Money Management (September 29, 2011)

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Vol.25 No.37 | September 29, 2011 | $6.95 INC GST

The publication for the personal investment professional

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STRONGER SUPER: Page 7 | ESTATE PLANNING - THE NEXT GENERATION: Page 14

FOS ‘swimming in the dark’

By Tim Stewart WHEN the “best interests” duties contained in the Future of Financial Advice (FOFA) reforms become law, the lack of a legal precedent will see the Financial Ombudsman Service (FOS) effectively “swimming in the dark”, according to Argyle Lawyers principal Peter Bobbin.

In practical terms, court cases “predict the past” because they are based on events that happen three to four years before the judge makes a decision, he said.

“What FOFA will do is create a skeletal frame. It’s not until the issues actually come before the courts that we’ll get the ‘meat’.

So FOS will be swimming in the dark for at least three to four years,” Bobbin said.

FOS will still attempt to apply FOFA in a proper legal manner, he added – it just won’t have any guidance to do so.

Minter Ellison partner Maged

“

FOFA will create more hurdles that a planner has to take in defending a claim before they can even start to argue about the other concept of ‘fairness’.

- Maged Girgis

”

Peter Bobbin Girgis said while FOS was not a court, and was guided by a “fairness” principle rather than the strict letter of the law, it still had to operate within the framework of the legal system.

“On c e yo u n a r row t h a t

framework down – so that a planner needs to have done certain things – it would be easier to find, I suspect, that if the person hasn’t done one of those things then that would be sufficient [for FOS to find in the complainant’s favour],” Girgis said.

There are two separate duties in the FOFA draft legislation: the duty to act in the best interests of the client, and the duty to give priority to the interests of the client before those of the licensee. On top of that, there

Planners must highlight claim-time help

By Mike Taylor

KEY differences between group and retail risk insurance arrangements make it imperative that financial planners sell not only the value of their initial advice but the importance of their assistance at claim time, according to expert risk consultant, Col Fullagar.

Fullagar has driven home both the value of advice and the value of follow-up assistance in the event of a claim in a column in this week’s Money Management in which he actively examines the circumstances of a client who wanted advice regarding a group insurance product with a premium of $400 and a retail product with a premium of $1,200.

Utilising the real life experience of the client, Fullagar found a range of key differences between the group and retail products not only go some way to justifying the higher retail premium but also highlight the need for people to

Col Fullagar be appropriately advised.

“I did not set out to determine which product was better. What I set out to do was determine to what degree the client needed to be appropriately informed,” he said.

Fullagar said that what became Continued on page 3

are 12 steps that planners must take before giving advice. “[FOFA will] create more hurdles that a planner has to take in defending a claim before they can even start to argue about the other concept of ‘fairness’,” Girgis said.

One big complaint from planners in the past has been that there is no avenue for them to appeal a FOS decision. But Bobbin said it was possible to appeal to the Federal Court on a “legal jurisdictional issue”.

“I would anticipate in the

early days of FOFA there may ver y well be a few appeals.

Because no-one – not even FOS – knows what ‘best interests’ means,” Bobbin said.

Australian Financial Services head of compliance Michael Butler said the 12 steps contained in the FOFA draft legislation would see the industry going back to the days of “ticking a box” and moving away from focusing on the individual needs of the client.

“That’s the fear of most people – that it’s going to end up being totally process driven,” he said.

Association of Financial Planners chief executive Richard Klipin said the FOFA regime and the best interests duty currently in the draft legislation would create more avenues for litigation.

“It will be a new world. There will need to be common sense prevailing and guidance from the regulator,” Klipin said.

Some planners in the dark on research models

By Chris Kennedy A significant proportion of advisers are unaware of the business model of their research providers, a Money Management survey suggests.

Almost a quarter of the nearly 100 planners responding to an online survey were unsure whether or not their research provider accepted payments from fund managers, while the survey also showed that planners overall were confident of the quality of investment research across the industry.

Asked to select all research providers they used, half said they used van Eyk in some capacity, a third used Lonsec, one quarter used Morningstar, one fifth used Standard & Poor’s, and one fifth used Zenith. One in six also used internal research and a smaller number used Mercer and other providers.

Lonsec head of research Amanda Gillespie said it wasn’t necessarily surprising that

many weren’t aware of their research provider’s business model.

“It suggests to me that they’re focusing on other aspects of the service that their research provides rather than necessarily focusing on the business model,” she said.

“To some degree the decision about research providers is made at the head office level in many instances. In that regard the advisers are less involved in that process,” she added.

Standard & Poor’s head of research, fund services, Leanne Milton, said it may also indicate that these decisions are taken at the dealer group level. Zenith national sales manager John Nicoll agreed that dealers’ lack of awareness wasn’t surprising, but added it was vital that advisers really query researchers on their payment methods.

However Mark Thomas, chief executive of van Eyk Research, said the situation may indicate a lack of disclo-

sure, because planners do not have to disclose to clients the business model of their research provider.

If planners had to disclose to clients when research was paid for by the funds that were being researched, the clients may have an issue with it, he said. van Eyk, which also derives income from an in-house funds management arm, has to disclose in its reports whether it has holdings in the funds it recommends, he added.

Morningstar co-head of funds research Tim Murphy said he was not surprised that one in five planners were unaware of their research providers’ business model. He said he would have expected the figure to be higher, but added that more and more people are taking notice of business models as there is a growing focus on conflicts of interest within the industry.

Continued on page 3

Editor

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MySuper the lowest common denominator

A

mid all the discussion around last week’s release of the Government’s Stonger Super package, there existed the strong assumption that low-cost, low-fee MySuper products would emerge to dominate the superannuation landscape.

That assumption was based in large part on the same thinking which actually drove the Cooper Review to recommend the creation of MySuper as a form of universal default – that most Australians are so disengaged from their superannuation that they need to be placed into a product specifically designed to protect them from their own disinterest.

It is worth reflecting that the Cooper Review’s embrace of MySuper ran completely counter to more than a decade of effort on the part of the Australian financial services industry to encourage Australians to actually engage with their superannuation and to make appropriately informed decisions.

Notwithstanding the Government’s decision to embrace MySuper as the central pillar of its Stronger Super push, the financial services industry would be wrong to meekly accept that disengagement from superannuation should be accepted as a norm.

2 — Money Management September 29, 2011 www.moneymanagement.com.au

MySuper should “therefore be regarded for what it is — a lowest common denominator — and the financial services industry should get on with the job of offering consumers a better range of options .

”

Indeed, any examination of the package released by the Assistant Treasurer, Bill Shorten, last week should give heart to the major financial institutions that a genuine opportunity exists to keep encouraging Australians to become engaged in their superannuation and to offer them products which actually encourage such engagement.

In circumstances where MySuper products will be predicated on a “single, diversified investment strategy”, there exists

substantial scope for funds to attract the attention of the supposedly disengaged by rewarding members with significant outperformance. There exists abundant evidence within the financial services industry, from sources as diverse as Roy Morgan Research to the Superannuation Complaints Tribunal, that the number one concern of superannuation fund members is the investment returns they ultimately receive.

Of course the make-up of a “single, diversified investment strategy” can mean different things to different people, but those members sitting within low-cost MySuper products may not be feeling too sanguine if their returns are persistently lower than the industry average.

There has been much discussion within the superannuation industry of the risk that MySuper may precipitate a “race to the bottom”. The Government’s Stronger Super blueprint has not, as yet, given reason to believe this might not happen.

MySuper should therefore be regarded for what it is – a lowest common denominator – and the financial services industry should get on with the job of offering consumers a better range of options.

- Mike Taylor

News

Dealer groups on the hunt for practices

By Chris Kennedy UP to 70 per cent of planners report approaches by a rival dealer group to switch licensees in the past 12 months, according to a Midwinter survey.

Although 67 per cent said they were not looking to switch licensees there were plenty of approaches being made. More than half said they had been approached twice or more in the past 12 months - and almost a quarter reported three or more approaches, the survey of more than 450 advisers from over 70 licensees found.

Less than a quarter of respondents said they were not comfortable with their dealer group’s reaction to Future of Financial Advice reforms, while 70 per cent were comfortable with their group’s response.

The most important dealer group qualities or services reported were: being easy to

“

Non-product aligned practice-based planners were also the most satisfied in terms of dealer groups’ ability to adjust to change.

”

do business with; planner autonomy to run their own business; being able to adjust to change; compliance and support and the approved product list.

Planners rated credit and loan services, dealer group financing and buyer of last resort policies as relatively unimportant.

Planners identified technology and software support, technology and software offering and quality of statement of advice as areas of high importance but low satisfac-

tion in terms of dealer group delivery. Two thirds of respondents wanted to be able to choose their own planning technology rather than their dealer groups mandating planning software, the survey found.

Respondents in the survey came from four types of businesses: dealer group product aligned, practice based; dealer group - non-product aligned, practice based; boutique/independent financial

adviser (IFA); and bank/institutional planner.

Dealer group satisfaction was very high among product aligned practice-based planners and very low among non-product aligned practice based planners for: brand recognition, buyer of last resort policies, credit and loan servicing, dealer group financing and practice management.

The reverse was seen in stability of head office team and, unsurprisingly, in dealer group independence from product.

Non-product aligned practice-based planners were also the most satisfied in terms of dealer groups’ ability to adjust to change and social interaction with colleagues, both areas where bank and institutional planners reported a very low level of satisfaction, although they were the most satisfied in the quality of statement of advice and technical services.

Planners must highlight claim-time help Continued from page 1

clear was that clients needed to be assisted in understanding what each product delivered in terms of inclusions and exc l u s i o n s a n d w h a t might be entailed in event of making a claim.

“In the end, I believe it is the client’s ability to understand what they are getting and what it involves that is more important than the level of the premium he or she ultimately pays,” he said.

“There would certainly be instances where, as a client, I would want the assistance and commitment of an experienced planner in dealing with the insurance company, rather than to be relying on a superannuation fund trustee,” Fullagar said.

“When a claim goes pear-shaped, that’s when you need the right advice and the right assistance,” he said.

Col Fullagar’s full analysis Page 18

Research providers’ models mystify some planners Continued from page 1 The survey also found 60 per cent of advisers rated investment research overall as either four or five out of five, and close to 90 per cent either somewhat relied on it or heavily relied on it when recommending products.

Lonsec’s Gillespie said the result was a good outcome, and suggested planners were not only finding research relevant but were also using it in the right way. “It’s an important input but not the only input,” she said.

Zenith’s Nicoll said the outcome showed an element of confidence in the research, given there has recently been a lot of concern about the viability of strategic asset allocation (SAA) and the traditional way the research houses construct model portfolios.

In the early stages of the global financial crisis SAA didn’t really work, but in Zenith’s view it wasn’t really being used properly. With all the markets going up people weren’t diversified to the degree they should have been and they weren’t rebalancing back, he said.

“I think research houses lost a bit of the faith because of that. Maybe we need to get out there and make sure the model and the research we’re offering is being used in the best possible way,” he said.

www.moneymanagement.com.au September 29, 2011 Money Management — 3

News Australian companies score well in ERM, but 50/50 for built-in risk culture

By Angela Welsh AUSTRALIAN organisations benchmark above average against their global peers when it comes to enterprise risk management (ERM) practices, yet only half have built a risk culture into their organisation, a survey has revealed.

The Institute of Actuaries ERM survey found that 81 per cent of actuaries willing to compare Australia with other countries

Dante De Gori

ranked Australian organisations as performing “above average” or “the middle of the pack” for ERM practices and management of risk culture. Only 11 per cent of the 250 actuaries surveyed said they believed Australia lagged the rest of the world.

Despite this positive result, only 52 per cent of organisations appear to have an embedded, formalised risk culture communicated to staff. Only 37 per cent of members surveyed said their

organisation’s approach to building and fostering a risk culture was “good” or “very good”.

Institute of Actuaries chief executive officer Melinda Howes said ERM was increasingly important in the current macroeconomic climate.

“Continuing global financial market volatility and a spate of natural disasters in recent times highlight the need for effective enterprise risk management,” she said.

Respondents identified the top

three benefits of effective ERM implementation as: minimising losses to the organisation (75 per cent); maximising return on equity (64 per cent); and managing expectations of customers, staff and investors (54 per cent).

While most respondents (84 per cent) felt there was a commitment from the head of their organisation to effective ERM, only 20 per cent of the group thought it was a “very high” level of commitment.

Melinda Howes

At Fidelity, the sum of our parts is performance

FPA concern on FOFA valuations impact

By Mike Taylor THE Financial Planning Association (FPA) has warned that the Government’s Future of Financial Advice (FOFA) legislation remains problematic and has the capacity to generate unintended consequences around financial planning practice valuations.

The FPA general manager, policy and government relations, Dante De Gori said the ‘opt-in’ arrangements had a sting in the tail with respect to practice sales.

“The draft legislation has highlighted a real danger because the Government has long argued that opt-in is prospective , not retrospective,” he said. “However, the current draft legislation is unclear on the issue of what happens in the event of the sale of a practice or a book of business.

