money management (april 5, 2012)

www.moneymanagement.com.au

The publication for the personal investment professional

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By Mike Taylor

THE Financial Planning Associa-tion (FPA) appears to be sufferinga problem with member engage-ment, according to new researchreleased by Wealth Insights.

The research, the result ofsurveys and focus groups conduct-ed by Wealth Insights over recentweeks, indicated that while 22 percent of those surveyed were FPAmembers and were satisfied withthe organisation, an almost equalnumber of planners who aremembers do not deal enough withtheir association to have a view.

The Wealth Insights data alsorevealed that 13 per cent of the

planners surveyed who said theywere members of the FPA weredissatisfied.

The release of the Wealth Insightsdata on satisfaction levels of themembers of FPA follows on from aweek during which the organisa-tion was subject to some intensecriticism over its handling of nego-tiations around the Government’sFuture of Financial Advice bills –particularly the perceived influenceof the Industry Super Network.

Wealth Insights invited the plan-ners it surveyed to give their reasonsfor dissatisfaction with the organi-sation, with many comments frommembers referring to the costsinvolved in maintaining status

under the FPA’s Certified FinancialPlanner (CFP) designation.

A number of respondents suggest-ed they had maintained their FPAmembership to ensure they couldcontinue to use the CFP designation.

Few of the respondents appearedto entirely recognise that the FPAhad changed its member structure,and even amongst those who didrecognise the change, a numbersuggested the organisation was stillunduly influenced by the majorinstitutions.

Among non-members, themajor issue appeared to be a beliefthat the FPA had not been strongenough in resisting the ISN or theGovernment’s FOFA changes.

SCALED advice remains an area of con-siderable uncertainty despite theFuture of Financial Advice bills havingpassed the House of Representatives.

That was the bottom line of a MoneyManagement roundtable held in theimmediate aftermath of the legislationpassing the lower house, involvingFinancial Planning Association (FPA)chief executive Mark Rantall, Associa-tion of Financial Advisers (AFA) chiefexecutive Richard Klipin, Mercer’s Jo-Anne Bloch, and Premium WealthAdvisers general manager Paul Hard-ing-Davis.

Rantall told the roundtable thatwhere scaled advice was concernedthere was still considerable uncertaintyabout how it could be provided underthe new best interests test.

He said that as a result of mattersnot being clarified prior to the legisla-tion being debated in the Parliament, itwas believed that the Government

would provide greater clarity in anexplanatory memorandum.

Rantall said that while Treasury offi-cials had indicated they believed theprovision of scaled advice would notrequire a full fact-find on the part offinancial planners, the FPA believed itrequired more comfort on the issue.

“We need more comfort than that,and we believe that comfort is goingto be housed in the explanatory memo-randum,” he said.

Rantall said the FPA and thebroader industry would need to workwith both Treasury and the AustralianSecurities and Investments Commis-sion (ASIC) to ensure appropriate reg-ulatory guidance was received toenable scaled advice to happen.

Mercer’s Bloch said, however, thatreassurances had been received fromboth ASIC and Treasury behind the

Many FPA members disengaged

Continued on page 3

Lingering uncertaintyon scaled advice

FOFA DEBATE: 2 | FIXED INCOME ROUNDTABLE: Page 15

Vol.26 No.12 | April 5, 2012 | $6.95 INC GST

By Chris Kennedy

ALMOST a year after starting up boutique fundmanager Avoca Asset Management, former UBSsmall caps analysts John Campbell and JeremyBendeich are starting to significantly build theirfunds under management (FUM), due mostly toan influx of institutional money.

Avoca officially commenced operations on1 May last year under the Bennelong FundsManagement umbrella, with fund inception at1 July last year. It has grown its FUM fromaround $10 million at 1 January this year toaround $63 million currently, primarily due tointerest from institutional investors.

As at 28 March Avoca had slightly outper-formed its benchmark, returning 1.6 per centagainst 1.1 per cent for the S&P ASX Small Ordi-naries Index over the same time period.

Managing director and portfolio manager JohnCampbell said Avoca was beginning to build arapport with larger asset consultants, and the factthey had earned meetings with several institu-tional investors was a positive sign.

The fund has so far been rated three stars byStandard & Poor’s and recommended by Zenith.

Attracting a higher rating from the retail ratingshouses would be a necessary step in attracting

significant retail money and gaining a footholdon platforms, but that would take time, Camp-bell said.

He hoped the fund would attract a further $150million to $200 million by the end of the year,which should be possible if two or three institu-tional mandates were awarded in that time.

Bennelong chief executive Jarrod Brown saidhe’d been warmly encouraged by the response sofar from the asset consultant community, but afour star or recommended or equivalent rating

Avoca gathers momentum

2

28%

12% 13%

22%

23%

FPA Member

58%

Not Member

42%

Satisfaction with the FPA

Do not deal with the FPA enough to comment

Dissatisfied

Satisfied

Do not deal with the FPA enough

to comment

Source: Wealth Insights

Table Satisfaction with the FPA

John Campbell

Continued on page 3

Keeping your friends close

If the comments section on the MoneyManagement website is to be takenas a guide, then the Financial Plan-ning Association (FPA) continues to

weather strong criticism over the mannerin which it secured changes to theGovernment's Future of Financial Advice(FOFA) bills.

It is therefore little wonder that FPAchairman Matthew Rowe and chief execu-tive Mark Rantall were last week selling themessage that the industry ought to putaside the machinations which led to theFOFA changes, enabling it to unite to takeadvantage of what was achieved.

Looked at objectively, the attitudeadopted by Rowe and Rantall seemsreasonable enough. The FOFA bills whichemerged from the House of Representa-tives just over a fortnight ago are nowherenear as objectionable as they might havebeen. The delivery of class order relief withrespect to opt-in represented a particularachievement.

However it says something about theevents which surrounded the final hoursof negotiations around FOFA that the FPAinsists it remains firmly opposed to opt-in,and that it will welcome its removal fromthe Act in the event that the Coalition gains

government at the next Federal Election.It is also in the nature of such things,

that the FPA might have endured less crit-icism if it had negotiated the legislativechanges a month earlier and without theapparent involvement of the IndustrySuper Network (ISN).

If the FPA had negotiated the changesdirectly with the Minister for FinancialServices, Bill Shorten, it is arguable it wouldhave faced significantly less criticism.

But Rowe and Rantall are right. Whilemany people will continue to harboursome animosity over the manner in whichthe FOFA changes were achieved, the

interests of the broader financial servicesindustry will not be served by continuingpublic argument and division. The bestinterests of the industry will be served byuniting to ensure the legislation deliversthe best possible outcome.

Further, if the Industry Super Networkhopes to hold itself out as an honestbroker, then its involvement in shapingthe final content of the FOFA bills oughtto preclude it from undertaking anyfurther funding of advertising which inany way diminishes the role of financialplanners or the value of advice.

Having apparently played a role inbrokering an accommodation around opt-in and other elements of the FOFA bills, theISN has effectively locked itself into theoutcome. It can hardly justify expendingmembers' funds disparaging an environ-ment it has helped create.

In weighing up the true impact of theaccommodations and deals struck aroundthe FOFA bills last month, planners shouldrecognise that political reality suggests theimmediate post-FOFA environment willlikely last little more than six months pastthe next Federal Election.

– By Mike TaylorABN 80 132 719 861 ACN 000 146 921

2 — Money Management April 5, 2012 www.moneymanagement.com.au

[email protected]

“The best interests of theindustry will be served byuniting to ensure thelegislation delivers the bestpossible outcome.”

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Average Net DistributionPeriod ending March '1110,207

By Chris Kennedy

WHK has overhauled its risk approvedproduct list (APL), removing CommIn-sure and MLC while adding BT Life andAsteron to the existing stable of TAL,Zurich and Macquarie Life.

The three-year APL partnership withthe newly approved providers beganon 1 March following a tender processthat sought commitment from insur-ers for adviser education and support ingaining efficiencies through technolo-gy, WHK stated.

Products also had to address theneeds of particular occupational groupswithin the WHK client base such as ruraland mining, medical professionals, qual-ified tradespeople and self-managedsuper fund (SMSF) clients requiringinsurance, said WHK Group head of

financial services John Cowan.He said the group seeks to remain

up-to-date on regular changes in themarketplace, then does a “deep dive”once every three years.

“We also wanted key partners thatcould provide WHK’s distributionnetwork with adviser educationsupport, high levels of service and dedi-cated sales campaign involvement,”Cowan added.

He said that having a smallernumber of providers on the APLallowed the group to build a relation-ship with those providers.

“It allows them to invest more in usbecause they know we’re not going tothe wider market as whole,” he said.The condensed APL also makes it easierfor advisers to thoroughly know thoseproducts, Cowan added.

He said it was increasingly impor-tant to have technological integration,and the group sought a commitmentto greater efficiency through data feedsinto COIN software.

The tender process was managed byWHK’s Maurice Thaung, working withtender manager Life Risk Partners, andwas an in-depth process lasting severalmonths.

Life Risk Partners managing direc-tor Stephen Dingjan said the processwas flexible enough to accommodatea high level of customisation.

“For example, we assisted WHK todetermine which companies could bestaddress key needs of the business toprovide quality product and sales skillstraining, and the ability to provide down-loads of existing policy data in a consis-tent and coherent manner,” he said.

www.moneymanagement.com.au April 5, 2012 Money Management — 3

News

Important Note: AMP Capital Investors Limited (ABN 59 001 777 591, AFSL 232 497) (AMP Capital) is the responsible entity of the AMP Capital Multi-Asset Fund(the Fund) and the issuer of the units in the Fund. To invest in the Fund, investors will need to obtain the current Product Disclosure Statement (PDS) fromAMP Capital. The PDS contains important information about investing in the Fund and it is important that investors read the PDS before making a decisionabout whether to acquire, or continue to hold or dispose of units in the Fund. Neither AMP Capital, nor any company in the AMP Group guarantees therepayment of capital or the performance of any product or any particular rate of return referred to in this document. While every care has been taken in thepreparation of this material, AMP Capital makes no representation or warranty as to the accuracy or completeness of any statement in it including, withoutlimitation, any forecasts. This document has been prepared for the purpose of providing general information, without taking account of any particular investor’sobjectives, financial situation or needs. An investor should, before making any investment decisions, consider the appropriateness of the information in thisdocument and seek professional advice, having regard to the investor’s objectives, financial situation and needs. ACI0037/MM/JUN/R

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AMP Capital can help you put

in its place.

WHK revamps risk APL

Avoca gathers momentum

would be required from retailratings houses to really be inline for retail opportunities.

“It follows that our expec-tations of growth in the short-to medium-term are likely tobe skewed to wholesaleinvestments,” he said.

Brown said that now thefund had been fully opera-tional for a number ofmonths, it was encouragingthat some of the investors monitoring the fund were start-ing to step up to the plate and invest.

Zenith senior investment analyst Steven Tang said Zenithhad seen the positive way Bennelong had worked with otherfund managers previously and was confident it would do thesame with Avoca. The fact the portfolio managers were employ-ing the same processes as they did at UBS also contributed tothe early recommended rating for the fund, he said.

scenes that scaled advicewould be allowed to workand blossom.

“What is important isthat the licensee has flexi-bility so that the underpinis there to allow it (scaledadvice) to occur,” she said.“And Mercer, for example,will never provide transitionto retirement advice on thephone, but some otherlicensees may choose todo that.”

Bloch said it needed tobe understood that thequestion of what wasincluded in the context ofintra-fund and scaled advicewas never going to be inblack and white, and itmight fall to the licensee tochoose how they wished tocomply, and therefore whatservices they were preparedto offer.

However, PremiumWealth’s Paul Harding-Davissaid that as attractive as theprovision of scaled advicemight be, many of Pre-mium’s members would nothave the scale to deliversuch an offering.

“In all honesty I think weare sitting in the campwhere scaled advice is justnot going to be commercialfor us and isn’t going to suit

our client base,” he said.What is more, Harding-

Davis said he had seennothing in the legislationthus far which would con-vince him that Premium’sadvisers should not do afull, holistic fact-find.

However, he said themain impediment for Pre-mium with respect to scaledadvice was not technical,but commercial.

The AFA’s Richard Klipinagreed that the commercialfactors mitigate againstmany advisers providingscaled advice, particularlyspecialist corporate super-annuation fund advisers.

“They are going to haveto find a commercial way todeliver scaled advice in theservices and educationpiece they do,” he said.

– By Mike Taylor

Lingering uncertaintyon scaled adviceContinued from page 1

Continued from page 1

Mark Rantall

Jarrod Brown

For more exclusive content,download the MoneyManagement iPad® app.

News

By Milana Pokrajac

PLANNERS have estimated athird of their clients were not ontrack to achieving a comfortableretirement, according to a surveyreleased by Investment Trends.

According to the December2011 Retirement Planner Report,financial planners anticipate 33per cent of their clients agedunder 75 will be dependent on

the age pension for more thanhalf of their income when theyretire.

By the time they reach theages between 84 and 95, agepension would make up 54 percent of their income, said Invest-ment Trends senior analystRecep Peker.

