UniSuper, the $60 billion superannuation fund for Australia’s higher education and research sector, says despite the rapid growth of ‘robo’ advice, meeting financial advisers face-to-face continues to grow as the preferred approach among its members.

UniSuper offers members a comprehensive financial planning solution, with nearly 50 financial advisers nationally providing complete advice across superannuation, investments, insurance and retirement strategies.
Demand for initial advice appointments with members is up over 20% year-on-year. Review Advice, where an adviser reviews an existing financial advice plan, is up over 70%, with demand spiking as members prepare for the upcoming superannuation changes due to come into effect on 1 July.

Jack McCartney, UniSuper Executive Manager – Advice, said more than 50% of UniSuper’s initial advice appointments across its adviser network are now occurring face-to-face.

“While phone based and digital scaled advice have a place, for members wanting to discuss more complex needs or approaching retirement there is a clear preference to have these discussions in person, with more than half of UniSuper’s initial advice appointments now occurring face-to-face,” Mr McCartney said.

“We know that around half of all adults in Australia have unmet advice needs with many lacking the knowledge, time or confidence to seek financial advice. Building a relationship face-to-face can quickly help overcome these barriers.

“We’ve also seen this trend grow among younger members, with the initial face-to-face meeting helping build a deeper relationship as a base to grow and evolve over time as their situation changes.”
“An increasing number of Australians who are looking for financial advice are first turning to their super fund and for UniSuper, our core goal is that when members are seeking advice we have a service offering and a channel that is right for them. What we are seeing is that the ‘right’ channel is more often than not face-to-face.”

Whilst Mr McCartney said that his team do not set out to win awards, the recent acknowledgement of Best Advice Offering at the Conexus Financial Superannuation Awards 2017 is a reflection of their collective hard work over recent years.

“We are tremendously proud to have won this award. Our members understand the importance of an expert opinion, especially when it comes to planning for the future. Receiving industry best-practice advice gives them confidence in knowing they are preparing themselves for a comfortable life now and into the future.”

SOURCE: UniSuper

The ability for employers to pay employees higher superannuation levies, offer better insurance benefits or pay for insurance premiums will be lost in three of the four model options put forward by the Productivity Commission in its Review on Superannuation Alternative Default models.

According to the Workplace Super Specialists of Australia (WSSA), many employers use superannuation and insurance as a tool to distinguish themselves from other employers, often providing increased benefits to their workforce.

However, under Model’s 1,3 and 4, which amongst other things, advocates for employee choice of default super fund, employer’s ability to pool together its workforce and negotiate better insurance rates, pay insurance premiums or pay higher compulsory super rates, will be eroded.

“Removing this benefit will have a negative impact on many employees,” said WSSA President Douglas Latto.

The WSSA is presenting its submission to the Productivity Commission in Sydney on Monday 8th May.

In it, the WSSA will confirm its support for Model 2 proposed by the Productivity Commission to provide assisted employer choice, however will also look to remove the heavy employer filter proposed in this model. It is proposed this filter would be applied to funds based on investment performance and exposure to various assets.

“This must be considered in light of an investor’s time frame and risk appetite,” WSSA writes in its submission. “It would be a very brave panel member who would accept responsibility for arbitrary decisions such as this should something go wrong.”

For a copy of the submission, please click here.
SOURCE: Workplace Super Specialists of Australia

ASIC has welcomed and strongly endorsed today’s announcement of the second stage of the ground breaking research project ‘Whistle While They Work’, which will lead to a strong information base to assist considerations of whistleblowing practices.

The ‘Strength of Whistleblowing Processes’ report, undertaken by a multi-university team led by Griffith University’s Professor AJ Brown, and funded by the Australian Research Council, follows on from the ASIC-sponsored Whistling While They Work report. It identifies the factors that influence good and bad responses to whistleblowing across a wide range of institutions.

This unique research project is the first to systematically compare the levels, responses and outcomes of whistleblowing in multiple organisations:

• Across the public, private and not-for-profit sectors; and
• Across international boundaries

The project will provide a clearer basis for evaluation and improvement in organisational procedures, better public policy, and a more informed approaches to the reform or introduction of whistleblower protection laws.

ASIC Commissioner John Price said, ‘The release of the new results provides an important new picture of where the strengths and weaknesses lie in current whistleblowing processes.

‘This demonstrates firstly, the value of the project and of participating in it, but also why it’s important that industry take a proactive approach to helping identify and adopt best practice, so that improvements in this area are well-informed and well-targeted on what’s needed.’

This research project comes at a very important time and will provide a strong rationale for both industry and regulators to understand the importance of effective whistleblower programs within their workplaces.

It will also progress our understanding of how these programs should be effectively embedded in large organisations. The ability for staff to speak up to its leaders and identify wrongdoing is a feature a strong organisational culture, including whistleblowers being heard, considered and appropriately dealt with.

ASIC encourages companies officers and directors to support this groundbreaking research.

SOURCE: ASIC

The Association of Financial Advisers (AFA) today announced the appointment of Linda Vogel to the role of General Counsel, Professionalism.

AFA CEO Philip Kewin said Ms Vogel will work with the AFA’s General Manager, Policy & Professionalism to ready the association to become a monitoring body of an ASIC-approved AFA Code Scheme under the new Professional Standards of Financial Advisers Act, and to prepare members for the Financial Adviser Standards and Ethics Authority (FASEA) requirements.

“We are delighted to welcome Ms Vogel to the AFA team,” Mr Kewin said. “She is a highly-qualified lawyer with over 30 years’ legal experience including as general counsel and company secretary for listed and unlisted organisations. Ms Vogel’s primary role with the AFA is to develop the AFA’s Professional Standards and Ethics Code, associated processes, governance and guides.”