“This may have a massive impact on practice valuations,” De Gori said.

‘We also think that the draft legislation needs to be changed and the FPA would advocate that financial planners and their clients should decide when the opt-in anniversary date is set and the process for opting in,” he said.

“This shouldn’t be dictated by legislation,” De Gori said.

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www.moneymanagement.com.au September 29, 2011 Money Management — 5

News

Omniwealth fires back at Choice

UBS axes INGIM jobs

By Andrew Tsanadis

By Tim Stewart

CHOICE’S view that the quality of financial advice in Australia is “among the worst” is not the fault of the adviser but the industry as a whole, according to Omniwealth.

The financial planning and wealth creation group has hit back at comments made last week in the Australian Financial Review by Choice chief executive Nick Stace, who accused brokers and financial advisers of giving consumers “crap financial advice”.

“While Nick Stace’s comments regarding the shortcomings around the level of advice provided in Australia do have some merit, it would be foolish for Choice to believe they will be able to provide a service which will far supersede the industry, as it’s the industry and its structure that’s actually the problem,” said Omniwealth chief executive and director Aaron Greaves.

“The industry has your run-of-the-mill financial planner who typically works for a larger institution, is vanilla in their offering, and offers a basic service.

“Then there are the true financial planners who pride themselves on advising on all their clients’ financial needs from mortgages, super, insurances and property recommendations,” he said.

Greaves said the industry is still far from effective because it is controlled by a few large organisations, resulting in a “single asset structure” being recommended to clients as a whole.

Greaves believes the Future of Financial Advice reforms are forcing advisers to show their clients the value of their advice, and this will help to change the industry’s current situation.

“Today’s average financial planner is little more than a glorified managed fund salesman,” Greaves said.

“There is a complete disconnect between what your average financial planner can recommend and what their clients expect them to recommend,” he said.

Choice needs to look deeper into the industry if they want to improve it, and compare advisers who are working to do the best for their clients in an industry increasingly controlled by banks, said Greaves.

THE takeover of ING Investment Management (INGIM) Australia by UBS Global Asset Management will come into effect on 4 October, and will see a number of the INGIM staff lose their jobs.

One source has told Money Management that 36 of the 120 members of the INGIM team will be made redundant.

UBS spokeswoman Erica Borgelt conceded that there would be redundancies, but declined to confirm the exact number.

“Obviously there will be duplications in terms of what people will be doing. Everyone was expecting some would go. People are still being told this week as to who will still be remaining on 4 October. It’s still a sensitive issue, but people will be expecting it,” she said.

UBS will issue a statement on 4 October providing more information, Borgelt said.

Accounting bodies support changes for SMSF auditors

By Milana Pokrajac ACCOUNTING bodies have supported the Government’s proposed changes applying to auditors of self-managed super funds (SMSFs) as part of its Stronger Super package.

CPA Australia and the Institute of Chartered Accountants (ICA) have welcomed the Government’s maintenance of a prin-

ciples-based approach to independence standards for SMSF auditors.

CPA Australia senior policy adviser for superannuation Michael Davison said the decision to maintain a principles-based approach to independence standards was a win for common sense, as prescriptive standards cannot be applied in all situations and could lose relevance over time as services evolve.

6 — Money Management September 29, 2011 www.moneymanagement.com.au

ICA head of superannuation Liz Westover said the announcement reinforced that the accounting profession’s standard on professional ethics is the most appropriate platform for the provision of audit services within SMSFs. The Assistant Treasurer and Minister for Financial Services has also announced the period in which auditors must provide their report to SMSF trustees will be extended

when the audit report cannot be provided on time due to certain circumstances beyond the auditor’s control.

Currently, SMSF auditors are required to submit their report no later than the day before the SMSF trustees are required to lodge their annual return.

CPA also supports the registration of SMSF auditors, and said it believed it would be beneficial to the profession and the sector.

Stronger Super

Stronger Super – both good and bad

By Mike Taylor THE Federal Government’s Stronger Super legislation has gained a mixed response from the financial services industry, with some elements being welcomed while others, particularly elements of MySuper, being viewed as a disappointment.

While the industry superannuation funds broadly welcome the Strong Super package, the reactions from the retail and institutional sectors were more diverse, with the Financial Services Council (FSC) welcoming some of the improvements from the original proposals, the Financial Planning Association (FPA) was less enthusiastic, particularly with its impact on advice delivery.

FPA chief executive Mark Rantall warned that the package might ultimately fall short of its original objectives and questioned whether the MySuper arrangements would be sufficiently transparent with respect to fees applying to the delivery of intra-fund advice.

For its part, the Self Managed Super Funds Professionals’ Association of Australia expressed disappointment that the changes had included a ban on off-market transfers with respect to

Mark Rantall self-managed superannuation funds (SMSFs) – something which it said would place the SMSF sector “at a significant disadvantage compared to other superannuation funds”.

The Federal Opposition spokesman on Financial Services Senator Mathias Cormann also said the Stronger Super package had fallen short because it had failed “to address the current closed shop, anti-competitive arrangements in the default workplace superannuation markets”.

As well, Cormann said the package had failed to address key corporate governance issues, including trustees sitting on multiple industry superannuation fund boards.

FSC chief executive, John Brogden welcomed the fact the Stronger Super package had allowed for variable pricing within MySuper, tick a box account consolidation and appropriate riskbasked capital requirements for superannuation funds.

Australian Institute of Superannuation Trustees chief executive Fiona Reynolds said it was impor tant to understand that a core element of the reforms – the launch of MySuper – was not about ‘dumbing-down’ super.

“At last we have a timetable to rid commissions from default super funds. For many Australians super will become more cost-effective, more comparable and easier to understand,” she said.

Industry funds political lobby group Industry Super Network also referenced the payment of sales commissions to financial planners and also signalled it would be pressing the Government to tighten the final policy p a r a m e te r s a ro u n d m u l t i - p r i c i n g arrangements to prevent “super savings being flipped into more expensive products”.

Govt urged to stop super tinkering WITH the Federal Government’s Stronger Super package now released, a key section of the superannuation industry has called for an end to tinkering around Australia’s superannuation laws.

Institute of Chartered Accountants in Australia head of superannuation Liz Westover referenced recent changes announced with respect to self-managed superannuation funds (SMSFs) and said they should be completed and stabilised.

“Further tinkering with the system could be detrimental to consumers’ confidence,” she said.

Westover said advisers were continuing to face a raft of legislative changes which were impacting on the way clients are being advised.

Westover’s comments flowed out of the Institute’s National SMSF conference which she said had driven home upcoming changes to the laws governing the SMSF industry and how recent changes could and should be interpreted.

“While reform to the industry is necessary and encouraging, it is time to reach conclusive, positive outcomes and then stabilise so that SMSF trustees can be confident in saving for their retirement,” she said.

Key element overlooked in Stronger Super THE Federal Opposition has claimed the Government omitted a key Cooper Review recommendation from its Stronger Super package – better corporate governance arrangements, including tougher rules around directors sitting on multiple superannuation boards.

The Opposition spokesman on Financial Services, Senator Mathias Cormann, also made clear he believed the Government needed to address the “current closed shop, anti-competitive arrangements in the default workplace superannuation market”.

“We are also disappointed that [Assistant Treasurer] Bill Shorten has failed to act on the very sensible Cooper recommendations to improve corporate governance arrangements in the super industry,” he said.

“Superannuation is big business with $1.3 trillion worth of Australians’ retirement savings at stake. So why is the Government not prepared to act on the Cooper recommendation to require independent directors on superannuation boards,” Cormann said.

“Why is the Government not prepared to act on the recommendation requiring directors wanting to sit on multiple superannuation boards to declare any foreseeable conflicts of interest to the Australian Prudential Regulation Authority?” the senator asked.

“Bill Shorten has recognised the flaws in his original MySuper proposal,” Cormann said. “It is high time he did the same in relation to his approach to default workplace superannuation arrangements and in relation to the need for improved corporate governance arrangements in the superannuation industry.”

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www.moneymanagement.com.au September 29, 2011 Money Management — 7

News FOFA failing on most counts – AFA

By Mike Taylor THE Association of Financial Advisers (AFA) has vowed to keep fighting against key elements of the Future of Financial Advice changes, particularly opt-in, arguing they represent bad policy unsupported by independent or objective research.

In a position paper sent to its members, the AFA made clear its continuing concerns over the contents of the first tranche of the FOFA changes, and pointed to the likely issues for concern for advisers in the second tranche of the legislative package.

The position paper said while the AFA believed the overall intent of the FOFA package was “honourable”, the Government’s execution of the issue was not.

“The game plan has been hijacked by sectors looking after their own political interests – groups which see FOFA as a way to weaken the role of advice and the role of financial advisers while strengthening their own,” it said.

The AFA paper said a slight chance might still exist for the FOFA changes to deliver on their original objectives by better defining what constitutes financial advice and by better protecting consumers.

“As drafted, however, FOFA fails all of these

Industry fund members want more super advice

By Chris Kennedy

strategic aims,” it said.

The AFA paper said the organisation believed the legislation had failed consumers and was utilising a heavy-handed approach to force change “without a shred of independent research, without any Treasury modelling or rigour, and with no clear evidence as to the impact and consequences for consumers, advisers or the industry”.

A SIGNIFICANT proportion of industry fund members would be interested in further advice about their superannuation, even though less than one in five members surveyed currently used a financial adviser, according to a survey by Energy Super.

Almost three in five members surveyed (57.8 per cent) said they would be interested in over-the-phone singleissue advice and more than two in five (41.1 per cent) would be interested in attending face-to-face super education seminars, the survey of more than 1000 members found.

The research also found about a third of respondents (31.7 per cent) were unsure of what super account they held and features they could be using to maximise retirement savings, while more than one in six respondents (17.9 per cent) had no idea what their current

account balance was.

Only a quarter of all respondents were confident they would have enough savings to last their whole retirement.

Energy Super chief executive Robyn Petrou said the survey revealed a segment of working Australians who were highly engaged and wanted more education and advice, and interested in a wide range of education points including online, face-to-face and over the phone.

“Our goal is to try and get more people into this group and at a younger age, as the benefits of understanding and engaging with your super earlier are well known,” Petrou said.

“The challenge for funds such as Energy Super is to better engage with members who are disinterested in their superannuation and make them realise how paying attention to their super now will pay dividends in the future,” she said.

ISN calls for stronger consumer protection THE Industry Super Network (ISN) has called for “watertight” consumer protection requirements to guard against future financial advice “scandals”.

In its official Future of Financial Advice submission, the ISN said a robust and watertight set of legal requirements on financial planners is the most effective way to insure against future financial scandals eroding individual and aggregate national retirement savings.

This will achieve the policy objective of increasing the professionalism of financial advice in Australia, increasing consumer confidence in advice and facilitating better access to advice, the ISN stated.

The ISN also called for the full annual disclosure of all fees and payments.

“It is inconceivable that the current regulatory gap, which means clients receive no ongoing disclosure of fees from financial planners, would not be rectified,” ISN manager of strategy Robbie Campo said.

The best interests obligation must “create a clear and watertight obligation that protects Australian consumers from the self-serving and

structurally corrupt business model, which currently dominates the financial planning industry,” she said.

The legislation should be formulated as a principles-based obligation that ensures all personal financial advice prioritises the client’s interests over the interests of the adviser, licensee or other related party, she said.

“A highly prescriptive or process-driven best interests obligation will be used by the financial planning industry to create loopholes and will impede the provision of affordable advice,” she said.

The reforms need to make clear that the best interests obligations apply to existing “passive” clients who are paying ongoing commissions and fees, she said.

The ISN continued to oppose ongoing and asset-based fees, and supported an increase in Australian Securities and Investments Commission powers “to ensure the regulator is better equipped to tackle bad apples and to initiate more proactive surveillance of the financial planning industry”.

AMP practice launches gearing program

By Benjamin Levy RECENTLY formed AMP Financial Planning practice Eluvia has launched a debt and gearing program for their clients.

The program will help clients look for more efficient ways of getting rid of debt and “where appropriate” use gearing to accumulate more assets, Eluvia director Mark O’Leary said.

The finance will be provided by mortgage aggregator Australian Finance Group, which has a three year agreement with AMPFP to provide mortgage services to its financial planners and mortgage consultants.

The gearing options would follow AMPFP guidelines, O’Leary said.

The gearing would be used for investing in property, managed funds and equities, either privately or through their self-managed

super fund (SMSF) where it was appropriate, he said.

Eluvia would offer gearing based on the “usual disclaimers” of risk profiling clients and their ability to repay the loans, he said.

While the market was not as eager to use gearing since the financial crisis, there was growing interest among Eluvia’s SMSF clients, O’Leary said.

“This has always been on our radar, but it’s a question of timing or so because we’ve spent the last year or so settling the business in and getting the back office in place,” he said.

The move into debt and lending was part of implementing a comprehensive offering for their investors and part of their final rebranding, O’Leary said.

Melbourne planning practices KRA Financial Group, President Financial Services and Mills Nettheim joined together to form Eluvia earlier this year.

