AMP Limited (ASX: AMP; ADR: AMLYY) today reported cashflows and assets under management (AUM) for the first quarter to 31 March 2017 and provided an update on its Australian wealth protection business.
 Q1 17 Australian wealth management inflows increased 11 per cent from Q1 16 to A$6.4 billion. This was offset by a 19 per cent increase in outflows resulting in net cash outflows of A$199 million.
 Outflows primarily driven by increased consolidation activity across the superannuation sector and as customers transitioned to MySuper.
 Net cashflows on AMP retail platforms were A$188 million in Q1 17. North continues to perform well, with net cashflows up 27 per cent from Q1 16.
 AMP Capital net external cashflows of A$228 million driven by strong cashflows from China Life AMP Asset Management.
 AMP Bank’s mortgage book grew by 5 per cent over the quarter.
 Positive Q1 17 Australian wealth protection claims and lapse experience, with the business performing in line with revised assumptions.
 Cashflows strong since beginning of Q2 with wealth management net cashflows now positive year to date.
AMP Chief Executive Craig Meller said:
“Q1 17 cashflows reflect an extraordinarily high level of activity across Australia’s superannuation industry as customers transitioned to MySuper prior to 1 July 2017, consolidate their funds and allocate more investments to SMSFs, amid a changing regulatory environment. As a result, both Australian wealth management cash inflows and outflows were higher.
“Cashflows into North increased, reflecting our continued investment in the market leading platform. AMP’s SMSF business, SuperConcepts, also increased its assets under administration as it builds on its market-leading position.
“Wealth management cashflows have been strong since the beginning of Q2 as we near the 1 July 2017 effective date for superannuation contribution changes and from the transition of a large corporate super mandate to AMP. Final MySuper transitions were completed in April and net cashflows in wealth management are positive for the year to date.
“Q1 claims and lapse experience in Australian wealth protection indicate that the measures we’ve taken to stabilise the performance of the business are working.”

SOURCE: AMP Limited

We are pleased to advise that the VanEck Vectors Australian Corporate Bond Plus ETF (ASX: PLUS) commenced trading on ASX today.

PLUS tracks the Markit iBoxx AUD Corporates Yield Plus Index and is a portfolio of the highest yielding investment grade AUD corporate bonds. Investors can invest in PLUS on ASX for 0.32 % p.a.

In the current low interest rate environment finding liquid defensive high yield has been a considerable challenge for investors. PLUS is designed for defensive allocations and is likely to be suited to investors who are in retirement and for those investors seeking simple and cost effective exposure to the Australian fixed income sector.

Arian Neiron, Managing Director, VanEck Australia said, “Smart beta investing continues to be a prevalent theme across markets and we are delighted to offer a fixed income smart beta concept to the Australian ETF market.  PLUS adds to our leading smart beta ETF line-up on ASX. Globally, VanEck manages US$9 billion in Fixed Income ETFs and PLUS extends on our philosophy to provide investors with opportunities to asset classes often underrepresented in their portfolios or new approaches to established asset classes.”

SOURCE: VanEck Australia

The Tax Practitioners Board’s (TPB) decision to terminate a tax agent’s registration and impose a one year non-application period has been affirmed by the Administrative Appeals Tribunal (AAT).

The TPB terminated the tax agent registration of Mr Ashley Carter of Bowral, NSW on the grounds that Mr Carter was no longer a fit and proper person given he had:

• entered into a series of loans with a client without proper written agreements or providing security for those loans
• failed to have adequate arrangements in place to manage the apparent conflict of interest arising from these loan transactions with his client
• sent messages to a client, threatening to withhold loan interest repayments unless the complaint to the TPB was withdrawn.

Mr Carter was the director and sole supervising agent of ACA Partners Pty Ltd, whose registration was terminated by the TPB in April 2016 for the same conduct. Mr Carter attempted to separate his actions from those of his company; however the AAT considered that the distinction could not be made given that Mr Carter was the sole supervising agent and the ‘guiding force behind the company’.

Deputy President Humphries of the AAT stated that the TPB ‘has an obligation to take into account conduct that may have led to the deregistration of an agent’s personal company in assessing whether that agent is a fit and proper person to be registered under the Act.’

The AAT decision makes it clear that a tax practitioner cannot seek to differentiate their personal behaviour from their conduct as a tax practitioner in relation to the provision of tax agent services. Consequently, the TPB can take into account a practitioner’s general reputation and conduct, not merely his or her conduct as a tax practitioner.

Chair of the TPB, Mr Ian Taylor, reminded tax practitioners that satisfying the fit and proper person requirement is an ongoing registration requirement.

‘It applies to all individual tax practitioners; and each individual partner and director in respect of partnership and company registrations. It is important to understand that there are serious consequences for failing to meet the fit and proper person requirements,’ Mr Taylor said.
SOURCE: Tax Practitioners Board

This week the ATO announced that it will extend the due date for lodgment of self-managed superannuation fund (SMSF) annual returns for 2015-16 to 30 June 2017.

Deputy Commissioner James O’Halloran said the ATO has made this decision as a result of feedback received from professional and industry representatives.

“We have heard that many accounting and advisory firms are stretched to meet their usual annual SMSF lodgment commitments, in addition to providing advice to their clients about the superannuation changes taking effect on 1 July,” Mr O’Halloran said.

“Accountants, tax agents and SMSF advisers play a key role in ensuring that their SMSF clients are ready for the changes on 1 July. They will ensure their clients are in the best position to make informed decisions about their superannuation savings in light of the changes.”

“Recognising this is a crucial transition period for the SMSF sector as we head towards the most significant superannuation reforms for several years, we have extended the lodgment due date for 2015-16 SMSF annual returns.”

“The ATO has taken this step to reduce some of the burden of compliance work so that accountants, tax agents and SMSF advisers can focus on providing appropriate advisory services to their SMSF clients ahead of the changes.”

“We acknowledge and appreciate the ongoing support tax professionals and SMSF advisers provide, especially at this important time for the sector and the broader superannuation industry.”

For more information about lodging SMSF annual tax returns, go here.

SOURCE: Australian Taxation Office

A budget lock-up is an odd place. It’s an intense, deeply insular environment, where the only source of information is the government. Phones are handed in at the door, and no connections to the world outside are permitted until the lock-up ends at 7.30pm.

The penalty for smuggling any information out before 7.30pm is up to two years in jail. A lock-up is a different sort of prison – one with more sociopathic cellmates and worse coffee, probably. (Sorry to go on about the coffee, but seriously.)

The upshot is that there’s little opportunity to bounce ideas around – Treasury officials, for one group, are not paid to express their opinions to the media – or get a variety of interpretations of what certain measures mean. Everyone talks to everyone else, and everyone else has also talked to everyone else … and so on.

