Print Post Approved PP255003/00299
Vol.26 No.19 | May 24, 2012 | $6.95 INC GST
The publication for the personal investment professional
www.moneymanagement.com.au
TRIO CAPITAL COLLAPSE BACKWASH: Page 12 | AGED CARE SYSTEM: Page 25
Advice oligopoly trend may hurt planners By Mike Taylor THE apparent eruption of a financial planning distribution turf war in the immediate aftermath of the acquisition of Count Financial by the Commonwealth Bank has led to warnings about vertical integration giving way to the creation of oligopolies. A number of key figures in the financial planning industry have expressed concerns at the extreme figures being quoted as “sign-on fees” for Count Financial practices joining BT Financial Group. Those figures have ranged from five times ear nings and from $500,000 through to $1 million. BT Magnitude Financial managing director Phil Butterworth has denied such figures have been paid, as well as denying suggestions that the strategy being pursued by BT Magnitude is counterproductive. “There is nothing sinister about what we are doing and to suggest otherwise
Phil Butterworth underestimates the commercial nous of the practices involved,” he said. Butterworth said it was simply a case of people making decisions relating to their best interests. “It is about distribution but it is also about practices making decisions to
Well-off Gen Y women a good advice market By Andrew Tsanadis THE rise of the younger, more affluent woman may present a golden opportunity for financial advisers looking to diversify their current client base. Sarah Riegelhuth, senior strategic financial adviser with Wealth Enhancers, said she has seen a considerable increase in the number of so-called young “professional women” actively seeking financial advice in the past two years. She said the clients she deals with in this space earn on average $140,000 or more. According to the Westpac Report on Women’s Finances by Generation, generation Y (Gen Y) women in general are more focused on their financial situation than past generations. From a survey of 300 respondents, 18 per cent of Gen Y women were likely to save 20 per cent of their income per month, compared to 8 per cent of generation X (Gen X) and 9 per cent of baby boomers. In addition, 53 per cent of Gen Y women felt to some extent that they needed to delay starting a family due to financial pressures, followed by Gen X (30 per cent) and baby boomers (15 per cent). Experience Wealth director Steve Crawford said developing more meaningful services for young, wealthy women was a unique proposition for any Continued on page 3
inject efficiencies into their businesses and align to scale,” he said. Butterworth dismissed the phrase “sign-on fee” and said the payments involved were better described as “transition payments” which assisted in covering the costs of transitioning to the new arrangement. He also confirmed that Count Financial firms were not the only ones being targeted, with those within other groups such as Professional Investment Services having also been subject to discussion. However, Paragem managing director Ian Knox said he was becoming uncomfortable with the reality that the major players “are distorting the advice industry by making inroads to planning practices by paying them to become agents of their licences”. “I can’t see how any licence-holder could ever recover that sort of payment without product obligation,” he said. “I sense we are increasingly moving toward an oligopoly in advice in
Australia which in the long-term will come back to bite the planning industry,” Knox said. “We’ve had an oligopoly in the platform market for so long and the result has been limited innovation. “Do we really want advice to be owned and licensed by four banks and AMP?” he said. Premium Wealth Management general manager Paul Harding-Davis expressed equal concern, saying he felt an overwhelming sense of déjà vu as the industry returned to the vertically-integrated days of the 1980s. Referring to the high figures being quoted with respect to sign-on fees, Harding-Davis said that in the old days such payments were regarded as “loans”, but there seemed to be a blurring of the line between “gifts” and “loans”. “But what is going on right now is hardly helpful in allowing market diversity to occur and it is certainly strengthening the influence of the major institutions,” he said.
ALTERNATIVE INVESTMENTS
What’s hot and what’s not? DESPITE solid performance recorded by some strategies, financial planners are not exactly jumping back into alternative investments, having been burnt during the global financial crisis. However, on the institutional side, super funds like Sunsuper and the Future Fund have moved quite heavily into alternatives in recent years. So which strategies within the alternative investment space are popular and which products are still on the nose? The “hedge fund is dead” mentality from 2008 and 2009 appears to be fading away and the new breed of products in this space is having a resurgence. Industry experts claim hedge funds have come back stronger and more sophisticated than ever. Despite the apparent image problem due to some negative experiences, investors can get substantial rewards provided they
pick their managers carefully. In the hedge fund space, global macro strategies are proving successful, while market neutral funds have also performed strongly. However, there are alternative investment options that are still struggling after blow-ups during the global financial crisis, such as fund of hedge funds. Their structure is not seen as investor friendly, has too many layers of cost and is inappropriate for the current environment, according to some industry commentators. Similarly, leveraged beta funds are ver y unpopular, primarily because of the amounts of leverage they utilise. For more on alternative investments, turn to page 14.