Ms Vogel has extensive experience in code development and management, as the former Head of Professional Conduct at Chartered Accountants Australia and New Zealand for 10 years, enforcing professional standards and the associated Code of Ethics.  Most recently Ms Vogel was Senior Legal Counsel at Deloitte Touche Tohmastu where she conducted an independent legal and regulatory review of Deloitte’s businesses in Australia and assisted in the drafting of Deloitte’s Principles of Business Conduct.

“I am delighted to join the AFA as General Counsel, Professionalism, and use my expertise in developing the AFA Code and practice guides,” she said. “I look forward to meeting and working with the AFA Community.”

Ms Vogel will report to the AFA’s General Manager, Policy & Professionalism, Samantha Clarke.

SOURCE: Association of Financial Advisers

Former property manager Mark Anthony Kolodynski has been sentenced to 18-months in jail with a 12-month non-parole period for stealing more than $370,000 from real estate trust accounts.

Mr Kolodynski, of Panania, pleaded guilty in Parramatta Court to taking the funds during his employment as a strata manager and rental property manager.

Minister for Innovation and Better Regulation Matt Kean said this is a timely warning to anyone thinking about stealing other people’s hard-earned money.

“If you choose to do the wrong thing, Fair Trading will come after you, and you will be prosecuted to the full extent of the law,” Mr Kean said.

“This result reflects the hard work of Fair Trading’s investigators who will continue to pursue dodgy operators to protect the community.”

Fair Trading’s investigation uncovered Mr Kolodynski’s systematic and unlawful conversion of trust money for his personal use.

According to information produced in court, Mr Kolodynski used false descriptions relating to fictitious expenses to cover his illegal activity.

Mr Kolodynski’s bank statements showed regular payments to an account at a well-known betting agency.

He was convicted of taking $129,457.48 from Peeco Pty Ltd, trading as Harcourts Northern Beaches & Northern Strata, and $243,965.30 from Bevans Wollongong.

Both companies have since reimbursed the corporations’ trust accounts at their own expense, to repay the money taken by Mr Kolodynski.

At the time of the hearing, Mr Kolodynski’s real estate certificate had expired. In addition to the prosecution, NSW Fair Trading disqualified him from holding any real estate credentials for 10 years.

SOURCE: NSW Finance, Services & Innovation

Yesterday’s report by the Senate Economics References Committee into the non-payment of Superannuation Guarantee (SG) – highlighting employers are not paying billions of dollars’ worth of super – requires an immediate fix and fresh solutions.

Integrated Payment Technologies (InPayTech) says its unique overlay technology can curb these losses to Australian workers.

The Senate Economics References Committee said it is “deeply concerned by recent analysis by Industry Super Australia that indicates that employers failed to pay an aggregate amount of $5.6 billion in SG contributions in 2013-14.

“The committee is keenly aware that this amount represents 2.76 million affected employees, with an average amount of over $2000 lost per person in a single year.

“Given the significant size of the fiscal impact of SG non-payment … the committee feels that it is necessary and wholly reasonable for the government to consider stronger, more proactive compliance activities in the SG space,” the Superbad – Wage theft and non-compliance of the Superannuation Guarantee report said.

The committee said efforts by the Australian Taxation Office (ATO) to identify and reduce unpaid super have been “inadequate.”

InPayTech’s system, PayVu, can help to overcome these inadequacies.  PayVu significantly speeds up SG payments to the same day and reports these payments to the ATO via Single Touch Payroll (STP).

For employers with 20 or more employees, STP reporting of SG payment information will be mandatory from 1 July 2018, though business can start from 1 July 2017.  STP streamlines the way employers report tax and superannuation information to the ATO, which will be able to track which employers are paying the right amount of super – and which ones are not.

“PayVu is an overlay service that will sit over the top of the STP initiative of the ATO and fully automates SG payments. Too many employers are skipping their SG obligations, and this is costing workers billions of dollars each year. PayVu will go a significant way to reducing this ‘wage theft’,” said PayVu’s Don Sharp.

Industry Super Australia (ISA) said yesterday that the Government could fix unpaid super by aligning SG payments and by extending STP coverage to all employees. “Both the senate committee and an inter-agency group established by the Financial Services Minister have been working on this for five months. The ducks should be lined up and ready to go,” ISA said.

 

Member Direct the new pathway for employers

Importantly, InPayTech says the notion of ‘member direct’ payments are a crucial element to increasing transparency and efficiency into the way salaries and super are paid. PayVu enables small employers (less than 20 employees) to make direct payments to members’ superannuation accounts.  This will reduce the time it takes super payments to go to employees’ funds to one day from an average of four days.

“STP processing will also go a long way to avoiding super payments getting lost in the system, from which clearing houses are profiting. If payments get sent to wrong accounts, the refund can end up sitting in clearing houses’ accounts for an indeterminate time, and clearing houses earn interest on this – at employees’ expense,” said PayVu’s Sharp.

“PayVu will help to eliminate this and get the refund sent directly to employers from where it can be re-contributed into employees’ accounts, where it belongs,” he said.

Employers too will spend much less time administering their super obligations and avoid complicated payment processes, saving valuable time and money too.

SOURCE: Integrated Payment Technologies

When Scott Morrison handed down his first budget last year, few advisers expected the foreshadowed changes would be weighted so heavily on superannuation, much less in a year when millions of pre-retirees and retirees would be going to the polls.

Many of the changes gave advisers just a little over 18 months to revisit and shift strategies, especially for
the soon-to-retire, the already-retired, the high earner and the low-earning spouse. Unsurprisingly, questions about super would become among the most asked of the year, as clients strategically and emotionally prepared
to pivot their retirement plans.

Fast forward a year and time has almost expired to prepare clients for the new rules. While clients would have ideally had their new plan in place last year, advisers know clients tend to wait until the egg timer sounds before proposing changes to their current plan. Some advisers, meanwhile, haven’t had time to review every one of their clients’ strategies for the new regime.

Fortunately, there is still time to review the new landscape and make appropriate changes to reduce the chance of a tax surprise, says Tim Howard, advice technical consultant for BT Financial Group.