8 — Money Management September 29, 2011 www.moneymanagement.com.au

Lindy Jones

FPA looks to online push THE Financial Planning Association (FPA) will leverage the internet over the next six months as part of its advertising campaign extolling the virtues of financial advice.

While the broader advertising campaign, which kicked off in newspapers and on television on Sunday, is intended to run for five weeks, the online search campaign will run for six months with the intention of driving consumers to the FPA’s new website www.fpabestpratice.com.au.

Commenting on the online push, FPA general manager of marketing, Lindy Jones said the online push, via a Google search campaign, had already proved successful in driving traffic towards the FPA’s new site.

She said that the $200,000 online push was proving highly cost-effective.

Jones said member feedback around the FPA’s new advertising campaign had been strongly positive.

“In light of the context of industry reform, we firmly believe that consumers first and foremost need a way to find advice they can trust,” she said.

She said the FPA was already seeing a marked increase in hits to its consumer website from around 500 per day to over 800 per day.

News

Charity sues over sub-prime losses

Citibank manager banned for false transactions

By Chris Kennedy WEST Australian charity Senses Foundation has filed an application against financial advice company Counterpoint through law firm Slater & Gordon.

According to Slater & Gordon, Senses lost more than $1.5 million in Basis Capital Funds, which was linked to the US sub-prime market and collapsed during the GFC, after following the advice of former Counterpoint director Peter Williamson.

An application filed by Slater & Gordon in the Federal Court alleges Counterpoint failed in its duty of care and engaged in misleading and deceptive conduct between 2005 and 2007 while advising Senses.

Slater & Gordon commercial litigation practice group leader Mark Walter said Senses would never have placed the money with Counterpoint if it had been told that its investment in Basis Capital Funds was high risk and volatile.

“It wasn’t informed of that and as a result, it suffered significant losses,” he said.

“Counterpoint ought to have known that this was a completely unsuitable, high risk proposal for a charity, and that the money should have been invested in a more appropriate manner,” he said.

Although Counterpoint merged with asset manager Grove Financial Services in 2008, Walter told Money Management that Counterpoint is a named party, that is still in operation, and can still be pursued from a legal perspective.

The case is being financially backed by litigation fund LCM.

THE Australian Securities and Investments Commission (ASIC) has permanently banned a former Citibank relationship manager from providing financial services for conducting transactions without client authorisation.

An ASIC investigation found that between December 2009 and August 2010, Victoria Cai, who worked for the bank from 2006 to 2010, “conducted 31 transactions between client accounts without their authorisation or knowledge and submitted transfer application forms containing falsified signatures”.

In one case Cai cancelled the client’s term deposit to facilitate a transaction, ASIC found.

Cai also altered the frequency at which client account statements were received, suppressed statements so clients had no knowledge of the transactions, and manually generated statements with fictitious account balances, ASIC stated.

In March 2010 Cai also transferred US$527,900 to her personal accounts from a client account, including $170,000 to pay her own mortgage, ASIC stated.

ASIC acknowledged the assistance of Citibank, which has also reimbursed impacted clients.

Govt mounts super clearing house push

By Mike Taylor MORE than a year after it established a small business superannuation clearing house within Medicare Australia, the Federal Government has initiated an advertising campaign aimed at having small employers utilise the facility.

The campaign is aimed at small businesses and involves letters attributed to both the Department of Human Services which is responsible for Medicare and the Australian Taxation Office (ATO).

The Small Business Superannuation Clearing House is available to businesses or organisations employing fewer than 20 employees and the promotional campaign launched by the Government is encouraging these employers to register their details with the Clearing House.

The mail-out of the letters promoting the clearing house comes not long after the Federal Opposition announced a policy to establish a similar facility under the auspices of the Australian Taxation Office.

The Federal Opposition has argued that small business take-up of the free clearing house facility has been poor and that it should more properly fall within the ATO. The letters declare that the documents have been produced jointly by the Department of Human Services and the ATO, and that “no personal information has been provided to the Clearing House by the ATO”.

More focus needed on risk management: MLC MULTIPLE global concerns including sovereign risk, geopolitics and policy errors, Chinese growth, inflation and the next bubble suggest a new focus on risk management may be required, according to MLC Investment Management investment strategist Brian Parker.

Historically, we have relied on the idea that if you are a particular type of investor – based on what sort of person you are and your risk appetite – then you should be in a particular risk bucket and can expect a particular level of returns over the long-term, Parker said at the MLC Implemented Consulting conference.

But there may be a better way to think about things, and rather than being return seeking, maybe we need to focus more on risk management, identify potential problems, and do something today to protect members and clients over the next three, five or seven years, he said.

“Can we rethink the way we do traditional exposures and approach equity markets?” he asked. “Can we rethink the way we mandate equity managers? If we think someone’s good can we let them loose more than we already have? Can we do more to encourage our active managers to not hug the index for dear life? Maybe there are more efficient ways to do it,” he said.

Maybe in the short-term we need to put up with lower returns in order to really guard against risk longer term, he said. Parker questioned whether, as a manager, you would rather apologise to clients during a hot market run for only returning 25 per cent when the

Brian Parker

market was up 30 per cent, or whether you would rather be apologising to a client when the market was down 30 per cent for having lost 40 per cent.

Parker said he was worried about sovereign risk, and that even governments that will pay us back – including the US, UK and Japan – are only offering returns of one or two per cent. He was also worried about the next bubble, potentially gold, which he said could drop by more than half in the next three to five years, as well as emerging markets and commodities.

There is also a worry about policy errors and the chance we could end up with another global recession by policy accident; geopolitical issues will also rear their head from timeto-time, and maybe the only defence is to have a well diversified investments strategy and avoid as many of the bullets as possible, he said. www.moneymanagement.com.au September 29, 2011 Money Management — 9

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News Accountant exemption removal could lower advice access

By Chris Kennedy THE Institute of Public Accountants (IPA) has responded to suggestions from SMSF Partners that the removal of the accountants’ exemption for advising on self-managed super funds (SMSFs) will be good for clients, saying it could reduce access to advice.

It will depend on the form the next tranche of Future of Financial Advice (FOFA) legislation takes, but there is concern that account-

ants will need to go through a complicated and expensive process in order to be able to continue to advise on SMSFs, according to IPA member integrity manager Reece Agland.

If this happens it’s possible that many accountants won’t take it up, reducing the ability of clients to get cost effective information regarding SMSFs, he said.

“We’re not against removal of the exemption but we want to make sure that whatever we get is something that works and we’re not

too sure that we’re going to get there,” he said.

Agland also expressed concern over a potentially cumbersome licensing system and said he hoped that where Accounting Professional and Ethical Standards Board (APESB) requirements are in line with Australian Securities and Investments Commission (ASIC) requirements then ASIC would not consider it necessary to replicate anything.

Another issue is the implementation time-

netwealth’s new online service to help with FOFA

By Milana Pokrajac PLATFORM provider netwealth has launched a new online service which the company said would help financial advisers prepare for the upcoming Future of Financial Advice changes and provide them with back office efficiency.

Executive director Matt Heine said the new site was developed in response to

adviser feedback, as they prepare for the regulatory changes and increased administrative burden.

Licensees and planners using the platform will be able to white label the new site and reports to promote their own brand, Heine said.

“They will also have the ability to access new features including online corporate actions, auto

sell down profiles and the ability to update client account details via web,” he added.

Over the past 12 months, netwealth has been conducting a market review, after which the company had implemented a range of changes, including the overhaul of its investment menu, and has made new hires for business growth.

the best opportunity.

This comes despite many feeling that conducting business globally is slightly more difficult now than three years ago.

Another interesting finding is that most CFOs find it significantly more challenging to find the right people with the right skills than finding the money to expand abroad.

Optimism of Aussie CFOs is matched by overall positive outlook of global chief financial officers, but BDO Australia’s national chairman

Newstart indexing inadequate, says ACOSS

By Tim Stewart

Matt Heine

Australian CFOs optimistic on global growth MORE than 95 per cent of Australian mid-sized companies are confident in their global expansion plans, with key executives expecting more than half of their revenue to come from abroad in three years, a survey has found.

The BDO Global Ambition Survey, which interviewed 750 chief financial officers (CFOs) from Australia and 13 other countries, found Aussie CFOs feeling ver y optimistic about crossborder growth of their companies, with China being seen as offering

frame, and Agland said he hoped there would be at least a two-year period for accountants to do what is necessary to become licensed.

“Doing the RG 146 course will be expensive, but it’s something we have to do. It’s all the other processes of actually putting in an application that’s a concern,” he said.

“Our optimal outcome would be at least a two-year transition, a simplified licensing system that’s low cost and one that recognises the experience that accountants have.”

Tony Schiffmann said Aussies are among the most optimistic about international growth.

“I believe this optimism is partly due to Australia’s enviable location as a springboard into the Pacific, South Asia and Asia, as well as our well-educated and skilled workforce and the strength of the broader economy,” Schiffmann said.

Global CFOs, however, find it rather difficult to expand in Australia, mostly due to in-market competition.

THE gap between the Newstart allowance and the age pension is rapidly increasing, placing Australians who are at the bottom of the ladder in serious financial stress, according to the Australian Council of Social Service (ACOSS).

The unemployment benefit for a single person in Australia is $474.90 per fortnight, or $34 per day – compared with the age pension fortnightly payment of $729.30 per fortnight.

The gap is likely to increase in the future, because the age pension is indexed to the average male wage – whereas the Newstart allowance is linked to the lower consumer price index.

The Government should heed the advice of both the Henry Review and the OECD and increase the Newstart allowance and the single parenting payments, according to ACOSS chief executive Dr Cassandra Goldie.

“Unless the base rate of

allowances is increased and indexed at the same level [as the age pension] to meet growing costs of essentials like rent, utilities and food, the accelerating difference in payment levels will lead to greater hardship and more people falling into poverty,” Goldie said.

She added that at the current rate, the OECD has predicted the Newstart allowance will be worth just half the age pension in 2040.

“Whilst ACOSS obviously welcomes the indexation increases as crucial in helping Australia’s 3.4 million people on pensions meet cost of living increases, it is distressing that people on Newstart and sole parenting payments have been left behind,” Goldie said.

The latest Australian Bureau of Statistics Household Expenditure Survey found that 79 per cent of people on the Newstart allowance reported three or more indicators of financial stress, said Goldie.

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Challenger Managed Investments Limited ABN 94 002 835 592, AFSL 234 668 (CMIL) is the responsible entity and issuer of interests in the Five Oceans World Fund ARSN 117 060 769 (Fund). This advertisement is not intended to be financial product advice and does not take into account any person’s investment objectives, financial situation or needs. Accordingly, investors should consider these matters, the Fund’s product disclosure statement (PDS) and its appropriateness to them before making an investment decision. The PDS is available from www.challenger.com.au and should be considered prior to making an investment decision. Five Oceans Asset Management Pty Limited ABN 90 113 453 160 , AFSL 290 540 is the Fund’s appointed investment manager. www.moneymanagement.com.au September 29, 2011 Money Management — 11

SMSF Weekly Accountants assert SMSF specialisation

ATO SMSF data skewed by retirees

By Damon Taylor

By Mike Taylor THE Institute of Chartered Accountants in Australia has moved to give members the ability to specialise in self managed superannuation funds (SMSFs).

The move, announced by the institute’s head of superannuation, Liz Westover, said it would make it easier for trustees to access highly skilled, expert advisers.

She said the 2010 Cooper review had acknowledged that professional accounting bodies were best placed to be tasked with ensuring high levels of competency existed with respect to the provision of SMSF advice.

“With chartered accountants making up one of the largest number of service providers in the SMSF industry, the institute is a natural choice to provide a specialist program,” Westover said.

She said the SMSF specialisation would be run in conjunction with the University of NSW and would give chartered accountants the opportunity to demonstrate their skills.

“More and more Australians are opting for SMSFs as their retirement savings vehicle of choice and it is important they have access to quality, accurate advice when they require it,” Westover said.

ONE of the more interesting figures to come out of the Australian Taxation Office’s (ATO’s) June Self Managed Super Fund (SMSF) Statistical Report was the proportion of members with incomes less than $40,000 per annum. Such numbers, according to Matthew Walker, director of WLM Financial, are likely to have come about for a variety of different but equally valid reasons.

“Our anecdotal evidence suggests that people on $40,000 a year income rarely, if ever, set up a self managed super fund unless they’re looking at doing something t h a t ’ s e i t h e r ve r y u n u s u a l o r they’re getting some poor advice,” he said. “So I’d suggest these statistics are probably skewed by members in draw-down phase, i.e. they’re retired.”

Walker was quick to point out

Matthew Walker that income coming out of a super fund was all tax free so that even if someone had $50 million, it wouldn’t be assessed.

“But that doesn’t mean they’re not wealthy,” he said. “It’s also not unusual for self managed super funds to incorporate other family members, as in Mum, Dad and the two kids.

