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Vol.25 No.24 | June 30, 2011 | $6.95 INC GST
The publication for the personal investment professional
www.moneymanagement.com.au
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Planners remain focused on sales By Milana Pokrajac SALES remains a dominant factor in financial planning recruitment, according to both recruitment experts and research undertaken by Money Management into the core criteria stated for many financial planning jobs. Associate director for banking at Robert Walters, Sara Harrison, and senior regional director of Hays Banking, Jane McNeill, agreed it was typical for financial planning roles to involve an element of sales and be remunerated in that way. McNeill observed around 90 per cent of financial planner ads listing sales skills as a job requirement. Money Management also looked at a number of financial planner job advertisements posted on the Money Management Jobs website and on the recruitment website SEEK, and found more than twothirds of employers either looked for salesdriven financial planners or named sales abilities as one of the job requirements. A large number of those who mentioned sales targets and bonus structures were banks and large dealer groups. “By comparison, planners working in the boutiques generally have to be quite selfsufficient and possess the ability to develop referral networks and generate business for themselves,” according to McNeill, who
Jane McNeill said banks offered 50-60 per cent bonuses on top of planners’ base salaries. “Often in boutiques, [bonuses] are even higher,” she said. A recent survey conducted by the Financial Sector Union (FSU) found more than half of bank, insurance and financial services employees witnessed clients being steered towards products they may not have needed. FSU secretary, Leon Carter, attributed this issue to the constant pressure on financial planners to sell products.
“Finance sector base salaries are not high; employees can’t afford to miss out on bonuses and performance pay – they are under unrelenting pressure to sell,” Carter said in response to the survey findings. Although sales bonuses are a far cry from commission structures, Colonial First State general manager for advice Marianne Perkovic said there still needed to be a balance between sales and other key performance indicators advisers have. “There obviously has to be a commercial outcome for most remuneration structures, but they’ve got to get the balance right,” Perkovic said. “If [the advice has] got a good balance between risk, compliance and quality of advice, then I still think that’s fine, but if it’s still heavily skewed to sales then I think that would be a problem – which is working against what the [Future of Financial Advice reforms] are trying to achieve and that is quality of advice outcomes for clients,” she added. According to Perkovic, banks have come a long way from five or six years ago when the advice was still heavily skewed towards sales, with the industry undergoing “good change” since then. “So, I think people embracing the change is the only way we’re really going to get good client outcomes from FOFA,” Perkovic said.
Valuations head down on FOFA worries By Mike Taylor THE policy uncertainty surrounding the Federal Government’s proposed Future of Financial Advice changes appear to have contributed to wiping up to 15 per cent off the value of Australian financial planning businesses, including major dealer groups. That is the bottom line of an analysis conducted by Money Management of the decline in share prices for the nation’s major publicly listed dealer groups. Further, the decline is seen as being pivotal to IOOF’s $88 million bid for DKN Financial. The question of whether the IOOF bid for DKN represented “fair value” for shareholders was raised by the chief executive of Count Financial Limited, Andrew Gale, who suggested the ongoing uncertainty around FOFA was serving to undermine the
value of financial planning related businesses. This view was subsequently shared by Association of Financial Advisers (AFA) chief executive Richard Klipin who, while declining to specifically comment on the value of the IOOF bid, said he believed the entrenched positions of some of those participating in the FOFA debate had served to erode confidence in the value of many businesses. The Money Management analysis of the share prices of the major publicly listed dealer groups – DKN Financial, Count Financial and Plan B – reveals a remarkably similar picture: that of a strong recovery in fortunes through the closing months of 2009, followed by a significant downward trend from about the time the recommendations of the Ripoll Inquiry began to be translated into the proposed FOFA changes. What is more, the declines in
Chris Kelaher share values occurred despite Count, DKN and Plan B having well-established fee-for-service business models in place. Klipin pointed to the fact that the proposed FOFA changes had been a key issue for financial planners for most of the past 18 months and that, while the process was drawing to a close, it seemed likely the Assistant Treasurer, Bill Shorten, would not be releasing draft
legislation until well into the new financial year. “There is still uncertainty around a number of decisions and the Government’s ultimate direction and that will inevitably impact perceptions of what a business is worth,” he said. IOOF chief executive, Chris Kelaher has also acknowledged the manner in which the FOFA changes were generating uncertainty and claimed many of the proposals would only serve to advance the interests of the industry superannuation funds. The group general manager of Professional Investment Holdings, Grahame Evans, earlier this month warned there was a danger that the FOFA proposals, in their current form, would lead to the re-emergence of a “quasitied agency structure”. For more on the effect FOFA is having on dealer group share prices,see the InFocus on page 13.
Concern over misleading fund names By Benjamin Levy
MAJOR industry research houses have renewed their calls for legislation to be introduced to stop fund managers putting misleading names on their funds. Standard and Poor’s (S&P) multi-sector head Andrew Yap said fund managers were continuing to name funds with titles that weren’t consistent with the asset mix of the fund, and it was endangering retail investors who didn’t have the ability to look through to the actual asset allocation of the fund. “Naming protocols of funds is a legislative weakness. There’s no legislation stating what you can and cannot call a particular fund,” Yap said. S&P was pushing managers hard to provide the research house with a name that accurately reflected its asset mix, Yap said. It was becoming a more significant problem post-GFC when investors were concerned about investing in incorrect funds, he said. Zenith Investment Par tners director and joint founder David W r i g h t s a i d t h ey “ a l m o s t ” ignored the names of funds they rated and assessed the fund according to the categor y in which they thought it belonged. Naming problems were a particular issue with diversified funds for Zenith, as different fund managers regarded ‘balanced’, ‘conservative’ or ‘growth’ labels in different ways according to their underlying asset mix, he said. “It would be nice if there was a standard naming protocol for diversified funds, which to be honest I wouldn’t think is that difficult [to introduce],” Wright said. Naming protocols has been an issue for the industry “forever”, he added. Lonsec general manager of research Grant Kennaway said his company had been giving feedback to new fund managers that their products were not Continued on page 3