New contribution caps

Lowered contribution caps will affect clients across the age and wealth spectrum, so preparing for the change will be high on the action list for many advisers, Howard says.

“Next year, you’ve got a couple of interacting changes,” he says. “Advisers are in pole position to help their clients make the most of this year’s caps and then plan next year. [To start with], target your wealth-accumulation clients to dial up their contributions, should they be eligible and able to afford it.”

While there is an opportunity to maximise concessional contributions before the new cap of $25,000 kicks in, Howard also proposes taking advantage of the transitional bring forward rule period for non-concessional contributions.

While the after-tax yearly contribution cap will be lowered from $180,000 to $100,000 – and in bring forward terms $540,000 to $300,000 – the transitional rule allows clients under 65 who have made their first contribution in either the 2015-16 or 2016-17 financial year but haven’t hit their $540,000 limit a slightly higher transitional non-concessional cap for the 2017-18 and 2018-19 financial years.

For example, Howard says if a client under the age of 65 were to contribute $200,000 this year, they could then contribute up to $180,000 over the following two years, to a total of $380,000 over three years. Without triggering the rule, their contributions over three years would be capped at $300,000. (See this chart for an example.)

“Those who have greater than $1.6 million in super won’t be able to make non-concessional contributions from next year,” he notes. “In addition, individuals with balances close to $1.6 million will be able to bring forward only the annual non-concessional cap amount for the number of years that would take their balance
to $1.6 million.”

Craig Day, executive manager at Colonial First State, says clients who have already triggered the bring forward rule would ideally hit the full $540,000 before July 1, but even if they have less, the transitional arrangements are worth making the most of. Another strategy worth considering for clients with higher super balances could be withdrawing the unrestricted component of their balance to maximise non-concessional contributions, Day says.

Transition-to-retirement questions

Prior to last year’s budget, Morrison famously labelled transition-to-retirement pensions a “loophole” in the retirement income system and hinted the arrangements were towards the top of his hit list. Indeed, from July 1, earnings on assets supporting TTR pensions will be taxed at 15 per cent, which may make setting one up prohibitive, especially for clients in their mid-to-late 50s, Howard says.

“For those aged between 55 and 59, if they are primarily relying on the tax-free aspect, the benefit will be quite small,” he says. “They may want to reconsider starting one because of the cost to set it up.”

Day agrees clients in their mid-50s could be worse off under the strategy due to the changes, especially combined with the reduced Division 293 tax threshold and concessional contribution caps. However, he says supplementing a TTR with salary sacrifice or deductible super contributions could still make sense for some clients in the age bracket.

For clients over age 60, income from TTR pension-paying assets will similarly be taxable, but because pension payments continue to be tax free, the arrangements may prove more worthwhile, Howard says. Again, advisers will have to crunch the numbers to make sure it makes sense.

Transfer balance cap

The $1.6 million pension transfer balance cap was introduced to restrict Australians from holding millions of dollars in the tax-free pension phase.

In his budget speech, Morrison said the cap, like the non-concessional contributions and Div 293 tax, would affect less than 1 per cent of super fund members. However, anecdotal insights from advisers suggest it has been among the more concerning of the changes for clients, even if they do not come close to the balance.

For clients who suspect they may trigger the cap, there is an urgency to move any excess above $1.6 million out of pension to avoid a tax penalty, Howard says. But even for clients who don’t have an excess, reassurance may be needed if they are wondering how to make sure they fall within the new rules, he adds.

CGT relief

SMSF clients who do trigger the transfer balance cap or have established TTR pensions may be eligible for capital gains tax relief for disposed of assets that would have previously been exempt from income tax under the old regime. The one-off concession recognises the tax trustees may trigger in shifting some assets from pension to accumulation to comply with the new rules and, as such, may allow trustees to reset the cost base of some of their assets, Howard says.

But the application – and appropriateness – of claiming the relief has been an area of confusion. To begin with, some clients may assume the relief is automatically applied – which it is not – or that it applies to all assets – which it doesn’t, Howard adds. He says advisers will have to clarify the asset-by-asset nature of the CGT relief and that an application will be required. They will also have to work closely with accountants on the administration of relief. Given the looming deadline, preparations should be started shortly.

Why is the price of a house in Sydney much more than for a similarly sized house in Wollongong? Silly question, there’s no comparison, right? Hold that thought for a moment.

When I was a young lad, the tallest building in Sydney was a 14-storey edifice in Castlereagh Street. The 50-metre height restriction on buildings was lifted in 1957. There are now 1168 skyscrapers in Sydney, of which, 35 are taller than 150 metres.

When I arrived in Sydney in 1975, there were almost no places to dine outside – it rains in the afternoon when the southerly comes, so I was told – and the Opera House was less than 2 years old.

Now, back to Sydney and Wollongong. If no sensible person thinks comparing prices in the two cities today is meaningful, why compare prices in Sydney now with prices when I was young? And if one of the world’s great financial centres had started in Wollongong 50 years ago instead of Sydney, what would have happened to house prices over time in these two cities?

While it is increasingly hard for people born in Sydney to be able to buy in Sydney, that does not mean there is a price bubble here. A bubble is only a bubble if prices have been bid up above sustainable levels based on fundamentals. And the fundamentals in Sydney have shifted upwards.

The critical bubble question

Whether or not a bubble exists is a question central to the stability of the banking sector, which, in turn, is central to the stability of the sharemarket. The Financials-x-REITs sector is 40 per cent of the ASX 200.
I wrestled with the bubble problem back in 2003-04, after a few years of strong price growth, like now. I concluded from extensive research that house prices in the major capitals – going back to as early as 1900 – relative to general price levels measured by the CPI, move in ‘steps’. On average, the so-called ‘real’ price levels change little for extended periods of time – about 4-7 years, and sometimes as long as 10 years – and then go through a price spurt.