“Those children may not be high e a r n e r s , ” a d d e d Wa l ke r. “ S o again, I’d suggest that statistically the numbers are probably skewed through the inclusion of all members of all types, not necessarily the primary income earners and contributors.”

The reality, according to Walker, wa s t h a t s e l f m a n a g e d s u p e r funds gave their members a great deal of flexibility and that that flexibility would always be attractive to a variety of different people in a variety of different circumstances.

“Setting up your self managed super fund gives you a lot of flexibility and a lot of options,” he said.

“If you can use that for the benefit of the family, that’s great.

“This is about taking advantage of the options available to you,” Walker continued. “You might not set it up for those secondary members, so to speak, but if it’s in existence there’s no harm in looking at it.”

ATO draft ruling welcomed, with caveats SISFA welcomes ATO property ruling A NUMBER of specialist laws firms have endorsed the Australian Taxation Office (ATO) draft ruling as generally good news for self managed superannuation funds (SMSF) trustees.

B ot h H a l l a n d W i l c ox a n d Townsends Business and Corporate Lawyers welcomed the ATO draft ruling, but both applied caveats to their welcome.

The Hall and Wilcox analysis said the changes represented “good news for those SMSF investor s trying to decide whether that new kitchen is a repair or an improvement, but not much comfor t for those SMSF investors looking to develop property in a SMSF that has been acquired under a borrowing arrangement”.

“In fact based on the draft ruling SMSF investors should take care with any subdivision of land or rezoning of residential to commercial premises,” it said.

The Townsends analysis said the draft ruling primarily dealt with two simple questions - what is a single asset? And when is an asset transformed into another asset?

“These simple questions arise because the limited recourse borrowing rules revolve around the concepts of a ‘single asset’ and ‘replacement asset’,” it said.

The Townsend analysis said that while the ruling remained in its draft form, SMSF Trustees and advisers should exercise caution in relying on the ruling or the reasoning underlying the ruling.

12 — Money Management September 29, 2011 www.moneymanagement.com.au

THE Small Independent Superannuation Funds Association (SISFA) has welcomed the Australian Taxation Office’s (ATO) recently released draft ruling which will allow self managed super funds (SMSFs) to make improvements to properties purchased through limited recourse borrowing.

Commenting on the ATO’s clarification of SMSF borrowing rules, Michael Lorimer, chair of SISFA, said it was a p ra c t i c a l o u t c o m e f o r t r u s t e e s t h a t a l l owe d f o r g re a t e r f l e x i b i l i t y w h e n purchasing property.

“It is a practical outcome for trustees and allows for greater flexibility in buying property where the opportunity to add va l u e c a n e n h a n c e t h e re t i re m e n t outcome for fund members,” he said. “I have found that many trustees wanting a residential investment have had to primarily consider new, ‘off the plan’ residential

d e v e l o p m e n t s w h e re t h e n e e d f o r improvements was not an issue.

“This practical change will allow for consideration of older properties that can be sensibly upgraded.”

Lorimer added that he did not harbour concerns that SMSF trustees would overcapitalise properties as a consequence of the new ruling. “ W h e n S M S F s s t a r t e d t o g r ow i n numbers and the first round of SMSF lending was allowed, we heard howls that trustees would go broke and lose money because they weren’t in proper managed funds,” he said. “That has simply not been the case and we have seen in ATO figures that SMSF portfolios are similar to standard balanced portfolios.

“They have not become over geared property portfolios and we can’t see that this practical change in treating property investments will cause any mayhem.”

InFocus HEDGE FUNDS SNAPSHOT Hedge Fund strategies performance - August 2011

-4.08%

Distressed securities

-4.07%

Long/Short equity

Shape of Stronger Super remains uncertain The Government has finally delivered the details of its Stronger Super package but, as Mike Taylor writes, those hoping for certainty may be waiting a very long time.

-3.90%

Emerging Markets

-2.57% Funds of funds

+0.27% CTA global

+6.97% Short selling

Source:: EDHEC - Risk Institute

W

hile much attention was directed towards the final release of the Government’s Stronger Super package last week, a single message from the superannuation specialist at the Institute of Chartered Accountants in Australia, Liz Westover, appeared to resonate most clearly with the broader financial services industry.

The message was that having delivered on its Stronger Super changes, the Government should simply “stop tinkering” with the superannuation rules and allow Australians some certainty about what for many of them will be their largest single investment after the purchase of a family home.

Of course, the likelihood that the Government will heed Westover’s plea is remote. In each of the four budgets delivered by Treasurer Wayne Swan, under both the Rudd and Gillard Labor administrations the Government has seen fit to tweak the super system – sometimes dramatically, such as reducing concessional contribution caps.

And as the Opposition spokesman on Financial Services, Senator Mathias Cormann, last week made clear, the Stronger Super package was significant as much for what it excluded as what it ultimately contained.

The elephant in the room according to Cormann is the treatment of default funds under modern awards and the manner in which this delivers a monopoly to industry superannuation funds.

Cormann is also concerned that the Government appeared to astutely side-step some key Cooper Review recommendations on imposing better corporate governance by requiring independent directors on superannuation boards, and closer APRA oversight with respect to those holding directorships of multiple boards.

Anyone who has been closely watching the superannuation industry knows that Cormann is making a none-too-oblique reference to a number of well-known personalities who, at the

same time as holding multiple directorships on the boards of industry superannuation funds, also wield considerable power within the broader Labor movement.

Nor was it lost on many of those reading Cormann’s comments on the need for improved corporate governance that they were being made in the wake of the controversy which swirled around MTAA Super and at the same time as media attention was being directed at the leadership of the Health Services Union.

While it may not have been deliberate, the release of the Stronger Super package last week served to indicate to many of the Government’s critics that it was not as much a captive of the industry superannuation funds as many might have claimed.

The fact that the package imposed a $1,000 figure with respect to auto-consolidation at the same time as allowing some flexibility around fees for funds servicing larger employers clearly ran counter to some of the arguments which had been pursued by the industry superannuation funds.

This probably explained the relatively positive welcome delivered by the Financial Services Council (FSC) and some of the larger institutions who had clearly been working hard behind the scenes.

In his response to the release of the package, FSC chief executive John Brogden suggested the Government had “landed on a balanced and measured package”, and then cited the improvements to MySuper as: • Allowing super funds variable pricing (variable investment fees and variable administration fees); • Tailored investment strategies for workplaces of more than 500 employees to reflect workplace profiles and demographics; • Allowing limited flexibility for workplaces of less than 500 employees through flexible administration pricing; • Allowing flexibility and workplace tailoring for insurance;

• Stripping out the red tape and cost by not requiring a separate licence or fund for MySuper; • Tick-a-box account consolidation for superannuation balances greater than $1000; • Appropriate risk-based capital requirements for super funds.

It was perhaps a measure of the degree to which the FSC and others had been successful that the industry fund’s political lobbying arm, the Industry Super Network (ISN) indicated it would continue its lobbying of the Government to extract the sort of framework it wanted.

“ISN will be encouraging government and regulators to remove the proposed $10,000 threshold for the consolidation of account balances when it is due to increase in 2014,” the ISN release said.

“The Government needs to determine the final policy parameters for the multi-pricing arrangements and address employees’ super savings being flipped into more expensive products. This is why the 2014 account consolidation process is central to the integrity of the reforms,” it said. “Further, super funds should need to demonstrate to APRA that any discounts to employers are the result of genuine scale advantages, as argued by retail super funds, and not cross subsidized by other fund members.”

So the message for superannuation fund members is that while the Government has delivered on its Stronger Super package it has not delivered on the certainty being craved by the ICAA. The timetable for the delivery of the Stronger Super changes combined with the continued lobbying by groups such as the ISN and the reference of the default funds under modern awards issue to the Productivity Commission means that much will remain up in the air for at least the next 18 months.

Then too, there is the reality that within the same timeframe Australians will be asked to go to another Federal Election. The only certainty with respect to superannuation appears to be continued uncertainty.

What’s on ASFA National Conference & Super Expo 9-11 November 2011 Brisbane Convention & Exhibition Centre www.superannuation.asn.au/co nference-2011/default.aspx

AFA National Conference 23-25 October 2011 RACV Royal Pines Resort, Gold Coast www.afa.asn.au/profession_eve nts.php

Finsia Event - Superannuation Reform: What Will Super Look Like In 2015?

4 October 2011 Sofitel Melbourne on Collins www.finsia.com/events

FSC Deloitte Leadership Series Lunch 28 October 2011 Four Seasons Hotel, Sydney www.fsc.org.au/events/eventsoverview.aspx

Property Investment Research (PIR) Property Industry Funds Forum 16 October 2011 Hyatt Regency Coolum, Sunshine Coast, Queensland www.pir.com.au/Public/PIR/Eve nts/Forum2011/

www.moneymanagement.com.au September 29, 2011 Money Management — 13

Estate Planning But he argues that this concept will suit all those advisers who always thought there was something wrong with the financial planning process himself included.

Bishop agrees that estate planning is a n a re a o f a d v i c e v e r y m u c h i n i t s infancy, and is still being driven by advisers simply asking their clients if they have a will and then referring them on. However, he envisions that the three disciplines of law, financial planning and accountancy will be wrapped in one package.

“But not every financial planner, solicitor or accountant is licensed to do that, and may not have the resources and infrastructure,” he says.

Referral relationships could work well, yet there may be fear among advisers that it would be difficult to maintain their lead adviser status. There is always concern that they will lose their clients to other professionals altogether, Bishop says.

“That’s a fact of life. The whole idea for any business is to retain your clients, but only with the services you can offer and do well. There’s no point in trying to retain a client for the services that you do halfwell,” he says, adding that will only lead to trouble.

Sanders says the concept of a professional relational practice will evolve in time, where a professional community of lawyers, accountants, auditors and financial planners comes together and from which networks grow.

For now there are a number of places advisers can look for specialists. Sanders suggested the Law Council of Australia website identify estate and trust specialists, with advisers also tapping into the STEP community. Perkins suggests law societies as a source of professionals that may have Wills and Estate Specialist Accreditation. Tax Institute members and Certified Practising Accountants are also a good port of call, he adds.

Galagher maintains that unless advisers have an aptitude for the law, then estate planning is an area they should perhaps not delve in.

Peter Burgess

The whole idea for any “business is to retain your clients, but only with the services you can offer and do well. There’s no point in trying to retain a client for the services that you do half-well.

- Colin Bishop

”

“It is clearly an attractive area of business, which fits nicely with their broader service offering. But it’s not as simple as hanging up a plaque outside your door – it needs a lot more than that,” he says. “People may feel that they can reduce liability with their professional indemnity insurance, but t h e i r p ro f e s s i o n a l , i n d e m n i t y ( PI ) insurer may to date not have contemplated estate planning advice.”

Perkins says that when PI insurers review business models, the view has always been expressed that dealing with estate planning actually reduces advice risk. He does not believe that taking on estate planning will create greater liability. Rather he asserts that by simply referring clients elsewhere, advisers may not only go against the reasonable basis for advice requirement, but may face greater reputational, relationship and business risk.

“The reality is that financial planners are well placed to take a lead adviser role. Estate planning is complementary to their financial planning knowledge and advisers take to the learning quite easily. The value they add to the client well exceeds any additional risk, provided that they are trained correctly in the first place.

“Telling clients to go to a lawyer and sort out their will is a far more dangerous statement,” Perkins adds.

Bo r n e r s a y s a d v i s e r s n e e d t o b e careful with any advice they give.

“Because of the nature of this type of advice and the family disputes that arise, it is an area that advisers have t e n d e d t o s t a y a w a y f r o m p u re l y because they are worried about the consequences of getting it wrong,” he says. “But we would rather be active in this area and have our advisers at a higher educational level than simply ignore it.”

The missing piece Technology and software seem to be missing in estate planning discussions, although some of the bigger software

providers have included an estate planning component in their offerings.

X P L A N , f o r e x a m p l e, p ro m o t e s i t s customer relationship manager system as easily adaptable to collecting the level of information needed for estate planning, while Midwinter’s AdviserTech also has an estate planning component. However, it seems that there are few if any solutions specific to estate planning within the financial planning arena.

Estate planning capabilities are looked at as part of Investment Trends’ annual Planner Technology Report.

“Planning software generally has limited support for estate planning as it mainly deals with clients’ investible assets, though they do cover some parts of the broader legal and tax related issues of estate planning,” says lead analyst Recep Peker. “Clients with substantial assets typically use the services of tax specialists or accountants alongside their planner to manage their assets.”

Perkins says a barrier for advisers is the absence of reliable tools for profiling the situation of the client.

“For dealer groups especially, the main put-off is how do they scale the personalisation of advice – where are the tools and where is the knowledge? It’s still a work in progress.”

However, he notes the development of product-less wrap accounts are a huge advantage in estate planning.

OneVue has developed a unified managed account, which enables advisers to view their clients’ total net financial position, with all assets and liabilit i e s m a n a g e d i n o n e p l a c e. L o c k acknowledges this won’t be a competitive advantage forever, but the real focus is not necessarily technology, he says.