Plus, there’s a deadline to meet and only six hours to get through some fairly weighty documents. So, unsurprisingly, some of the best analysis happens in the days, and sometimes weeks, following the actual event. And often the best analysis covers far more than just the hard numbers. For example, what follows are some insights into how to seize the an opportunity the new First-Home Super Saver Scheme provides.

Rob Lavery, technical manager at knowITdigital, says a measure like the first-home super saver scheme (FHSSS) is a gift-wrapped opportunity for financial planners to engage with the adult children of existing clients.

For this cohort, superannuation is a bit of a yawn. It gets deducted from their earnings every payday, but retirement is a long way off, they’ve got other things to do, and their engagement with super is low. But if superannuation all of a sudden becomes a step on the pathway to home ownership, then that’s a whole different ballgame. And who better to offer them some help and guidance than the planner their parents already know and trust?

It’s often said that the cost of advice is only an issue when the advice is perceived to have no value, so the trick is to pitch an opportunity like the FHSSS so that the value of the advice is obvious. How about a $10,000 tax savings – would that get someone’s attention, even a 20-something couple’s?

That’s what Lavery estimates a couple could save if they are well advised on the FHSSS.

The tax argument

A client may contribute up to $15,000 a year (which is included in their existing contribution cap), and up to $30,000 all-up over their lifetime. In an FHSSS, tax is paid at 15 per cent on contributions. This means 85 per cent of the pre-tax contribution is put to work within the fund, earning a deemed rate of return equivalent to the 90-day bank bill rate plus 3 per cent.

When the money is withdrawn, tax is paid at the client’s marginal tax rate, minus 30 per cent. Lavery’s calculations show what happens for clients across three marginal tax rates.

Regular saving vs salary sacrifice under FHSSS

Lavery’s example above is for one client. For a couple, the benefits are doubled, which is where the $10,000 tax-saving figure comes from (assuming the couple each contributes the maximum $30,000 allowed under the scheme). And that’s before the potentially greater investment returns inside super are factored into any decisions.

He says there are other advantages as well:

• With more money invested due to less tax, returns compound from a higher base.
• Returns taxed at 15 per cent in super, returns outside super taxed at MTR

But what the government gives with one hand, it takes away with the other, and Lavery says advisers also need to consider some potential disadvantages to the scheme, including:

• A withdrawal amount may push a client into a higher marginal tax bracket in that year
• Only a capped amount of earnings can be withdrawn – excess earnings will remain in the fund
• The client’s money is not as easily accessible as if it were in a bank account – although the flipside is enforced savings discipline.

So those are the hard numbers, and a good place to start to explain the potential benefits of the FHSSS. Lavery says there are other opportunities for advisers as well. Once you’ve got their attention, pitch the opportunity so it’s the start of a journey to bigger and better things for you and the client alike. Lavery’s thinking goes like this.

• At the time of the first FHSSS discussion, offer basic superannuation fund advice. Are they in the best fund or even one that’s appropriate? If they’ve been unengaged with their super, there’s a chance they haven’t even considered this. And are they using super as effectively as they could be?
• Offer some advice on basic insurance. Are they aware of the insurance in their super fund? Are they adequately covered? What are their options and alternatives?
• Some time after July 1, 2018, the client will want to withdraw the FHSSS contributions and (deemed) earnings to contribute to a property purchase. Offer some advice on setting up debt efficiently, along with a review of life and other insurances.
• If all goes well, at some point they will outgrow the first home – particularly if children have arrived on the scene – and will need to trade up. Offer to review loan options and insurance. Are they saving for other goals now, like a child’s education?

The point, Lavery says, is that a discussion about the FHSSS with the children of your existing clients could be just the start of a new relationship, and a chance to reinvigorate your practice’s client base, particularly if your existing clients tend to be older and moving into (or are already in) retirement.

“The bottom line: the advice is worth the cost,” Lavery says.

Opinion is split on new incentives for ‘downsizers’ unveiled in the federal budget on May 9, 2017, to allow individual retirees to pour up to $300,000 from the sale of their principal residence into their superannuation fund.

From July 2018, people who have reached the age of 65 and owned a property for more than 10 years will be able to make a non-concessionary contribution into super from the sale of their home. This applies regardless of whether it would breach the $1.6 million pension fund transfer balance cap.

Under the new rules, a retired couple could stash up to an extra $600,000 into the tax-advantaged setting, while allowing each member of the couple to boost their respective retirement income accounts to as much as $1.9 million. However, industry associations think those lower down the socioeconomic scale will be the main beneficiaries.

Potential help for women, middle earners

“Predominantly, it will not be the people at the higher end of the homeownership and superannuation scale who will benefit from home equity release,” Association of Superannuation Funds of Australia chief executive Martin Fahy told Investment Magazine.

“It seems to be women who will benefit – particularly surviving spouses and separated women faced with financial and health challenges who are downsizing from relatively modest to even more modest housing.”

Australian Institute of Superannuation Trustees chief executive Eva Scheerlinck said the policy was “not aimed at rich people putting proceeds from the sale of their $3 million harbour-side mansion into their super”. Scheerlinck said the policy would help middle-income earners, who will be able to sell their property and put in $300,000.

The Financial Services Council said it was supportive of the government’s efforts to remove barriers to downsizing by enabling older Australians to contribute windfall gains from the sale of their home to superannuation without breaching super caps.

“The proposed reforms to allow consumers to save through their superannuation for their first home are well designed, [as they do not] undermine the integrity of the superannuation system,” FSC chief executive Sally Loane said. “Allowing retirees to downsize and contribute up to $300,000 to their superannuation accounts will free up much-needed supply in housing markets and help retirees monetise their largest asset – their home – to help fund their needs in retirement.”

StatePlus chief client officer Jason Andriessen also welcomed the policy.

“Accessing part of a home’s equity to fund a better retirement outcome is an excellent idea for retirees. Eighty per cent of retirees own their own home but they don’t have much superannuation to live off,” Andriessen said. “Freeing up capital of $300,000 per single – or $600,000 per couple – to reinvest in superannuation will be a real life-changer for many Australians.”

Some industry voices express caution

On the other hand, actuarial consulting firm Rice Warner cautioned that, for the masses, it might not be a good idea to capitalise home equity.

“A couple owning a home and with other assets, including superannuation, of $350,000, would be eligible for a full age pension of $34,800. If they capitalise $600,000 and put it into superannuation (or the bank), they lose the whole pension. While they will start getting a part pension later as they spend their assets, the pain is likely to be too great to endure,” Rice Warner’s analysis reads.

NGS Super chief executive Anthony Rodwell-Ball was also cautious about the proposal, and recommended members seek advice for their situation.

“We can see the rationale of the government introducing this incentive to reduce barriers for older people to sell their homes; however, in reality only a small cohort of people will benefit,” he said. “Those seeking to balance a small Centrelink pension and a higher superannuation balance will need to look closely at this incentive.”