Therefore, it is easy to distort price growth analysis by focusing only on the price spurts.
Why should prices behave like this? It is hard to determine a fair value for a particular house, especially when average prices are rising. It also takes a long time to find a suitable house and then await the auction, so there is a temptation to pay more than one thinks is fair on the day, so long as it might be fair in a few months when that person finds the next similar home to buy.

At some point, people realise prices have moved a bit too much and decline to buy at that or higher prices – and transactions levels fall. Hence the next ‘property price plateau’ is born. And it continues until prices seem a bit cheap after wage growth, and the next price spurt begins.

In about 2004, I presented my findings at a press conference while I was at the Commonwealth Bank of Australia. I’m not sure anyone believed me in that meeting when I claimed that there was then
no bubble and property price growth would just slow down for 4-7 years, or maybe longer.

There was one journalist in particular who was rather rude about not accepting my findings, I recall! And he remarked that it is silly to compare a house price in Sydney in 2004 with one in 1900. Point made. The fundamentals have shifted and more so in Sydney and Melbourne. In Perth’s case, they faced strong house price growth in the mining boom but then the fundamentals fell away.

Numbers dispel the myth

I show in this chart what happened after that press conference, by deflating the ABS Sydney Residential House Price Index using the Sydney Consumer Price Index. This data series starts only in 2003 because many people then said the ABS had got it all wrong. Of course they hadn’t; the bubble-myth people just didn’t understand price formation. Reminds me of climate-change sceptics.

So if I wanted to cheat, I could say Sydney house prices (not CPI deflated) have grown at 13.4 per cent a year since March 2013 (by choosing the period of fastest growth). But, net of inflation, the answer is only 2.6 per cent a year, since the series began in September 2003 – only a bit faster than real wage growth.

Note that real prices had fallen from 2003 to 2013!

And if we go through a new plateau, the 2.6 per cent a year figure will fall. Of course, 2003 marked the end of a price spurt, so the number would be higher if we had a longer time series going backwards.

So I see no mortgage-related problems from bubbles for the banks or the sharemarket but individuals will always find it tough and the prices in individual submarkets may fall.

Back in 1975, I was attracted to work at UNSW because I was going to earn a gross salary of $11,900 a year, which tripled my Manchester University lecturer’s salary. In 1977, it took us two good salaries and parental help to get a mortgage on a two-bedroom unit in Coogee. We didn’t have breakfasts out in cafes and expensive lattes. My wife didn’t go for a “mani and pedi” or a day spa to chill out, and our friends didn’t either. We had to budget. The world has changed.

So will average house prices fall in Sydney? Quite possibly, in the sense of the plateau I show in the chart. But anything worse? No, unless Melbourne attracts the finance industry from Sydney in the way it attracted the F1 Grand Prix from Adelaide in 1996!

BetaShares, a leading Australian ETF manager, today announced the establishment of its Melbourne office, as the business continues its growth trajectory having recently surpassed $4 billion in assets under management (AUM).

Damon Riscalla joins BetaShares in Melbourne as National Manager, Adviser Services. Damon brings with him 21 years’ experience across the banking, insurance and funds management industries. This includes existing experience in the Australian ETF industry, with his most recent role being ETF Distribution Manager at Russell Investments.

Commenting on the expansion, BetaShares Managing Director, Alex Vynokur, said: “We are pleased to welcome Damon into our team and look forward to building a strong on the ground presence in Victoria to help us meet increased client demand.”

Mr Riscalla’s appointment follows on from additional recent hires in Sydney across the distribution, operations and finance functions.

Mr Vynokur added, “Since the launch of our first ETFs in December 2010, our business has expanded considerably and we are now managing a diversified family of 39 funds, covering a broad range of asset classes and investment strategies. As a leading participant in the Australian ETF industry we are committed to investing in education and client service and are pleased strengthen that commitment with recent additions to the team.

SOURCE: BetaShares

The Financial Planning Association of Australia (FPA) has announced the appointment of Graham McDonald as Chair of its Conduct Review Commission (CRC), and Dale Boucher as Deputy CRC Chair. The CRC is an independently chaired tribunal that hears and determines disciplinary complaints, holding FPA members accountable to high standards of ethics and professionalism.

These appointments are made on the recommendation of an independent selection committee chaired by the Honorable Bernie Ripoll, former Federal Member for Oxley. Mr. McDonald brings a wealth of experience from a long and successful career as a solicitor and barrister, and a deep understanding of dispute resolution gained as a former Presidential Member of the Australian Administrative Appeals Tribunal, where he oversaw a number of cases relating to financial planning.

Mr. McDonald has also served previous roles as Banking Ombudsmen and Chair of the Superannuation Complaints Tribunal. Mr. McDonald’s appointment includes the newly created role of Independent Code Administrator (ICA) for the FPA Professional Ongoing Fees Code, the FPA’s ASIC approved code.

His term as Chair is for three years. Mr. Boucher will commence as Deputy CRC Chair on 1 July 2017. His current term as Chief Executive Officer of the Legal Services Council and Commissioner for Uniform Legal Services Regulation will end in September 2017.

He brings to the role a depth and breadth of experience that spans more than four decades and includes time as an Australian Government Solicitor, a Partner with Minter Ellison in Canberra, Chairman of the Tax Practitioners Board, and Chair of the Mortgage and Finance Association of Australia Tribunal.

These appointments will be integral to the FPA’s application to become a code monitoring body following the passing of the Corporations Amendment (Professional Standards of Financial Advisers) Bill 2016 by Parliament on 7th February. Code monitoring bodies will be responsible for ensuring the conduct of members meets the new Code of Ethics set by the Financial Adviser Standards and Ethics Authority (FASEA). “The high calibre of the new appointments reflects the reputation the FPA has built in the financial planning profession. Both appointees put their names forward to independently uphold the high standing of members, and we’re delighted to have them on board,” said Chair of the FPA, Neil Kendall CFP® .