For him, the key difference has been changing his questioning technique, enabling him to delve deeper into his clients’ particular circumstances.

Borner believes that there will be innovation in niche areas like superannuation and insurance, but he agrees that asking the right questions is paramount. MM

www.moneymanagement.com.au September 29, 2011 Money Management — 17

OpinionInsurance Industry versus retail: A tale of two policies Col Fullagar takes a look at two income protection policies – one is offered by an industry super fund, while the other comes from a retail fund. While the premiums may vary significantly, it is important to conduct a proper cost-benefit analysis, so that a client is better able to make an informed choice.

I

n seeking to make an income protection insurance recommendation to her client, an adviser was recently confronted with the following options.

Should she: • Recommend the client retain cover within an industry fund for which the premium was $400, or • Recommend the client move to a retail product for which the premium was $1,200.

The problem of course centred on the cost-benefit analysis. What was driving such a dramatic premium difference, and was it possible the retail product was so much more appropriate that the difference could be justified?

Irrespective of the answer, the adviser needed to be able to provide a response for the client, so she arranged for an analysis to be undertaken.

To ensure apples were being compared it was confirmed that both contracts were for the same benefit amount, benefit and waiting period and both premium quotes were on a no-commission basis.

The analysis was undertaken at four different levels:

1. Premium When making a premium comparison, it is often necessary to go further than comparing the current year’s premium. Future premiums may also reveal material differences: • For stepped premiums, are both premiums stepped in the same way?

• For level premiums, how are indexation increases treated, at original rate or current rate?

• Is one set of premiums calculated in age bands such that large increases occur when a previous band ends and a new one starts?

• Is one set of premiums calculated on a flat basis ie the same for all ages, such that the younger lives are heavily subsidising the older lives?

This information alone may account for a large component of any premium difference.

2. Contractual The first level was on a traditional basis: contractual differences were identified and an estimate was made of the approximate value of each of the featured differences. To ensure “reasonableness”, an actuary was

asked to check and confirm. Set out below are the findings: (i) Indemnity versus agreed value The industry fund was insured through a group insurance contract. As a result, each year the client needed to advise their then current level of earnings, and cover for the coming year would be based on that figure.

Further, the policy stated “if actual earnings at time of claim are less than nominated earnings, the benefit will be based on actual earnings.”

In other words, cover was issued on an indemnity basis both from year to year and also within each year.

The retail product was agreed value.

The agreed value facility within a retail income protection insurance policy is worth around 15 per cent of premium. (ii) Ancillary benefits In addition to the core benefits of total and partial disability, the industry fund only included the following ancillary benefits: • Death benefit, twice times the last monthly benefit paid; • Rehabilitation expenses reimbursement – at the total discretion of the insurer, and • Waiver of premium, only whilst on claim.

The inclusion of a full, comprehensive range of ancillary benefits within a retail income protection insurance policy is also worth around 15 per cent of premium. (iii) Exclusions The industry fund contained several exclusions that were not present in the retail product: • Engaging in professional sporting activity; • Flying except as paying passenger or as a passenger in a chartered plane for the purposes of carrying out the duties of the member’s occupation, and • The member’s involvement in, or perpetration of, a criminal act, with discretion to reduce or refuse benefit payment if the member is imprisoned.

There was also a pre-existing conditions exclusion. The precise conditions of this were relatively complex. However, in brief it excluded any claim that arose as a result of an injury where the injury originally

18 — Money Management September 29, 2011 www.moneymanagement.com.au

occurred in the 12 months prior to cover starting and an illness that occurred in the six months prior to cover starting.

In the event of “war”, the insurer reserved the right to increase premiums or exclude benefit payments if the claim was caused directly or indirectly as a result of war.

“War” was defined as declared war, armed aggression by one or more countries resisted by any country, combination of countries or international organisations, participation in an action to defend a country or region from civil disturbance or insurrection, or in an effort to maintain peace.

Thus not only were significant additional exclusions introduced, but the presence of the war provision had the effect of adding a cancellable element to the industry fund product.

None of the above conditions were present in the retail policy.

The absence of the above exclusions with a retail income protection insurance policy is worth around 10 per cent of premium. (iv) Offsets Benefit offsets within the industry fund product included payments received from any of the following: • Workers’ compensation; • Social security or other statutory or government payment; • Any payment in respect of loss of income (whether under legislation or otherwise); • Statutory accident compensation and • Other disability insurance except term and permanent disability (TPD).

There were no offsets in the retail product.

The absence of the above offsets with a retail income protection insurance policy is worth around 5 per cent of premium. (v) Claims There were several unique claim conditions within the industry fund.

One stated that the insurer could require the insured to be examined by a medical practitioner of the insurer’s choosing who “must confirm the condition.” This might be problematic if the nature of the condition was unknown: for example, a mental or nervous disorder for which the specific diagnosis was open to debate.

The insurer could require the insured to undergo rehabilitation. This provision appeared to contradict the definition of total disability to the extent that it purported to deem total disability if one duty could not be performed, the insured was following medical advice and was not working.

If the insured refused or felt it inappropriate to undergo rehabilitation, it was contractually possible for benefits to be withheld.

Finally, if there was a dispute concerning claim admission, the policy indicated that the matter would be referred to the “claims review committee” and “the parties agree that any determination of the claims review committee is final and binding”.

This could be perceived as an attempt to negate any appeal to the Financial Ombudsman Service or the legal process.

The absence of the above issues within a retail income protection insurance policy is worth around 2 per cent of premium, although the actual impact at the time of claim might be much greater. (vi) Cover end date Cover under the industry fund policy ended if: • The member commenced active duty with the armed forces of any country; • The member permanently retired from employment (clarification of when this assessment would be made, by whom and on what basis, was not provided); • The member was on unpaid leave for longer than 12 months; • The member worked overseas for longer than three months (notwithstanding the

policy spruiked that it provided 24-hour, world-wide cover; • The member ceased to be a member of the plan (it then became clear that the policy did not provide for a continuation option); • The member, who is not an Australian resident, was no longer permanently in Australia or not eligible to work in Australia.

Again, the absence of the above cancellation provisions within a retail income protection insurance policy is worth around 2 per cent of premium. (vii) Miscellaneous areas of difference Not unexpectedly, there were also numerous subtle but potentially important areas of difference, for example: • The waiting period requiring the insured to attend a doctor rather than simply stop work; • Pre-disability earnings not being indexed whilst on claim; • The absence of a guarantee of upgrade, and so on.

When the impact of the above contractual differences was taken into account, the premium comparison became somewhat different: Retail product $1,200 Less reduction for: • Indemnity (15 per cent) • Ancillary benefit (15 per cent) • Exclusions discount (10 per cent) • Offsets (5 per cent) • Claims (2 per cent) • Cover end date (2 per cent) Net premium = $700 While this brought the premiums much

The premium, contractual, procedural and “representative differences between the two policies and the potential direct and indirect costs associated with them mean that a cost-benefits analysis is not necessarily straightforward.

”

closer, there was still a considerable difference: $700 compared to $400.

little or no procedural impact. However, they would impact on premium cost.

3. Procedural

4. Representation

Having considered the contractual differences and the monetary value of these, the procedural differences were considered next.

The main area of difference was the administration efficiencies associated with group insurance: • Group automatic acceptance avoids individual new business administration and underwriting costs; and • The dynamics of group insurance drive lower lapse rates.

Irrespective of whether or not group cover is provided at an employer or a fund level, the above factors will deliver economies of scale that will be reflected in the premium.

The positive impact for the client of automatic acceptance levels would be the speeding up of cover commencement. Lower lapse rates, on the other hand, would have

An important area of difference and thus a material matter in the product analysis was that of client representation.

Under group insurance arrangements, it is generally necessary for the client to deal with a middle-person: ie the trustee, employer or administrator.

While this may generate a cost reduction for the insurer, the arrangement may be to the detriment of the client, as many who have had to deal through a middle-person will attest.

If the client does not have a personal support base, they will be on their own when it comes to advice and assistance. Should they need either, it may well be necessary to pay a fee either to an accountant, a solicitor or a financial adviser.

Depending on the amount of assistance required, it may well be that any premium

difference would be very quickly negated if the contractual differences within the industry fund product manifested as a greater likelihood of misunderstandings and disputes, particularly at the time of claim.

The premium, contractual, procedural and representative differences between the two policies and the potential direct and indirect costs associated with them mean that a cost-benefit analysis is not necessarily straightforward.

For some clients, the cost will be more important than the benefits foregone, while for others it will not.

Naturally, the question of what is appropriate for a particular client is not for determination within this article. Rather the intent of the article has been to consider various ways in which differences may be presented to a particular client such that the client is better able to make an informed choice.

Depending on the circumstances, a simple premium or contractual comparison may suffice. Sometimes it may be necessary to go further and consider the monetary value of these differences. It may even be necessary to consider non-contractual factors such as the value-add of adviser involvement.

The challenge for the adviser is to know when one basis of analysis is appropriate over another and then to have the tools at their disposal such that they can assist the client to make the all-important informed choice.

Col Fullagar is the national manager of risk insurance at RI Advice Group.

www.moneymanagement.com.au September 29, 2011 Money Management — 19

OpinionAccounts Coming of age Since their arrival on our shores about a decade ago, managed accounts have remained largely dormant in Australia.

But with continuing market volatility and the imminent FOFA fallout, the market seems to be paying them more attention. Thomas Bignill explores why the day of managed accounts is dawning.

U

p until recently, there hasn’t really been a need to adopt managed accounts. Financial markets were ticking along nicely, investors were happy and planning practices were making money. Against this backdrop, why would an adviser change a business model that wasn’t broken?

Managed accounts were also in their infancy. Generally speaking, they were offered for large-cap Australian equities only and product choice was limited, due to the reticence of fund managers about ‘sharing their IP’. There was only a small number of managed account providers – and an overarching sense that the sector needed to develop further.

Other obstacles included a lack of knowledge amongst clients as to the benefits of managed accounts and the difficulties, perceived or real, of transferring clients to a new investment model.

Fast forward a few years and the world is a very different place. During the past 12 to 18 months, we have witnessed increasing activity in the managed account sector.

The main impetus has been the fallout of the GFC. This has prompted investors, advisers and regulators to examine the existing financial services model and ask whether there is a better way.

For investors, key concerns have centred on fees, performance and control.

Connected to this are questions about the fairness of capital gains tax outcomes for managed funds. Frankly, I don’t envy the adviser who has to front up to a client and explain why they need to pay capital gains tax on an investment that has lost money.

As a result, investors have begun demanding “simpler" investments like direct equities and exchange trading funds (ETFs). According to Investment Trends,

new investment in direct shares is expected to rise to 26 per cent in 2013 – an increase of more than 10 per cent from two years ago. As these pressures mount and demand for direct shares increases, structures like managed accounts come into their own.

With managed accounts, the beneficial ownership of the shares sits with the investor. This entitles them to company dividends and franking credits and facilitates personalised capital gains tax outcomes. At the same time, clients continue to benefit from the oversight and input of professional investment managers.

Managed accounts also provide complete transparency so the investor has full knowledge of what they are invested in, how their portfolio is performing and how much they are paying. It provides the investor with a sense of control over their financial outcomes.

It is for similar reasons that managed accounts have experienced significant growth in the US market, particularly amongst high net worth clients and their advisers. Recent figures I’ve seen out of the US indicate that their managed account market is worth about US$2.1 trillion, and is growing by about 14 per cent per year.

Legislation and regulatory reform are also helping support the growth of managed accounts. The Future of Financial Advice (FOFA) reforms echo the concerns of investors with an emphasis on fairer fee models, greater transparency and a requirement to place the investor firmly in the centre of the equation. The hightouch approach of managed accounts is a natural fit with the high-touch approach of FOFA’s opt-in provisions and fiduciary duty requirements.

The outcome of all this for advisers is significant. Under FOFA, advisers will be

20 — Money Management September 29, 2011 www.moneymanagement.com.au

meeting with their clients in the coming months to sign new service propositions. I expect clients will begin to ask questions about fees and value creation and will demand greater accountability.

To keep clients engaged and preserve practice value, many advisers are going to have to reassess their business models.

There is a pressing need to redefine value propositions for the post-regulatory environment – to show their clients that they have addressed the problems of the (GFC) and found a better solution.

It is the transparency of managed accounts that provides a key advantage.

When a client engages an adviser, they expect the adviser to know the intricacies of their portfolio. This could be difficult if the adviser is using managed funds which provide monthly or quarterly updates on performance and the ‘top 10 stocks’.

With managed accounts, advisers have complete visibility of client portfolio outcomes and can be more involved in investment decisions. This enables the adviser to cement their role and forces closer relationships between adviser and client. In addition, managed accounts ease the transition to fee-for-service, as the planner has greater visibility of fees, enabling them to better calculate and justify the value they add.

Managed accounts can also provide advisers with the benefits of a managed discretionary account (MDA), thus enabling them to be proactive when markets demand it. Without an MDA, advisers have to move clients individually – and by the time they get through the approval and administration process, the opportunity has often been lost.