Often, practices focus primarily on their client value proposition, and that’s important. While many advisers focus ‘below the line’ (on investments and products), I’ve proposed repositioning this to ‘above the line’ (people, goals and objectives) in the form
of ‘life-first’, real goals-based advice.

Clearly, there are other areas to consider in designing and building a world-class business. Let’s look at each of them.

It starts with you

There are various stakeholders in an advice business, and the principals are among them. Typically, principals are practitioners and employees, along with business owners. I see some advisers want to grow increasingly scaled businesses, while others are quite happy to maintain a lifestyle business. There’s no right or wrong but before you consider your business plan, ask yourself whether you have a personal plan. Are you clear what you want out of your life? In all our lives, we have a start, a middle and an end. We need to enjoy the middle bit. We have a limited number of days and hours. Precious time is slipping away. What do you want to do with your life?

Business vision

The key notion here, figuratively speaking, is taking a helicopter up to 10,000 metres for an overview and working on your business not just in it. And not just once a year, but regularly. It’s an old saying but a good one: ‘If you fail to plan, you plan to fail.’ I continue to meet an alarming number of advisers and principals without a documented business plan, or who don’t regularly review, monitor and update the one they do have.

Have you considered a formal board or an advisory board structure? (The difference, of course, is a formal board has directors. An advisory board has advisers to the board, without formal governance, regulatory and compliance responsibilities and associated risks). Certainly those businesses with growth aspirations, who have annual revenue at or greater than $1 million to $1.5 million, and typically 5-10 staff or more, need to consider this. We can all benefit from fresh eyes, objectivity, mentoring, coaching and accountability. Take the best athletes as examples; they typically have a coach, or a team around them. (Unless you are Nick Kyrgios, and therein lies the point – enormous unfulfilled latent talent and potential.)

What about your current and prospective organisational structures – which tasks and roles are you undertaking? Which do you enjoy, and which could you delegate? What tasks do you undertake that you detest? Are you using the notion of leverage, working on ‘the highest and best use of your (and everyone else’s) time’? Draw up a chart of all the roles you fill, all the ‘hats’ you wear, then ask yourself what would need to happen for you to get out of each of those roles.

Have you considered future organisational charts, based on expected growth rates, to determine what your business might look like after one, three and five years? What roles need to be filled and when? What will the drivers be?

These are not easy decisions for businesses, as new hires mean increased expenses and, typically, shorter-term pressure on margins. But we need to invest in our own business and people to grow. Evidence shows greater EBIT margins are available to those who make the hard decisions and push through the barriers and glass ceilings.

Client value proposition

Historically, many clients, certainly in a commission-based world, have received suboptimal value propositions. In a fee-based world, an issue that I am sure will surface over the next period from some quarters will be ‘fees for no service’.

I strongly feel more people would seek out advice from client-centric, life-first, goals-based advisers whose value proposition is focused ‘above the line’. The keys to an above-the-line value proposition are reflected in the following statements:
‘Really know me and my family. Understand me, help me, simplify me, de-clutter me, reduce my anxiety, and help me achieve what’s important to me.’

One of the challenges is that prospective clients often have the view that an adviser’s value proposition is ‘below the line’ – investing. Rarely would a prospective client proactively ask for a financial adviser to help them achieve their goals and dreams. They typically ask you to help them with their investments. My view is that there is a difference between what they want, and what they need. Many don’t know what they don’t know, and certainly don’t understand that the adviser of the future can help them achieve their goals.

Working on the value proposition, we need to make sure you and the team can articulate the basic building blocks. This would include both your business and personal ‘why’. Why you, and why your business?

Successful businesses are able to articulate their ‘why’; most articulate their ‘what’ and ‘how’ – what is often referred to as an ‘elevator pitch’. That’s how you articulate and summarise what you do in, say, 30 seconds? But where do you add value? You might also want to consider defining and working on the following areas:

Ideal client. Have you defined clearly the sort of people you want to work with? Can you and your team articulate what that market looks like?

Niche markets. Do you have a precise area of expertise you could focus on? Increased focus and efficiency lead to increased profitability.

Employee value proposition. If you’re moving from a practice to a business, you need to attract and retain good people. Why would someone want to work with you, rather than the firm down the road? How would you articulate the attractions of your firm to prospective employees? Once they join you, what are the reasons they
are likely to stay?

As financial planners, we act in three stages. Firstly, in the ‘life-first’ discovery process, where we get judged by the questions we ask. Secondly, in the ‘life-first’ strategy stage, where strategic solutions are recommended to help clients get on track to achieve their goals and aspirations, and remain there. Finally, if required, we offer a product-based solution to implement the strategies. Of course, one of the issues from the past has been that advisers have led with the third step – product-based solutions.

Service and pricing

Working on the relationship between client segments, client services and pricing is a job
that’s never finished. This is a critical area you need to come back to each year as the market changes.

Typically in an advice business, 80 per cent of clients bring in about 20 per cent of business income. What’s your breakdown and ratio? Without measuring these variables, your management, analysis and strategic decisions become much harder. Ideally, a business can measure not only income per client, but profitability per client as well.

Think of this in terms of an airline: many businesses offer first class, business class, premium economy and economy services, but we need to be careful we don’t take the first-class wine and trolley down the back of the plane. All clients deserve equal respect but clients don’t all deserve equal service. They should receive what they pay for.
Precise client segmentation will enable solid strategic decisions to be considered and made, increasing efficiency and profitability, and potentially a partial client sale and capacity release that could provide capital to meet your goals. Remember, you’re not only in the business of financial advice, you’re in the business of getting paid for financial advice.

Processes and systems

“It’s not the unique things of a business that make it successful, it’s the business’s ability to do the ordinary things in an extraordinary way, and to do those things consistently, predictably, effectively, day after day after day” – Michael Gerber, The E Myth.

Advisers frequently ask for help on workflow processes and the systems required to automate those processes. In undertaking these reviews, the key is being clear on your practice’s end-to-end client experience. Reverse engineer the processes and document them. This needs to include, but is not limited to, all letters, emails, agendas, minutes and templates. So the first step is what is best-practice client-centric process? The second step is how you automate that.

We often hear the term ‘sales and marketing’ but marketing needs to come before sales. What’s your marketing plan to bring in an endless stream of pre-qualified referrals? Do you have a social media strategy?

For smaller businesses, do you have an external team that can assist you on matters you’d like to outsource? What areas will you in-source? What are you outsourcing? For example, in human resources, do you have an employee manual, position descriptions, staff induction tools and documented KPIs that are SMART – specific, measurable, agreed, realistic, and time-based? The key here is to systemise the process, but
to customise the advice – we are not talking about a ‘cookie cutter’ approach here.

Measurement, management

What do you measure in your business? What would you like to know, but don’t currently measure? What should you measure?

