the Fed’s statement that: “The path of the economy will depend significantly on the course of the virus, including progress on vaccinations. The ongoing public health crisis continues to weigh on economic activity, employment, and inflation, and poses considerable risks to the economic outlook.”

Not only that, the recent spike in US long bond yields – due to rising inflation expectations — could throw another spanner in the works by negating the stimulatory effects of the Fed’s actions on economic activity.

Having said that there could also be upside surprises. Economic growth could be stronger and unemployment lower providing enough impetus for higher inflation and by extension, reduced policy accommodation (read, higher interest rates).

But isn’t this a lot better than having the economy forever breathing through a ventilator? fs

Feb-21

Jan-21

Dec-20

Nov-20

Oct-20

Consumption 1.79

Employment Employed, Persons (Chg, 000’s, sa)

88.67

29.47

46.35

86.20

176.80

Job Advertisements (%m/m, sa)

7.24

2.63

8.74

14.30

11.92

Unemployment Rate (sa)

5.83

6.34

6.59

6.82

6.98

Housing & Construction Dwellings approved, Tot, (%m/m, sa)

-

-12.16

17.10

6.25

5.54

Dwellings approved, Private Sector, (%m/m, sa)

-

-19.37

11.97

2.25

6.15

Survey Data Consumer Sentiment Index

109.06

107.00

112.00

107.66

105.02

AiG Manufacturing PMI Index

58.80

55.30

-

52.10

56.30

NAB Business Conditions Index

15.42

9.05

15.29

9.11

3.97

NAB Business Confidence Index

16.40

11.95

5.96

11.45

4.73

Trade Trade Balance (Mil. AUD)

-

10142.00

7133.00

5707.00

6737.00

Exports (%y/y)

-

2.94

-7.61

-10.80

-12.64

Imports (%y/y)

-

-12.58

-13.36

-11.69

-20.74

Dec-20

Sep-20

Jun-20

Mar-20

Dec-19

Quarterly Indicators

Balance of Payments Current Account Balance (Bil. AUD, sa)

14.52

10.71

16.38

7.48

3.70

% of GDP

2.86

2.20

3.50

1.48

0.73

Corporate Profits Company Gross Operating Profits (%q/q)

-6.55

3.22

15.84

3.02

-3.71

Employment Wages Total All Industries (%q/q, sa)

0.67

0.08

0.08

0.53

0.53

Wages Total Private Industries (%q/q, sa)

0.52

0.53

-0.08

0.38

0.45

Wages Total Public Industries (%q/q, sa)

0.52

0.45

0.00

0.45

0.45

Inflation CPI (%y/y) headline

0.86

0.69

-0.35

2.19

CPI (%y/y) trimmed mean

1.20

1.20

1.30

1.70

1.84 1.50

CPI (%y/y) weighted median

1.40

1.20

1.30

1.60

1.20

Output Real GDP Growth (%q/q, sa)

News bites

Consumer confidence The Westpac-Melbourne Institute index of consumer confidence rose by 2.6% to a reading of 111.8 in March, “just 0.2 points below the December level which was a 10-year high. The main factors driving the Index are improving economic conditions and prospects, both domestically and abroad, particularly as they relate to our labour market”. All components of the index were higher in March, led by the 3.7% increase in the economic outlook in the ‘next 12 months’ and the ‘economy, next five years’ sub-index’s 2.3% rise over the month. The consumer sentiment survey showed “unemployment expectations dropped by 2.1% over the month to a reading of 112.0.

Employment The latest Australian Bureau of Statistics (ABS) ‘Labour Force’ report shows total employment

increased by 88,700 heads to 13,006,900 workers in February 2021. While this is 1800 scalps short of the tally recorded last year, it’s more than the 13,003,310 total number of employed Australians in March 2020 (in Prime Minister Scott Morrison’s words, “when the recession began”). Even better, additions in full-time employment had been outpacing part-timers since October last year. In February 2021, full-time jobs increased by 89,100 while part-time employment decreased by 500 people. The unemployment rate dropped sharply to 5.8% in February from 6.3% in the previous month despite the participation rate remaining steady at an elevated 66.1%.