Yet despite their benefits and relevance in a post-GFC world, we continue to encounter some resistance when it comes

to actually making the decision to implement managed accounts. The reasons are varied, but typically include a lack of investment choice, concerns about technology and the process of transition. Fortunately, the managed account industry has used its time on the sidelines to mature and address many of these concerns.

Firstly, with more providers now in the market, managed account technology and administration systems have advanced considerably, leading to improved efficiency and reliability. Most managed account providers have also integrated their systems with key software programs such as Xplan and Coin.

Secondly, investors are no longer restricted to Australian shares. There is now a broader range of asset classes available such as international equities, fixed interest, ETFs, cash and derivatives. This has been facilitated by improved technology and also a growing awareness and acceptance of managed accounts amongst fund managers. It also allows the adviser to properly diversify a portfolio.

Managed account providers are also placing greater emphasis on transition support, which is critical if the sector is to prosper. Providers are more adept at helping planners structure managed accounts to complement their existing platforms.

At the end of the day, managed accounts are starting to shine because they enable advisers to rebuild their value propositions and deliver what clients and regulators want – a high-touch, transparent and fair approach to investment management that places the client firmly at the centre of the equation.

Thomas Bignill is the managing director of Mason Stevens.

OpinionTax Tax Summit: gabfest or brave step forward?

David Glen proposes a number of points that the life insurance industry can address during the upcoming Tax Summit — including tax incentives for life policies outside of superannuation and ways to approach longevity issues.

T

he details of the forthcoming Tax Summit are gradually emerging, and the essential question for the life insurance industry is whether or not we will be ignored again. The Henry Review, the so-called root and branch review of the taxation system, largely ignored our industry. This was expected, as the special needs of the life insurance industry have been consistently ignored in the noise and conflict surrounding tax reform.

Even worse than being ignored is our potential to be a victim of collateral damage in a conflict over issues which are not related to our industry. As an industry, we need to avoid this unsatisfactory guilt by association.

What should the life insurance industry be bringing to the attention of the illustrious minds at the Tax Summit?

We need acknowledgement and acceptance of the fundamental fact that there is an enormous underinsurance gap in Australia, and steps should be taken to encourage the closing of this gap. The tax system should play a role in closing this.

This means the introduction of taxation measures which encourage life insurance.

Australians carry high levels of debt, and many do not have the ability to maintain even a modest lifestyle in the event of death or disability. To date, we have probably had insufficient acknowledgement by the policy makers of the existence of the underinsurance gap, and the need for measures which would encourage its closing. We need legislative intervention in four key areas outlined below.

Tax incentives for life insurance outside superannuation We should be encouraging Australians to take out life insurance protection. In its present form, the Australian taxation system does not contain any incentives for taxpayers to take life insurance outside superannuation. The cost of life insurance premiums outside superannuation should be deductible to individual taxpayers. The deduction should be capped to ensure that cover is kept at a level sufficient to maintain a reasonable lifestyle in the event of claim.

The existing taxation system offers incentives to taxpayers to have insurance

via superannuation. This is a positive step, as most Australians have life insurance through superannuation as their only source of insurance cover. Some purists may argue that superannuation is for retirement savings, and not for protection from death or disability. The reality is that the present system of life insurance via superannuation should be maintained with the existing tax incentives in place.

This will ensure continued protection for those Australians with life insurance cover through superannuation.

Consistent treatment of life insurance inside and outside superannuation We should be encouraging consistent treatment of life insurance inside and outside superannuation. This can be achieved by offering tax deductibility for life insurance premiums outside superannuation as discussed above.

This consistency should also flow through to the treatment of claim proceeds. The tax-free status of the claim proceeds outside superannuation for tax dependants, such as surviving spouses and economically dependent children, should continue. However, we have to accept that the proceeds of life insurance claims paid outside superannuation to non-dependants should be assessable on a basis consistent with the taxation of these benefits within superannuation.

This consistency would eliminate the tax-driven choices of insurance inside or outside superannuation. The tax outcomes should be the same under both choices.

Abolition of stamp duties on life insurance products The third issue for the life insurance industry is the elimination of stamp duties payable on life insurance products. Life insurance stamp duty was considered by the Henry tax review, but disappointingly, the Government responded that this is a state tax issue and out of its hands. The reality is that this issue can only be resolved at federal level. The states will need substitute sources of revenue if life insurance stamp duties are abolished.

Few consumers of life insurance products realise that the state governments take the biggest clip of the ticket in the life insur-

ance supply chain. For example, trauma insurance in South Australia carries an 11 per cent impost on the premiums paid without the State Government taking any economic risk. Few product providers have margins of this magnitude. Ultimately, it is the consumer who carries this cost via higher premium charges.

At the very least, we should have consistency of duties across the states and not vary levels in each state.

Longevity issues Longevity will emerge as one of the major challenges of the future. We are likely to outlive our retirement savings. We are faced with the prospect of a large cohort of indigent octogenarians and nonagenarians who will place a heavy burden on the social security system.

The life insurance and broader financial services industries are ideally positioned to offer investment options and risk insurance products which can provide funds to the elderly investor for use when other retirement savings have been depleted.

The tax and regulatory systems need to support the introduction of products of this type. Ultimately, the marketplace will be the judge of the merits or otherwise of these products. However, there needs to be a friendly tax and regulatory system.

At present, the tax system does not allow the tax-free treatment of investment returns while a product of this type is in accumulation phase. The system also permits those over 60 years of age to have

unlimited withdrawals of savings from the superannuation system.

Capital maintenance and other regulatory rules applicable to product providers need to be examined carefully to ensure the correct balance between the protection of the consumer on the one hand and the viability of the product on the other hand.

The great unanswered question is whether or not the Australian consumer would be prepared to undergo the shortterm pain and inconvenience of using today’s economic resources for the longterm security of having a source of income in their twilight years. It is likely that considerable education is required to get the average Australian to engage in the requisite long-term thinking and planning.

A question mark hangs over this Tax Summit. Will it be another talkfest with the Government going through the motions? The cynic may take the position that this is some fluff imposed on the Government by a crucial independent member of the House for ongoing support. History may well judge this summit in that light, but it does represent an opportunity for the life insurance industry to educate and enlighten everyone on the benefits it can offer to all Australians. Our industry needs to rise to this challenge via active participation and engagement.

David Glen is the taxation counsel at TAL.

www.moneymanagement.com.au September 29, 2011 Money Management — 21

OpinionLongevity

Can baby

boomers afford to grow old?

As they prepare for retirement, the baby boomer generation continues to shape advice strategies and product development, writes Barry Wyatt.

I

t’s hard to believe, but I have just celebrated my 49th birthday. That means I only have another 132 monthly pay cheques left to fund my retirement at 60, placing me at the back of the baby boomer demographic.

While it’s still some time before I take my bat and ball and head off to the financial services pavilion for the last time, my thoughts are already turning to ensuring I have sufficient funds to enjoy a retirement that promises to be long and active.

As the first baby boomers approach retirement, many of them will also be starting to think about how long their nest eggs will last.

A growing number of people are moving from accumulating assets to unlocking capital that will fund their lifestyles.

The baby boomers’ march towards retirement represents a huge opportunity and challenge for financial planners, advisers and product providers to effectively engage this segment of clients.

Baby boomers – the architects of advice Baby boomers have played a major role in shaping advice strategies and product development over the past three decades.

It’s no coincidence that trauma insurance first appeared about 20 years ago, when boomers started to take on the financial liabilities that come with house ownership and raising families, as a larger potential market prompted huge innovation in insurance product design to meet their protection needs.

Later, one of the best strategies for accelerating accumulation – transition to retirement – happened to appear shortly after the first boomers hit 55.

The influence of baby boomers on financial infrastructure continues: the unstoppable rise of self managed superannuation funds has coincided with cashed-up baby boomers looking for greater control, choice and flexibility.

Don’t rely on averages While averages are useful, they can be misleading. Retirement planning software

tends to deal in averages – whether it’s life expectancy, future returns or income generated. But we all know life isn’t as predictable as that.

While the average life expectancy of an Australian male is 83, only 4 per cent of Australian men die at this age and more than half of them live longer. For example if you are 60 and retiring today, there is a one-in-two chance that you or your spouse will still be alive after the age of 90*.

However, if you are from a mid-to-high socio-economic background, enjoy a comfortable lifestyle and are generally in good health, there’s every chance you will live longer.

Combined with increasing life expectancy, I estimate there’s a 50/50 chance that my wife or I will live to the age of 95: that means we need a 35-year retirement plan.

When it comes to predicting future retirement income needs, basing assumptions on previous average market returns can be equally as dangerous.

Let’s look at Australian share prices over the last century or so. Since 1900, the average annual return on the All Ordinaries Index was 13.6 per cent. But on only one occasion over the past 110 years have investors actually received a return between 13 and 13.9 per cent. And in only three years has the return been within 100 basis points of 13.6 per cent.

The range of returns has fluctuated – from a 40.4 per cent fall during the recent global financial crisis (GFC) to a 62.9 per cent rise in 1975 as the world’s stock markets rebounded from the oil crisis.

When it comes to predicting future returns, averages are a poor yardstick.

The risk of retiring in the wrong year As Australians live longer and enjoy more active retirements, we’re rightly hearing a lot about longevity risk. But the sequence of investment returns, which isn’t as important when accumulating, can become critical in retirement.

If you happen to retire in a year when the market loses 10 per cent, then the risk that your savings will run out within 30

22 — Money Management September 29, 2011 www.moneymanagement.com.au

years increases from 1-in-3 to 2-in-3**.

Sequencing risk isn’t a major feature of our advice terminology now, but in five years time I believe we’ll all be using this language when talking about retirement income.

Climbing down the mountain You might be surprised to learn that more people die coming down a mountain than climbing up – so much focus and planning goes into the ascent that the descent remains neglected.

It’s too easy to relax after reaching your summit and lose concentration on the road down. Having the right support is critical and anyone going it alone is taking a big risk.

As an industry, our focus has been on helping individuals build wealth. Financial advice businesses have evolved to cater for the needs of baby boomers at every life stage. With the majority of these clients still in their 50s and with high asset levels, few liabilities and surplus income, many advisers remain understandably focussed on pre-retirement planning.

As an industry, our next challenge is to help the boomers climb down the mountain by providing quality financial advice geared towards retirement income.

Onwards and downwards The very nature of retirement is changing.

It used to be a short rest before death but now it’s a reward for hard work – a chance to hitch our wagon to the grey nomad trail around Australia or travel the world.

The biggest fear for many retirees is losing their regular monthly pay cheque.

On approaching retirement, many people’s mindset changes from wealth creation to wealth protection.

They don’t want to be sweating over the small stuff and poring over the sharemarket’s daily movements. Instead, they’re looking for the peace of mind of a regular income to replace that monthly pay cheque.

The catchcry of many retirees is: “I don’t want you to make me rich, I just want you to ensure I am never poor.”

Meeting the need – income and protection The move from accumulation to retirement income will entail a complete shift in thinking about investment portfolio planning for retirees.

We have to think about building purpose-based asset allocation strategies that deliver regular income.

In addition, the GFC has left a deep scar and clients expect their advisers to be more proactive in managing the possibility of another downturn. After all, in a 35-year retirement there are likely to be seven years when the market will fall.

Over the next 10 years, I think it will become the norm for retirees to have a guarantee over a significant portion of their retirement funds. Once again, the boomers will be shaping advice strategies and product development as they have done so often in the past.

Seize the day The successful financial advice businesses of the past needed a deep understanding of financial protection and wealth accumulation.

As the generation of baby boomers continues to profoundly influence our industry, the successful financial advice businesses of the future need to add to their mix a deep understanding of postretirement strategies.

We are standing at a pivotal moment for our industry. The future of providing quality financial advice lies in these key areas: • Managing assets in retirement • Creating and maintaining a regular, sustainable income stream • Making sure clients’ incomes last the distance Barry Wyatt is the director of sales at AMP. *Australian Bureau of Statistics Life Tables, 2006-2008 ** Risk and retirement: Impact of the market downturn, Milliman, 2008.

OpinionHousing Housing markets: what you should know Tom Stevenson looks at current events in major housing markets around the world and suggests investors consider five key factors.

F

ollowing the extended residential property boom that lasted until 2007-8, many of the world’s housing markets have since undergone a synchronised downturn.

The size of the correction has varied from country to country, with significant housing recessions in some countries and strength in others – as shown below. What’s next for these markets?

First, it is less appropriate to talk of the ‘global housing market’ in a collective way.

Housing markets have become increasingly local, with correlations dropping sharply.

House prices in Hong Kong (the topperforming country) were 24.2 per cent higher than a year earlier in the first quarter of 2011. In contrast, prices in Ireland – among the worst performers – were 11.9 per cent lower in the same period.

Housing markets matter to all investors Where there is a culture of home ownership, residential property tends to account for a relatively large share of national wealth.

The US and UK are good examples of this.

Higher property prices (even if they are unrealised through sales) tend to make people feel wealthier, causing them to spend more.