Commenting on outgoing Deputy and acting Chair Mark Vincent, Mr. Kendall said: “The FPA would like to acknowledge the important contribution made by Mark to the development of the CRC. Over the past two years Mark has lead the CRC through an important period of transition, improved processes and independence for our professional accountability systems.”

SOURCE: Financial Planning Association of Australia

The ATO recognises the importance of the Superannuation Guarantee (SG) to the community and its vital role in providing for people’s retirement. Deputy Commissioner James O’Halloran said that while the vast majority of the $85.7 billion paid in superannuation each year is paid voluntarily by employers, there are reports of non-compliance from employees.

“In 2015-16 we undertook around 21,000 cases that addressed SG non-compliance, raising $670 million in SG, including penalties, from a range of reviews and audits” Mr O’Halloran said.

“Since 2010-11 we have transferred almost $2 billion in SG entitlements to employee’s super funds as a result of ATO action.”

Mr O’Halloran said the ATO receives roughly 20,000 reports each year from people who believe their employer has not paid SG.

“We have over 150 staff focused specifically on SG compliance. We examine every report of non-compliance and follow-up with the employer and if necessary undertake audits and apply penalties,” Mr O’Halloran said.

“We also have an additional 300 staff who review SG compliance in conjunction with Pay As You Go Withholding Tax audits targeted across a range of industries, regional areas and individual circumstances to address non-compliant behaviour.”

In addition to investigating all reports of non-compliance made to us, the ATO undertakes a range of compliance activities to detect and deal with non-compliance

“This includes analysing our data to detect patterns in non-payment, identifying high-risk industries, and taking firm action with employers who do not cooperate with requests to ensure employee entitlements are paid on time,” Mr O’Halloran said.

“Third-party referrals from intermediaries such as super funds, employee associations, other government agencies and tax professionals are additional sources of information for compliance action.”

If an employee believes their employer is not paying SG they should report their employer through our online tool or by calling 13 10 20. Our website also has calculators and guidance to help employees determine whether they are being paid enough SG. When the ATO recovers outstanding super amounts from employers, payments are then sent to the employee’s super fund.

The ATO’s submissionExternal Link to the Senate Standing Committee on Economics on Superannuation Guarantee Non-Payment has more detail about how the ATO deals with SG non-compliance.

SOURCE: ATO

Equity Trustees has appointed James Connell to the role of Senior Manager, Structured Finance – Corporate Trusts in the Sydney office of the Corporate Trustee Services (CTS) team. He begins in the role on 8 May.

Mr Connell has significant expertise in corporate trusteeship, coupled with experience as a lawyer, and transaction manager with a leading institutional bank. His most recent role was Vice President, Transaction Management Group Asia for Deutsche Bank in Hong Kong.

“James will be an important addition to our strengthening team,” said Harvey Kalman, Executive General Manager, CTS. “We will be rounding out our services to include Debenture/Note Trusteeship, Security Trusteeship, Escrow Agency, Property and Special Custody, as well as other CTS and bespoke corporate trust transactions.”

CTS has grown into Australia’s largest independent responsible entity (RE) service provider since it was established 17 years ago with just three clients, seven funds and $700m in funds under supervision. It now services more than 100 clients, 240 funds and over $50bn funds under supervision.“Importantly, this appointment signals our commitment to growing our presence in Sydney. We are already leaders in the responsible entity service area, and James brings added expertise, drive and commitment to the CTS team to grow our corporate trustee service area and strengthen our market position,” said Mr Kalman.

The CTS team has set its sights on the expanding fund manager market in Asia and overseas, which requires Australian RE, trustee and corporate trustee services, as part of its continued evolution and development.

“Our clients can be assured that they are being looked after by one of the most credentialed and experienced specialist corporate trustee team in the business,” said Mr Kalman. “We are committed to recruiting great talent and welcome James to the Equity Trustees team.”

Mr Connell holds an LLB (Hons) from Kings College, University of London, England and a Diploma in Legal Practice from the College of Law, Guildford, England. He is registered to practice in Australia and the UK, and is also currently a Director, and Treasurer of the Banking and Financial Services Law Association.

SOURCE: Equity Trustees

Lonsec Research expands its SRI and emerging markets capabilities

Lonsec Research has intensified its focus on the Environmental, Social and Governance (ESG) and Socially Responsible Investing (SRI) sectors, establishing dedicated investment product coverage and analysis within the rapidly growing space.

Lonsec has provided research coverage on the SRI and emerging markets sectors for a number of years, and the increased focus recognises the growth in ESG as an investment approach and the growing recognition of ESG factors as a source of alpha in investment management.

Lonsec Research’s Steve Sweeney will drive the new research focus as General Manager – ESG/SRI and Emerging Markets Research.

“By formalising and expanding our ESG and emerging markets research capabilities, we are recognising the growing importance of these sectors, both in terms of financial product expansion and the impact they are having within the investment community,” said Lonsec Research CEO Matt Olsen.

“We believe emerging markets research will be a key long-term growth area in financial product issuance, and it fits well with ESG given that governance remains a key risk area in many developing economies. Steve has made a very substantial contribution to Lonsec Research over many years, and his experience and expertise will add real value to this sector.”

Lonsec Research has noted increasing choice within the SRI sector over recent years, with fund managers adding more financial product options and incorporating ESG factors into their investment process across all mainstream asset classes in funds management.

“Socially responsible investing is often categorised as a modest sector, but we have witnessed sustained growth over the past decade,” said Mr Sweeney. “The sector has evolved from a standpoint of avoiding investment in unattractive companies on the basis of values, to embracing sustainability where investors can capitalise on the benefits of ESG analysis to enhance risk awareness and improve performance outcomes.

“There is greater awareness of the impact companies can have on the community and environment, especially among younger investors. As this demographic continues to build wealth, we expect to see more demand for investment options aligned with these values. Our job is to ensure that financial advisers are equipped to meet the investment objectives of their clients, including the identification of high-quality responsible investment products.”