Business confidence Australian business confidence continues to improve. The NAB business confidence index rose to an 11-month high of +16 in February, “with all states and industries reporting gains, except for retail”. In addition, the latest survey showed business conditions increased to a reading of +15 from +9 in January, with trading, profitability and employment conditions all marking solid improvements. Conditions remain very strong in retail, wholesale, mining and professional services, while construction, personal services and transport conditions continue to lag. According to NAB Group chief economist Alan Oster: “Business conditions and confidence are both at multi-year highs and, importantly, we’re starting to see an uptrend in business hiring and investment activity.” fs

3.13

3.40

-7.00

-0.30

0.44

Real GDP Growth (%y/y, sa)

-1.12

-3.70

-6.31

1.40

2.19

Industrial Production (%q/q, sa)

-0.30

0.20

-3.01

0.10

0.59

Survey Data Private New Capex, Total, Chain, Vol, (%q/q, sa) Financial Indicators

3.03 19-Mar

-3.08

-5.51

-1.91

Mth ago 3mths ago 1yr ago

-2.51 3yrs ago

Interest rates RBA Cash Rate

0.10

0.10

0.10

0.75

1.50

Australian 10Y Government Bond Yield

1.81

1.43

0.99

1.48

2.71

Australian 10Y Corporate Bond Yield

1.58

1.33

1.31

2.27

3.20

Stockmarket All Ordinaries Index

6959.6

-1.48%

0.51%

44.71%

S&P/ASX 300 Index

6699.9

-1.21%

0.64%

41.44%

14.76% 13.14%

S&P/ASX 200 Index

6708.2

-1.26%

0.49%

40.25%

12.57%

S&P/ASX 100 Index

5519.1

-1.61%

0.24%

38.88%

12.63%

Small Ordinaries

3198.2

1.63%

3.48%

63.58%

16.52%

Exchange rates A$ trade weighted index

64.50

A$/US$

0.7746 0.7862 0.7611 0.5864 0.7703

63.00

61.50

57.00

63.60

A$/Euro

0.6504 0.6483 0.6221 0.5480 0.6247

A$/Yen

84.31 83.05 78.69 64.54 81.52

Commodity Prices S&P GSCI - commodity index

475.10

470.09

408.02

269.53

441.29

Iron ore

168.00

164.07

152.49

89.97

67.40

Gold

1735.20 1786.20 1879.75 1474.25 1312.40

WTI oil

61.42

59.12

49.04

25.09

Source: Rainmaker Information /

62.01

Sector reviews

www.financialstandard.com.au 6 April 2021 | Volume 19 Number 06

Figure 1. Business & consumer confidence

Australian equities

75 INDEX

CPD Program Instructions

Figure 2. Employment growth

130 NET BALANCE %

6 ANNUAL CHANGE %

4

120

50

110

25

2 0 -2

0

100

-25

90 Consumer confidence

Prepared by: Rainmaker Information Source:

80

-50

Business confidence -RHS

-75 2006

2008

2010

2012

2014

2016

2018

Part-time

-8

Total

-10

Full-time

-12

70 2004

-4 -6

2020

-14 2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

Confidence contagion Ben Ong

ot only has the domestic economy conN tracted less sharply than its peers, it has also rebounded stronger relative to most — later confirmed by the OECD ‘Economic Outlook’ March 2020 quarter interim report.

Sure, US GDP growth received the biggest upgrade from the OECD – 3.3 percentage points to 6.5% this year – but this owes a great deal to the Biden administration throwing not only the kitchen sink but the entire kitchen – US$1.9 trillion coronavirus relief package.

This compares with the OECD’s 1.3 percentage point upward revision to Australian GDP growth this year to 4.5% in the year 2021, notwithstanding the Morrison government’s declared intent to end its JobKeeper programme and coronavirus supplements to welfare recipients at the end of March this year.

Sure, Australia have had some delays in the

International equities

Figure 1. ECB interest rates 2.00

sumers (through the labour market). Latest domestic employment stats show total employment increased by 88.7K heads to 13,006,900 workers in February 2021.While this is 1,800 scalps short of the tally recorded in the same month last year, it’s more than the 13,003,310 total number of employed Australians in March 2020 when the recession began. The unemployment rate dropped to 5.8% in February from 6.4% in the previous month.

