Print Post Approved PP255003/00299
Vol.26 No.2 | January 26, 2012 | $6.95 INC GST
The publication for the personal investment professional
www.moneymanagement.com.au
GOVERNMENT’S FOFA DISCONNECT: Page 8 | INCOME PROTECTION COVER: Page 14
Quality will need to trump quantity after FOFA By Mike Taylor THE servicing of A and B clients will dominate and financial planners will be kidding themselves if they believe they can adequately service unduly large client books in the new Future of Financial Advice (FOFA) environment. That is the assessment of a number of industry players, including Adelaidebased consultant, Max Franchitto, who believes planners will face significant difficulty in convincingly arguing they can appropriately service more than 300 or 400 clients in any one year. He said the advent of FOFA meant planners were facing a new paradigm in which the fees charged would need to more closely reflect the expectations of clients. “The reality is that there are only so many clients you can look after efficiently and effectively," he said.
Franchitto also believes that in an environment where the industry funds continue to agitate with respect to the value of advice delivered by planners, it will be important that planners deliver on client expectations. “We are dealing with consumers who have been told some superannuation funds cost more because of commissions paid to advisers, so planners need to deliver," he said. Syd n e y- b a s e d Au s t ra l i a n Un i t y planner Andrew McKee agreed that the FOFA requirements would ser ve to impose physical limits on the number of full-service clients a planner could re a s o n a b l y e x p e c t t o h a n d l e i n a 12-month period, but said insurancerelated and other clients should not be overlooked. “FOFA possibly will serve to reduce client loads a little, but it will depend on the type of client," he said. “Certainly, you're going to find planners focusing
Wealth management jobs mostly safe despite banking cuts
Paul Harding-Davis more closely on A and B clients.” P re m i u m We a l t h M a n a g e m e n t general manager Paul Harding-Davis said that despite the Government's
FOFA objective of making advice more readily available and affordable, one of its consequences was likely to be taking full-service advice out of the reach of many people. “ You might almost say the FOFA changes are making full-service advice a little more elitist," he said. Harding-Davis said overly large client lists were not common amongst planners within Premium Wealth Management, with most focused on maintaining longstanding relationships with their clients. Franchitto said planners with a large number of fee-for-service clients would not be unduly impacted by the changes, but those who had large numbers of C and D clients would need to think about “getting rid of people at the bottom of the food chain”. “And realistically, they only have about five and a half months to get their act together,” he said.
EMERGING MARKETS
The road not taken
By Chris Kennedy DESPITE ongoing concerns from the Financial Sector Union (FSU) about job cuts and offshoring at the major banks, most of the banks either deny there are set plans to cut jobs, or say they have no plans to reduce numbers in their wealth management divisions. ANZ recently announced plans to cut around 130 jobs, mostly in the area of retail banking, and there has been ongoing concern from the FSU about Suncorp moving a number of commercial insurance jobs offshore. In early November Westpac announced close to 200 mostly IT-related roles would go, while NAB signalled 135 jobs would disappear. An ANZ spokesperson said it was possible there would be further job cuts in the future, but that there were currently no plans to reduce the number of roles in wealth management. The spokesperson added that the staff who lost their jobs would be able to apply for other roles within the company. In September, ANZ’s general manager advice and distribution Paul Barrett spoke of growing the group’s advice network by about 50 planners per year. In December, he highlighted growth in the group’s phone advice service, My Advice. Suncorp Life said in a statement that market conditions remained challenging but it was too early to predict what impact this might have on jobs. “There will be efficiencies gained from the simplification of the business through the 31 December 2011 merging of our two life companies, Asteron Life and Suncorp Life & Superannuation. How this will impact employees will be better understood in due course,” Suncorp stated. Continued on page 3
LAST year was a tough one for emerging markets, as investors shunned anything viewed as vaguely risky. Falling investor sentiment and continuing volatility in Europe and the US saw global fund flows into emerging markets equities decline over the second half of 2011. Europe, in particular, remains the problem, as the uncertainty around the continent’s economic outlook is clearly having an impact. However, the news is not all bad, with many investors staying positive on emerging markets, and particularly China. The International Monetary Fund predicts growth in this sector for 2012 and the next five years. Furthermore, the potential for a rapid rebound is a key factor in the current appeal of emerging markets, as investors want to catch the upswing. But while Europe attempts to resolve its crises, investors seem to be Asia-bound, with Indonesia attracting the most attention. For more trends on emerging markets, turn to page 10.