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Vol.26 No.24 | June 28, 2012 | $6.95 INC GST
The publication for the personal investment professional
www.moneymanagement.com.au
SHARES NOT BONDS: Page 18 | TRANSITION TO RETIREMENT: Page 25
Lonsec wins favour with fundies By Milana Pokrajac LONSEC has yet again come out on top in Money Management’s 2012 Rate the Raters survey, but other researchers have been closing in on the firm over the past 12 months. The first part of the Rate the Raters survey (full results on page 14) looks at sentiment coming from fund managers towards the six – soon to be five – major research firms who rate their products. Despite holding a significantly smaller share of the market, Zenith Investment Partners received stellar ratings from fund managers, particularly in areas such as research methodology, transparency and feedback. Other research houses – such as Morningstar and van Eyk Research – have slightly improved since last year, but have also received
polarised results, which they mostly attribute to their subscription-based remuneration model and accountability to dealer-group clients, rather than fund managers they rate. In fact, the remuneration model war in the research sector is still raging, with some claiming Australia is one of the few markets where the ‘pay-for-ratings’ model was still viewed as acceptable. Co-head of research for Morningstar Tim Murphy said this was also the reason why Australia remains one of the most researched markets in the world. “Because for whatever reason the Australian market still views paid-for research as being acceptable, there will be more firms that will put their hand up to do [research],” he said. However, in a recent interview with Money Management, Zenith’s
Amanda Gillespie John Nicoll said if the pay-forratings model is removed by the regulator, the quality of fund reviews could fall dramatically. He claimed that research that would be available in the market would be simpler and quantitatively skewed.
The Australian Securities and Investments Commission has been reviewing the potential conflicts of interest apparent in some of the financial arrangements between fund managers and research houses, but is yet to make its decision public. Focus on research transparency and methodology in this year’s survey also comes amid changes implemented by almost all major firms in funds research, which could change the results in the coming years. van Eyk has revamped its strategy in a bid to combat market challenges, which will see the company focus on the alternatives sector, potentially dropping up to 60 names off its current ratings list. Morningstar changed its analyst ratings scale model in January this year, which resulted in some funds, which were previously
‘recommended’, receiving silver or bronze labels. Lonsec’s Amanda Gillespie said the researcher is increasing its focus on more strategic guidance and communication with subscribers. “This is in terms of how to use products, giving them more basis for the discussions they have with their clients, and I guess it kind of comes back to that shift to a more strategy-focused advice model,” Gillespie said. Furthermore, Standard & Poor’s recently announced it would no longer be conducting funds research and local wealth management services in Australia as of 1 October this year. However, the impact of these changes is likely to be seen in the second part of the Rate the Raters survey (which gauges dealer group sentiment), to be published later this year.
Planners positioned to engage life insurance customers When a dog gets INFOCUS
By Bela Moore
DESPITE the rise of direct channels, financial planners are better poised to engage customers about life insurance, according to industry executives. Rice Warner’s direct life insurance report for 2011 said direct life insurance sales were up 11.3 per cent in the 2011 calendar year, with the take-up of products spiking 86 per cent in the four years to December 2011. But while direct life insurance has filled a gap for cash and time-poor consumers seeking death cover, the country is still under-insured, with engagement one of the major problems. Suncorp executive manager for Direct
Life Jane Power said the industry needed to convert products into tangible assets that have relevance to customers’ lives. She said the industry could learn from the increased popularity of funeral cover, which customers see as tangible and relevant to their future. Rice Warner said the market was saturated and growing, with inforce premiums for funeral cover reaching 15.4 per cent in 2011. “I think if we can make it tangible … as an industry we are going to grow and every channel will benefit, be it the financial planner, the direct operators, we all Continued on page 3
a bad name ON the same day the Future of Financial Advice (FOFA) bills completed their passage through both houses of Parliament, the Minister for Financial Services and Superannuation, Bill Shorten, cited the collapse of Opes Prime as being one of the reasons the legislation was necessary. However, the collapse of Opes Prime represented a stockbroking-related failure with little or nothing to do with financial planners. Similarly, the references in the debate around FOFA to the collapse of Storm Financial and Trio Capital overlook the fact that, operationally, Storm ticked all the regulatory boxes and
Trio failed as a result of criminal fraud. In this week’s In Focus, Money Management argues that financial planners have suffered significant reputational damage and are too often being blamed for product failures and other events beyond their control. See In Focus on page 12