There are some obvious measures, such as total revenue, ongoing revenue, EBIT or profit, and share price. Some critical but less obvious measures and key ratios would be: revenue/full-time equivalent (FTE) staff, revenue/adviser and revenue/active client. As an example, an efficient business in Australia would be at or above $200,000 for revenue/FTE; an efficient and scalable business is at more than $300,000 in revenue/FTE.

Less critical, but also important, measures would be assets/client, number of clients/FTE, number of clients/adviser; and margins such as average basis points charged, normal gross profit margin and normalised operational margin.
Ideally, once you decide what your key measures will be, the outputs will be automated on a dashboard for efficiency.

In conclusion, the future will not be an upgrade on the present, it will be entirely different. People don’t buy what you do, they buy how you make them feel. Set regular time aside to work on your business, not just in it.

David Haintz is a principal of Global Adviser Alpha.

Talk to many financial planners
about the gestation of BT’s Panorama platform and chances are there’ll be eye rolling and smirking and a comment that half a billion dollars is a ridiculous amount to spend to prop up ageing technology.
Westpac subsidiary BT Financial Group will indeed have spent $600 million or so by the time the Panorama launch is complete. But viewing its development solely as a buttress to existing technology, particularly BT Wrap, misses a bigger strategic picture for the Westpac group.
John Shuttleworth, general manager, platforms and investments, for BT, says the investment
in Panorama is partly defensive, to protect an existing market position, and partly to capitalise
on expected growth in both superannuation
and non-superannuation wealth markets.
But he says it is also part of a business transformation that, once bedded down, will
cut operating costs by about $100 million a year.
“If we can just, over a seven-year period, get those cost savings post-migration, that would cover the cost,” Shuttleworth says. “If you look at the simplification side of our business, you’ve virtually covered the investment in Panorama through cost savings alone, without revenue growth. But with revenue growth, if we’re
more successful in self-managed super funds and things, we can do better. It’s a completely acceptable kind of investment proposition.”

The need to simplify

Shuttleworth says the genesis for Panorama was
the need to simplify the structure and operating systems of the Westpac wealth-management business. Renovating BT Wrap would have cost not much less than the ground-up Panorama build but would not have had the same transformative effect on the business.
The Westpac wealth-management business
covers more than 50 different products and platforms, supported by seven separate operating systems. Shuttleworth says that after implementation and migration for Panorama, the group’s structure will be simplified from more than 50 products to three, from four superannuation trustees to one, from 12 super funds to one, and from seven registry systems to one.
“Don’t think of it as an additional product or platform, think of it as a core operating system within BT. We are basically going to run our entire business
on it,” Shuttleworth says. “We have a range of different portfolios. We have investments outside of super, we have superannuation, we have self-managed super funds and we have integrated insurance. Whether you are a direct investor, an advised investor or [engage] through an employer plan, you’ll be on this operating system. So the customer experience is configured for the investor but all the core infrastructure is one standard operating system.
“Then we’ve got [the model portfolio functionality, which incorporates] all the different asset classes around cash, term deposits, managed funds, individual portfolios or separately managed accounts, listed securities and tailored portfolios. And we’ve…spent
a lot of time on the user experience.”
Shuttleworth says BT has spent just less than
$400 million on Panorama to date and at the end of the project will have spent “just north of $600 million”.
“We’ve done the build and we’re in the migration phase now,” he says. “There’s a little bit of super still to build, and then there’s the migration phase. So the total investment is significant, but…we’ve taken our whole wealth infrastructure, connected it to the bank and
gone through a massive simplification project, which
is why it’s costing us a reasonable chunk of money.”
To put that outlay into perspective, Shuttleworth says BT generates annual revenue of about $2.6 billion a year. Building Panorama wasn’t aimed only at generating growth, but also at protecting the group’s existing revenue base.
“If I took just superannuation and investment,
we’re north of $1 billion in turnover, at pretty reasonable margins,” Shuttleworth says.
He says the Panorama project has reached “a really exciting phase”. But with a $600 million investment to justify, the stakes are high, even if the prize is valuable.

A play for growth

The total value of all assets in Australia is estimated to be about $11.3 trillion, of which about $6.7 trillion is regarded as non-financial – essentially, housing. BT is making a play for a slice of virtually everything else – the $2.1 trillion invested in superannuation, and the $2.4 trillion of assets held outside superannuation. BT’s current platform business has assets of about $130 billion, and a market share of about 20 per cent. Shuttleworth says the scope for growth is immense, despite ongoing pressures on margins.
“There’s so much opportunity and upside that we see in the business,” he says. “One of the things I guess the whole wealth industry is fortunate about is that…there’s this mandated, legislated growth that is basically built in. There’s a responsibility managing the money, and there’s also margin pressure – what we’ve seen with MySuper is quite a lot of pressure as prices have come down – but it’s a phenomenal amount of growth.”
Panorama will probably take about seven years to pay off, so BT is bargaining that it isn’t usurped by new technology. Shuttleworth is convinced the group has some breathing space, and says key domestic competitors are not obviously investing in technology or are scaling back their ambitions. Competition may emerge from overseas, however, and Shuttleworth
says part of the Panorama strategy is positioning Westpac to meet it head-on.
“While we’re investing, others are divesting,”
he says. “ANZ has decided to get out. MLC is selling
its life business. But they’re all dealing with the
same complexity.
“You wonder whether or not we’ll get another overseas player or someone stepping in. I think it’s too attractive a market for that not to happen. But we’re not seeing a lot of competitors spending a huge amount. AMP, having bought AXA, has got North; we understand that, whilst they’ve been doing some investment, it’s tailed off a little bit.”

What users will get

Shuttleworth says there will be no impact on advisers or clients as Panorama comes online and existing systems, processes and products migrate. The process of migrating BT Wrap onto the Panorama system is on schedule to be completed this calendar year. When that happens, clients and advisers will have access to “all the new features and functionality”, Shuttleworth says.
He says BT has done “a little bit of work” with advice practices to assess the impact of the change but it has not yet quantified exactly what efficiency gains there might be for advisers. More will be done to help advice practices – starting with Westpac’s own – improve how statements of advice are created and “that whole front-end, robo-advice solution”.
“They’re doing work on the digital advice engine. So the next evolution of the platform will be to take that process of building the SoA and integrate it directly with Panorama.
“What everyone hates is re-keying, so we have to be able to interface and download into Coin and Xplan, but if you have a simple interface, that’s nirvana – because so much of the adviser’s time now is spent just dealing with crap, basically.”
Shuttleworth says that at the completion of the Panorama roll-out, Westpac will have addressed the inefficiencies that tend to plague financial services and wealth-management operations built on legacy systems and acquisitions. He says the group is confident of avoiding a repeat of the “creeping complexity” issue, having become the first Australian institution to adopt the Swiss
group Avaloq’s underpinning technology.
“The reason we bought the underlying technology is you can run virtually any asset class on it; whereas, many systems are account based,” he explains. “The fundamental system we have is so configurable, it’s hard to imagine there’s any product we couldn’t run on it.
“Because you’ve got that in as your operating system, connected to the trading, it would make no sense at all to say, ‘I’m going to put a new system in.’
“Now that’s up and running, it’s more, ‘What’s the incremental development effort to get a new product or a new feature onto the platform?
“When we get the Comparator data and we look at our own operations versus some of our competitors’, believe it or not, we’re still the lowest cost on a cost-per-transaction basis today, but we think we need to get it down so much further, based on where the industry could go, to be able to sustain our profitability in the face of margin pressures.”

