Print Post Approved PP255003/00299
Vol.26 No.27 | July 19, 2012 | $6.95 INC GST
The publication for the personal investment professional
www.moneymanagement.com.au
NEW DEALER GROUP MODEL: Page 12 | DECONSTRUCTING ‘REAL RETURN’ FUNDS: Page 22
Cautionary tale in trail book sale By Chris Kennedy A MELBOURNE-BASED financial adviser has hit a hurdle in his purchase of a large book of clients, with two of the fund managers involved in the purchase requesting confir mation of client approval before they will transfer trailing commissions over to the adviser. The adviser, who did not wish to be named, has purchased several trail books in the past. He made the most recent acquisition shortly before switching licensees – although the new dealer group is owned by the same institutional owner as the previous licensee. He purchased the book for $650,000, and although the majority of clients were largely invested in a platform which has transferred revenue over, some of the money is tied up in Macquarie Structured Products as well as Synergy personal choice super and investments. Both Macquarie Funds Group and Synergy have requested assurances that all clients involved in the book had approved the transfer, but the adviser says
Peter van der Westhuyzen that with many of the products in the book sold as much as 20 years ago, many of the clients will be uncontactable. He adds that he has purchased the revenue legitimately and should not be obliged to contact clients individually. Macquarie said it would accept signed confirmation from either the adviser or the prior dealer group that all clients
Aqua II floating retail By Andrew Tsanadis
WITH the Australian Securities Exchange (ASX) considering the final look of its new listed managed fund service, questions remain over whether Aqua II will attract wholesale fund managers to make the leap into the retail realm. If supported, the service could spell the end of the expensive and complicated paper-based settlement process, which OneVue chief executive Connie McKeage said could potentially make it worthwhile for wholesale managers to target retail investors. “Part of the reason they haven’t bothered with retail is that they would have to invest a lot of resources in increasing their profile. Another key part to that is the need for greater distribution,” she said. Through the automated settlement service, fund managers will have access to those distribution channels – traditionally a point against trying to market to retail investors, McKeage added. “It might be worth it for the first time for people who are good performers in the market to consider being in the retail market, because all of a sudden it’s less expensive to go in, other people Continued on page 3
approved of the transfer. Macquarie Specialist Investments executive director Peter van der Westhuyzen could not comment on the specific example. However, he said in general, client approval would usually be required for a transfer to a new adviser, although there might be exceptions, such as where a licensee approved the transfer. “Because there are so many different arrangements in place in the market, the key point comes back to that in the absence of anything specific, we would want the individual client to provide us with the transfer instruction,” he said. Macquarie would always try and find a balance between fulfilling its legal obligations and making it an efficient administrative process for all involved, he added. Synergy cited Privacy Act concerns as the reason for the assurance that clients had been contacted, and indicated it would contact the impacted clients directly. Synergy could not be reached for comment by Money Management’s print deadline. Gold Seal director Claire Wivell-Plater
said she was unsure of the legal ramifications of the request, and whether the fund managers were legally able to refuse to transfer the revenue over to the adviser if that adviser had the appropriate releases from the previous licensee. However, she said it is not a usual arrangement in this type of transaction. “It’s certainly flying in the face of current industry practice,” she said. With hundreds of similar transactions still being completed in the industry, if client consent was required in order to reassign trail commissions, it could have major implications for future sales, she added. The adviser said that if the situation involved the major platform with 450 of the clients in the book generating around $25,000 per month in revenue, then he would be under pressure to make his bank repayments and meet his financial commitments. “Surely they can’t retain the commissions where I’ve purchased the income stream and I’m not changing the funds or investment options?” he asked. “And if so we should know that before we buy practices.”
AGRIBUSINESS
Cropped harvest AGRIBUSINESS has been a dirty word in the financial services world ever since 2009, when a number of high-profile projects collapsed, costing investors millions of dollars. The size of the sector has deteriorated rapidly since, with retail inflows falling to about $35 million in 2010-11 from a $1 billion peak in 2008. Of the four projects left in 2012, one has been withdrawn and the future of another has a big question mark hanging over it. Financial advisers don’t seem too enthused by agribusiness’ tax effectiveness, with most of the money coming from overseas-based institutions. One of the big frustrations for firms operating agribusiness managed investment schemes is the lack of interest Australian superannuation funds have historically shown in this sector as an asset class. But there have been suggestions that the industry has got its business model backwards and needs to set it straight if it wants to see more money flowing through. Meanwhile, the financial services regulator has worked on ways to improve disclosure in a bid to prevent history from repeating and to ensure investors have a better idea of what they are getting into. Although this move was met with a somewhat cynical response – mostly coming from research houses – the industry generally supported the improved disclosure benchmarks. For more on agribusiness, turn to page 14.