“In light of this, it is not surpris-ing that in 2011 planners advised69 per cent of their pre-retiree

clients to contribute more to theirsuper, 26 per cent to retire laterand 13 per cent to downsize theirhome,” Peker said.

“Most planners are not shy ofrecommending the tough strate-gies required to help their clientsget closer to their retirementgoals,” he added.

However, Australians who usea planner are more likely to feelo n t ra c k t o a c h i e v i n g t h e i r

retirement goals.“The proportion of those who

don’t feel on track is 19 percent-age points higher at 42 per centamong those who don’t use aplanner,” Peker said.

The Investment Trends report,which was based on a survey of1,027 financial planners, alsofound that they are now provid-ing more advice on retirement-specific needs.

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Some see investmentas an abstract game of numbers.


By Tim Stewart

UNLISTED property schemeswill be required to adhere to sixnew disclosure benchmarksfrom 1 November 2012.

Australian Securities andInvestments Commission(ASIC) Regulatory Guide 46has been updated to includebenchmarks relating to theunlisted property scheme’sgearing policy, interest coverpolicy, interest capitalisation,valuation policy, related partytransactions and distributionpractices.

The scheme must disclosewhether each benchmark is‘met’ or ‘not met’, on an ‘ifnot, why not’ basis, accordingto RG 46.

The regulatory guideexpresses ASIC’s concern thatunlisted property schemesoften appeal to retail investors“who may believe that theinvestment offers capital sta-bility and consistent ongoingreturns that are not likely tovary significantly”.

ASIC commissioner GregTanzer warned that while“many Australians like to investin real estate”, unlisted prop-erty schemes “carry risks aswell as opportunities”.

“It’s necessary to ensureinvestors have the informationthey need to make informedinvestment decisions, as inade-quate disclosure can contributeto investors not understandingthe risks,” Tanzer said.

Responsible entities mustalso ensure that the advertis-ing of unlisted propertyschemes is consistent withthe disclosure of the newbenchmarks in the ProductDisclosure Statement (PDS).

Responsible entities mustdisclose the benchmarks andthe new principles to investorsby 1 November 2012, andnew PDSs after 1 November2012 must include “promi-nent and clear disclosure” ofthe benchmarks.

ASIC upsproperty schemedisclosure

Recep Peker

One third of clients not on track to achieve comfortable retirement


News

By Chris Kennedy

T H E Se l f - Ma n a g e d Su p e rFund Professionals’ Associa-tion of Australia (SPAA) hasannounced it will reform itsi n t e r n a l m e m b e r c o d e o fc o n d u c t s o t h a t S PA Amembers are exempt fromopt-in requirements whenFuture of Financial Advice(FOFA) reforms take effect.

Minister for FinancialServices and SuperannuationBill Shorten recently announcedthat although opt-in require-ments would remain a part ofthe FOFA reforms, adviserscould obviate the need for opt-in if they were part of a profes-sional organisation governed byan acceptable code of conduct,as determined by the AustralianSecurities and Investments

Commission (ASIC).SPAA chief executive Andrea

Slattery said the group wouldwork closely with ASIC toensure i ts code of conductmeets the required standard toexempt members from opt-in.

“ The FOFA refor ms wil lresult in the raising of stan-dards across the financial plan-ning profession, which is aposit ive step to boosting

consumer confidence in advi-sors,” Slattery said.

According to SPAA, a statu-torily imposed opt-in regime isunnecessar y, because theintroduction of the best inter-est duty, the banning ofcommissions, and the use offee for service will assist inbuilding trusted relationshipswith clients based on agreedterms.

SPAA aims to exempt members from opt-in

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You see smaller companiesWe see hidden gems

By Mike Taylor

RATINGS house Standard& Poor’s has placed AMPCapital’s property andlisted infrastructurefunds “on hold” follow-ing the company’sannouncement it will beending its joint venturewith Brookfield Invest-ment Management.

The AMP Core Prop-er ty Fund rat ing hadalso been placed “onhold” fo l lowing thechanges due to aninvestment of about 25per cent of funds undermanagement in theglobal l isted proper tysecurities strategy.

The rat ings housedescribed the changesas “a significant devel-opment – one whichaf fects a number ofAMP Capital-distributedand AMP Capital Brook-field managed funds”.

I t sa id that i t hadplaced rat ings of theaffected funds on holduntil it could meet withAMP Capital.

AMP Capital announcedthis week it would bringthe management of itslisted property and listedinfrastructure capabilitiesin-house – somethingthat would have signifi-cant implications for theinvestment teams.

AMP Capitalfunds placed“on hold”

Andrea Slattery

News

By Chris Kennedy

BANK of Queensland (BOQ) has announceda $450 million equity raising to strengthenthe bank’s Tier 1 capital position inresponse to an expected loss of $91 millionfor the six months to 29 February 2012.

The loss was contributed to by a down-turn in Queensland tourism and in thecommercial and residential propertymarket, partly due to recent natural disas-ters in the state, BOQ chief executiveStuart Grimshaw said.

The $450 million equity raising wouldconsist of an institutional placement toraise approximately $150 million, aninstitutional entitlement offer to raiseapproximately $135 million, and a retailentitlement offer to raise approximately$165 million, the bank announced.

The equity raising would strengthen thebank’s Tier 1 capital ratio from 6.4 percent to 8.6 per cent, fund organic growthopportunities and fund the redemptionof the remaining $105 million Tier 2 con-vertible notes.

“This equity raising will strengthen ourbalance sheet and provide Bank of Queens-land with the capacity for continuedgrowth,” Grimshaw said.

“The proceeds will be used to ensureBank of Queensland is one of the best pro-tected banks in Australia, with one of thehighest Core Tier 1 capital ratios, while alsoallowing us to strengthen provisioning ofour current loan book,” he said.

The bank also announced a sightlyincreased underlying profit before tax of$222 million for the half year, as well as a

significantly increased impairment expenseof $328 million, up from $134 million inthe prior corresponding period.

Grimshaw said he expected conditionsin Queensland to remain challenging overthe next few years and a continuation ofhigher competition in the banking market.

The bank would continue to focus onsmall-to-medium businesses, agribusi-nesses and its core retail customers as itlooked to grow “above system” over thelong-term while maintaining costs at orbelow the inflation rate, he said.

Bond ETFsshouldn’t replaceterm depositsBy Tim Stewart

BOND exchange-traded funds(ETFs) shouldn’t replace termdeposits in portfolios – rather,they should be used strategi-cally to achieve investor goals,says Russell Investments direc-tor of ETFs Amanda Skelly.

While bond ETFs have lowvolatility compared to hybrids,term deposits have zero volatil-ity on their capital – which isvery important to investors,Skelly said.

Following the launch of threebond ETFs on the AustralianSecurities Exchange earlier thismonth, Russell has seen thebiggest take-up from retailinvestors, said Skelly.

“We’re not seeing a lot ofinterest from institutions. Andthe reason is they can accessbonds themselves … at verylow cost. Right now it’s prima-rily more of a retail proposi-tion,” Skelly said.

But advisers need to educatetheir clients about bond ETFsand the way they can be used tocomplement cash and hybrids,added Skelly.

“We recognise that there arerisks with putting these tools ininvestors’ hands and saying ‘onyour way’. We’ll be giving tiltingadvice quarterly and providingadvice on what to do,” she said.

It was also up to planners toeducate their clients about therisks of hybrids, she added.

“There’s been a huge take-up of hybrids of late. We are alittle concerned about therush to hybrids, because wefeel that people don’t reallyunderstand how they can actin difficult market environ-ments,” Skelly said.

In fact, there have beenrecent examples of hybridissuers being required to stoptheir coupon payments, sheadded.

“The common phrase is:When you want hybrids to actlike bonds, they act more likeequities,” Skelly said.

BOQ announces $91m loss; $450m equity raising

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IT’S A NEW WORLD.

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News

ISN urged to stop anti-planner advertising post-FOFABy Mike Taylor

THE Industry Super Network (ISN) has nojustification for running its ‘compare the pair’advertising campaign in the wake of theFuture of Financial Advice (FOFA) bills whichpassed the House of Representatives lastmonth.

That was the bottom line for both theFinancial Planning Association (FPA) and theAssociation of Financial Advisers (AFA) duringa Money Management roundtable held in theimmediate aftermath of the passing of theFOFA bills.

FPA chief executive Mark Rantall noted thatthe ISN had stopped running the ‘comparethe pair’ commercial recently and added, “I

would hope never to see them again”.Rantall said that the withdrawal of the ISN

advertising would be “a great indication of anolive branch enabling the industry to cometogether”.

“I think everyone around this table agreesthat we’ve got a once-in-a-lifetime opportuni-ty to evolve into a profession,” he said. “Let’stake it seriously, let’s come together, let’s stopthe bickering and let’s make it happen.”

AFA chief executive Richard Klipin made astrong call for the ISN to stop its anti-planneradvertising, noting the degree of politicisa-tion that had entered the debate.

“The ISN have driven this debate and theyhave absolutely won out of this debate,” Klipinsaid. “If you look at it in political terms, they

have done a fabulous job of wedging theindustry.”

However, he said the industry players nowneeded to put down their swords and cometogether to talk about the things they had incommon.

“In our view the pendulum swung too farover, but we’ve just come out of a weekendwhere the politics in Queensland has mani-festly changed the Queensland landscape andperhaps the national landscape,” Klipin said.

He said that what was undesirable was thatevery time a particular political party gainedpower there was a sense of retribution “andon that basis I put the call to the ISN to actu-ally join in and join the entire marketplacerather than playing wedge politics”.

FPA says ASIC should not baulk at asset-based feesFINANCIAL Planning Association(FPA) chief executive Mark Rantallhas made clear he does not believeasset-based fees should becomean issue in the Australian Securi-ties and Investments Commission’s(ASIC) consideration of class orderrelief from opt-in.

Participating in a Money Man-agement roundtable in the directaftermath of the passage of theFuture of Financial Advice (FOFA)bills, Rantall said the FPA wouldargue very strongly that an asset-based fee should not have any-thing to do with class order relieffrom opt-in.

“The intent of opt-in was toensure consumers were notpaying for advice they weren’treceiving,” he said. “The discus-sion we’ve had with Governmentand regulators so far is that thereis a requirement that if you’repaying for advice you’re receivingadvice, and that is as far as youhave to go to obviate opt-in.

“We won’t be countenancing theremoval of asset-based fees,”Rantall said. “Asset-based fees area charging mechanism and theproduct of a negotiation betweenthe client and their professionalfinancial planner.”

Association of Financial Advis-ers chief executive Richard Klipinagreed with Rantall that asset-based fees ought to no longer bea part of the discussion aroundopt-in, but rather a part of thediscussion between clients andtheir advisers.

“There are a range of ways thatadvisers and principals will run theirbusiness models, the main thingis disclosure,” he said.

Mercer’s Jo-Anne Bloch told theroundtable that she did not believethe Australian Securities and Invest-ments Commission (ASIC) wouldmake an issue about asset-based

fees, and that if the regulator hadintended to do so it would have“forced the issue” before now.

Bloch said Mercer’s clients had achoice: they could pay a fixed feefor an on-going service or pay anasset-based fee.

“I have to tell you that nine out of10 choose an asset-based fee, andthe difference is that an asset-based fee is disclosed, it is in theirstatement every year, it is in theirannual review, whereas a commis-sion never was, it was built into themanagement expense ratio, it wasnetted out of returns and it wasn’tvery transparent,” she said.

Blended families need new approachesto SMSF super death benefitsBy Bela Moore

A SELF-MANAGED super fund (SMSF)Will is better than relying on “off-the-shelf” binding nominations for superdeath benefits in the case of blendedfamilies, according to two specialistadvisers from the Self-ManagedSuperannuation Fund Professionals’Association of Australia (SPAA).

Addressing Money Management’sSMSF Essentials 2012 forum, Glenisterand Co.’s Ian Glenister and Hill Legal’sChris Hill agreed binding nominationsfor super death benefits often failed inthe case of blended families, and manyadvisers were unaware of clients’ SMSFrules governing nominations.

They concurred that an SMSF Will,which refers to an ancillary deed outlin-ing terms and conditions for how deathbenefits are paid upon the members’death, could overcome conflicts thatarise between the surviving spouse andtheir stepchildren.

“An SMSF Will specifically can makeprovision for the payment of specificitems or specific assets out of the fundto specific players,” Glenister said.

He said he applied the SMSF Will to

his and clients’ SMSFs and it compliedwith superannuation legislation, taxregulations and trust law - but hethought the “legislator has forgottenabout blended families”

“We certainly think it’s a very viablestrategy that will pass and tick all thelegal and superannuation boxes, butthere needs to be certain safety nets inplace to make sure it works,” he said.

Hill said most of his clients camefrom blended families and needed astrategy to overcome conflicts andprotect assets from depletion throughdivision and taxes. They said they sawno reason why a sub-trust could not becreated stipulating that a conditionalpension be paid to a surviving spousefrom within the SMSF, as long as itcomplied with SIS rules.