AZ Next Generation Advisory today signed a binding sale and purchase agreement to acquire the entire
capital of Peters & Partners (“P&P”). The agreement includes a share swap of 49% of P&P’s equity for AZ
NGA shares and a progressive buy back of these shares over the next ten years.
AZNGA has been focussed on investing in financial planning companies for the past two years and recently
completed it’s 29th financial planning transaction. The acquisition of P&P is AZNGA’s first foray into the
accounting profession. AZNGA intends to inject capital into P&P with a view to bulding out a national
accounting footprint that can enable a broadening of the offering of AZNGA partner firms.
P&P is a full service accounting firm that offers business and taxation services, SMSF accounting and
administration, specialised SME services, and corporate advisory. The business was established in 2014 and
has build an impressive client base through a combination of acquisition and organic growth.
According to AZNGA CEO Paul Barrett “What started as a convenient relationship between AZNGA and P&P
where P&P was essentially providing a back office and accounting solution to our practices quickly became
a strategic opportunity. We assisted Michael in his growth ambitions, and he assisted us in ours. It became
obvious to us late last year that a great opportunity existed for both firms to broaden our offering to clients.
We’ve now developed a long term strategy to build a national Accounting and SME services footprint.”
CEO of P&P Michael Peters says “AZNGA is a natural partner for us. We want to build a truly national
footprint. We’ve seen what Paul and the team have done in the financial planning space and we want to
replicate that in the accounting space. Naturally we will look to team up with AZNGA partner firms to
establish a broader client offer. We will also be looking to make acquisitions of accounting firms who also
want to grow, or in some cases where an owner wants to sell out completely.”

SOURCE: AZ Next Generation Advisory

In 1989, with official interest rates scaling the high teens, the founder and then-managing director of Count Financial, Barry Lambert, had a conversation with his bank that would
colour his views about business, and specifically about debt, from then on.

Count had a $100,000 overdraft with the Commonwealth Bank, supported at the time by a $100,000 term deposit. The bank also had a mortgage over Lambert’s home, to support a personal guarantee he’d provided as a director of Count for the overdraft.

“I rang them up one day – because back then they never put the interest rates on your statement – and asked them what the interest rate was on my overdraft,” Lambert says. “They said it’s normally 20.5 per cent, but because you’re over your limit – on that day we were over $100,000 – you’re paying 25.5 per cent. True story. Now, I’m smart enough to know that if you’re paying that sort of interest, you’ll go broke. So I thought, I’ve got to get out of this.

“So they had a mortgage over my house, plus a term deposit, which is our own money, and they’re charging 25 per cent. I paid the overdraft off, and said I’d never borrow again. And I virtually never did, you might say, except for day-to-day business.”

Lambert sought to have the mortgage on his house lifted, but the bank refused.

“So I wrote them a letter and said, I can see the headlines now, front page of the Financial Review: ‘Lambert stronger than CBA term deposits’. I got the house back. No questions. You’ve got to stand up to these guys.”

Just over 20 years later, in 2011, Lambert would pocket a reported $127 million from CBA as part of the bank’s $373 million acquisition of Count.

Whether it’s creating Count, and its offshoot Countplus, or campaigning on a personal front for the legalisation of medicinal cannabis and entering the hemp-growing business, Lambert, with a self-described “socialistic attitude to life”, has always done things his own way and in his own time.

Lambert is among the pioneers of financial planning in Australia. He established Count in
1980 with one eye on the direction in which he believed financial planning would eventually
have to evolve. He proved to be ahead of his time.

“When I started, 35 years ago, I set up Count as an accounting-based group, a professional-based group, I’d hope you’d say, to be different from the sales-based organisations that existed at that time,” Lambert explains. “I went to the accounting-based group, because you had to be university-qualified even then. They had an existing client base, so they didn’t have to worry about prospecting, as such. And their clients came first, because if they upset their clients on financial planning then they’d upset them as clients as a whole, and they had more to lose. So they were very accountable for their advice.”

Lambert says the regulatory picture coming into focus now – through both the Future of Financial Advice (FoFA) changes and upcoming education, professional and ethical standards – will make financial planning closer to what it should always have been. That just wasn’t feasible for an industry that was sales-based and commission-based.

“The situation now, with a more professional base than there has been, is what I expected it
to go to,” Lambert says. “You only had to think forward and you knew what was going on couldn’t last. Upfront fees and commissions and [sales] practices were just unsustainable.”

Deserved disruption

Lambert says that over the past decade or so a strong push towards professionalism, supported
by legislation, has caused disruption in the industry, particularly to “the older guys, my sort of age or a bit younger”.

But legislation and regulation were inevitable, Lambert says, because “the history of the industry wasn’t all that good”.

“Some would argue that the industry didn’t self-regulate well enough and then we got regulated from outside,” he says. “In retrospect, that’s a bit cumbersome and over the top. But the industry deserved that. The industry let itself down and deserved what it got, quite frankly.”

While Count’s financial planning fee was still based on a percentage of client assets, “I never classified Count as distribution,” Lambert says. “We set a fee structure, maximum commissions, so if a company paid more commission than that, it would be rebated. We lost one accountant to Godfrey Pembroke back then because [Godfrey Pembroke] didn’t have a limit on the commission they could take.

“So even within the accounting profession some of them weren’t much better than the rest of
the industry anyhow.”

Count became a major user of BT Wrap and Colonial FirstChoice, and Lambert maintains
that the group was a keen supporter of more than one provider, mostly in the interests of fostering competition.

“Our concern was platforms could get us in, but they might then hold us to ransom on pricing,”
he says. “That’s why we didn’t just go with one.”

That independence remained important to Lambert throughout his career at Count.

“There was no one saying, ‘Look guys, you’re not making enough money, we’re going to pull the pin, or you’ve got to flog our product,’ ” he says. “We had no outside ownership, and that was deliberate as well, because I’d never had such in my life, and I wouldn’t want to be answerable to somebody and having them tell me what to do.”

Lambert says a degree of his success in setting up and developing Count was down to luck, but
at least some of this luck was attributable to having a clear vision for the business.