Secondly, higher property prices can boost consumer spending more directly because they allow people to borrow money against the increase in the value of their homes.

Property markets can also affect fixed investment spending because higher prices tend to encourage greater construction activity. When house prices fall, as they did during the crisis, then the effects on both private consumption and fixed investment will be negative.

Table: Rank/50 1 2 3 5 8 26 27 28 29 30 42 43 45 48 49

Variation in market performance Country Hong Kong India Taiwan Singapore China Sweden Germany Australia UK South Africa Spain US Greece Ireland Russia

12-mth % change 24.2 21.9 14.3 10.5 8.4 2.1 1.3 -0.2 -0.2 -1.3 -4.6 -4.9 -5.7 -11.9 -13.9

What’s happening in the US housing market today?

Source: Knight Frank Residential Research, 17 June 2011

The significance of the US housing market is underscored by the fact that it effectively originated the global financial crisis via its sub-prime sector – aided, of course, by very loose credit and exacerbated by financial engineering. Given this history, it is reasonable to think that a clear recovery in the US housing market could have a significant positive bearing not only on the US economy, but also the global economy.

The US housing market has experienced a continued recession. According to the Case-Shiller 20-city home price index, as of April 2011 prices were almost a third lower (32.8 per cent) than the July 2006 peak; moreover, the latest reading is less than a percentage point away from the April 2009 low-point, suggesting the risk of a possible double-dip in prices.

While US gross domestic point (GDP) growth has bounced back, unemployment has remained elevated, so the cyclical backdrop is neutral at best. In addition, the supply situation is particularly unfavourable owing to the large number of foreclosed properties.

However, the negatives in the US housing market today are counterbalanced by two

key positives. From a valuation perspective, the sharp correction in prices has made housing much more affordable. In addition, since most US mortgage loans are linked to the 10-year US Treasury yield – which is near record low levels – mortgage/income ratios are also very favourable at present. On balance, while it is possible that US house prices may have a little further to fall, the chances of further big declines from current levels are fairly limited.

The economic importance of the US housing market means that serious downside risk would be mitigated by additional policy stimulus. On the other hand, if the cyclical position of the US economy improves and unemployment comes down further, then conditions could become ripe for a recovery in the US housing market. This would have positive second-order effects on consumer confidence and provide a more supportive environment for equities.

Where’s China’s housing market heading?

Apart from the US, the only other country in which the residential housing market can

6-mth % change 14.1 14.1 6.9 3.5 6.8 -0.7 -0.1 -0.9 -0.5 1.9 -2.8 -3.7 -0.4 -6.9 -13.6

3 mth % change 9.3 6.8 0.8 1.7 0.4 -1.1 -0.3 -1.7 1 1.5 -2.5 -1.9 0.3 -4.5 -13.7

be seen as having a high degree of global significance is China. Indicative of the rapid changes taking place in China, it was not until 1998, when the Chinese Government decided to privatise the country’s urban residential housing stock, that most ordinary people were able to acquire their own homes for the first time.

Today, official figures (which need to be treated with caution) claim that home ownership in the country is as high as 89 per cent. Irrespective of the precise numbers, it is clear that China’s residential sector has seen a remarkable boom in terms of ownership, investment and prices.

Partly the property boom there has reflected the fact there are relatively few other viable investment alternatives for most ordinary Chinese.

Less well appreciated, though, may be the linkage between commodity prices and China’s housing sector. For example, construction directly accounts for about 40 per cent of all Chinese steel usage, but when home appliances, property-related infrastructure and other property-dependent sectors are included, this figure jumps

further to a remarkable two thirds.

Massive investment in construction and a relentless rise in property prices have raised concerns that the sector may be at risk of overheating, with ultimately negative effects for China and the global economy. In response, the Chinese government has introduced a range of measures aimed at slowing speculative demand (especially in the luxury segment) and stimulating overall supply (especially in affordable segments). Affordability is now clearly stretched by most measures.

Fortunately, policy measures aimed at cooling the property market, and inflation generally, appear to be having some impact. The concern, however, is that instead of slowing, prices may begin to collapse.

However, a number of factors should help to mitigate the risk of a severe collapse.

Firstly, if the risk of collapse became more real, the authorities would likely take countervailing measures. Secondly, while prices appear somewhat elevated at the present time, it is worth remembering that urbanisation is increasing rapidly in China, coupled with continued strong income growth, risks over the medium to longer term should be lower on account of this.

Finally, a critical factor is that unlike in more advanced countries, the use of mortgage financing in Chinese property transactions is minimal. The lack of leverage means that, even in the event of a property market collapse, there would be fewer of the cascading negative effects we would expect to see in more highly-leveraged western markets, in terms, for example, of foreclosures, bank write-downs and associated credit tightening.

When looking at today’s housing markets, we suggest investors consider five key factors: 1. Cyclical position – as measured by real GDP growth and especially labour market conditions (ie, real income growth and unemployment).

2. Valuation – as measured by affordability ratios such as average price-to-average income and return measures such as annual rental income-to-price (ie, yield).

3. Mortgage/income ratio – the relative costliness of mortgages. Mortgage costs depend largely on the level of interest rates which makes this factor particularly crucial, especially in high-leverage markets.

4. Excess supply risk – as measured by the supply of new homes being constructed and property becoming available through foreclosures.

5. Country specific factors – many countries are subject to more individual characteristics.

Investors have to be far more selective in their analysis and investment in markets.

Tom Stevenson is the investment director at Fidelity.

www.moneymanagement.com.au September 29, 2011 Money Management — 23

OpinionPost-FOFA

Avoiding conflict of interest Samantha Hills provides tips for financial planners on how to manage and avoid conflicts of interest when dealing with clients, ahead of the proposed FOFA changes.

T

he Future of Financial Advice Reforms (FOFA) will change, to some extent, the way you manage conflicts of interest in your business. But this is not that revolutionary. Licensees are already subject to requirements which govern the way they manage conflicts of interest. If you are up to speed on your existing obligations, it will be an easier step across to the new regime, if and when it comes into play.

Conflicts of interests – AFSLs and ACLs If you have both an Australian Financial Services Licence (AFSL) and an

Australian credit licence (ACL), you may have noticed that a number of your general obligations under each licence are identical but that your conflicts of interest obligations vary slightly from licence to licence.

Under your AFSL, you must: Have in place adequate arrangements for the management of conflicts of i n t e re s t t h a t m a y a r i s e w h o l l y, o r partially, in relation to activities undertaken by the licensee or a representative of the licensee in the provision of financial services as part of the financial services business of the licensee or the representative.

24 — Money Management September 29, 2011 www.moneymanagement.com.au

This is from section 912(1)(aa) of the Corporations Act 2001.

Under your ACL, you must: Have in place adequate arrangements to ensure that clients of the licensee are not disadvantaged by a conflict of interest that may arise wholly or partly in relation to credit activities engaged in by the licensee or its representatives.

This is from section 47(1)(b) of the National Consumer Credit Protection Act 2009.

The critical differences are those in bold type above.

In Regulatory Guide (RG) 181 Licensing: Managing conflicts of interest, the

Australian Securities and Investments Commission (ASIC) defines conflicts of interest as “circumstances where some or all of the interests of people (clients) to whom a licensee (or its representative) provides financial services are inconsistent with, or diverge from, some or all of the interests of the licensee or its representatives. This includes actual, apparent and potential conflicts of interest.”

In RG 205 Credit Licensing: General conduct obligations’ ASIC states that the obligation regarding conflicts of interest arises.“where an interest of the licensee…conflicts with a legal obligation that the licensee…owes to the

if you are on top of “yourButcurrent oblications, it shouldn’t be too big a step across to the brave new world of FOFA.

”

“adequate” arrangements for managing conflicts of interest. In the advice context, if the FOFA reforms come into play, this issue will at least become clearer.

In the meantime, we believe that the most prudent and efficient course of action if you hold both an AFSL and an ACL is to apply both standards across both licenses – using the methods of controlling, disclosing or avoiding conflicts of interests so that they are managed in such a way that no conflict of interest occurs which disadvantages a client.

Conflicts of interest requirements in action

client, including one that arises under the credit legislation, National Credit Regulations, or at law (whether through statute, common law or contractual arrangements between the licensee and the client.”

This description, which is the closest thing to a definition of “conflicts of interest” offered in RG 205, seems narrower than the definition offered in RG 181.

However, in RG 205, ASIC states that, in relation to conflicts management obligations under the AFSL and ACL regimes, “the conflicts obligation for credit licensees is more explicit about the required outcomes for the consumer”.

It appears that the current AFSL regime tolerates conflicts of interest that disadvantage the client as long as these are in some way “managed”. In RG 181, ASIC states that conflicts of interest are managed by controlling, disclosing or avoiding them. This suggests that the current AFSL regime might tolerate a conflict of interest which disadvantages the client – provided the conflict has been disclosed to the client.

The danger is that ASIC might take the view that this does not amount to

No matter what the fate of the FOFA reforms, conflicts of interest will remain an issue dear to ASIC’s heart. Recently, the regulator conducted a surveillance exercise into a financial planning business and, as a result, imposed additional conditions on its AFSL. This is one form of action ASIC can take if it identifies issues or concerns with the way a licensee is operating.

It was concerned that the licensee had entered into an agreement with an investment platform which gave rise to a conflict of interest. ASIC said that, in providing advice to clients to move from existing products to the platform, the licensee made insufficient disclosures regarding its conflict of interest. ASIC’s comment suggests that, in this case, disclosing the conflict would have been an appropriate way of managing it. RG 181 suggests that there will be times when a conflict is so great that the only appropriate way of managing it in accordance with section 912A(1)(aa) is to avoid it altogether.

ASIC had other concerns about the licensee on this occasion as well. Where ASIC raises concer ns about AFSL holder’s arrangements for managing conflicts of interest in the advice process, it will often have other concerns about the advice process as well. This is because many of the requirements applicable to the advice process themselves act to manage conflicts of interest – for example, the disclosure of commissions or demonstrating a reasonable basis for the advice.

Your AFSL and ACL are not the end of the story, even putting FOFA to one side for the moment.

Fiduciary duty and conflicts of interest It is possible that, at times, you have a fiduciary duty to your client. Fiduciary duty is a concept which derives not from the law made by the Parliament but from that which has developed through the courts – initially in England and then later in our own courts here in Australia.

A fiduciary duty imposes particular obligations on one party towards another party – for example, an obligation not to put your own interests ahead of those of the other party.

Particular categories of relationship automatically give rise to a fiduciary duty – for example, the relationship between solicitor and client, or the relationship between agent and principal.

By contrast, we recently considered, in the context of advising a client, whether the relationship between broker and client automatically entails a fiduciary duty and found that it does not.

Where the particular relationship does not automatically give rise to a fiduciary duty, other characteristics of a relationship might make it (or parts of it) fiduciary in nature. One characteristic is one party placing its trust in the other party – as a client might do in their adviser. There is ongoing debate as to whether financial planners generally owe fiduciary duties to their clients.

Such debate takes into consideration the kinds of characteristics present in the relationship typically in place between adviser and client. The reality is that whether or not a particular relationship is fiduciary will vary depending on the adviser and the par ticular client involved.

In our view, if you carefully abide by the requirements imposed on you by legislation relating to your ACL and/or AFSL, you have a good chance of avoiding being accused of breaching a fiduciary duty, should one exist.

In comes FOFA FOFA introduces a number of requirements, such as the “best interests” duty, which, if they come into play and you meet them, will help you steer clear of conflicts of interest. FOFA also proposes to introduce two new specific obligations relating to conflicts of interest in the advice process.

These are: 961K — Conflict between the client’s interests and those of provider.

If there is a conflict between the interests of the client and the provider’s interests, the provider must give priority to the client’s interests when giving the advice; and 961L — Conflict between the client’s interests and those of licensee or authorised representative: If the provider knows, or reasonably ought to know, that there is a conflict between the interests of the client and the interests of: (a) A financial services licensee of

whom the provider is a representative, or (b) An authorised representative of whom the provider is an employee, then the provider must give priority to the client’s interests when giving the advice.

According to the proposed section 961, the “provider” will be the individual who provides the advice. “Conflict” is not defined in the proposed amending legislation. It is hard to predict precisely how ASIC will interpret these provisions if they come into play.

Nevertheless, it is clear that these proposed sections would make the adviser responsible for prioritising the client’s interests, in the course of giving the advice, over those of the adviser, the adviser’s employer (if they are employed by an authorised representative) and the adviser’s licensee.

In our view, these sections will make it very difficult, for example, for an adviser to recommend that a client changes from an existing to a new life insurance policy if the existing one does not offer a commission to the adviser but the new one does – unless it is clearly in the client’s interests to move to the new policy.

This is the same outcome as we would expect under the existing section 945A of the Corporations Act 2001, which requires you to have a reasonable basis for your advice. Under the proposed legislation, section 945A would be repealed.