This makes the jump in consumer confidence hardly a surprise.

The Westpac-Melbourne Institute index of consumer confidence rose by 2.6% to a reading of 111.8 in March.

Confident consumers beget confident businesses – household spending rises, lifting sales and profits and ultimately investment in buildings and structures, machineries and equipment and … staffing. fs

4000 RATE %

3800

1.75

Marginal lending facility

1.50

Repo rate

1.25

3600

0.25

2800

0.00

2600

-0.25

International equities

2400

-0.50 -0.75

CPD Questions 4–6

2200 2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

2015

2016

2017

2018

2019

2020

2021

ECB gives a PEPP talk I

t’s not what the European Central Bank (ECB) did at its March governing council meeting but its pandemic emergency purchase programme (PEPP) talk that sent the Euro Stoxx-50 index on the up and up.

The Eurozone’s equity market index rose to its highest level in a year and three weeks to 3845.60 points – up by 0.6% on the day, 8.2% this year to date and a whopping 61.2% from the pandemic low recorded on 18 March 2020.

This, notwithstanding only marginal changes in the ECB’s GDP growth forecasts. It raised its 2021 growth projection to 4.0% (from the 3.9% it predicted in December 2020) and lowered 2022’s to 4.1% from 4.2% — practically cancelling each other out — while at the same time not changing 2023’s 2.1% growth projection.

The ECB’s inflation projections were revised higher for this year and the next though – 1.5%

2. According to Westpac what drove the rise in consumer confidence in March? a) Improving domestic conditions and prospects b) Improving international conditions and prospects c) Improving domestic labour market outlook d) All of the above

3000

0.50

Ben Ong

1. Which NAB survey measure improved in February? a) Business confidence b) Business conditions c) Both a and b d) Neither a nor b

3200

0.75

2011

INDEX

3400

Deposit facility

CPD Questions 1–3

3. Australia’s unemployment rate fell in February from the previous month. a) True b) False

Figure 2. Euro Stoxx 50 index

1.00

Prepared by: Rainmaker Information Source: Rainmaker /

The Financial Standard CPD Program has been developed for professionals governed by the Corporations Act 2001 and hold an AFS Licence which provides an obligation to undertake continuous professional development (CPD). Test your knowledge with the following questions.

[See next page for instructions on how to submit your answers].

Australian equities

vaccine roll-out but with cases of infections virtually next to nil, life had and can go on to pre-pandemic normal – jabbed or unjabbed – and the Reserve Bank of Australia (RBA) providing the icing with its promise to provide continued support.

How good is that? Well, it’s so good that Australian business confidence remain on the up and up. The NAB business confidence index rose to an 11-month high of +16 in February, “with all states and industries reporting gains, except for retail”. In addition, the latest survey showed business conditions increased to a reading of +15 from +9 in January, “with trading, profitability and employment conditions all marking solid improvements. Conditions remain very strong in retail, wholesale, mining and professional services, while construction, personal services and transport conditions continue to lag”.

Confident businesses beget confident con-

2.25

29

in 2021 (from 1.0%); 1.2% in 2022 (from 1.1%); and, unrevised at 1.4% in 2023.

What has changed though, to get the stockmarket singing hallelujah is Madam Lagarde’s statement that: “While the overall economic situation is expected to improve over 2021, there remains uncertainty surrounding the near-term economic outlook, relating in particular to the dynamics of the pandemic and the speed of vaccination campaign.” She also said: “Inflation has picked up over recent months mainly on account of some transitory factors and an increase in energy price inflation. At the same time, underlying price pressures remain subdued in the context of weak demand and significant slack in labour and product markets.”

The risk to near-term growth and the ECB’s conviction that inflation is just a passing fancy — “While our latest staff projection exercise foresees a gradual increase in underlying infla-

tion pressures, it confirms that the mediumterm inflation outlook remains broadly unchanged from the staff projections in December 2020 and below our inflation aim” because “underlying price pressures remain subdued in the context of weak demand and significant slack in labour and product markets”.