“We were lucky we came along at the right time, I guess, and we were lucky we set up a structure that meant we could run our own race and, really, it was just a matter of how hard we ran and whether we were good enough to survive,” he says.

But survive the business did, and Lambert’s view of the world inevitably meant that the
spoils of success should be shared.

“I’ve always had a socialistic attitude to life, you might say,” he says. “I believed that
the staff and our franchisees who made this business should share in it. So we listed the company in 2000 and we gave out large amounts of options to our franchisees.”

CBA acquired Count in 2011, and Lambert says that even though banks have since been shown
to have less than stellar track records managing advice businesses, “back then we didn’t have the problems known publicly”, and he was happy that CBA would be a good home for Count.

“I had always thought that if I was going to sell, then CBA’s the one I wanted to sell to,” he says.

Lambert’s attention now is divided between: Countplus, an offshoot designed as a succession-planning vehicle for accounting practice principals; Class Super, which provides administration services to self-managed super funds; and Ecofibre, an Australian medicinal cannabis-growing business with operations in the US.

Successful professional services firms, whether they be financial planning-based or accounting-based, will need to be efficient and provide a holistic service offering. Greater convergence is inevitable, he says.

“To give value, you can’t be inefficient,” he says. “If you’re terribly inefficient and you blame the government, or whatever, for these regulations, the client couldn’t care less about that. It’s costing them too much and they’ll go somewhere else.

“Robo-advice, because of the cost, will happen to some extent for smaller clients. [But can] they ever make any money out of it? You’ll get more robos, and they’ll be doing it for next to nothing.

“There should be more convergence, I would think. There’s a common client base, sharing of knowledge between professionals…It’s all about the advice. You should be in the advice business.”

Ecofibre: Cannabis and hemp

And with that, Lambert veers into a conversation about a golfing mishap and the consequent state of his right knee, before elaborating on the practical hurdles to the widespread, legalised use of medicinal cannabis, which is an issue close to his heart, in light of a medical condition affecting his young granddaughter.

“There are only 23 doctors in Australia who can prescribe it,” Lambert says. “You’ve got 24 million people and 23 doctors. [The rest] haven’t been trained and they know nothing about it. Until it gets into the medical schools, they’re too busy. They’re busy doing what they’re doing. Also, they’re close to big pharma companies. They have the overseas holidays and they learn about the next drug and this, that and the other.

“Cannabis is going to reduce the need for a lot of medication. I take it, by the way, for arthritis
in my left knee. Beautiful – I sleep like a log.”

Ecofibre grows cannabis for medicinal use, as well as producing hemp fibre for clothing,
and seeds for food.

“I’ve given notice to stand down as chairman of Countplus, because being involved in a cannabis business might not fit,” he says.

Ecofibre has shifted its growing operations from the Hunter Valley, north of Sydney, to the United States, where it has planted more than 500 acres. Lambert says the rules around growing medicinal cannabis in Australia “are just so impractical, compared with what happens in America”.

“We grow it over there, with no security, because we grow hemp with very low THC [tetrahydrocannabinol] – if you knocked it off and smoked it, it would do nothing for you,” he says. “Here, you’ve got to have high-security fencing, they call it, high intruder-proof fencing, with back-to-base alarms, out in the country. It’s just ridiculous. In America, we grow it like wheat.”

He says there are political hurdles still to overcome, including protection of the opium poppy industry in Tasmania – the state produces about half of the world’s legal supply of the material, which is refined into opiates, including morphine and codeine.

But as addiction and overdose issues related to opiates gain greater and greater publicity, it may
be that Lambert will once again get lucky by being in the right place – a little ahead of his time.

It’s safe to say that if you operate a successful small business, whether it’s in the city or the bush, you might have been approached to sponsor local community activities. Perhaps it’s the local rugby league or surf club, a charity, the arts, rotary, a political party or school initiative.

There’s a commonly held view that supporting the local community is good business. But is it?

Sponsorship and marketing go hand in hand

A well-considered community program can contribute to your overall marketing. Apart from the feelgood factor, being involved in the community can bolster brand recognition, by putting your logo in front of more eyeballs.

Sponsorships are a valuable way of building your profile and reputation. This will prove useful for financial planners, as clients are looking to trust you with their money management. That said, like any marketing channel, there should be some method to the madness.

1. Consider your client base. Look at what sponsorship activities provide access to potential customers. For example, if young families are your target audience, it makes sense to target activities they’d support, such as junior sport. Conversely, older people make valuable contributions to the community through initiatives such as volunteering, caregiving, education and social activities.
2. Involve your team in selecting the cause. This is usually a sensible idea. You want your team to be passionate about your community relations activities and sponsorships, so seeking their collaborative input is crucial.
3. Think outside the square: It’s a given that your local sporting clubs will be seeking sponsors. By all means be involved, but it doesn’t hurt to look for options that maybe aren’t as obvious.

Don’t make it all about the bottom line

A client of my firm, Corpwrite Australia, who is heavily involved in several causes in the market he lives and works in, advises that when it comes to sponsorships, “You can tell the people who are in it for the business side of things.” If this is your approach to sponsoring community activities, you won’t achieve the results you’re seeking – and worse, you could sully your reputation.

It’s important that you consider supporting programs that align with the business and your own personal values – and those of your employees. The old saying ‘what goes around comes around’ applies in this instance. If you enter into a community relations program with the right intentions, the pay off for your business will be there. If you’re invested in the community and want to see it thrive and prosper, that can only be good for business.

Like anyone that has nurtured and worked tirelessly to produce an in-depth research report, today’s announcement of the launch of the Adviser Pricing Models 4^th Edition Research Report puts to bed one of the most extensive research reports conducted by Elixir Consulting to date and provides a sense of relief to principal Sue Viskovic.

“This has been a mammoth task consolidating and analysing the data to produce the Adviser Pricing Models Research Report fourth edition. It includes in-depth data from 320 advice practices on how they charge for their services.” stated Mrs. Viskovic, “Pricing financial advice has always been complex, and when you add in a deep-dive to pricing insurance advice, with all of the variables we found used by advisers, it’s been no small feat to interpret the data into a piece of work that will be incredibly helpful for every adviser wanting to determine or refine their own pricing model.”

The research provides insights and the models being used and figures being charged, for pricing:

• insurance advice
• engagement fees for new clients with comprehensive and limited scope advice,
• engagement fees for aged care, estate planning, finance advice
• ongoing fees – for comprehensive and limited scope advice
• specific application of fee models in 6 client case studies, and
• complete snapshots of 6 different Business Models

“If you’d told me a decade ago that we’d now be In an environment where every adviser has to charge a fee for their financial advice, and yet there is more confusion and curiosity about pricing models than ever, I’d have probably laughed” shared Mrs Viskovic. “Whilst pricing is often talked about, the intricate detail of how advisers charge for their services is still elusive to most; today it remains a very private and commercially sensitive topic.”