The G over nment explains these proposed new sections in its explanatory memorandum as follows: Consistent with the best interest obligations, a provider does not breach the obligation to give priority merely by accepting remuneration from a source other than the client (for example, a commission paid by an insurance provider). However, if the provider gives priority to maximising a non-client source of remuneration over the interests of the client, the provider will be held in breach of their obligations.

The bottom line Conflicts of interest should be carefully managed by both holders of AFSLs and holders of ACLs. Where one entity holds both an ACL and an AFSL, the s a m e m e a s u re s c a n b e e m p l oy e d across conflicts that appear in both the f i n a n c i a l s e r v i c e s a n d t h e c re d i t spheres – provided that the measures meet the requirements under both regimes. Be mindful of the possibility that, at times, with some of your clients, a fiduciary duty may exist. This w i l l a l s o re q u i re y o u t o c a re f u l l y manage, or steer clear of, conflicts between your interests and those of the client.

In due course, new legislative requirements will tighten up the way you manage (and sometimes avoid) conflicts of interest. But if you are on top of your current obligations, it shouldn’t be too big a step across to the brave new world of FOFA. Samantha Hills is a lawyer at Holley Nethercote.

www.moneymanagement.com.au September 29, 2011 Money Management — 25

Toolbox Clawback waive Julie Steed looks at the complexities around the waiving of the five-year claw-back for SMSFs.

O

n 25 August 2011 a social security specification came into effect which will permanently waive the Centrelink five-year clawback for self-managed superannuation funds (SMSFs) and small APRA funds (SAFs) that restructure asset test exempt complying pensions to a term allocated pension.

The arrangements apply to both 100 per cent and 50 per cent asset test exempt lifetime and life expectancy pensions in SMSFs and SAFs. The exemption does not apply to retail income stream products.

This news will be welcomed by many clients whose account balances have reduced to the point where the balance no longer effects their Centrelink entitlements under the assets test. This may also provide relief for aging clients in SMSFs who no longer want the burden of running their own fund.

Centrelink five-year clawback If a lifetime or life expectancy pension is converted to a term allocated pension then the assets test exemption that applied to the pension is lost. In addition, Centrelink will generally assess the pension against the assets test for the previous five years. If including the pension account would have resulted in a lower amount of pension being paid, then Centrelink will raise a debt. The debt cannot be paid from the pension – it must be paid by the pensioner from personal sources.

Many clients have experienced a decline in the value of their complying pension, either as a result of continued

drawdowns and/or the effects of recent poor investment returns. As a result, many clients’ Centrelink benefits will not be affected by the current pension account being included in their assets test.

However, the five-year clawback debt could still be a significant deterrent.

Previous relief In response to the global financial crisis, the Government announced temporary relief for the 2009/10 year. The relief was offered to clients whose complying pensions had failed to meet the high probability test. This test requires an actuarial certification that the fund has a high probability (typically a 70 per cent probability) of meeting its future liabilities. Any assets test exemption was lost going forward, but the five-year clawback did not apply.

Despite much lobbying from the industry, no relief was extended for the 2010/11 year.

Importantly, the current relief does not require that pensions have failed the high probability test – the relief will be available to all lifetime and life expectancy pensions.

Options for clients The new regime will provide three avenues for clients with asset test exempt complying pension in SMSFs and SAFs to restructure their pensions: Pre-20 September 2004 pensions 1. Restructure to a term allocated pension within the SMSF or SAF. The

pension will lose its 100 per cent assets test exemption but no five-year clawback will apply.

2. Restructure to a term allocated pension with a retail provider. The pension will lose its 100 per cent assets test exemption but no five-year clawback will apply.

3. Restructure to a life office complying annuity. The pension will retain its 100 per cent assets test exemption and no fiveyear clawback will apply.

income streams.

Many product providers closed their term allocated pension products around September 2007 when the 50 per cent assets test exemption was reduced to nil.

Review of the workings of a term allocated pension

Pensions commenced between 20 September, 2004 and 31 December, 2005 1. Restructure to a term allocated pension within the SMSF or SAF. The pension will lose its 50 per cent assets test exemption but no five-year clawback will apply.

2. Restructure to a term allocated pension with a retail provider. The pension will lose its 50 per cent assets test exemption but no five-year clawback will apply.

3. Restructure to a life office complying annuity. The pension will retain its 50 per cent assets test exemption and no fiveyear clawback will apply.

Advisers may wish to brush up on the workings of a term allocated pension as we do not usually recommend them to clients since the 50 per cent asset test exemption ceased at 19 September 2007. The purpose of a term allocated pension is to provide a pension, paid at least annually for the required payment term. This type of pension is designed to last for a specific term, based on a client’s life expectancy, and to have a zero capital balance at the end of the term.

A term allocated pension may be commenced with either a rollover from a lifetime or life expectancy complying pension account or a rollover from another term allocated pension account.

Term allocated pension options

Conclusion

The SMSF or SAF may be able to commence a term allocated pension in their existing fund. The trust deed will need to be reviewed to ensure that members are able to commence this type of income stream.

Clients may also look to transfer to a retail offering. Term allocated pensions may also be known as market linked income streams or non-commutable

This relief provides an opportunity for advisers to assess the value of the current Centrelink asset test exempt status of any complying pensions held by their clients in SMSFs and SAFs and to restructure to a term allocated pension if this meets the client’s needs.

Julie Steed is the technical services manager at IOOF.

Get the satisfaction you’ve been looking for with FirstWrap & FirstChoice. Contact your Business Development Manager for transition services, call 13 18 36 or visit colonialfirststate.com.au/satisfaction This is general information only and does not take into account any individual objectives, financial situation or needs. Investors should consider the relevant PDS available from us before making an investment decision.

Colonial First State Investment Limited ABN 98 002 348 352 is the issuer of the FirstChoice range of super and pension products from the Colonial First State FirstChoice Superannuation Trust ABN 26 458 298 557.

Colonial First State also issues interests in investment products made available under FirstChoice Investments and FirstChoice Wholesale Investments. Avanteos Investments Limited ABN 20 096 259 979 AFSL 245531 is the issuer of the FirstWrap super and pension products from the Avanteos Superannuation Trust ABN 38 876 896 681. Avanteos operates the FirstWrap service. CFS2042/MM/AS/T 26 — Money Management September 29, 2011 www.moneymanagement.com.au

Appointments

Please send your appointments to: angela.welsh@reedbusiness.com.au

Don Sillar ANZ Wealth has appointed a new head of sales, former BT executive Don Sillar.

The appointment was announced by ANZ Wealth head Paul Barrett, who said Sillar would lead ANZ Wealth's distribution team and be responsible for promoting the group's products through independent, aligned and salaried financial planners.

He said the role was key to developing the group's approach to distribution and realising the cross-sell opportunities arising from the creation of the ANZ Wealth Business Unit.

Sillar, who most recently was head of broking services at E*Trade, will take up his new role on 24 October.

MATTHEWS Steer Chartered Accountants has made two senior appointments in what the firm sees as a boost to its accounting and financial planning teams. Harry Chemay has been appointed financial planning manager, with Mark Lane as the new team manager and client manager.

Chemay has over 16 years experience in finance and investment. In his new role with the Melbourne-based accounting firm, he will advise clients on a range of planning issues including self-managed superannuation funds.

Chemay had previously worked as an investment consultant at Mercer, and before that as a financial planner at WHK Smith Read Prescott, specialising in selfmanaged super.

Lane is a qualified chartered accountant with over 20 years experience in the accounting profession. In his new position, he will help clients with their accounting matters, such as taxation, business services, planning and advisory needs, while also managing one of the company's accounting teams.

Lane's previous experience as an accountant includes consulting to business in agriculture, retail, transport and manufacturing, as well as

Move of the week SUNCORP Life has announced the appointment of Sean Carroll to the role of executive general manager (EGM) for Life Risk Australia, based in Sydney.

Carroll moved directly from his position as EGM of Suncorp Life in New Zealand, where he was responsible for the New Zealand-based activities under the brands of Asteron and AA Life. He had been acting in the Australian role for five months, while still managing the firm’s New Zealand operations.

Commenting on Carroll’s new position, Suncorp Life chief executive Geoff Summerhayes said, “Life Risk is the engine room of our life product and service offer at Suncorp Life, and the EGM role is critical to our business success.”

consulting to high net worth individuals and investors.

AUSTRALIAN Unity Investments (AUI) has made several senior appointments as part of a restructure of its business operations.

Stephen Alcorn has joined AUI as head of institutional, based in Sydney. He was most recently deputy managing director at BNY Mellon Asset Management, and also held the roles of director, institutional business and head of consultant relations during his time with the firm.

Kara Gilmartin, an internal hire for AUI, has moved to the role of head of joint venues. She previously worked as AUI’s executive

manager supporting the chief executive officer, David Bryant, in business-wide and joint venture initiatives.

Peter Loosmore has joined as the new chief operating officer (COO), having previously held COO roles at Suncorp Group, St George Bank, Asgard Wealth Solutions and Rothschild Australia Asset Management, as well as management consulting roles with Deloitte.

Leonie Pratt, who was previously AUI’s chief operating officer, has moved to the newly-created role of general manager – executive, where she will look after AUI’s corporate governance responsibilities including licences and capital usage. Pratt has over 20 years finan-

Opportunities FINANCIAL ADVISER – RISK Location: Adelaide Company: Terrington Consulting Description: An international stockbroking firm based in the Adelaide CBD is seeking a financial planner to specialise in the provision of risk strategy to an existing base of high-net-worth clients.

In this role, you will manage a book of existing clients in a proactive manner, ensuring that maximum revenue and referral outcomes are achieved.

Tertiary educated investments-focussed individuals are encouraged to apply.

Completion of DFP 1-4 is essential, while DFP 1-8 and the CFP accreditation are highly sought after.

For more information and to apply, please visit www.money management.com.au/jobs or contact Emily at Terrington Consulting – 0422 918 177 / (08) 8423 4444 or Emily@terringtonconsulting.com.au.

FINANCIAL PLANNER – ASSOCIATE Location: Sunshine Coast Company: ANZ Financial Planning Description: ANZ Financial Planning is seeking an associate financial planner to identify and act on business opportunities,

Sean Carroll

cial services industry experience, including eight years at Intech in such roles as head of institutional client services and head of investment operations.

HASTINGS Funds Management has appointed a new chief executive, with former Sensis chief executive Andrew Day taking up the position.

Day's appointment was announced by Hastings chairman, Alan Cameron, on 19 September, which also marked Day’s commencement date. Day’s most recent position was as chief executive of an Irish-based telecommunications investment company, Eircom.

For more information on these jobs and to apply, please go to www.moneymanagement.com.au/jobs

and build relationships to promote services.

You will work with an experienced financial planner as your dedicated mentor to help you in this role.

A DFS 1-4 is required, along with a solid understanding of the financial planning industry. You should also be progressing towards your ADFS qualification.

For more information and to apply visit www.moneymanagement.com.au/jobs and www.anz.com.au/careers.

adherence to the relevant compliance frameworks.

You must work well in a team environment, and possess an ADFS 1-8 qualification, a minimum of two years experience in financial planning, exceptional communication skills, sound analytical and problem-solving skills, and attention to detail.

To find out more, and to apply, visit www.moneymanagement.com.au/jobs or contact Ric Zanetti on 0413 020 864.

FINANCIAL ADVISOR FINANCIAL PLANNER Location: Brisbane Company: Zanetti Recruitment Description: One of Australia’s largest financial planning institutions is now looking for a financial planner to join its wealth management team.

Reporting to the financial planning manager, your role will be to provide advice to new and existing clients in the areas of superannuation, risk and investment. Your key responsibilities will include assisting customer needs and providing holistic and tailored solutions, coaching and mentoring team members to help generate referrals, and ensuring

Location: Adelaide Company: Terrington Consulting Description: An opportunity is now available for an experienced financial adviser to join one of Australia’s largest national dealer groups.

You will have a proven track record working as a financial adviser within the ‘mums and dads’ market, and providing ethical solutions on a fee-for-service basis. In addition, you must be comfortable specialising in risk, transition to retirement and investment strategies.

The successful applicant will have the opportunity to either purchase an existing client book or service the book with a view

to building equity over time.

For more information and to apply, visit www.moneymanagement.com.au/jobs or contact Emily on 0422 918 177 / (08) 8423 4444, Emily@terrington consulting.com.au.

SENIOR PARAPLANNER Location: Brisbane Company: Zanetti Recruitment Description: A financial planning organisation on Brisbane’s Southside is now seeking a financial planner to join its team. The firm specialises in taxation, salary packaging arrangement, investment advice and lending solutions.

In this role you will be supporting a couple of financial planners who will assist in the construction and preparation of SOAs that meet relevant legislative, compliance and company standards.

Responsibilities include attending client meetings, filling in the “fact find” for clients and preparing SOAs for retirees and pre-retirees.

You will require a minimum of three years experience as a paraplanner, and a DFS 1-4, or preferably an ADFS. For more information and to apply, visit www.moneymanagement.com.au/jobs.

www.moneymanagement.com.au September 29, 2011 Money Management — 27