“I think most clients…want to look

after their spouse, that’s the keypriority, but they also have a conflict-ing interest to look after the chil-dren,” Hill said.

“This way, it provides a solution tothat dilemma and it keeps key assets inthe fund in this concessionary tax envi-ronment for as long as possible.”

They said financial planners wouldbe faced with an increasing number ofblended families. There were risks indoing nothing despite the need forother safety nets, such as mutual Willsand the appointment of a ‘gatekeeper’replacement trustee, to ensure thewishes of the member are upheld.

Hill said the Future of FinancialAdvice reforms would open a “can ofworms” regarding duty of care, andfinancial planners would be expectedto partner with specialist advisers to givespecialist estate planning to blendedfamilies.

“It’s another way of adding value toyour clients as part of your service offer-ing,” Hill said.

“Rather than sit back and be fright-ened to do something, let’s have a crackat this and see if it works and see if itworks properly,” Glenister said.

AMP withdraws fromIronstone acquisition AMP Limited has withdrawn from its bid toacquire a share of specialist residential propertyfunds management group Ironstone.

Ironstone principal Sean Preece confirmed toMoney Management last week that negotiationswith AMP Limited which began in mid-Februaryhad been discontinued.

Preece said the company was now reviewingits options.

AMP is understood to have entered into thenegotiations with Ironstone as part of a broaderstrategy to drive further into the self-managedsuperannuation funds advisory market, alliedto its recent acquisitions of both the Super IQand Multiport businesses.

Richard Klipin

Sean Preece

Jo-Anne Bloch

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News

ANZ rethinks relationship strategiesas open market shrinksBy Bela Moore

DEALER groups need to rethink rela-tionship-building strategies as con-solidation forces the open marketto shrink, according to ANZ generalmanager advice and distributionPaul Barrett.

Consolidation is driving a rethinkingof relationships in what is now a “con-testable and competitive market,” Bar-rett said.

“All the major players are in thesame boat … we built our businesseson the open market and the openmarket is now closing,” he said.

Barrett said independent financialplanners and large groups were con-solidating and aligning with institu-tions, and as boutique dealer groupsspring up in opposition, it is impor-tant that ANZ reconsider the com-pany’s relationship with them.

“You’re seeing smaller boutiquesstart up who don’t want to be partof this institutional consolidationand that, I think, is a good thingbecause it actually fosters competi-tion,” Barrett said.

“As a product provider you have tohave a strategy for dealing with thoseboutique groups as they start up, andthe strategy has to be a bit differentand it’s pretty competitive,” he said.“We need to do some different thingsfor that market.”

Barrett said part of ANZ’s restrate-gising involved considering dealership-to-dealership services and whetherANZ would provide third party sup-port, but the company would not “tryto be all things to all people”.

“We need to be very specific aboutwhat our value proposition is acrossthe wealth value chain and certainlyinsurance and superannuation is atthe core of that,” he said.

Barrett said ANZ was also focusedon relationships with their financialplanning business – approximately8000 independent financial plannersand aligned dealer groups – and wasworking to provide everything theywould need to “survive a FOFA world”.

Overall satisfaction among bank customers falls in February – Roy MorganBy Andrew Tsanadis

OVERALL satisfaction levels among bankcustomers fell to 79.3 per cent in February –down from 79.6 per cent in January, showingthe first monthly decline since March 2011,according to the latest report from RoyMorgan Research.

The ‘Customer Satisfaction – ConsumerBanking in Australia Monthly Report’ statedthat the results were spurred on by “out-of-cycle” mortgage rises in February followingthe Reserve Bank of Australia’s decision tokeep the cash rate unchanged.

ANZ – which was the first major institu-tion to increase their home loan rates last

month – copped the brunt of the negativepublicity fallout and subsequently showedthe largest drop in satisfaction among homeloan customers of the four major banks, thereport revealed.

Roy Morgan stated that Westpac – whichwas the next to announce a rate rise – alsoshowed a drop in the satisfaction levels oftheir home loan customers.

The largest overall decrease in satisfac-tion among the major four institutionswent to the National Australia Bank (NAB)(-0.8 percentage points) which was duemainly to a decline in satisfaction amongtheir non home loan customers, theresearch house stated.

According to the report, “over the last12 months NAB has been the biggestimprover among the big four (+6.5 percent-age points) and currently leads with 78.7 percent customer satisfaction, followed by theANZ on 77.9 per cent (an increase of only 2.8per cent over the period)”.

Taking third position in overall satisfac-tion, Commonwealth Bank of Australiaposted an increase of 4.8 per cent over theyear to 77.3 per cent and showed the biggestincrease in home loan customer satisfactionamong the major four banks over the past12 months (up 9.2 percentage points), thereport stated.

As Roy Morgan’s previous report revealed,

the smaller banks still lead the majorinstitutions with Heritage Bank scoring a91.9 per cent rating, followed by INGDirect on 90 per cent and Bendigo Bankon 89.8 per cent.

The survey also revealed that the satisfac-tion levels of business customers of all majorbanks scored 66.3 per cent in February 2012compared to 79.3 per cent for personalcustomers.

The big disparity between the twoconsumer segments is “likely to attractincreasing attention by banks as customersare likely to feel more predisposed to switch-ing banks if they feel they are not getting agood deal”.

FPA urges forward-lookingapproach to FOFA outcomeBy Mike Taylor

THE Financial Planning Associa-tion (FPA) has written to itsmembers giving them an audit ofoutcomes from the Future ofFinancial Advice (FOFA) bills anddeclaring that “we should cele-brate the outcomes the FPA hasmanaged on your behalf thus far”.

The e-mail letter, signed off byFPA chairman Matthew Rowe, liststhe achievements “including themajor concessions made to thecontroversial opt-in proposal andthe specific recognition of yourprofessional difference”.

“The heavy lifting on achiev-ing these concessions wasachieved not by bickering fromthe sidelines, but by doggedpersistence and absolutepassion for achieving the rightoutcome,” Rowe’s message tomembers says.

Rowe pointed to the finalHouse of Representatives vote onthe legislation, saying the 64-59outcome “means that the Billwould always have been carried”.

“This margin clearly demon-strates that in our negotiationswith the Independents andGovernment we gained the bestground we could for our

members, the community andour profession,” he said.

“You may have heard contrar-ian, disparaging comments orread public statements in themedia from others who have hadnothing else to offer throughmuch of the debate,” Rowe said.“I urge you to dismiss thesedoubters and recalcitrants forwhat they are.

“Your FPA representativesshould be congratulated for theirpersistence and passion in all oftheir dealings with FOFA stake-holders - including Governmentand the cross-benches.”

He said it was easy to sit on thesidelines and criticise, and muchharder to stay in the fight andpersistently demonstrate credi-bility and offer real challenges tothe government of the day.

Commenting on the outcomeof events last week, FPA chiefexecutive Mark Rantall toldMoney Management he believedit was time for the industry to putaside any bitterness from recentevents and to move aheadtogether.

He said the FPA remainedopposed to opt-in, but believedthe class order relief and the earlylodgment of the FPA’s code of

conduct with the Australian Secu-rities and Investments Commis-sion might obviate this problemfor members.

In his letter, Rowe pointedout that, subject to detail, ‘opt-in’ notices would now only berequired for new clients from1 July 2013.

“As a member of the FPA – abody already recognised by theCourts and FOS [FinancialOmbudsman Service] as thepremier professional standardsbody – we will work hard to nego-tiate class order relief so that ‘opt-in’ will not apply to you as arecognised professional,” it said.

Paul Barrett Matthew Rowe


News

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Mortgage trusts slowlyfinding favour againBy Andrew Tsanadis

MORTGAGE trusts are beginning to beaccepted by investors as a longer-termincome-generating asset and not simplya short-term cash-like proposition,according to SQM Research’s MortgageTrust Sector Review.

The freeze on mortgage trusts in late2008 weakened investor confidence, withmany mortgage trusts unable to surviveafter re-opening, the report stated.

According to SQM, the sector hassince generally addressed such issuesas the traditionally low yields offered bysuch trusts. It has moved from a policyof daily redemptions to less frequentwithdrawal periods of monthly, quar-terly or yearly redemptions.

A number of new mortgage fundshave also chosen to move away fromthe traditional performance benchmark(the USB Australia Bank Bill Index) byeither utilising a different benchmarkor adding a premium over the bench-mark, the review stated.

SQM added that it did not find thecurrent benchmark for the mortgageindustry appropriate.

Despite the review finding thatbetween December 2002 and

December 2011 mortgage fundsreported positive returns, it said theyhave also experienced a gradualdecrease in funds under manage-ment (FUM) since December 2007.

According to the review, FUM fell 18.9per cent for the year to December2011, in contrast to the 24.3 per centfall for the year to December 2010.

As part of its review, SQM increasedits overall rating of La Trobe AustralianMortgage Fund – Pooled MortgageOption from 3.75 stars to 4 stars, givingthe fund the highest rating.

Coming in second, Provident CapitalMonthly Income Fund was alsoupgraded, going from a 3.5 to a 3.75star rating.

The Australian Unity Wholesale Mort-gage Income Trust remainedunchanged at 3.75, while two newly-reviewed funds – the Perpetual PrivateCapital Income Fund and the BalmainMezzanine Income Trust – bothreceived a rating of 3.5, according tothe report.

SQM stated that in the currentmarket environment, mortgage fundsare providing investors with an attractiveoption, capital stability and regularincome streams.

Cross-ownership a barrier togood advice: ASICBy Milana Pokrajac

THE ownership of financialplanners by product manufac-turers creates one of the mainbarriers to improving thequality of advice in Australia,according to the AustralianSecurities and InvestmentsCommission (ASIC).

In the final report on itsshadow shopping exercise, ASICidentified a number of barriersto improving the quality offinancial advice in Australia.

The regulator first pointed toits 2009 submission to theParliamentary Joint Committee,which stated that approximate-ly 85 per cent of financial advis-ers were associated with aproduct manufacturer, “so thatmany advisers effectively act asa product pipeline”.

These conflicts of interestwere also present in the finan-cial advice ASIC reviewed in theshadow shopping researchstudy, the regulator said.

More than two thirds of theadvice examples involved the

recommendation of in-houseproducts or products associat-ed with the advice group. Ofthese, 11 of the 13 advice inter-actions with advisers from thebig four banks (or their finan-cial planning divisions) result-ed in an in-house productrecommendation, ASIC said.

“While in some cases, theproducts recommended mayhave been equivalent to orbetter than the client’s existingproduct, there were also caseswhere the in-house productsrecommended were relativelymore expensive, or otherreasons meant that theproduct switch was notadequately justified,” ASIC

stated in its report.Other potential barriers to

improving the quality of adviceas identified by ASIC were: therole of financial products, remu-neration structures and thequality of adviser training.

The list of these barriers waspublished in ASIC’s Report 279:shadow shopping study ofretirement advice, which foundthe majority (58 per cent) ofadvice examples it reviewedwere adequate. Around 40 percent of the examples wererated by the regulator as“poor” and two advice exam-ples were deemed goodquality advice (3 per cent).

These findings resemblethose presented by ASIC to theParliamentary Joint Committeeduring discussions on theFuture of Financial Advicereforms several weeks ago.

The regulator said the barri-ers that currently prevented thequality of advice from improv-ing were not the same as thosethat discourage people fromaccessing financial advice.

Despite lingering misgivings about themanner in which some workablechanges were achieved to theGovernment’s Future of Financial

Advice bills, the financial planning industry willunite sufficiently to ensure their appropriateimplementation.

That was the bottom line of a Money Manage-ment roundtable held on March 26 Monday inthe immediate aftermath of the House of Repre-sentatives’ passing of the FOFA bills, as the dustsettled on the minor furore which accompaniedthe leaking of documents suggesting the Finan-cial Planning Association (FPA) had reached anaccommodation with the Industry SuperNetwork (ISN).

That roundtable involved FPA chief executiveMark Rantall, Association of Financial Advisers(AFA) chief executive Richard Klipin, PremiumWealth Advisers managing director PaulHarding-Davis and Mercer’s Jo-Anne Bloch.

The mood of the industry seemed to be indi-cated by Klipin, who described the evolution ofFOFA and the events of the prior week as having“played out like a soap opera”.

“Last week was a pretty huge week and fromMonday to Thursday the way it played out wasin many ways a bit of a soap opera, and it lookedlike in certain components the Government hadlistened to the industry and then it chopped andchanged,” he said.

“But in hindsight with respect to last week,we’re done and dusted and after three long yearsFOFA is now a reality, and good advisers whohave adapted will be well placed to take advan-tage of it,” Klipin said.

However, the AFA said there was a sense ofdisappointment within the AFA communitybecause the Government had been foundwanting with respect to both the outcome of thelegislation and the processes themselves.

The FPA’s Mark Rantall was making no bonesabout the fact he believed the industry hadachieved some wins in the FOFA process, whilethere remained things about which it was stillnot happy.

However he claimed that while the FPA hadnever supported opt-in, he believed a point hadbeen reached which made it more acceptable.