SOURCE: Lonsec Research

The Government has today released draft regulations on the operation of the industry funding model for the Australian Securities and Investments Commission (ASIC).

This is the next step in meeting the Government’s commitment to an industry funding model in place from 1 July 2017. Industry funding is a critical component of the Government’s plan to improve consumer outcomes in the financial system and builds on other measures, including:

• $127.2 million in funding to boost ASIC’s data analytics, surveillance, and enforcement capabilities as well as accelerate the implementation of a number of consumer protection measures recommended as part of the Financial System Inquiry;
• a comprehensive review of ASIC’s enforcement regime to ensure the regulator has the powers and penalties available to it to deter misconduct and foster consumer confidence; and
• the ASIC Capability Review, undertaken to ensure that ASIC is operating in line with global best practice.

Industry funding for ASIC will ensure that ASIC’s regulatory costs are recovered from those entities that create the need for regulation. This will make industry more accountable and by increasing transparency of ASIC’s costs and activities make ASIC a stronger regulator.

The Government invites all interested parties to lodge a submission on the draft regulations. The exposure draft regulations and explanatory statements are available on the Treasury website.

SOURCE: Federal Treasury

On 2 May 2017 the Administrative Appeals Tribunal (AAT) upheld ASIC’s decision that Mr Michael Roger O’Sullivan of Sydney be disqualified from managing corporations for five years and from providing financial services for seven years (refer:15-033MR). The AAT qualified the five-year disqualification decision by permitting Mr O’Sullivan to remain as a director of three private companies, provided that those companies only involve activities relating to Mr O’Sullivan’s immediate family.

In affirming ASIC’s decision, the AAT said that ‘the behaviour of Mr O’Sullivan has fallen below the standard that is expected and required of a public company director.’  The AAT also found that Mr O’Sullivan showed no ‘genuine contrition for his conduct or genuine insight into his corporate failures.’

The AAT also noted that Mr O’Sullivan’s behaviour ‘involved either a subconscious or at times an attempt to camouflage or massage critical information and to even completely prevent that information from being disclosed on a timely basis.’

The AAT highlighted that ‘deficient disclosure [of information] was designed to obfuscate the real position’ and that this behaviour ‘put at risk the funds of certain third party investors who were largely being kept in the dark about the precarious nature’ of one of Provident’s largest loans.

ASIC’s Commissioner John Price welcomed the AAT finding, saying ‘ASIC is committed to taking action against directors who fail to exercise care and diligence in the management of company assets.  ASIC’s powers to disqualify directors of failed companies and to ban individuals from providing financial services are important preventative measures  to safeguard the public interest.’

Mr O’Sullivan had previously been granted a stay of the disqualification order, pending the AAT’s review of ASIC’s decision.

Mr O’Sullivan has 28 days to appeal this decision to the Federal Court.

ASIC action against other Provident directors

On 1 July 2015 ASIC banned former non-executive director of Provident Capital, Mr John Patrick Sweeney of Sydney, from providing financial services for two years (refer:15-173MR). ASIC found Mr Sweeney failed to comply with financial services laws.

On 28 July 2015 ASIC banned former non-executive director of Provident Capital, Mr Trevor John Seymour, from managing corporations for three years and providing financial services for three years (refer: 15-199MR). ASIC found Mr Seymour breached his duties as a director and failed to comply with financial services laws. Mr Sweeney and Mr Seymour also sought a review of ASIC’s decision in the AAT.  The hearing of the review of Mr Sweeney’s and Mr Seymour’s decisions concluded on 14 February 2017 and a decision by Senior Member Taylor is pending.

On 19 April 2016 ASIC banned former executive director and in-house legal counsel of Provident Capital, Mr Malcolm Bersten, from managing corporations and providing financial services for five years (refer:16-175MR). On 25 May 2016 Bersten was granted permission to manage the trustee of his family trust and self managed superannuation fund (Caldabra Investments Pty Ltd ACN 003 958 423), as well as his incorporated legal practice (Bersten Legal Pty Ltd ACN 098 743 483).  Mr Bersten has also sought a review of ASIC’s decision in the AAT and the five-day hearing is currently set down to commence 23 October 2017.

SOURCE: ASIC

When Bronwyn Cant first moved to the Riverland in South Australia, a horticultural border region along the Murray, she was a young mum with a nursing background.

Her husband was a horticultural farmer who had taken up the family business, which meant moving to a remote community that was “30 km from the nearest town”.

“It was pretty isolating,” Cant says now, casting her mind back four decades. “I started to think about what I could do, and I came up with accounting. Mainly because that was the only TAFE course being offered in the region at the time, as it was very isolated.

“But I figured it may even help in the family farm when we took it over later.”

Cant spent some time doing book work for the local farmers’ co-ops, but was given scant opportunity to advance.

“I had a moment when I realised that no matter how many skills I acquired, the board of directors on the growers’ associations would never appoint me to a senior management role,” she says. “It was the ’80s and there was a very solid glass ceiling in place.”

Not long after her realisation, Cant was offered a job as a planner in a new firm that was finding its legs.

Planning was wholly unregulated at that stage and the firm was purely interested in making money off clients.

Cant lasted exactly three months.

“But I was still interested in planning and I took some of those clients with me,” she says.

Cant established Vizion in 1993 and her clients are mostly farmers. She travels hundreds of kilometres to pull up a chair at their kitchen table, and her word and reputation are everything.

“I never wanted to be one of those people who was ducking behind a bin of potatoes because they saw someone they didn’t want to see at the local supermarket,” she says. “Our community is so close so my credibility and authenticity is all I have.”

As a farmer herself — her and her husband have since fully taken over the family horticultural business — she knows first-hand the trials of farming life.

“There is a confluence of factors that farmers face, from the nature of farming, to the weather and its unpredictability, to Government regulation,” she says. “Everything comes together with farmers and it’s very complex.”