To counteract this risk to growth, “we will continue to conduct net asset purchases under the PEPP with a total envelope of €1.850 trillion until at least the end of March 2022”.

Further, “the Governing Council expects purchases under the PEPP over the next quarter to be conducted at a significantly higher pace than during the first months of this year.

The ECB’s final words: “The Governing Council stands ready to adjust all of its instruments, as appropriate, to ensure that inflation moves towards its aim in a sustained manner, in line with its commitment to symmetry.” fs

4. What is the European Central Bank’s latest GDP growth projection for 2021? a) 3.9% b) 4.0% c) 4.1% d) 4.2% 5. What is the European Central Bank’s inflation projection for 2021? a) 1.0% b) 1.2% c) 1.4% d) 1.5% 6. The European Central Bank cut interest rates at its March meeting. a) True b) False

30

Sector reviews

Fixed interest

Fixed interest

CPD Questions 7–9

7. What was Japan’s GDP growth in the December 2020 quarter? a) +5.3% b) -0.5% c) -1.9% d) -8.3% 8. What was the BOJ’s decision at its March meeting? a) It cut interest rates deeper into the negative b) It reduced the target for 10-year JGB yield to negative c) Both a and b d) Neither a nor b 9. Japan remains in deflation. a) True b) False Alternatives CPD Questions 10–12

10. What is China’s GDP growth target for 2021? a) 6% plus b) 7.8% c) 7.9% d) 8.1% 11. When did China record negative GDP growth? a) March 2020 quarter b) June 2020 quarter c) September 2020 quarter d) December 2020 quarter

www.financialstandard.com.au 6 April 2021 | Volume 19 Number 06

Figure 1: Japanese real GDP growth

Figure 2: Japanese CPI inflation

25

4

20

ANNUAL CHANGE %

PRECENT

3

15 10

2

5 1

0 -5

0

-10

Prepared by: Rainmaker Information Prepared by: FSIU Source: Rainmaker / Sources: Factset

-15

Annualised quarterly growth rate

-20

Quarterly

-25

Annual

-1 Headline inflation

-2

-30

Core inflation (ex-food)

-3

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021

BOJ widens JGB trading band Ben Ong

I

t won’t be long now till cherry blossoms start blooming in Japan. But just like these blossoms’ short-lived wonder, the ‘Land of the Rising Sun’s’ economic recovery through various crises going back to the late 1980s-early 1990s proved to be five minutes of sunshine.

Japan’s economy has risen and fell through the 1990-91 recession, the 1997 Asian financial crisis, the 2001 US recession, the 2007-2009 Great Recession, the 2010-2012 European sovereign debt crisis and lately, the 2020 .COVID-19 pandemic.

Sure, like most other economies Japanese growth has rebounded – by 5.3% in the December 2020 quarter – after recording three straight quarters of contraction – 1.9% in December 2019; 0.5% in March 2020; 8.3% in June 2020 (the sharpest decline on record) but its current recovery is far from being sustainable and, at best, not strong enough to turn deflation into inflation.

Japan’s headline and core inflation rates

Alternatives

stood at negative 0.4% in the year to January 2021. While an improvement from the previous month’s 0.6% deflation, they remain way below the Bank of Japan’s (BOJ) 2.0% target.

It’s not surprising, therefore, that the BOJ found it imperative to conduct a review of its policy tools at its March meeting to make its pandemic stimulus programme more “sustainable and effective”.

As per Reuters, “BOJ Deputy Governor Masayoshi Amamiya has said one of the key goals of the review would be to mitigate the pain that negative rates inflict on financial institutions’ profits, and dispel perceptions in the market that further rate cuts were off the table.”

It’s beginning to look like the BOJ’s target rate that has been frozen at minus 0.1% over the past five years would be moved … deeper into the negative soon.

However, financial markets aren’t convinced that the BOJ’s move to significantly impact Ja-

Figure 2: Caixin China PMI

Figure 1: China GDP growth 16

60

ANNUAL CHANGE %

14

INDEX

55

12 10

12. The Caixin China PMI indices show the country’s manufacturing and services sector still in expansion. a) True b) False

pan’s economic growth and inflation (largely because it will run out of JGBs to buy)– a sentiment echoed by LDP lawmaker Kozo Yamamoto.