“We don’t support opt-in, we never support-ed opt-in, but where we got to on opt-in, as itrests in the legislation, is that through the signingup to the professional code of conduct that isapproved by the Australian Securities and Invest-ments Commission (ASIC), members of thatcode should not have to comply with the opt-in legislation as it stands – they will have relieffrom ASIC,” Rantall said.

“We would have much rather opt-in hadbeen removed, that would have been cleaner,but where it stands at the moment we may be

in the position where no FPA member has tosign an opt-in certificate. That is a reasonablewin,” he said.

However Rantall said that when the opt-inarrangement was taken together with theGovernment’s undertaking to legislativelyenshrine the term “financial planner” or“adviser”, it represented “enormous advance-ment for the profession”.

“We’ve got a chance now to take financialplanning, which is in the national interest, intoa respected profession, and that has always beenour objective,” he said.

Reflecting the pragmatic view of many in theindustry, Mercer’s Jo-Anne Bloch said her over-whelming plea to the industry was to cometogether to support the FOFA changes.

“Anyone who thought such a significant pieceof reform was going to go through with theirparticular interest in mind, without significantchange, was really on the wrong page,” she said.

Bloch said that while not everything in thelegislation was perfect, the main tenets withrespect to best interests duty and the ban onconflicted remuneration deserved the supportof all the major stakeholders.

Premium Wealth Advisers managing directorPaul Harding-Davis echoed Bloch’s sentiments,saying the reality was that the industry neededto recognise what had happened and to get onwith the job of looking after clients.

However, he warned that much needed to beclarified in a regulatory sense around fee disclo-sure and other matters.

“The sooner that comes out, the sooner we

can get on with it,” he said.What also became very clear from the round-

table was an expectation that ASIC would get onwith the task at hand, rather than raising issuessuch as the appropriateness of asset-based fees,with all roundtable participants agreeing that thetype of fees charged were a matter between plan-ners and their clients.

As well, there was general agreement that withthe FOFA changes having been thrashed out andwith the apparent involvement of the IndustrySuper Network, it would be inappropriate forthe ISN to continue any of its advertising under-mining the role financial planners or the valueof advice.

Klipin said he believed the ISN advertisingcampaign had ultimately proved damaging tothe entire financial services industry, butacknowledged that on many of the debate issuessurrounding FOFA the ISN had proved a winner.

“The ISN have absolutely driven this debateand they’ve absolutely won out of this debate,and if you look at it in political terms they’vecome out and succeeded in wedging the indus-try, which is unfortunate,” he said.

Klipin said it was now time for ISN and theother parties to put down the swords and for theindustry to come together to talk about thethings it has in common.

“In our view the pendulum has swung too farover and we’ve just come out of a weekendwhere the politics has manifestly changed theQueensland landscape and perhaps the nation-al landscape,” he said. “But what you don’t wantto have is that every time a governing partychanges there is a sense of retribution.”

Klipin said it was on this basis he wanted tocall on the ISN to join the entire marketplacerather than playing wedge politics, and thatincluded getting their own backyard in order –“clear, transparent and unbundled”.

Rantall said it was time for all participants tolift the debate and to act as an entire industry.

“It is critical for all participants to sponsor theindustry,” he said, “...there is no room in that tohave divisive advertising or strategies at all”.

InFocus

Some of the players might not approve of the way in which the FOFA bills willultimately be shaped but, as Mike Taylor reports, a Money Managementroundtable has concluded the best interests of the industry will be served bypresenting a united front.

Lay down your swords –everyone34%

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SMSF Weekly

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APRA paper flags moreconsolidationBy Mike Taylor

NEWresearch released by the Australian Prudential RegulationAuthority (APRA) last week has pointed to the benefits of furtherconsolidation within the superannuation industry.

The research, contained in a paper developed by Dr JamesCummings titled ‘Effect of fund size on the performance ofAustralian superannuation funds’, found that larger funds,both in the not-for-profit and retail sectors, had significant-ly lower operational expense ratios to net assets.

It said this finding suggested that larger funds were able tospread fixed costs associated with administration and IT infra-structure over a larger asset base.

“Furthermore, not-for-profit funds with larger accountbalances per member have significantly lower operationalexpense ratios,” the paper said.

It said this suggested that not-for-profit funds with largermember balances were also able to reduce variable costs,such as those associated with member interface and insur-ance claims management.

The paper said that while they benefited from spreadingfixed costs over a larger asset base, retail funds did not realiseany reduction in variable costs from administering largermember balances.

“In sum, this paper provides strong evidence that theperformance of not-for-profit superannuation fundsimproves with fund size,” it said. “Based on this evidence,fund members are likely to benefit from further industryconsolidation in the not-for-profit sector.”

Australian LICswarned on aggressivehedge fundsTHE significant undervaluation of many Aus-tralian listed investment companies (LICs) andtrusts will make them targets for hedge funds,according to a UK expert.

Pottinger senior adviser Nicholas Gold saidhe believed dozens of LICs and listed trustshad share prices more than 50 per cent belowthe net asset value of their investments, andwere attractive targets for hedge funds pre-pared to force restructuring or even gain controland sell off their investments.

“International hedge funds including Laxey,Carrousel and Weiss, as well as domestic activeinvestors such as Dixon Advisory and NickBolton, have attacked a range of AustralianLICs and trusts in recent years,” he said.

Gold said Australian LICs should be pre-pared for further aggressive action by “thesepredators” as their activity in Australia wasstill relatively low compared to Europe andNorth America.

Pottinger joint chief executive Nigel Lake saidmany boards were not well prepared to respondto an aggressor and all too often the range ofresponse options became very narrow once ahedge fund had gained a significant stake.

New OneVue platformcaters to SMSF investors By Tim Stewart

ONEVUE has announced thelaunch of a consumer platformdesigned for members of thefinancial services group MAPthat caters to self-directedinvestors.

MAP chief executive JenniErbel said OneVue wouldprovide MAP’s members, whoare predominantly medicalprofessionals, with an “end-to-end solution” for self-managedsuperannuation funds (SMSFs).

“With more of our membersengaging in self-directed invest-ing and establishing SMSFs, wewant to ensure we move with thetimes, stay relevant and have aplatform offering that can caterto those who want that extraindependence,” said Erbel.

OneVue is looking to extendits distribution through interme-diaries such as MAP, said OneVuechief executive Connie McKeage.

“We also recognise that there

is a growing market for limitedadvice and self-directed investorswho want to do it themselvesand seek advice only whennecessary,” Mckeage said.

Erbel added that the OneVueplatform would also cater for“term deposit functions anddaily research regarding sharesand managed funds”.

“Other features of the platformwill include access to real-timebroking, consolidated reportingacross all assets and liabilities viaa private label website, and freeaccess to a web-based budget-ing and planning tool calledWealthVue,” Erbel said.


Roundtable

MT: I think probably in theminds of Money Management’s

readers, the question is wherefixed income actually sits in the

greater scheme of things at the moment,and how you feel it should be positionedin the minds of planners giving advice totheir clients. I am agnostic as to who wekick off with, but maybe let’s kick off withAberdeen.

SD: Okay. Where does it sit in the greaterscheme of things? Probably, for mostpeople here, as fixed income portfoliomanagers, we feel it is probably under-represented within the allocation of assetsacross Aussie super. Comparing our super-annuation allocations to other countries itis a well known story: in 2008, Aussie superportfolios were under-performing relativeto OECD [Organisation for Economic Co-operation and Development] peersbecause of the high equity weighting, andagain, you saw that last year.

Now, obviously the Aussie equitymarket itself under-performed relativeto global equities, so there is a bit ofhomecoming advice there as well.

But the bigger picture is, we’re under-weighting to bonds versus other coun-tries for different reasons. Nonetheless,there is a structural bias there which is alonger-term public finance risk, if youlike, in the event that that future retire-ment plans fail to provide adequately fora large number of people and they fallback on government pensions to fill thatjob. I guess that is probably the openinggambit for me.

BC: I think it is interesting because if yougo back to when superannuation wentfrom defined benefit to defined contri-bution, you’re back about 20 to 25 yearsago. And you think about the environ-ment that we had from that point to now,and you look at the allocation of whatyou’d call a basic portfolio. It was pretty

balanced and was probably appropriate.But over time, when you’ve taken the

decision-making away from someone whois running a defined benefit scheme for acompany and you give it to a mum anddad and say ‘Here’s your pension’, it madea lot of sense for 20 years while we had thisgreat leverage trick in play that peoplegravitated or attracted high returns ofequity - so now you have this imbalance.

We think it is actually a very structuralchange that is going on, that fixed incomewill increasingly become the core part ofa person’s portfolio, and so the decline ininterest in fixed income, which has essen-tially been happening for 20 to 25 years,should turn around. You’ll see peoplehaving the core of their portfolio, whetherit be in floating rate or in bond format, ahuge allocation to that income. So it is ashift away from growth investing toincome investing, and as such, I think it

Continued on page 16

Fixed income:

PRESENT:

Mike Taylor – chairmanStuart Dear – senior investment manager,

AberdeenAsset ManagementMichael Korber – head of fixed income, PerpetualAndrew Gordon – director of fixed income, FIIG SecuritiesMark Beardow – head of fixed income, AMP CapitalBrett Lewthwaite – head of fixed income, MacquarieBrendan Irwin – senior executive, research, Count Financial

finding its place

“At the moment theprospective terms of fixedincome are really quiteattractive. ”– Michael Korber

In Money Management’s panel discussion on the latest trends in the fixed income space, industryexperts discuss the role fixed income should play in a client’s portfolio.


Roundtable

MT: I think probably in theminds of Money Management’s

readers, the question is wherefixed income actually sits in the

greater scheme of things at the moment,and how you feel it should be positionedin the minds of planners giving advice totheir clients. I am agnostic as to who wekick off with, but maybe let’s kick off withAberdeen.

SD: Okay. Where does it sit in the greaterscheme of things? Probably, for mostpeople here, as fixed income portfoliomanagers, we feel it is probably under-represented within the allocation of assetsacross Aussie super. Comparing our super-annuation allocations to other countries itis a well known story: in 2008, Aussie superportfolios were under-performing relativeto OECD [Organisation for Economic Co-operation and Development] peersbecause of the high equity weighting, andagain, you saw that last year.

Now, obviously the Aussie equitymarket itself under-performed relativeto global equities, so there is a bit ofhomecoming advice there as well.

But the bigger picture is, we’re under-weighting to bonds versus other coun-tries for different reasons. Nonetheless,there is a structural bias there which is alonger-term public finance risk, if youlike, in the event that that future retire-ment plans fail to provide adequately fora large number of people and they fallback on government pensions to fill thatjob. I guess that is probably the openinggambit for me.

BL: I think it is interesting because if yougo back to when superannuation wentfrom defined benefit to defined contri-bution, you’re back about 20 to 25 yearsago. And you think about the environ-ment that we had from that point to now,and you look at the allocation of whatyou’d call a basic portfolio. It was pretty

balanced and was probably appropriate.But over time, when you’ve taken the

decision-making away from someone whois running a defined benefit scheme for acompany and you give it to a mum anddad and say ‘Here’s your pension’, it madea lot of sense for 20 years while we had thisgreat leverage trick in play that peoplegravitated or attracted high returns ofequity - so now you have this imbalance.

We think it is actually a very structuralchange that is going on, that fixed incomewill increasingly become the core part ofa person’s portfolio, and so the decline ininterest in fixed income, which has essen-tially been happening for 20 to 25 years,should turn around. You’ll see peoplehaving the core of their portfolio, whetherit be in floating rate or in bond format, ahuge allocation to that income. So it is ashift away from growth investing toincome investing, and as such, I think it


Fixed income:

PRESENT:

Mike Taylor – chairmanStuart Dear – senior investment manager,

AberdeenAsset ManagementMichael Korber – head of fixed income, PerpetualAndrew Gordon – director of fixed income, FIIG SecuritiesMark Beardow – head of fixed income, AMP CapitalBrett Lewthwaite – head of fixed income, MacquarieBrendan Irwin – senior executive, research, Count Financial

finding its place

“At the moment theprospective terms of fixedincome are really quiteattractive. ”– Michael Korber

In Money Management’s panel discussion on the latest trends in the fixed income space, industryexperts discuss the role fixed income should play in a client’s portfolio.


Roundtable

is only in the early stages of that shift.Bonds will be increasingly important topeople as we move forward – that’s theway I think about the environment.

MK: Yes. I think obviously those senti-ments are a good basis, and I guess we’retalking our own book to a degree, but thequestion we’re trying to solve, and there’sno right answer to this, is: for people’slong-term return, what is their optimalbalance of risk and reward?

And if you look at the dynamics of theequities markets, they can have periodof very good performance and periodsof very bad performance and muchvolatility. Bond markets typically aremuch less volati le and much moreconsistent, therefore they really dampenthe level of volatility in people’s portfolio.So if they don’t deliver anything else, theyare delivering a cleaner run for people’sreturn over time.

The scenario at the moment is onewhere you’ve got decent interest rates inthis country, you’ve got great creditspreads, and the rewards are actuallyquite strong. I think if you look at long-term performance, the cost of thedamping of returns by holding a decentchunk of fixed income is very, very low.