“I want to say thank you to all those advisers that took time out to complete the research survey,” says Sue, “you were incredibly generous in sharing your pricing detail, your challenges, and the solutions you’ve found to overcome them. By doing so you have provided great insight into the depth and breadth of the pricing models used in the Australian Market.”

The Pricing Model Research Report 4^th Edition is now available for online purchase here.

To highlight some of the take-outs from the research Sue Viskovic and co-author Lana Clark will be publishing a short series of videos of their discoveries during the countless hours preparing the data and compiling the research report.

“When we decided to expand on the questions we posed to advisers in this latest edition, we never dreamed that the responses would be so complex and detailed” states Ms. Clark, “Respondents have been so generous with the information, making this report this biggest and most in-depth to date.”

SOURCE: Elixir Consulting

ASIC has banned Mr Stuart Arnold-Levy from providing financial services for a period of four years and Mr David Heycock from providing financial services for a period of six years following an investigation.

Mr Heycock was the director of Corporate Superannuation Pty Ltd (previously Australian Superannuation Pty Ltd and Superannuation in Australia Today Pty Ltd) which traded under the business name MySuperMan. Mr Arnold-Levy was an employee of Corporate Superannuation Pty Ltd (and its predecessor entities) before subsequently becoming the director.

The MySuperMan business provided financial advice services and operated from offices in Carlton, Victoria.

ASIC’s investigation focused on the period 2013 – 2015 and identified concerns in relation to the activities of Mr Heycock and Mr Arnold-Levy including:

• poor and unlicensed advice provided by them to certain clients;
• money loaned to clients of MySuperMan by entities related to Mr Heycock, and money loaned by clients’ self managed superannuation funds to the MySuperMan business itself; and
• information and advice provided to clients and former clients in relation to a residential property development in Footscray, Victoria.

As a result of the investigation, ASIC found that Mr Heycock had breached the Corporations Act by:

• operating a financial services business and providing financial advice without holding an Australian Financial Services (AFS) licence and without being authorised by an AFS licence holder to do so; and
• providing financial advice that was not in clients’ best interests or appropriate for their situation, failing to provide statements of advice and failing to disclose potentially conflicted remuneration.

ASIC also found that Mr Arnold-Levy had breached the Corporations Act by:

• being aware of and involved in Mr Heycock’s unlicensed conduct; and
• providing financial advice that was not in clients’ best interests and not appropriate for their circumstances.

Mr Arnold-Levy and Mr Heycock each have the right to appeal to the Administrative Appeals Tribunal for a review of ASIC’s decision.

Background

ASIC commenced an investigation after it received a breach notification from Dover Financial Advisers.

Until suspended on 28 March 2014, David Heycock and Stuart Arnold-Levy were both Authorised Representatives of Charter Financial Limited, a subsidiary of AMP Group.

Additionally, Superannuation in Australia Today Pty Ltd was until 28 March 2014 a Corporate Authorised Representative of Charter Financial Limited.

Wealth Management Project

This outcome is a result of ASIC’s Wealth Management Project. The Wealth Management Project was established in October 2014 with the objective of lifting standards by major financial advice providers. The Wealth Management Project focuses on the conduct of the largest financial advice firms (NAB, Westpac, CBA, ANZ, AMP and Macquarie).

ASIC’s work in the Wealth Management Project covers a number of areas including:

1. Working with the largest financial advice firms to address the identification and remediation of non-compliant advice; and
2. Seeking regulatory outcomes when appropriate against Licensees and advisers.

As part of its Wealth Management Project, ASIC has banned 36 advisers (in addition to Mr Arnold-Levy and Mr Heycock) from the financial services industry.

SOURCE: ASIC

Mr Gavin Keith Hyland has been convicted in the Brisbane District Court on two counts of dishonestly using his position to misappropriate investor funds. In relation to the first count, Mr Hyland was sentenced to two years imprisonment and one year imprisonment for the second count. The sentences are to be served concurrently.

Between 8 March 2010 and 4 November 2010, Mr Hyland was a director of Jacqalex Pty Ltd (Jacqalex) and solicited and received funds from investors for the purpose of trading on their behalf in financial products, including shares, bonds and derivatives.

ASIC’s investigation revealed Mr Hyland had dishonestly applied $104,110 of those investors’ funds for his own personal use, including personal trading and using the funds to pay his credit card and other personal expenses.

Mr Hyland was taken into custody today and will be released on a recognisance after serving six months. The recognisance is conditioned that he give security of $3000 and be of good behaviour for a period of three years.

As a result of his conviction, Mr. Hyland will be automatically banned from managing a corporation for five years.

ASIC Commissioner John Price said, ‘ASIC will not tolerate directors and officers of companies conducting their business dishonestly. ASIC will continue to take enforcement action against directors where they fail to perform their duties with integrity and at the standards the community expects.’

The Commonwealth Director of Public Prosecutions prosecuted the matter.

Background

On 3 May 1996, Mr Hyland was sentenced and imprisoned to an effective sentence of four years and six months for dishonesty offences relating to the misuse of investors’ funds, in circumstances where the funds were invested contrary to client instructions.

On 28 August 1996, Mr Hyland was sentenced to a further term of three months imprisonment, to be served concurrently with his earlier sentence, for being involved with the management of a corporation while an undischarged bankrupt.

In September 1996, he was sentenced to a further nine months imprisonment in addition to his earlier sentence, for dishonesty offences relating to Mr Hyland applying superannuation funds for which he had responsibility for his own use.

Mr Hyland was also sentenced in 2003 for a Fraud contrary to the Queensland Criminal Code of having dishonestly applied superannuation funds for which he had responsibility. He was sentenced to a period of 12 months imprisonment and as this offending breached his previous parole order; it was ordered to be served in addition to the May 1996 sentence.

On 16 February 2017, Mr Hyland pleaded guilty to two counts of dishonestly using his position as director with the intention of directly gaining an advantage for himself, contrary to s184(2) of the Corporations Act 2001 (Cth).

SOURCE: ASIC

CommInsure has enhanced its underwriting offer with a new tele-interview service and upgrades to its underwriting rules to improve adviser productivity.

The improvements are part of a wider program designed to deliver a more seamless and efficient experience for advisers applying for a client’s life insurance cover.

Advisers will now have the option to request CommInsure collect information from customers directly to complete their personal statement for life cover. A dedicated Australian-based specialist tele-interviewing team will collect all the information needed in a single call. This will reduce advisers’ compliance burden and risk exposure, and free up more time for them to spend with their clients.

CommInsure has also upgraded its existing rules for underwriting, increasing auto-acceptances to include loadings and exclusions and refreshing underwriting guidelines to reduce unnecessary referrals within CommInsure’s online application tool, WriteAway.