Yamamoto suggests that Japan needs “to make a bold move along the lines of what the US is doing” – massive fiscal spending – declaring that Japan “needs to double the nearly $700B already budgeted in extra spending to ensure a recovery from the pandemic, according to Factset.

While the BOJ didn’t budge on its monetary policy settings at its March meeting — keeping interest rates unchanged and maintained the target for the 10-year Japanese government bond yield at around 0% — it announced that it’s widening “the range of 10-year Japanese government bond (JGB) yield fluctuations” to around plus and minus 0.25% from the target level (from +/- 0.20% previously) as well as declaring that, “it will introduce “fixed-rate purchase operations for consecutive days” as a powerful tool to set an upper limit on interest rates when necessary.” fs

50

8 6

45

4 2 0 -2

Prepared by: Rainmaker Information Prepared by: FSIU Source: IEA Sources: / Factset

-4

40

Manufacturing

35

Services

30

Composite

-6 25

-8 05

06

07

08

09

10

11

12

13

14

15

16

17

18

19

20

21

2018

2019

2020

2021

China sets low growth goal Ben Ong

G

Go to our website to

Submit

All answers can be submitted to our website.

DP growth of over 6% for 2021.

Chinese premier Li Kequiang announced this target growth rate at the opening of the fourth session of the 13th National People’s Congress (NPC) in Beijing on March 5.

Many a times, China’s annual economic growth target had been considered too high/ambitious by economists, international institutions and financial markets. This time is different.

For this time, the Middle Kingdom’s growth goal is lower than consensus expectations for an 8.0% expansion in 2021.

Just recently, the OECD’s March 2021 ‘Interim Economic Outlook’ report pencilled in a 7.8% expansion this year. In January this year, the World Bank (WB) forecast China’s GDP to grow by 7.9% in 2021 predicated on “the release of pent-up demand and a quicker-than-expected resumption of production and exports”. In the same month, the IMF predicted China’s economy to expand

by 8.1% this year due to “effective containment measures, a forceful public investment response, and central bank liquidity support.

But premier Li is looking beyond the year 2021, explaining that the current target is “wellaligned with the annual goals of subsequent years” under the Politburo’s five-year plan that ensures a more sustainable long-term growth.

Still, this isn’t consistent with China being the only major economy that has come out of the COVID-19 pandemic without a recession and with positive economic growth in 2020. After contracting by 6.8% in the year to the March 2020 quarter, the economy advanced by 3.2%, 4.9% and 6.5% over the remaining three quarters of last year.

But as Li underscored, “In 2021, China will continue to face many development risks and challenges…”.

The latest Caixin China PMI surveys back Li’s warning. Although still at a reading indi-

cating expansion, the composite output index registered its third straight month of decline to a reading of 51.7 in February as “demand and supply in both the manufacturing and services sectors improved at a slower pace”.

The services PMI eased for the third month in a row to a reading of 51.5 in February – the lowest since April 2020 – and the manufacturing PMI fell a third month to a nine-month low of 50.9 in February 2020 The survey blames “the domestic flare-ups of COVID-19 and the ongoing overseas pandemic” for these – factors that have weakened both overseas and domestic demand.

One not so minor thing that the survey failed to mention is the rise and rise in the Chinese currency – itself a de facto tightening of financial and economic conditions.

The Chinese yuan has now appreciated by a 10.2% versus the US dollar to CNY6.5 from last year’s low of CNY7.16. fs

Sector reviews

www.financialstandard.com.au 6 April 2021 | Volume 19 Number 06

Property

Property

CPD Questions 13–15

Prepared by: Rainmaker Information Source: The University of Melbourne, HIA & Tenants’ Union of NSW

addition to increasing the rate of home Isitynownership, a recent study from the Univerof Melbourne found that abolishing stamp duty would likely reduce the purchase price for home buyers, increase the sale price for sellers, increase the total number of transactions and reduce the degree of mismatch in housing.

The New South Wales government is currently consulting on plans to have homebuyers pay either a land tax or gradually opt-in to paying stamp duty, while the ACT government is already acting - albeit over 20-year timeline.