Over the long term it works very well foryour total performance, and in the analy-sis we’ve done it takes off a few basispoints but halves the level of volatility. SoI think that in itself is a good thing.

At the moment the prospective termsof fixed income are really quite attrac-tive. Also you’ve got an ageing popula-tion. I think people’s attitude to risk doeschange during their life cycle, and aspeople start to draw down as opposed toaccumulate, lack of volatility becomesquite valuable. So I think it [ f ixedincome] is under-represented, and thereare a number of reasons why that shouldgradually change, and change structural-ly, as we said.

AG: Yeah, look, I would agree with allthose sentiments, but I think one of thethings that we’re seeing is a huge interestin fixed income being a known outcome.People can really tailor, as they are intoretirement or heading into retirement,tailor what they actually want in termsof returns.

So that forward-looking nature ofbonds and fixed income as a whole isvery important for people making thosedecisions in terms of ‘how do I fund myretirement, and how do I fund the next10, 15 years of what I do?’ And again,then you can get into the detail of fixedversus floating versus inflation-linked,et cetera.

But when you present clients withforward-looking instruments versustaking a punt on equities and you’re notquite sure where they’ll be, there is ahuge amount of interest in that.

MB: I’d agree with that on SMSFs, butthere is no such thing as an average retailclient. I think if we’re thinking about howclients’ attitude to fixed income is goingto change, it is not going to be the 30 or40-year olds that have got little interest insuper. They are probably correctly asset-

allocated. They are probably feeling thepain, but they are probably correctlyasset-allocated.

What we’re really more interested in isthose ones who are approaching retire-ment, or in retirement and have had toomany growth assets in their portfolio.

The question is: how might a plannerand their client use fixed income? Tradi-tionally in Australia it has been used justreally as an anchor. Its role as an incomeprovider has been subservient to its roleas a diversifier. With such big equityratings in the portfolio you really neededto allow fixed income to be the diversifi-er, whereas I think that has undersold itsbenefits. It has particularly undersold itsbenefits to those in retirement andneeding an income stream.

So I think that is the opportunity, notas a diversifier but as an income stream,and then there is a range of things forwhich more developed fixed incomemarkets have shown they can use theasset class.

The post-retirement phaseMT: The theme seems to be around thetable that really we’re talking as muchabout post-retirement and de-accumu-lation as we are in the accumulationphase. So I am just wondering whether,looking at the whole post-retirementphase, enough has been said about fixedincome and bonds and where they sit inthat part.

But there are a lot of companies at themoment trying to find products to bringto market for that phase, so I’m justwondering where you think where theseproducts stand in the mix in terms ofpost-retirement.

MB: On post-retirement to us thereseems a pretty big gap between bondfunds that have been designed as part ofa diversified portfolio. Principally inAustralia a lot of those have beendesigned for that purpose. There areothers. And then at the other end of thespectrum there are annuities, term

deposits somewhere in there.It seems like there is a big spectrum

for focussing on outcomes using fixedincome assets and that is going to requiresome product development, and that isgoing to require thinking through theasset class a little differently. Because ifyou do have investors who have got a 10or 15-year horizon, then it might beworthwhile structuring funds aroundthat, or around a five-year rise or a 10-year rise rather than having a productwhich is a one-size-fits-all.

What we know in SMSF-land is that isnot what investors are looking for. Theyare looking for things that are tailored totheir needs.

AG: I think I would also add thatinvestors are getting more educated onfixed income. Historically they haven’tfocussed on that and I think what wefind, specifically at our firm, is that they



“It seems like there is abig spectrum for focussingon outcomes using fixedincome assets and that isgoing to require someproduct development. ”– Mark Beardow

Andrew Gordon


Roundtable

really want to understand a little bit moreand understand the risks that they’ve goton a relative value basis. What is the riskof this versus the risk of that, and am Igetting compensated enough?

Once they start making those deci-sions, then the spectrum will be thebookends of risk, being cash at one endand equities at the other end. That willopen up the way for an investor to say,‘well, I’m prepared to take some risksdown here in equity’ or ‘I’m not and Iwant to be closer to the cash end’.

But as they’re getting educated in thatprocess, their risk-for-return analysis, theyare making that themselves. But again,regarding ongoing education and peoplewanting to understand what fixed incomedoes, we are seeing a lot of that, primari-ly from the pre- to -post generation.

SD: Typically I think what we’re gettingto in the last few threads of discussionhere is that, absolute return-style fixedincome funds are becoming popular, andwhy? Well there is obviously the cyclicalelement.

But more structurally there is thatfocus on the objectives, such as that it isan objective-based form of investing thattries to wrap up, if you like, the alpha andbeta decision with relation to at least thebond asset class, and perhaps more assetclasses, depending on the scope of theabsolute return fund. And it takes thatstructural allocation decision away, ifyou like, from the superannuation allo-cator and it puts it in the hands of themanager, to be long-duration or be right

back at cash-like duration, or even havenegative interest rate exposure.

So that is like if you segregate the cycli-cal and structural components of thatwhen you think about the structure ofthe funds, that is a shift that we seem tobe making in the funds managementindustr y or the consulting/fundsmanagement industry. The crossover issort of blurring, if you like.

A segue back into equities?MT: Moving along a little bit, and this isprobably moving away from the core ofwhat you guys do, but there seems to me,as a journalist, to be a confusion in theminds of investors about how long theyshould remain cautiously set in the currentmarket, and when they should start to takeup that exposure - I guess on the basis of alot of planners telling them that if you missthe upswing, well, you’ve missed it really.You can maybe pick it up a little bit some-where, but you’ve missed it.

So I guess looking at the overall state ofthe market, and this is sort of the $1,000question really isn’t it, is what you guysspecialising in the segue to the markets

are picking up: we’re never going to getthe bull run we had? Is this really a segueto moving back into equities?

MB: I don’t see it like that because, again,I would come back to the retail investorsbeing quite different. So taking a 55-year-old in 2007 - maybe being over their skisin terms of growth assets - coming in2011 to have a conversation with theirplanner: should they be increasing theirweights to equities?

I think depending on particularcircumstances, they probably need to begetting those weights down. They prob-ably need to be thinking about income.They’ve come into retirement. Theymight be five years away. They haveprobably more than halved the amountof income they’re going to receive fromtheir job in that time frame pre-65.

I think the question is: there are someinvestors for whom it is appropriate togo back to equities and fixed income.Probably it isn’t the natural segue neces-sarily. I don’t view it as a mutual fundproduct, as a natural segue, but for thoseinvestors who begin in cash, then

certainly - fixed income.I sort of come back to a point that

Michael made, which is when you reallystart to focus on income, there are somebenefits in bond products over floatingrate products. That is, you are much morecertain actually on the coupon flow, so youcan plan much more effectively on thecoupon flow. Capital becomes less impor-tant if you’re living off monthly distribu-tions and you know that they’re going tovary not significantly over, say, a two- to -three year timeframe.

I just sort of contrast that with what weknow. When interest rates fluctuate,perhaps you will hear pensioners relay inthe media about how difficult it is to liveoff reduced deposit rates, and I think thatis something that fixed income can address.

BL: I think it is interesting that quiteoften it is sort of tagged as a stepping-stone to a different place or a betterplace, but ultimately I think in terms ofthe environment that we’re in, we’vegone from an environment where it wasa good idea to have a lot of growth assets.It was a good idea to borrow a lot ofmoney because those assets that peoplewere buying, whether it be property orshares, continued to go up.

I think we are past that tipping point now,and deleveraging is a completely differentmindset. So is it a stepping-stone to anotherplace? Well, not necessarily. I think we’regoing to have an environment where thereare good trading ranges in what we call, Iguess, risk assets, so if you’re a trader you’reprobably going to have a good time.



“I think the whole bonds sector is becoming a much moreinteresting and innovative type of vehicle.”– Brendan Irwin

Mark Beardow Brendan Irwin


Roundtable

But most people aren’t traders, and ifyou’re not it could be a bumpy ride tonowhere, the same place you are now ormaybe worse. So I think it is really aboutsaying if you want more than cash, poten-tially you increase your allocation to fixedincome to get that moderately higherthan cash, but it is a core situation.

It is something that you base most ofyour portfolio around, a steady income-reliable return. There is still nothingwrong with having allocations to all theseother asset classes, but there is a muchheavier weight in that reliable, positivereturn situation. So I don’t necessarilysee it as a stepping-stone. It is more achange of thinking.

BI: I thought of bonds 20 or 30 years ago.I came into the business and bond fundswere pretty simple. They were durationand they were put in a portfolio as a diver-sifier and an uncorrelated asset. You lookat the fixed interest market today afterinflation having dropped for 20-odd yearsand 30 years of fabulous bond returns, andI think the dynamics are a lot differenttoday. You can see that in the type of prod-ucts that are now coming to market. Wenever had credit products, or the differ-ent types of products that we see today.

I think the whole bonds sector isbecoming a much more interesting andinnovative type of vehicle, and there willbe some products that people will belooking for in terms of getting theincome. Some will be looking for it as adiversifier, if you like. With the demo-graphics and the demand in theAustralian and global markets for asteady income stream, I think the bondmarket will continue to innovate.

Fixed income - is now its time in the sun?MT: Another one of those questionswhich plays on everyone’s mind: Howlong do you think the market is goingto play to this strength, in the sense thatwe continue to have Europe as anunknown, and the US is kind of recov-ering, notwithstanding this quantita-tive easing, which seems to be anotherphrase for printing money? Underlyingall of that, Australia remains fairlystrong in terms of the global economy,and China is doing all their things.

So I guess putting all that together,the times have suited you guys in termsof a product set coming back to the fore.How long do you see your time in the sun,I guess, if indeed it is a time in the sun?I can see a whimsical smile over here.

I think you have seen many times in thesun come and go, Brett.

BL: I think the fixed income universe hasa lot smaller voice. If this is our time inthe sun, it has been a time that hasconstantly been argued by equities thatthere is a bond bubble, et cetera.

There are all sorts of reasons why weshouldn’t be where we are. It is amazingactually. I think the infrastructure aroundthe fixed income universe is a lot smaller,so I think it is interesting to look athybrids that are sold through equitychannels, and they are very successful.It is access. How do we create greateraccess to these sorts of products as wellis I think part of it.

From an economic point of view it is avery challenging environment. It doesn’tmean that different asset classes can’thave good performance periods. I thinkmost people would have gone into theend of last year surprised that equitieshave performed as well as they have sofar in 2012, but it is an interesting envi-ronment.

If you go back to the big issue aroundthe US and its downgrade inJuly/August, they got debts and anincrease there. It took three months tohit the first one. They default and they

go to the second one. They’ve breachedthat now. They’ve just approved a payrolltax extension with no cuts on the otherside. There was another one in electionyear, and we’re heading towards sixteenand a half trillion dollars of bond issuance.

So you talk about quantitative easingbut it’s 8 per cent to 10 per cent fiscalstimulus that that economy is gettingeach year as well and that is not sustain-able either. Developed economies aresuffering from indebtedness and they’vegot their foot to the floor. Their sail isfull up, so if risk assets aren’t doing wellhere then potentially the outlook is quitea challenging one. So it does change thatthinking about how do I make a positivereturn on a consistent basis, so potentially our time in the sun goes onand on.

MK: I think it is funny because the onlytime fixed income markets ever havetheir time in the sun is when everyoneelse is buried in a storm cloud.

MT: I didn’t want to say that.

MK: So you’re already asking how long dowe think the rest of the asset sectors will bedoomed, and it could be for some time. ButI think you’ve also got to look a bit beyondthat and think, in Australia in particular,that we are a big importer of capital.

Interest rates here are structurallyhigher than in many other places andtherefore, in a relative sense, fixedincome here is going to be a relativelyattractive asset. The one thing that killsit more than anything else is the taxregime here, which really heavily favoursequities ahead of fixed income, but thatis less of a factor than the superannua-tion and pension environment.

So I think structurally we have seenthe fixed income market under-repre-sented because the equities market hasbeen so strong. And I think structurally ifthat strength in equities tapers off, andobviously it has and it may well contin-ue to do so, the domestic fixed incomedynamics are fantastic and good inter-est rates, low-credit risk, it is to thatdegree nirvana.

It is higher predictable returns, and Ithink once people lose the stars in theireyes about equities, the ongoing dynam-ics of fixed income will continue toimprove. I think we’ll see continuedgrowth and diversity of cash, and the sortsof issues we see and the sorts of paper thatwe see. And liquidity begets liquidity.Those things will encourage ongoinggrowth, so I think you’d have to be fairlyoptimistic that it is not just a flash in thepan or a brief break in the clouds. I thinkit is a structural sort of asset that willcontinue to do well, continue to developquite well.

BI: Unfortunately the demographicdemand for a stable income stream, asopposed to relying on growth, will I thinkjust mean that there will be a lot moreproducts that will be designed to come tomarket to feed that requirement.

