Print Post Approved PP255003/00299
Vol.26 No.8 | March 8, 2012 | $6.95 INC GST
The publication for the personal investment professional
www.moneymanagement.com.au
INFOCUS: Page 13 | MULTI-ASSET FUNDS: Page 24
Canny planners prepare for post-FOFA world By Mike Taylor FINANCIAL planners may well be resistant to the Government’s two-year opt-in, but many are already putting in place the paperwork necessary to establish the arrangement with their clients. Money Management has confirmed that numerous planners and a number of dealer groups have begun moving ahead of the Future of Financial Advice (FOFA) bills actually passing the Parliament to ensure they are ready to become compliant with the new regime. Guardian Financial Planning executive manager Simon Harris confirmed that Guardian had already moved to assist its planners in ensuring they would be compliant with the new regime. “It has been a case of planning for the worst but hoping for the best,” he said. Harris said Guardian had put a program in place to assist its advisers and to provide them with the necessary tools to handle the new regime, including pricing models and other collaterals.
“Some of our advisers have readily accepted the need to be prepared for the changed regime, others are taking a little longer,” he said. Premium Wealth Management general manager Paul Harding-Davis said that most members of the dealer group were ready to handle the new regime because they already had in place written client service agreements. However, he said that those client service agreements had been modified to take account of the expected new regime, and would be utilised at each client meeting to provide rolling two-year approval. “It is simple enough for the clients who regularly come in for face to face meetings but it becomes harder with respect to those clients who are harder to convince to come to regular meetings with their advisers,” Harding-Davis said. “We don’t yet have a system in place to handle those clients in terms of first letter, second letter, third letter and the whole renewal process,” he said. Harding-Davis said that opt-in represented a considerable logistical challenge for
Rick Di Cristoforo those clients who did not regularly visit their advisers – and one capable of adding significant cost. Harris also pointed to the costs involved in getting advisers ready to handle the new regulatory environment. “We have already incurred significant costs but we are hopeful that the Government will provide a 12-month phase-in to help allevi-
Hedge fund clarity needed By Andrew Tsanadis
PROPOSED fund disclosure requirements for hedge funds have industry support, but experts say that the guidelines should extend to all complex investment schemes and that a better definition of what constitutes a hedge fund is required. Released last month, the Australian Securities and Investment Commission (ASIC) is currently seeking submissions on the likely compliance costs of Consultation Paper 174 Hedge funds: Improving disclosure – Further consultation. While Australian Fund Monitors chief executive Chris Gosselin believes the guidelines are designed to better inform investors on the nature of complex products, he said simpler managed investment schemes (MISs) could potentially be given an advantage over hedge funds in more easily meeting their regulatory commitments. Under the Government’s Shorter Product Disclosure Statement regime, it was announced that hedge funds would not be included in the arrangement until they could be fully considered in
Daniel Liptak light of the policy intent of the regime. Despite the shor ter PDS arrangement making it less onerous for simple funds to be compliant, Gosselin concedes that ASIC’s disclosure guidelines are justified because investing in hedge funds can be high-risk ventures. He argued, however, that the regulator has been focused too heavily on long-short products and pointed out that simple longonly products also carry with
them investment risk. “What ASIC are focused too heavily on is the Trio Capital debacle, which was the result of fraud rather than poor investment management,” he said. Zenith Investment Partners head of alternatives research Daniel Liptak agrees that all investment funds should disclose the custody of their assets. He added that ASIC’s definition of a hedge fund is “deliberately vague” and could potentially create a “catch-all” situation in which the proposed legislation could target products that are not hedge funds. “As per the guideline’s definition, a hedge fund is anything that is marketed as a hedge fund – effectively all a responsible entity (RE) has to do is say that it is not a hedge fund.” The uncertainty around what constitutes a hedge fund may also give rise to confusion on the part of investors, added Nikki Bentley, a partner at Henry Davis York and chair of the Alternative Investment Management Association’s Regulatory Committee. CP 174 states that the RE Continued on page 3
ate the immediate impact,” he said. Mercer’s Jo-Anne Bloch agreed that existing client service agreements would serve with respect to meeting some facets of optin, but warned that the annual fee disclosure requirements contained in the FOFA bills represented a considerable challenge. Matrix Planning Solutions managing director Rick Di Cristoforo said any adviser who regularly reviewed their Terms of Engagement and/or services with the client would likely be complying with the principles of opt-in. “That is one part of Matrix’s FOFA-readiness approach,” he said. “However, the core issue is that the details of compliance with opt-in are unclear. How can any of us be sure until we see the final approved legislation?” “Compliance with opt in is less problematic when the message/paperwork is prepared and signed off [in whatever form] on time, every time; the problem is when a subset of clients don’t sign off, on time, for any range of reasons, that may or may not be because they are unhappy with their adviser or the fees,” Di Cristoforo said.
Career paths still beckon planners By Tim Stewart WITH little new business being written, most planning practices are reluctant to take on new staff – but there are still opportunities out there for recent graduates. Based on her recent discussions with planners, Wealth Insights managing director Vanessa McMahon believes the current environment is looking “grim”. Practices simply don’t need to take on new people the way they used to, she said. RI Advice chief executive Paul Campbell said his company’s experience has been that practices are getting their businesses in shape in order to reflect the current economic climate. “What we’re noticing is their production is remaining the same but they’re doing that with fewer people, and they’re a lot more efficient,” Campbell said. While RI Advice does not have the capacity to run an internship at the moment, the salaried arm of the business, OnePath Finan-
cial Planning, does have a small developmental program, he said. “It’s a career pathway. The role they can come into involves getting on the phone and just responding to enquiries. Then they become a junior adviser and progress through the ranks,” Campbell said. For Campbell, the best pathway into the industry remains through the salaried arm of institutions and the big banks. However, Tupicoffs partner Neil Kendall believes that experience with a smaller practice is the best way for younger people to learn about the advice process. “The big institutions have an ability to provide training, but in my experience that can be focused more around product knowledge and product sales as opposed to broader advice principles,” Kendall said. Tupicoffs has a relationship with Griffith University, which runs a Bachelor of Commerce (Financial Planning) program Continued on page 3