The study, which drew on the Household, Income and Labour Dynamics in Australia survey and data on house prices and stamp duty rates, found that average home ownership should increase by two percentage points. However, for those under age 35 it would go up by four percentage points, while barely moving for over-65s.

The share of total housing assets held by those over 65 would also decrease by 20% while increasing by 15% for under-35s. Young people would also be more likely to buy bigger homes, the research found.

Stamp duty removal a win for most, not all: Research Jamie Williamson

The study also found that removing stamp duty could raise the annual housing turnover rate by 50%. It could also see a decline in the number of people living short of their preferences.

Making a submission to the NSW government’s consultation, the Housing Industry Association said the case in favour of abolishing stamp duty is so strong that it doesn’t matter which option is adopted, as long as it goes ahead.

“Households able to move to a home that suits the size of the family and the location of their employment and studies can lead to a more efficient allocation of public investment in transport infrastructure,” HIA chief economist Tim Reardon said.

“It allows an ageing population to shift closer to family and medical support leading to a more efficient allocation of land and healthcare resources. A switch away from stamp duty also offers a better use of land as it penalises low value use of land in areas with high land values.”

Also making a submission, the Tenants’ Union of New South Wales has said the option to opt-in should be removed, with a plan imple-

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Managing Director Christopher Page

31

mented to gradually transition all properties to a new annual property tax from point of sale.

Within 10 years, 75% of dwellings would be under the new regime, the union estimates.

The union has recommended protections for renters be put in place to ensure rent prices don’t increase during or following the transition.

While the land tax in itself is not expected to drive rental prices, the union said the operation of market forces may be inhibited by the large costs faced by tenants when moving out.

“We also recognise the possible risk that during the transition to implement a new tax regime, new owners ‘opting in’ may seek to pass through the annual cost as a higher market rent when listing their new property for rent, with the effect of pushing up market rents at the point of listing and across rental listing sites,” the union said.

But, in terms of the biggest losers from such a reform, the University of Melbourne study said retirees are unlikely to benefit given they will find themselves with an ongoing tax burden that wasn’t previously there and relatively minimal income to foot the bill. fs

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THE JOURNAL OF SUPERANNUATION MANAGEMENT

Volume 16 Issue 01

Dealing with vulnerable clients Holley Nethercote

christopher.page@financialstandard.com.au

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14. Which of the following was identified as a risk that could arise during the transition phase in implementation of an annual property tax? a) Higher rentals on new listings to cover the property tax b) A sustained fall in the annual housing turnover rate c) Poorer use of lowervalued land d) A drop in the share of total housing assets held by under-35s 15. The University of Melbourne study claimed that retirees would most likely benefit from the abolition of stamp duty in favour of an annual property tax on all properties. a) True b) False

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13. According to the recent study from the University of Melbourne, the abolition of stamp duty on property transactions will reduce: a) The rate of home ownership b) The sale price to home sellers c) The degree of mismatch in housing d) The total number of property transactions

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Profile

www.financialstandard.com.au 6 April 2021 | Volume 19 Number 06

A NEW PERSPECTIVE A recent accident forced Centrepoint Alliance group executive of advice services and solutions Kate Anderson to slow down for what felt like the first time, giving her the space to realise what is really important.

t was a Friday and I remember feeling really I tired and thinking I can’t wait to go home,” Centrepoint Alliance’s Kate Anderson says.

“The next thing I knew the car hit me.”

It was November 2020 and Anderson was about 50 metres from home, crossing the road, thinking about how she would wind down for the day and how good it would feel to sit on the couch – maybe with a glass of wine.

As she crossed the road she was picked up by a vehicle, thrown against the windscreen and then flung about five metres from the car.

Anderson hit her head and landed on her left ankle, suffering a severe break.

“The accident really made me question everything. Luckily I’m alive, it’s only my ankle that’s still recovering because I broke it in about five places,” she says.

The accident would have been shocking for anyone, suffering a delayed concussion on top of her ankle injury, Anderson was in quite a state.

She describes the delayed concussion as similar to being dumped by a wave at the beach, saying she felt like her head was underwater.

Anderson ended up taking eight weeks off work; the longest amount of time she’d had off since having her two children.