MT: Thank you very much gentlemen.Those questions probably didn’t suiteveryone, so thank you very much foryour time. MM


“I think we’ll seecontinued growth anddiversity of cash, and thesorts of issues we see andthe sorts of paper that wesee. ” – Michael Korber

Stuart Dear

Brett Lewthwaite


When the financial servicessector was developing as amajor force a couple ofdecades ago and changing

the face of wealth accumulation andmanagement for Australians, it was verysuccessful in convincing Australians thatsaving was not investing.

Financial planners and fund managersalike did a good job in persuadingAustralians that leaving money in bankaccounts was not a good long-term wealthbuilding strategy.

It was a convincing argument, andlargely turned Australians from a nation ofsavers to a nation of investors.

However, in recent months the distinc-tion between ‘investing’ and ‘saving’ hasbecome blurred, which must be to thedetriment of those looking to create long-term wealth.

At the moment, Australians are being ledto believe that leaving money in bankdeposits is the same as investing.

This change in attitude started in thewake of the global financial crisis (GFC) and

was reinforced with the American andEuropean debt crises that followed. The‘double whammy’ of these events resultedin investors throughout the world, includ-ing Australia, losing their appetite for risk.

As a result of the general mood of risk-avoidance, there was a significant move byinvestors into cash such as term deposits.This attitude was reinforced at the time inAustralia by the bank guarantee.

Today, we are even seeing expertcommentators talking about “investing incash”. This should concern financial plan-ners who are looking to encourage clientsto adopt long-term investment strategiesto build wealth and trying to get them tounderstand the difference between savingand investing for growth.

Clearly, wealth left in interest-bearingbank accounts is not investing, it is saving– or, putting the best light possible on it,preserving capital.

We need another round of persuasivearguments from the financial servicessector that explains investing means takingon some risk (albeit risk that is managed) togrow wealth and increase capital. Leavingmoney in cash will not achieve this.

In the current circumstances of fallinginterest rates, where inflation continues toerode capital value, investors need tounderstand the impact on their wealth –and on their long-term plans – that leavingtheir assets in cash has.

If nothing else, investors need to beencouraged to understand the impact ofinflation, so that when they calculate theirreturns from cash deposits, they reducethem by the inflation rate to give a truereturn.

With the current sea of negativityswamping us all, and the ever moredemanding regulatory requirements, it isunderstandable that financial planners arefeeling very constrained in their ability toencourage clients to look at growth assets.

The outlook for Australia is still impact-ed by major concerns about the European,US and Chinese economies, all of whichhave a major influence on local markets.

It is also perfectly understandable thatmany investors remain very concerned

about the risk to capital of investing ingrowth assets in the current market envi-ronment. However, we still need toconvince long-term wealth accumulatorsthat they should not become paralysed orself-deceiving because of short-termconcerns.

Investors must be encouraged to keep asense of proportion and balance, as well ashave an appreciation of alternativeapproaches, including long-term riskmanagement, so that this balance is takeninto account in their approach to wealthaccumulation.

They must appreciate that term depositswill not lead to wealth accumulation andthat, at best, such approaches only preservecapital at existing levels. A balanced port-folio that includes growth assets must stillbe considered by long-term investors.

Perhaps the present yield situation canbe used to further this point of view. In thecurrent circumstances there is a powerfulargument for investors to consider high-yielding blue chip stocks to add somegrowth to their investment portfolio andmanage risk, as well as providing tax-enhanced yields that are more attractivethan the returns achieved by leaving cashin a bank.

This approach exposes investors to fairlylow-risk equity investments in long-termassets, in keeping with a conservativewealth accumulation strategy.

Apart from anything else, I firmly believethat in five years time investors who are notnow in the market will look back at equityprices today with regret.

Even investors who still want no part ofequity markets at the moment need tounderstand that there are alternatives toterm deposits that they could consider.

In looking at diversifying the cashcomponent of portfolios, there are a varietyof bond approaches that will give betteryields over time than cash – includingrecently available corporate bonds.

Again, these offer very low risk to investorswho hold the bond for their full term.

Another investment that has beenunfairly tarnished since the GFC, and intro-duction of the Australian bank guarantee,is mortgage funds.

There are alternatives to leaving investorcash in a bank and investors must beencouraged to understand that short-termfear should not freeze long-term growthstrategies, that saving is not investing andthat preserving capital is not wealth accu-mulation.

Phil Galagher is head of wealthmanagement and marketing at EquityTrustees Limited.

OpinionCash

Can’t help ourselves, old habitsHaving clients believe that placing money in bank deposits constitutes investing willhave a detrimental effect on both the financial advice industry and the end consumer,according to Phil Galagher.

It is the great social dread, being at aparty or social function and suddenlyrealising you have nothing of value orinterest to add to the conversation. Life

flashes before you as you desperately try tothink of something to say.

For those in the ‘at risk’ group, this articlemay provide some hope, as the use of one ortwo of the questions posed in a conversa-tion lull will no doubt create an impression.

The impact will be striking and immedi-ate, and there is the added advantage thatthe subsequent discussion may prove ofvalue – not only in a social sense, but a busi-ness one as well.

Question 1If a client had an income protection insur-ance policy with a benefit period to age 65 andthe client became permanently disabled, forhow long would benefits be paid?

Those responding with the obviousanswer of “to age 65” could be smiled atknowingly and advised “maybe, but notnecessarily”.

This no doubt would generate deeperthought from others who might venture “tothe earlier of age 65 and the death of the lifeinsured”.

Again – a charitable smile and the same“maybe, but not necessarily.”

Having now captured everyone’s atten-tion, an explanation can proceed.

Notwithstanding the popular vernacularmight be “benefit period to age 65”, benefitpayments will only continue up to the policyexpiry date, which may be age 65 or it maybe the policy anniversary prior to or afterage 65.

Case studyJim was born on 1 January 1950 and will turn65 on 1 January 2015.

His adviser recommends he takes outincome protection insurance, pointing outthat if he is disabled, benefits will be payable“to age 65”.

Jim accepts the recommendation and thepolicy starts on 1 February 2010.

A year later, Jim is permanently totallydisabled. His claim is accepted and benefitpayments start.

Jim rearranges his financial affairs on thebasis that benefit payments will continuethrough to 1 January 2015.

Unfortunately, Jim’s policy actually expireson the policy anniversary prior to age 65 – ie,on 1 February 2014 – a full 11 months beforehis 65th birthday (the maximum differencebetween a birthday and a policy anniver-sary can be up to 1 day short of a year).

As a result, Jim receives $110,000 less inclaim payments than he was expecting – ie,11 x $10,000.

Jim’s financial security is thrown intoturmoil – as is Jim’s adviser’s financial secu-

rity – as Jim commences proceedings againsthim on the basis of misleading advice.

Precision in advice is important ifunpleasant surprises are to be avoided atthe time of claim.

Question 2Is it true that with an indemnity incomeprotection insurance policy, the payment ofone claim may render subsequent claimseffectively null and void?

The short answer is ‘yes’, and again, theissue is best illustrated with a case study.

Betty is earning $80,000 and insures 75 percent of this ($5,000 a month) under an indem-nity income protection insurance policy.

The definition of pre-disability earnings(PDE) is similar to most in the market – ie,the average earnings over the 12 monthsprior to disability. ‘Earnings’ are defined asthose received due to the ‘personal exertion

of the life insured’.Several years after taking out the insur-

ance, Betty suffers a sickness which rendersher totally disabled.

Betty’s claim is admitted, and she receivesthe lesser of the insured benefit amount($5,000) and 75 per cent of PDE ($80,000 x0.75/12) – ie, $5,000.

A year later, Betty recovers and returns towork, but tragically, the next day she isinvolved in a serious motor vehicle accidentand is permanently totally disabled.

Betty submits a fresh claim fully expectingthat benefit payments will recommence.

The insurer, however, informs Betty thatas this is a new claim the amount payablehas to be recalculated – ie, the lesser of theinsured benefit amount ($5,000) and 75 percent of PDE. However, because Betty was onclaim for 12 months prior to the motorvehicle accident, her “personal exertionearnings in the 12 months prior to the (new)claim” are nil.

Thus, Betty is entitled to a benefit amountof nil.

Betty is less than impressed, and like Jim,decides to issue proceedings against heradviser.

In brief, the issue is that under an indem-nity income protection insurance policy, if

the insured suffers a new disability within12 months of returning to work from a previ-ous disability, their benefit entitlement maybe adversely affected.

To overcome this situation the insurerswould need to make an appropriate amend-ment to the definition of PDE.

Question 3A client has income protection insurancewith a benefit period of lifetime accidentand to age 65 sickness. Is it better to retainthis or replace it with accident and sicknessto age 65 or 70?

Without client specifics, this question canonly be discussed on the basis of theory, andthus, the usual disclaimer regarding generaladvice must apply.

Income protection insurance shouldprotect the lifestyle of the insured and theirfamily to the extent that this lifestyle is reliant

on the earned income of the insured. Gener-ally, protection would be to the plannedretirement age of the insured because afterretiring, lifestyle protection falls to superan-nuation savings that have accumulated overthe insured’s working years.

In line with the above theory, a recom-mended benefit period to age 65 or 70 for bothaccident and sickness would appear moreappropriate, bearing in mind that “over insur-ance” by way of “lifetime” benefits can be justas inappropriate as “under insurance”.

An exception to the above logic is if, at thetime of the advice, the insured’s superannu-ation savings were clearly deficient andwould remain so, an argument could bemade for lifetime benefits being an appro-priate supplement to what savings did exist.

If this recommendation was to be made,it would be important to provide precisedetails of the lifetime cover – for example, isit only providing total disability cover afterage 65? Does the benefit amount scale downafter age 60? If the insured is not disabled atage 65, does the policy expire anyway?

The adviser might also point out thatdifferent benefit periods for accident andsickness can give rise to disagreementsabout the cause of the disability – ie, theinsurer has a vested interest in the cause

being sickness, whilst the insured wouldprefer the cause to be deemed an accident.

Disputes rarely reflect in a positive wayon the insurer, the adviser or the industry.

The correct answer is, of course, not thatone option is better than another, but thatone is more appropriate than another; andtherein lies the skill set of adviser analysis.

Once the analysis is completed the theoryis an important part of providing the clientwith a basis for the recommendation.

Question 4Do insurers have the right to promote theirproducts direct to an adviser’s clients?

This question was posed to a number ofinsurers who virtually all responded in linewith the following:

“Within our distribution agreement westate that we will not market to an adviser’sclients outside the policy contractual terms– ie, sending account and premium overduenotices, etc.”

Whilst the response might be in partcorrect – in that it reflects current practice –it does not necessarily reflect what “rights”the insurer possesses.

It is common for wording along the linesof the following to be included in theinsurer’s Policy Disclosure Statement,usually, and somewhat ironically, in thesection headed “Privacy Statement”:

“Before providing us with personal infor-mation, you should know that … we may usepersonal information collected about you tonotify you of other products and services weoffer. If you do not want personal informationto be used in this way, please contact us.”

or “Group organisations will collect person-

al information for the purposes of lettingyou know about products or services fromacross the Group that might better serveyour financial or lifestyle needs.”

It may be the case that if an adviserdoes not want clients contacted direct bythe insurer about alternative productsand services, it will be necessary for theadviser to specifically instruct the insurerto this effect.

Question 5An adviser has reasonable grounds tosuspect that a client is committing a fraud-ulent act against an insurer. The advisershould:

(a) Immediately advise the licensee;(b) Speak to the client and ascertain if in

fact a fraud is being committed;(c) Say and do nothing because the

adviser has a fiduciary duty to the client; (d) Say and do nothing because the

adviser does not want to get involved; or(e) Immediately terminate the relation-

ship with the client and make an appropri-ate file note.


OpinionRisk

Let’s get the party startedCol Fullagar lists six conversation topics about risk insurance which could no doubtcreate passionate discussion.


Question 6In simple terms, why would a clientconsider both trauma and TPDinsurance?

Despite the perception held bysome that trauma insurance rendersTPD redundant, there is generally aneed to consider both.

True, there is a significant overlapof cover between the two products;however, there is also a material gapin cover if TPD is excluded in prefer-

ence to trauma insurance.Simply put, the gap appears in

two areas:• There will be sicknesses and

injuries that may render a client TPDthat are not necessarily coveredunder trauma insurance; somemusculoskeletal injuries, andmental and nervous disorders beingtwo examples; and

• There are some trauma insuredevents that may render a client TPD

at a level of severity lower than thatnecessary to generate a traumapayment – for example, severe burnsto the hands of a surgeon may notsatisfy the trauma definition, butcould render the surgeon unable toever again perform the duties oftheir own occupation.

In risk insurance advice there arefew absolutes, which again, is oneof the imperatives for clients to haveaccess to quality advice.

Well by this stage the party is likelywell on its way, with attention firmlyfocused on “the person with all theinteresting conversation”.

However, even if the party doesnot provide an improved socialoutcome, the questions and subse-quent discussion may well providean improved business one.

Col Fullagar is national manager forrisk insurance at RI Advice Group.

