Print Post Approved PP255003/00299
Vol.25 No.17 | May 12, 2011 | $6.95 INC GST
The publication for the personal investment professional
www.moneymanagement.com.au
NAB POSTS HEALTHY HALF-YEAR PROFIT: Page 5 | TREADING CAREFULLY WITH ESG: Page 16
Planners reject FOFA By Mike Taylor MORE than 90 per cent of financial planners responding to a Money Management survey believe that the Government’s current Future of Financial Advice (FOFA) changes will have a negative impact on their businesses. The survey, conducted over two days last week, revealed overwhelming opposition to the key elements of the FOFA changes – with particular emphasis on the imposition of two-year opt-in arrangements and a total ban on commissions on the sale or life risk products within superannuation. Nearly 80 per cent of respondents to the survey described themselves as being independent financial advisers. What little support existed for the FOFA changes was strongest among those respondents describing themselves as being bank-aligned or connected to an industry superannuation fund. The only element of the FOFA proposals to extract an element of support from planners was the introduction of a ‘best interest’ requirement, with 42 per cent of respondents nominating it as capable of having a beneficial effect on their businesses. Asked which of the FOFA proposals would have the most negative impact on their businesses, 58 per cent of respondents nominated the two-year opt-in arrangements, while 31 per cent nominated the ban on commissions on life risk products sold within superannuation. Despite 42 per cent of the respondents
Graph
Which proposed FOFA change will have most negative impact on your business? 3% 8%
The two-year opt-in The banning of all commissions within superannuation The banning of volume-related bonuses Other
31% 58% Source: Money Management
suggesting that the ‘best interest’ requirement would have a beneficial impact on their businesses, 92 per cent said they did not believe the financial planning industry would be improved by the introduction of the FOFA changes. What became clear from the survey was that a significant number of respondents did not believe the organisations representing the industry had done a good job in dealing with the Federal Government and appropriately influencing its approach to FOFA. When asked which organisations had best represented their interests with respect to FOFA, just over 50 per cent nominated the Association of Financial Advisers (AFA), while around 30 per cent nominated the
Financial Planning Association. There was no support among respondents for the efforts of the Financial Services Council. A common theme in the comments attaching to some survey responses was that the FOFA changes were largely inspired by the industry superannuation funds and that, ultimately, the changes would not achieve the outcomes being pursued by the Government. A small number of respondents argued that the changes would create a divide in the industry with financial advisers providing comprehensive advice while the banks, major institutions and industry funds would provide single-issue advice.
One-stop-shop model returns By Ashleigh McIntyre
A LEADING financial planning spokesperson has said that the Future of Financial Advice (FOFA) reforms will push wealth management groups into the old ‘one-stop-shop’ business models of the 1990s. Fiducian managing director Indy Singh has said that the ‘all-in-one’ model being adopted by several groups is nothing new, but is simply history repeating itself, with FOFA creating new opportunities to consolidate. One such group is Yellow Brick Road (YBR), the new wealth management venture by Mark Bouris. By offering mortgage broking, financial planning, accounting and insurance broking all under one roof, Bouris says his licensees can increase their revenue streams while doing business more efficiently. Licensees do not need to know how to do all of those things in order to open a branch. Rather, all of the accounting and financial planning is done from head office, while the licensee gets payment for originating the client. According to Bouris, YBR takes the nonrevenue earning hours away from licensees and does the work out of head office. “We’ve basically deconstructed how financial planning is normally done and we’ve built economies at a head office level to Continued on page 3
Agri-MIS still too risky for advisers By Milana Pokrajac THE structure of agribusiness managed investment schemes (MIS) would need to change radically before they become attractive again to financial advisers, according to Professional Investment Services (PIS) managing director Graeme Evans. Furthermore, agribusinesses would have to be “well diversified” with “substantial funds under management” and institutional ownership to complement retail investors, he said. PIS had taken off all agribusiness MISs from their Approved Product List (APL) in March last year following the collapse of Timbercorp and Great Southern, announcing they would review the position in 12 months. However, those products have not yet earned their spot on the dealer group’s APL, with Evans saying he did not want investment
Shane Kelly schemes to rely on next year’s investments to “pay the bills for this year”. “I think it is unfortunate that there are a couple of reasonable players like Macquarie and TFS who are collateral damage in respect to the industry, but I think the risks
are far too great to put our toes back in the water,” Evans said. Managing director of researcher Adviser Edge, Shane Kelly, agreed the market required the next generation of MISs in terms of the structures and protections that are put in place. “Until the market settles down and the failed projects are either restructured or purchased by other investment houses, the focus won’t come on to MISs,” Kelly said. The researcher expected the agribusiness MIS inflows to be around $80 million this year, whereas that figure three to four years ago was over $1 billion. However, Adviser Edge is seeing the remaining players in the market increasingly focus on investor protection and “putting in place structures that are more likely to allow the projects to actually reach their conclusions.”
Nevertheless, neither Kelly nor Lonsec’s head of agribusiness research Jim Blackburn anticipated that the agribusiness MIS sector would bounce back to its pre-global financial crisis position any time soon. Lonsec is not covering the agribusiness MIS this year, due to “structural and corporate issues” within the sector yet to be resolved, according to Blackburn. However, he said the model was still sustainable, as long as it was used only as part of the funding, instead of being the only or the dominant form of agricultural asset and operations funding – supporting Evans’ claim. “Over time, we expect things like [direct] land ownership and other structures become more evident,” Blackburn said. Analysts also agreed that greater investment in the sector would not occur until the aftermath of the failed schemes had completely played itself out.