The time off was a big deal for Anderson.

From a young age she has prided herself on financial independence, developing a strong work ethic despite insisting that she never viewed herself as someone particularly ambitious.

With two school-aged children, Anderson is a full-time working mum and an advocate for flexible work practices for men and women.

But Anderson herself has never taken employers up on those flexible options.

“I’ve never asked an employer to work from home one day or work less, I’ve always worked five days in the office. But that’s my own choice,” she says.

“I thought I needed to be in the office and be seen. That’s got nothing to do with flexible work arrangements, it was my choice. And it might actually be to my detriment that I’ve worked like that.”

With financial independence consistently a priority for her, Anderson found herself always putting her work first and giving everything to the job and her team.

“I currently have eight direct reports with people underneath them, you find yourself giving a lot of your emotional energy to people at work as well,” she says.

Despite the trauma of the accident, the time off and the space to think was a good, even necessary, thing, according to Anderson.

She admits that at times being a working mother, working in the financial services industry through a period of immense change and giving her all to work every day often meant she struggled to maintain a work-life balance.

“The accident made me question everything in my life, which I think is a good thing. I think I was at the stage where I needed to think about the path I was going down,” Anderson says.

“Do I really enjoy what I do? Am I still passionate about it? I am. I really do still believe in the value of financial advice.”

The experience also clarified the areas of her work that really matter to her.

“I’m particularly passionate about education and the role I play in providing services and solutions to advisers who then go and help mums and dads out there who have worked hard their whole lives to save for their retirement. That’s why I come to work,” Anderson says.

“More than ever, I want to help and give back to the mum and dads out there working hard to build a future for their families, getting access to affordable advice to make sure they are on track with their own path.”

Anderson also made a promise to herself: that she would remain in the industry only so long as she is passionate about it.

Her dedication to her work is something of a surprise, given that Anderson essentially fell into a career in financial services.

“I had no intention of ever getting into finance or financial services when I finished school. I went to university, and I always had a passionate desire to do psychology,” Anderson says.

“If you asked me 24 years ago whether I’d be where I am now, working in financial services, I would have laughed.”

She started a psychology degree at Macquarie University but struggled mainly – funnily enough – with analysing numbers and statistics. When she chose to study psychology, Anderson had focussed on sitting down with people and helping them through their problems, but she quickly found out that wasn’t what it is all about.

So, disillusioned, she transferred to an arts degree. Once she graduated, Anderson took off to London, working service roles and travelling the world in her time off.

When she finally returned to Sydney, she had gathered many valuable experiences and life lessons but she was in debt and in need of a job.

“I found an ad in the newspaper and applied for a job, it turned out it was to be part of the graduate program at Bankers Trust. I knew nothing about financial services, I didn’t know what Bankers Trust was,” Anderson says.

Successful with her application, Anderson was trained for three months alongside 30 other graduates before she was allowed to interact with clients.

“During that time, I got exposure to this fabulous idea of superannuation.

Everyone is putting money into super and I realised this is a really wonderful thing to be interested in and know about because I’ll always have a job if I know something about super.

That’s where I started getting into more technical roles,” she explains.

The accident really made me question everything.

Luckily I’m alive, it’s only my ankle that’s still recovering because I broke it in about five places.

Kate Anderson

From there, Anderson’s career took off.

She had roles at Zurich, AM Corporation and Mariner Financial before becoming head of technical at IOOF. For those who might admire her career, Anderson’s advice is simple: believe in yourself, be passionate and be honest, above all else.

“Empower the people around you. Develop good communication skills – verbal and written. You need to communicate well with people and build trust so they want to work with you.

And give people time,” she says.

“Everyone is in such a rush; I don’t know where they’re rushing to. There is that lack of face time and of having a real conversation with someone. You need to be able to give that time to team members.”

It’s something she missed while working from home during the pandemic.

But, she welcomes the increase in flexibility that has come along with that - especially for working mothers, like herself.

However, Anderson still sees herself showing up to the office most days. She values doing certain things the old-fashioned way.

“I might be a little old school, but I think people still want to meet you, they still want to look you in the eyes and shake your hand,” Anderson says. fs

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