The following commentswhich respond to the abovescenario simply compriseone view and should not betaken as formal legal advice.Licensees should investigateand develop their ownpolicy for this and similarsituations, and these shouldbe made available to theadviser so there is no uncer-tainty as to what actionshould be taken.

Having said that …Under the adviser’s fidu-

ciary duty to their client, theadviser is required to main-tain confidentiality inregards to informationobtained about their clients.

This duty of confidenceis, however, subject to adefence of disclosure forjust cause or excuse, theclearest example of whichis disclosure of a crime or acivil wrong. Disclosure inthis situation is subject tothe test of whether it is inthe public interest todisclose.

It would be difficult toimagine a situation of fraudor attempted fraud whendisclosure would not be inthe public interest.

If the adviser knows orhas reasonable grounds tosuspect that a fraudulent acthas occurred or is beingconsidered, the advisershould immediately speakto the licensee.

The licensee may directthe adviser to return to theclient and recommend thatthe insurer should beadvised of the correct posi-tion. If the client fails to dothis, the adviser mightsubsequently notify theclient of the possible conse-quences of their actions inregards to their contract ofinsurance and refuse to actfurther for the client.

In more serious situa-tions, the licensee maydirect the adviser to have nofurther contact with theclient.

Depending on thecircumstances, the licenseemay in turn contact theprofessional indemnityinsurer, the licensee’s legalrepresentative and theinsurer of the client’s policy.It may even be that thepolice are advised in anextreme situation.

Failure to take appropri-ate action such as that abovecould result in the adviserand licensee being implicat-ed in any fraudulent actionsof the client.

The correct answer is (a).

The Government recentlyannounced that a Superannua-tion Roundtable will be estab-lished to consider retirement

options based on ideas raised at last year’sTax Forum and the ‘Stronger, Fairer,Simpler’ package of tax reforms. Topicsfor discussion include the types of incomestreams offered through superannuation(such as annuities and deferred annu-ities), the concessional contribution limitfor individuals aged 50 or older, the superguarantee (SG) age and rate, and the lowincome super rebate.

According to the Australian Bureau ofStatistics (ABS), 41 per cent of Australiansaged 45 or older intend to transition topart-time work before they retire,however, 13 per cent of older workersintend to work for as long as they are able.Out of those people that do intend toretire, 36 per cent stated that financialsecurity was the main factor that deter-mined their retirement age. About 50 percent of these people expect superannua-tion to be their main source of income atretirement, while 26 per cent expect theage pension to be theirs. These percent-

ages differ for individuals currently inretirement, with only 17 per cent relyingon super and a large proportion (66 percent) relying on the age pension as theirmain source of income.

The proposed changesTable 1 outlines the relevant superproposals and compares it to current law.

Retirement savings for older workersmay increase due to the SG age and rate

changes. In addit ion, some olderworkers may reduce work hours andsalary, therefore becoming entitled tothe low income super rebate and co-contribution. Other individuals who arecontinuing to work full-time may needto uti l ise the higher concessionalcontribution limit.

Under the proposed measures, retire-ment savings may increase overall.However, potential age pension entitle-ments may reduce. This is in line with theGovernment’s general view that personalassets should be run down before incomesupport is provided.

Case study 1 – low income older workerSebastian, age 55, is a single homeownerwith few assets. His super balance is$100,000 (invested in a balanced portfo-lio) and he contributes $500 of after-taxcontributions per year. His only otherassets are personal assets worth $20,000and $30,000 in the bank. Sebastian worksthree days a week and his salary is $35,000gross per annum. His intention is to workfor as long as he can – he believes he canwork until age 75. Upon attaining age

pension age (age 67), he will commencean account-based pension and draw theminimum pension each year.

He will be entitled to receive the lowincome super rebate and some co-contri-bution. However, the co-contributionamount payable will differ under thecurrent and proposed rules.

Graph 1 and Graph 2 illustrate the effectof the proposed measures on Sebastian'sretirement savings and age pension enti-tlements (today's dollars).

Sebastian’s retirement savings willincrease by more than $30,000 (today’sdollars) at retirement age (age 75) and$22,000 at life expectancy (age 85)under the proposed changes. This isdue to a larger amount of mandatoryemployer contr ibutions and lowincome super rebate (although total co-contribution decreases).

However, as retirement savings haveincreased, cumulative age pension bene-fits decrease by over $12,000 (from age 67 to85), creating a net benefit of just over$10,000 (today’s dollars) at age 85. There-fore, under the proposed rules, Sebastianis slightly better off.


OpinionTechnical

Rounding up super for older workersRachel Leong analyses the impact of proposedsuperannuation measures on older workers’ retirementsavings and age pension entitlements.

Table 1:

Proposed change

There will no longer be an upperage limit for SG payment obliga-tions

The mandatory percentage thatemployers must contribute foreligible employees will graduallyrise from 9% to 12%

Contributions tax of up to $500pa is refunded (to the fund) forindividuals with income of$37,000 pa or less

The co-contribution matching ratewill be reduced to 50%, with amaximum co-contribution of$500

Individuals aged 50 or older withsuper balances under $500,000will be able to contribute up to$50,000 concessional contribu-tions without incurring excesscontributions tax

Current law

SG is only mandatory for eligible employeesunder age 70

SG is only payable on 9% of salary for eligi-ble employees

No low income super rebate, however higherco-contribution

The co-contribution matching rate is 100%,with a maximum co-contribution of $1,000

Concessional contribution limit will revert tothe lower limit (currently $25,000) from 1July 2012 for all individuals, regardless of age

Proposed startdate1 July 2013

1 July 2013

1 July 2012

1 July 2012

1 July 2012

Measure

SG age

SG rate

Low income super rebate

Co-contribution

Concessional contributionlimit

0

50,000

100,000

150,000

200,000

250,000

300,000

67 68 69 70 71 72 73 74 75 76 77 78 79 80 81 82 83 84 85!"#$

Proposed rules

Current rules

($)

Source: Suncorp

Graph 2: Age pension entitlement (cumulative)*

0

50,000

100,000

150,000

200,000

250,000

55AGE

Proposed rules

Current rules

($)

57 59 61 63 65 67 69 8583817977757371

Source: Suncorp

Graph 1: Retirement savings

*Assumptions: Maximum low income super rebate, lower threshold and maximum payment for the co-contribution are not indexed. Salary, after-tax contributions and concessional contribution limits are indexed at 3% per annum. Contributions, deduction of tax and pension drawdown occurs at

the end of the year. Earnings are calculated after all contributions, deductions and pension drawdowns have occured.All contributions cease after age 75 (retirement age). Super is converted to an account-based pension at age pension age and every subsequent year. No commutations are

taken from the pension. Normal minimum pension drawdowns occur (reduced minimum does not apply). Centrelink rates/thresholds are at 1 January 2012 (indexed). Centrelink assets and income test lower thresholds are indexed at 3% per annum. Super investment is in a balanced portfolio

with a gross return of 7% per annum. Net rate of return on cash is 3%.Value of personal assets remains at $20,000. Life expectancy for projection purposes is age 85.

“Under the proposedmeasures, retirementsavings may increaseoverall. However, potentialage pension entitlementsmay reduce. ”


Case study 2 – mid-high incomeolder workerDuncan, age 55, is a marriedhomeowner who wishes tocontinue to work full-time untilage 75. He has a salary of $80,000per annum and $250,000 in super(invested in a balanced portfolio).He would like to salary sacrifice$40,000 pa into super, but only ifhe can do so without exceedingthe concessional contributionlimit. His aim is to maximise theamount of contributions hemakes into super each year(within his budget), withoutincurring excess contributions tax.

Duncan and his wife Penelope(age 55) have joint personalassets of $50,000 and $60,000 inthe bank. Penelope has neverworked and therefore does nothave any super.

Graph 3 and Graph 4 illustratethe effect of the proposed measureson Duncan and Penelope's retire-

ment savings and age pension enti-tlements (today's dollars).

Under the proposed changes,Duncan’s retirement savings willincrease by more than $82,000(today's dollars) at retirement ageand nearly $80,000 (today's dollars)at life expectancy. This is due to anincrease in mandatory employercontributions and the ability tocontribute larger amounts underthe concessional contribution limitwithout incurring excess contribu-tions tax.

The increase in retirementsavings is partially offset by areduction in cumulative agepension entitlements (from age67 to 85) of over $59,000, result-ing in a net benefit of over$20,000 at l i fe expectancy(today's dollars). Therefore,Duncan and Penelope are betteroff under the proposed rules.

Note that Duncan has notcommenced a transition to retire-

ment and salary sacrifice strategy. Ifhe did, this may increase retirementsavings even further. However, thepurpose of this case study is to illus-trate the impact of announcedlegislative changes.

SummaryIf all announced changes comeinto effect, some individuals mayreceive a higher net benefit evenafter decreases in age pension enti-tlements are taken into account.However, the superannuationlandscape may change again as thecurrent tax concessions withinsuper will be reviewed by theSuperannuation Roundtable.Therefore, any benefits under theproposed measures may be offsetby additional changes to thecurrent super concessions.

Rachel Leong is the technicalservices manager, directdistribution at Suncorp Life.

0

100,000

200,000

300,000

400,000

500,000

600,000

700,000

800,000

900,000

55 57 59 61 63 65 67 69 71 73 75 77 79 81 83 85Age

($)

Source: Suncorp

Graph 3: Retirement savings

0

50,000

100,000

150,000

200,000

250,000

67 69 71 73 75 77 79 81 83 85Age

Current rules

Proposed rules

($)

Source: Suncorp

Graph 4: Age pension entitlement (cumulative)*

*Assumptions: Super balance threshold for the higher concessional contribution limit remains at $500,000 (not indexed). Salary sacrifice after-tax contributions and concessional

contribution limits are indexed at 3% per annum. Contributions, deduction of tax and pension drawdown occurs at the end of the year. Earnings are calculated after all contributions,

deductions and pension drawdowns have occurred. Refund of excess concessional contributions (up to $10,000) does not apply.All contributions cease after age 75 (retirement

age). Super is converted to an account-based pension at age pension age and every subsequent year. No commutations are taken from the pension. Normal minimum pension draw-

downs occur (reduced minimum does not apply). Centrelink rates/thresholds are as at 1 January 2012 (indexed). Centrelink assets and income test lower thresholds are indexed at

3% per annum. Super investment is in a balanced portfolio with a gross return of 7% per annum. Net rate of return on cash is 3%.Value of personal assets remain at $50,000. Life

expectancy for projection purposes is age 85.

Changes to the treatment ofemployment terminationpayments (ETPs) came intoeffect on 1 July 2007. At the same

time, ‘transitional’ rules were introducedthat cease on 30 June this year. Eligibleindividuals who are thinking aboutresigning or retiring (or are faced with aredundancy) could benefit from receiv-ing their ETP before the transitional rulesexpire. If they don’t, they could forgo theopportunity to have their ETP paid direct-ly into super and or pay more tax on theirETP next financial year.

Who is eligible for the transitionalrules?To qualify for the transitional rules, theindividual’s employer must have had aworkplace agreement or written employ-ment contract in place on 9 May 2006 thatspecifies the terms of the payment. Also,the employment contract or workplaceagreement must have remainedunchanged since 9 May 2006.

Key implicationsIndividuals wanting to get money intosuper

Individuals who receive a transitionalETP before 30 June will be able to elect tohave the money paid directly into super asa directed termination payment (DTP).By doing this:

• A maximum tax rate of 15 per cent willbe deducted from the DTP in the super fund;

• DTPs up to $1 million will be deemedto be excluded concessional contribu-tions, and therefore will not count towards

the individual’s concessional contribu-tion (CC) cap; and

• The entire DTP will not be subject tothe Income Maintenance Period (IMP)that applies to certain social securitybenefits such as the Newstart Allowanceand the Disability Support Pension (DSP).

Conversely, if the individual was to takethe money as cash and make a personalafter-tax super contribution:

• The tax rate payable on the ETP wouldbe 31.5% or higher if they are under age55, or aged 55 and over and the paymentexceeds $165,000

• The personal super contributionwould count towards the individual’s non-concessional contribution (NCC) cap, and

• The money would be counted towardsthe IMP, which could increase the timethey need to wait to be eligible forNewstart or the DSP.

Given the opportunity to direct thepayment into super will not be availablefrom 1 July 2012, some individuals maywant to resign or retire before 30 Juneor negotiate with their employer toreceive their redundancy paymentbefore this date.

Case study: DTP vs cash-out and NCCin 2011/12John, aged 53, has been made redundantand is entitled to a transitional ETP of$80,000. He would like to invest themoney in super to increase his retirementsavings. The table below compares the netsuper contribution he could make if he:

• Elects to direct the payment intosuper; and

• Elects to receive the payment as cashand uses the money to make a NCC.

Individuals with transitional ETPswanting to receive cashIndividuals who are entitled to a transi-tional ETP over $165,000 may want toreceive the payment before 30 June to takeadvantage of the lower lump sum tax ratesthat would be payable.