She saw some sad figures on spreadsheets during the drought years, but admires the toughness of the other locals.

“The numbers were horrible, and people were going further into debt to keep the farm going or they were selling up and leaving the land,” she says.

“My job was to go through those numbers with them and to give them the external perspective.

“Things such as, ‘Have you even spoken to your children to see if they even want to take over the farm?’ ”

The drought may have passed, but farming remains a tough field and Cant applies the same methodology in speaking with clients today as she did then.

“Sometimes people will come to me and they will present me with a solution to the problem they think exists,” she says.

“And I say to them, ‘Let’s just go back and look at what you want and what your goals are and see if this is the real problem’.

“That is definitely what takes the most amount of time.”

About eight years ago, Cant moved to a fee-for-service model and is proud of the depth of the relationship she shares with her clients.

“I’m really bossy,” she says, with a laugh. “The feedback I get on forms is, ‘She is a lovely adviser and you had better do what she says’.”

It’s like a Monty Python sketch: an adviser describes herself to a client as an IFA, but then steadfastly refuses to say what the “I” in IFA stands for. She can’t say it stands for “independent”, because she is not independent, by the definition of the Corporations Act. And she can’t say it stands for “independently owned” for two reasons, one practical and one grammatical: first, the term is essentially meaningless; second, she’d have to describe herself as an IOFA.

There’s going to be a bit of focus on using the term “independent” in coming months, not least because Professional Planner will shortly be publishing an article in which the legitimacy of the licensee-authorised representative structure is questioned.

One of the reasons it’s questionable is because the public can’t always differentiate between a truly independent adviser and one who just calls herself that – and sometimes deliberately, to mislead the consumer. This confusion means the licensee-authorised representative structure might fail what’s called a “cognitive-cultural” test of legitimacy. There’s more on what that means in upcoming articles.

It’s important that the public understand the difference between true independence and all the other claimed forms of the state, so they can be alert to where potential conflicts of interest might lie in the course of a financial planner’s work. It would be ideal, of course, if no conflicts existed in the first place, but they do, and some people just can’t help themselves. In the absence of meaningful penalties or sanctions, they happily refer to themselves as independent or independently owned, oblivious to or not caring about or – at worst – deliberately putting a false spin on the impression that conveys to a client.

A discussion paper by Angela McInnes, a lecturer at Central Queensland University, looks at the legitimacy of the licensing regime and notes that a 2013 Roy Morgan Research report suggested the public is generally unsure as to whether financial planners are aligned or independent.

McInnes’s paper states: “This is evident when the majority [of respondents] incorrectly perceived and claimed, for example, Financial Wisdom (owned by Commonwealth Bank of Australia) or Godfrey Pembroke (National Australian Bank/MLC) or Retireinvest (ANZ) provide independent financial advice.”

McInnes, as part of her current PhD work, has identified instances where “mid-sized licensees and their ARs advertis[e] themselves as ‘independent’ while under the misconception of following the independent advice principles when instead they are selling their own ‘white label’ products recommended from single platforms and/or allow commissions or asset-based fees, thus potentially misinterpreting the requirements in section 923A of the Act.”

We’re not suggesting that all aligned, or non-independent, advisers set out deliberately to mislead. Some are genuinely confused and unsure what “independent” means. But while there’s a big and potentially exploitable grey area, there’s the possibility of consumers not being fully informed, or at worst being misled, and unwittingly receiving conflicted advice.

In acknowledgement that the worst conflicts of interest arise from remuneration structures, the Australian Defence Force has created a panel of advisers who sign a legally enforceable document stating they will not receive conflicted remuneration for the services they provide to ADF personnel.)

It’s not always easy to quantify the cost of conflicted advice. It depends on what action the conflict drives, and in some cases it’s conceivable that conflicted advice could even leave a client better off if, for example, it leads an adviser to recommend an investment product that happens in future to be the best among its peers.

But that is far from a defence of conflicts. It is an illustration of achieving the best client outcome through dumb luck, rather than by skill or by systematically providing advice in the client’s best interests.

But just because it’s difficult to quantify doesn’t mean no one has tried. In the US, two groups – Americans for Financial Reform, and the Consumer Federation of America – have joined forces to dramatically illustrate the cost of conflicted advice to US retirees. And they have come up with a staggering figure of roughly $US530 ($708) a second.

The analysis is based on a 2015 White House Council of Economic Advisers (CEA) estimate of what conflicted advice costs Americans when they roll over money accumulated in 401(k) plans into individual retirement accounts (IRAs).

The CEA reckons an individual who receives conflicted advice earns a return, on average, about 1 percentage point a year less than an individual who receives non-conflicted advice. Given there’s about $US1.7 trillion invested in IRA products that “generally provide payments [to advisers] that generate conflicts of interest”, the CEA estimates the cost of the conflicts is about $US17 billion a year – that’s the $US532 a second. It also estimates that the lower returns would cause a retiree to run out of money five years sooner than if they’d not received conflicted advice.

“The conclusions of this report are based on a careful review of the relevant academic literature but, as with any such analysis, are subject to uncertainty,” the CEA says. “However, this uncertainty should not mask the essential finding of this report: conflicted advice leads to large and economically meaningful costs for Americans’ retirement savings.”

This so-called “retirement rip-off” figure has come into focus in the US as part of a growing movement against attempts to dilute or abolish the Department of Labor’s so-called “fiduciary rule”. The rule would require retirement advisers to explicitly act in their clients’ best interests. Predictably, any institution that uses “advisers” as a way to push product hates the rule and has opposed it vocally.

The rule has been delayed by at least 60 days while a new review is undertaken.

Meanwhile a Retirement Rip-off Counter shows the cost to American retirees since February 3 has already topped $US4 billion. And if you’ve an average reader, in just the four and a bit minutes since you started this article, conflicted advice has cost US investors almost $US140,000.

Plato Income Maximiser Limited (ASX: PL8), the first Australian listed investment company (LIC) aiming to provide monthly fully franked dividends, began trading on the Australian Securities Exchange (ASX) today.
The listing on the ASX follows on from PL8’s oversubscribed initial public offering (IPO), which raised $325.9 million, representing the third largest LIC IPO raising in Australia.
PL8, the first LIC managed by Plato Investment Management Limited (Plato), has been specifically designed for SMSF and pension-phase investors and is based on the investment strategy of the successful Plato Australian Shares Income Fund.
The funds raised will be used to invest in a diversified portfolio of Australian shares with an income focus.
For each share issued, one option (ASX: PL8O) was issued to participants. The options also began trading on the ASX today.
Plato Managing Director and PL8 Director Dr Don Hamson said the experienced investment team’s consistent track record of investing for income combined with a transparent, liquid vehicle was clearly a powerful combination for investors.
“PL8 recognises the changing needs of Australian investors and has been designed to respond to investors wanting a dependable income stream from their investment portfolio,” Mr Hamson said.
PL8 Chairman Jonathan Trollip added: “We are delighted the market has shown such confidence in Plato’s proven investment process and that investors are now choosing to access it through a new channel.
“On behalf of the Board and managers of PL8, I would like to thank shareholders for their support in the offer and welcome them to the register of PL8.”
Plato’s Corporate Adviser to the issue was Seed Partnerships.
CommSec acted as Lead Arranger, Book Runner and Joint Lead Manager with Ord Minnett and Taylor Collison. Co-Managers included Finclear and Wilsons.
Plato is supported by leading multi-affiliate investment management firm, Pinnacle Investment Management Limited (Pinnacle) which owns a minority stake in the business. Pinnacle currently has a stable of seven specialist investment managers that collectively manage over $25 billion.

SOURCE: Plato Investment Management

Being an adviser has become a very lonely profession. The chances are that even though you may be with a large licensee the level and quality of interaction with your peers is minimal. As our industry has matured, we have moved from being quite a closely knit community with an abundance of face to face interaction between peers to something much more isolated.  We once knew a significant number of our industry colleagues and their areas of expertise and often would go to them when looking for a professional opinion. Being able to call on mentors with expertise in other areas was something that was highly valued.

Today’s isolation is driven largely by the impersonal way we now go about our business. Today, there is much less face to face industry interaction with such things as monthly industry association functions and fund managers’ presentations being replaced with Webinars, GoTo meetings and video conferencing, all of which largely denies us the opportunity to mix with and get to know our colleagues on a more personal basis.

The opportunity to interact directly with our peers in professional discussions is invaluable for both our clients and ourselves. It creates innovation which, in turn, often translates into better client outcomes. This means if you are lonely and see value in building a network of peers to call on when you are dealing with potential clients outside your typical client demographic, then it is up to you to make the effort to get along to those events that provide the opportunity for face to face interaction with other advisers.

Some licensees who recognise the value of the sharing of ideas organise regular network meetings that provide a forum that encourages interaction between their advisers. These forums are not to be confused with traditional PD days where a significant proportion of attendees leave early and those that remain disappear immediately after the last session. Not making the effort to get face to face time with your peers denies you the opportunity of developing good professional relationships with others and stifles serious discussion.

A less obvious benefit for advisers of AFSL’s that encourage this culture of sharing is that it builds a close knit group where people respect each other. This has a positive effect on the overall culture of the network as people tend to mirror the behaviour of their peers. When people do the right things then their colleagues are inclined to reciprocate. It creates a sense of community and companionship, something that our industry has largely lost over the past so very difficult ten years.

However, if you are lonely and wanting to work with like-minded people. If you want to be with people who are interested in what you are doing. If you want to be involved with peers and a licensee that you can trust, then it is worth taking the time to get to find out whether you can respect the advisers alongside you and whether the environment being offered is the one in which you are going to enjoy operating.

In short, if working in a community style environment has appeal then when considering your AFSL options it is important to look past the standard dealer services to appreciate the significant benefits that can be gained, in enjoyment, from the peace of mind you get in being able to trust and in being aligned with your peers and your AFSL.

Dennis Bashford, Executive Chairman, Futuro Financial Services 

SOURCE: Futuro Financial Services 

Following extensive consultation, Chair of the Tax Practitioners Board (TPB), Mr Ian Taylor, has today confirmed release of a new TPB information sheet on obligations regarding confidentiality of client information under the Code of Professional Conduct (Code).

• TPB(I) 32/2017 Code of Professional Conduct – Confidentiality of client information for tax (financial) advisers

This information sheet has been developed to assist registered tax (financial) advisers in understanding their confidentiality obligations under Code Item 6. It provides an explanation of this Code item (including a comparison with the Corporations Act 2001) and guidance on how to comply with the Code item, including examples of how the item applies.

‘We were keen to ensure that our key stakeholders had an opportunity to contribute to the development of this new information sheet,’ Mr Taylor said.

‘Consultation was conducted with financial planning associations through the TPB Financial Adviser Forum, as well as government agencies including the Australian Securities and Investments Commission (ASIC).’

Public submissions on the original exposure draft closed on 19 February 2016 and the TPB then undertook a further round of consultation to further refine the information sheet.

‘The result of our extensive consultation process is practical guidance to assist tax (financial) advisers to understand how to comply with their confidentiality obligations under the Code,’ Mr Taylor said.

‘I encourage all registered tax (financial) advisers to read the new information sheet and familiarise themselves with its contents.’

For media enquiries, please contact Communications or phone 02 6216 2993.

About the Tax Practitioners Board

The Tax Practitioners Board regulates tax practitioners in order to protect consumers. The TPB aims to assure the community that tax practitioners meet appropriate standards of professional and ethical conduct. Follow us on Twitter @TPB_gov_au and LinkedIn

SOURCE: Tax Practitioners Board