Case study: Cash out ETP in2011/12 vs 2012/13Ross, aged 61, is made redundant in Junethis year and is entitled to a transitionalETP of $250,000. He wants to receive thebenefit as cash. The table below shows thetax savings he could make by negotiatingwith his employer to receive the paymentin 2011/12 rather than in 2012/13.

Other individualsOther individuals may want to defer receiv-ing an ETP until the next financial year,where possible. This includes individualswho are eligible for transitional ETPs under$165,000 that they want to take as cash andthose who are not eligible for the transi-tional rules. This is because:

• Less tax may be paid on amounts thatare taxable at marginal rates (such asaccrued annual or long service leave) ifincome from other sources is lower nextfinancial year;

• New taxable income thresholds andmarginal tax rates will come into effecton 1 July that particularly benefit lowerincome earners;

• The ETP cap that applies to the taxablecomponent when taken as a lump sumincreases from $165,000 to $175,000; and

• The Flood levy currently payable bypeople with incomes over $50,000 pa willno longer apply.

Mike Mitchell is a Senior TechnicalConsultant with MLC Technical Services.


Making the most of thetransitional ETP rules

Toolbox

MLC’s Mike Mitchell outlines the strategy implications that the ending ofthe transitional ETP rules could have for eligible individuals.

1. Individuals are eligible for thetransitional rules if: a. Their employer had a workplaceagreement or written employmentcontract in place on 9 May 2006.b. The terms of payment are specifiedand contained in the employmentcontract or workplace agreement.c. The employment contract or work-place agreement remains unchangedsince 9 March 2006.d. All of the above.

2. Transitional ETPs up to $1 milliondirected into super will be deemedto be excluded concessional contri-butions and therefore will not counttowards the individual’s concession-al contribution cap?a. Trueb. False

3. Directing a transitional ETP intosuper could potentially reduce theIncome Maintenance Period thatapplies to certain social securitybenefits such as the NewstartAllowance and the Disability SupportPension?a. Trueb. False

This activity has been pre-accred-ited by the Financial PlanningAssociation for 0.50 CPD credit,which may be used by financialplanners as supporting evidenceof ongoing professional develop-ment. Readers can submit theiranswers onl ine at www.moneymanagement.com.au.

CPD Quiz

If you are experiencing technicalproblems, please call our customer

service centre on 1300 360 126.

For more information about theCPD Quiz, please contact Milana

Pokrajac on (02) 9422 2080 or emailmilana.pokrajac@reedbusiness.

com.au.

Available in theMoney ManagementiPad® edition

MONEYMANAGEMENT iPad® edition

iPad is a trademark of Apple Inc.,registered in the U.S. and othercountries.App Store is a servicemark of Apple Inc.

Direct ETP into super Cash ETP & make NCC

Gross payment $80,000 $80,000

Less 15% contributions tax ($12,000) N/A

Less ETP lump sum tax of 31.5%1 N/A ($25,200)

Less Flood levy (Nil) ($1502)

Net super investment $68,000 $54,650

Additional super investment $13,350

Table 1

Receive cash in 2011/12 Receive cash in 2012/13(transitional rules apply) (non-transitional rules apply)

Gross payment $250,000 $250,000

ETP cap $165,000 $175,000

Less tax on ETP cap ($27,225) ($28,875)

Less tax on remaining ETP ($26,775) ($34,875)

Less Flood levy ($1,7502) (Nil)

Net payment $ 94,250 $186,250

Tax saving $8,000

Table 2

1. Includes a Medicare levey of 1.5%.2. Ignores other sources of income.

Appointments


Please send your appointments to: [email protected]

PLANNER'S ASSOCIATE-ESTATEPLANNINGLocation: Perth Company: Met RecruitmentDescription: A boutique financial servicesfirm specialising in risk insurance, estateplanning and business succession isseeking a planning associate to join itsSubiaco office. The company takes acollaborative approach to resolving clientneeds, and outsources all non-coreservices to experienced financial plannersand accountants.

In this role, you will be required toparticipate in client meetings with theprincipal planner and prepare advice.

To be considered, the candidate willhave completed their ADFP and have atleast 3 years’ experience in a relatedrole within the financial planningindustry.

For more information and to apply, visitwww.moneymanagement.com.au/jobs, orcontact Mike at Met Recruitment – 0422 922 467,[email protected]

PRACTICE MANAGER/ADVISERLocation: MelbourneCompany: Fortrend SecuritiesDescription: A boutique financial servicesfirm is seeking a wealth managementpractice manager/adviser.

The business is a specialist internationalinvestment banking firm, and in this role youwill build on an existing business of mediumhigh net worth clients.

You will also be comfortable dealingwith C clients, professionals, executives,entrepreneurs and self-funded retirees.

To be considered, you will have aminimum of 8-10 years’ experience as afinancial adviser, and be DFP or AdvancedDFP qualified and RG146 compliant.

For more information and to apply, visitwww.moneymanagement.com.au/jobs, orcontact Fortrend Securities – (03) 9650 8400.

SENIOR AUDITOR - ASSURANCELocation: AdelaideCompany: Terrington ConsultingDescription: A second tier accounting firmis currently looking for a senior assuranceaccountant.

You duties will include developing auditplanning strategies, conducting interimand year-end visits, facilitating the trainingand development of staff and preparingand conducting assurance of general andspecial purpose financial reports.

To be successful, you will need over 3years’ experience in accounting -preferably in Australia - and will need tohave previously held a position in aprofessional services accounting firm.

Working directly with the firm’s partner,you will take ownership for your work andclient base.

To find out more and to apply, visitwww.moneymanagement.com.au/jobs, orcontact Jack at Terrington Consulting – 0412 690 268,[email protected]

CLEARVIEW Wealth hasannounced the appointment ofTony Smith as state manager ofQueensland and Tony Schiavel-lo as state manager of Victoriaand Tasmania.

According to ClearView, bothSmith and Schiavello will beresponsible for promotingClearView's life advice andwealth product offeringslaunched in December 2011 toindependent financial advisers.

Smith and Schiavello bothhave extensive experience ingrowing adviser businesses andmarket share, having previouslyworked for CommInsure.

Smith has around 20 years’experience in the life insuranceand wealth management indus-try, and will be based in Bris-bane.

Schiavello has been in thesuperannuation, investmentand life insurance industry formore than 25 years. He will bebased in Melbourne.

Bank of Queensland (BOQ) hasannounced the appointments ofJohn Sutton as chief operating

officer and Peter Deans as chiefrisk officer.

With extensive experience inrisk strategy, Sutton most recent-ly served as general manager ofinstitutional banking riskmanagement at the Common-wealth Bank of Australia (CBA).

Having also previously servedin the same position at CBA,BOQ stated that Deans wouldbring a renewed focus on assetquality and strengthen thebank's risk managementprocesses and procedures.

Following the end of its jointventure AMP Capital Brook-field , AMP Capital hasannounced the appointment ofseveral new portfoliomanagers/analysts to managethe investment manager's globalportfolios in-house.

Matthew Hoult has beenappointed as AMP Capital headof global listed real estate andwill be based in Sydney.

AMP Capital has alsoannounced that a team of listedreal estate professionals based inChicago have been appointed to

monitor investment trends in theAmericas. The team will be leadby AMP Capital senior portfoliomanager Joseph Pavnica.

With the further additions ofRobert Thomas , MatthewHodgkins and Dominic Cappel-lania as portfoliomanagers/analysts, the teamnow has 15 listed real estateprofessionals.

Appointed to the role of AMPCapital head of global listedinfrastructure, Tim Humphreys

will team up with existing port-folio managers Jonathan Reyesand Joseph Titmus, and newly-appointed portfoliomanagers/analysts Kevin Scuttand Giuseppe Corona.

Australian Unity PersonalFinancial Services has appoint-ed Viki West as a financialadviser in the Brisbane area.

Joining the dealer group fromAon Hewitt, West stated that

Australian Unity could provide thesupport she needed to achieve herpractice's growth targets.

Australian Unity PersonalFinancial Services stated that itwas currently in the process ofgrowing its Accountant Partner-ship Program.

The program currently hasrelationships with around 188accounting firms – most ofwhom refer their clients toAustralian Unity advisers andmortgage brokers.

Move of the weekGLOBAL asset manager AllianceBernstein has announcedthe appointment of Ross Kent as chief executive of Alliance-Bernstein Australia.

Since December 2006, Kent oversaw marketing efforts acrossAustralia and New Zealand as AllianceBernstein's seniormanaging director – institutional relationships.

Prior to joining the asset manager in 2004, Kent served asmanaging director for AMP Financial Services in New Zealand.

AllianceBernstein global head of client group Bob Keithsaid that Kent's appointment further demonstrates thecompany's commitment to Australia after AllianceBernsteinacquired full ownership of its Australian operations when itsjoint venture with AXA Asia-Pacific Holdings dissolved lastyear.

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

OUTSIDER has long conformed to the beliefthat desperate times call for desperate meas-ures. Although within the confines of Out-sider’s high-octane lifestyle, desperate timesgenerally equate to “there’s no Glenfiddich12 year left and the shops are closed” anddesperate measures are along the lines of“better just have a Jamesons then”.

Not so in continental Europe, where timesare tough indeed – so much so that allmanner of professions are in uproar over thedire state of several major economies.

One of those includes the oldest profes-sion of all, according to several news outlets:ladies of the night in Madrid, Spain, are report-edly “on strike” when it comes to the nation’sbankers.

Madrid’s high-end prostitutes are refusing

to service bankers until they “fulfil theirresponsibility to society” and go back to provid-ing loans to families and small businesses,according to reports.

Outsider was impressed to hear that theladies have their own trade association, andmore impressed that said association seemsto have a sense of humour.

“We have been on strike for three days nowand we don’t think they can withstand muchmore,” a spokesperson reportedly said.

Outsider suspects this isn’t the first time inhistory that the fairer sex has withheld their,err… services… to get a point across. Lysistrataand her pals in Ancient Greece, for starters.But Outsider doesn’t want to say too much lestMrs O starts getting ideas – Outsider doeshave a birthday coming up, after all.

Outsider


Out ofcontext

Oh what a feeling – eight members!

Oh wheely?

Pros opt out of Spanish fly

OUTSIDER loves to watch the ebb andflow of Australian politics, but evenmore does he savour the jokes thatevolve from major events such as therout of the Australian Labor Partywhich occurred in the QueenslandState Election.

As someone who actually remembersreporting on the last ALP disaster whenthe party was reduced to just a ‘cricketteam’ in the Queensland Parliament ledby the late Tom Burns, Outsider nownotes that the party is reduced to barely abasketball team and, at time of writing,

doesn’t actually have a leader.He also notes that in the immediate

aftermath of the passage of the Future ofFinancial Advice bills there were many inthe financial planning community point-ing to the harbinger of what lies ahead forthe Gillard Government and therefore,possibly, the fate of opt-in.

However, back to jokes and the latesteffort to emerge from Brisbane.

What is the difference between theQueensland Parliamentary ALP and aToyota Tarago?

A Toyota Tarago has more seats.

OUTSIDER was surprised to hear anumber of financial services types saythey aim to “give back to the commu-nity” by cycling in the 2012 WheelClassic.

Not because Outsider believes thecharity event, which aims to helpdisadvantaged children, isn’t a goodone. Nor does he disbelieve that ourreaders want to help disadvantagedyoung Australians. But he does ques-tion the community’s need to bearwitness to their trusted financierssweating it out from Sydney toMelbourne.

The industry isn’t one often equated(with several notable exceptions) withthe toned biceps and popping calfmuscles of professional cyclists, andOutsider can’t fathom residents

rushing to watch a procession ofspindly legs and swaying bellies zig-zagging all over the Hume Highway(think of the children!).

Whatever their shape, however,Outsider does believe all the hoo-haregarding FOFA of late may propelthe participants forward in attemptsto escape their offices – or perhapsthe absence of ties makes the notionof skin-t ight Lycra al l the moreappealing.

Unfortunately, Outsider’s workschedule will make it impossible forhim to participate: indeed, the roadrage dangers and physical exertionneeded could threaten the future ofour back page. So Outsider would liketo wish all participants the best of luck– from the safe confines of his office.

A L I G H T - H E A R T E D L O O K A T T H E O T H E R S I D E O F M A K I N G M O N E Y

“Minister Shorten could havebeen the White Knight of financialservices reform … unfortunately,his legacy will be more like that ofLord Voldemort.”

Association of Financial Advisers chiefexecutive Richard Klipin on Minister forFinancial Services and Superannuation

Bill Shorten after the Future of FinancialAdvice reforms passed through

Parliament.

“You did well – I’mimpressed. Sorry, it’s anatural academicresponse.”University of Technology Sydney

senior lecturer, accounting, DrRobert Czernkowski gives

delegates at the van Eyk 9thAnnual Conference gold stars

for getting a pop quiz oninflation correct.

“I’m not used to seeingthis many people – atour academicconferences there’susually about threepeople.”

Dr Czernkowski again on thenumber of delegates at the

van Eyk conference.““

money management (april 5, 2012)

Documents

wealth insights data

wealth insightsdata

theprovision of scaled

lower house

house of representatives

thebroader industry

withtheir association

roundtable thatwhere