Olivia Sarah-Le Lacheur, Head of Life Distribution at CommInsure, said the enhancements were designed to improve advisers’ productivity by providing more choices when applying with CommInsure.

“These enhancements are the first phase of a broader program designed to create a simple and seamless application experience for advisers and their clients. We’re transforming our digital business platforms to complement the significant product enhancements we released in November 2016.”

In delivering these enhancements CommInsure ran a pilot program with a number of advisers who provided feedback over a nine month program.

Advisers can ask for CommInsure’s tele-interview service through CommInsure’s online application system, WriteAway, with timeslots available Monday to Friday, 8am to 8pm Eastern Standard Time.

SOURCE: Commonwealth Bank of Australia

Boutique fund incubator Bennelong Funds Management has formed a partnership with three asset management experts – Alastair MacLeod, Sam Jacob and Andrew MacLeod – to create a new business, Wheelhouse Investment Partners.

It brings the number of partnerships Bennelong has with specialist asset managers to eight, and the funds to 12.

The team’s mission is to deliver improved investment outcomes to Australian retirees. To achieve this, Wheelhouse Partners takes into account the real-world challenges of market volatility, income generation, and the impact of manager fees, whilst still delivering access to a high growth asset class, namely equities.

For their initial offering, they are utilising Morningstar index and research capabilities to deliver a global equity income strategy. The strategy relies upon an index created and maintained by Morningstar with Wheelhouse Partners integrating a tailor-made derivative overlay, purpose built for Australian retirees.

The focus on actual outcomes delivered is an important concept for the business, as outcomes are ultimately what the investor receives and can differ materially from simple time-weighted performance expectations.

Portfolio manager Alastair MacLeod  says the global equity income strategy aims to minimise the risk of chronic loss when investors can least afford it.

“When Australians enter retirement, and have changed from accumulation to redemption mode, their investment objectives need to change too. Australians are fortunate to be living longer, which means investment strategies also need to change to minimise the risk of retirees outliving their savings, and the real-world outcomes that this represents.

“Returns are very important but the shaping of those returns, and the management of portfolio risk to better align outcomes with when retirees are most likely to have their life savings at work, can massively impact – and improve – investor outcomes,” Mr MacLeod said.

“The strategy is designed to have structural lowered volatility, improved capital preservation and higher income generation, all of which, when combined with a growth asset like equities, should work to narrow the range of investment outcomes.

“Manager fees also stand between returns and outcomes, and we have structured our offering with Bennelong to enable what we believe is a genuine low-cost solution for the value that we provide.”

The Wheelhouse Global Equity Income Fund is now available for sophisticated and institutional investors; plans are underway to extend the offering to the retail market at a later date.

The Fund is based upon the Morningstar® Developed Markets Wide Moat Focus Index^SM, which is in turn drawn from a universe of approximately 1,400 stocks that are actively researched by Morningstar’s global equity analyst team. Morningstar’s equity analyst team consists of over 100 equity analysts globally that apply the same consistent economic moat investment philosophy in their research and valuation activities.

Furthermore, all stocks that appear in the index are required to be rated ‘Wide Moat’ which, as defined by Morningstar, are companies with a structural business characteristic that supports a firm to generate excess economic returns for an extended period of time.

Bennelong CEO Craig Bingham said Wheelhouse Partners has a solid team and has developed an offering that is designed to help retirees manage the volatility in their investment portfolio, and smooth their income returns.

“Alastair and his team have a strong background, and proven track record. Bennelong’s reputation has been built on its success in identifying and partnering with quality asset managers, offering high-grade investments. Wheelhouse Partners fits this model perfectly.”

Mr MacLeod said the Bennelong philosophy to provide the environment for entrepreneurial, specialist asset managers to create relevant and sought after investment products, was key to the decision.

“Bennelong is the best at what it does in the market. With Bennelong providing the distribution, marketing, compliance, finance and administrative support, we are free to focus our attention on investment management and positive outcomes for investors.”

SOURCE: Bennelong Funds Management

Hugh Robertson was in his second year of university, bounding down the same path as his father, when dad told him something that stopped him in his tracks.

Robertson was studying a bachelor of international finance at Griffith University on the Gold Coast and had plans to move into law and become a barrister like his father.

“I hadn’t really thought about what I wanted to do, but I saw that Dad had always provided a good living for us, so I thought I would do what he did,” Robertson says. “Then, one day, he asked me why I was doing it. I told him because I had seen him work hard as a barrister and he confessed he hadn’t really enjoyed it all that much.”

The revelation gave Robertson suitable pause for thought.

“The subject that I was doing really well in was corporate finance and it was the one that two-thirds of students fail,” he says. “So the competitive side of me decided that was where I would head.”

By that stage, Robertson read The Australian Financial Review every day and was working his way through the tomes of Warren Buffett, among other business leaders.

Robertson was accepted into one of the highly sought after bank graduate roles and was placed within the financial planning division.

“I thought eventually I would do a sideways move into funds management,” he says.

Instead, he found his niche within planning, although the industry was seen as less of a career in those days.

“The focus was more on whether you wrote up enough business that week, rather than whether you were doing the right thing for the customer,” he notes.

“I didn’t enjoy that, but someone said to me that you need to stay somewhere for three years before you can quit otherwise it looks bad on your resume.

“So I quit after three years and one month.”

He went on to work as an adviser with Whittaker Macnaught for many years until it was bought out by Commonwealth Bank.

“I had been in bank land and didn’t want to go back, so I left, ” he says.

“But my years at Whittaker Macnaught were great. They gave me permission to be the person who cares about clients first.”

In 2009, Robertson joined Centaur Financial Services and, in 2013, he bought out the owners and retains 100 per cent of the business.

Since then he has revamped the processes with clients, introduced new technologies and spent money on attracting and retaining good staff.

He has also had to fire a couple of clients.

“We only work with clients who respect the process so if clients are unreasonable or demanding sometimes you have to overlook the revenue and do the right thing,” he says.

“There may be a couple of people who think that if they bark they will get attention, but that is not how we do business.

“And I think it’s important for your staff to see you supporting them in this way; it builds loyalty.”

Robertson is a fan, too, of new education requirements for professional planners.

“If my mother was sitting across from someone and talking about her financial affairs, I would want that person to be empathetic, and while educational standards won’t guarantee that, it will, I think, force out the salesmen in the industry who are very good at pretending,” he says.

“Because study is hard and they won’t want to do it.”

He is also optimistic about the future.

“We do deserve the reputation we have got: we have had some bad advisers.

“But I do think we will get better and better.”

Following intervention by the Australian Small Business and Family Enterprise Ombudsman (ASBFEO) and the Australian Securities and Investments Commission (ASIC), the big four banks are taking action to protect small businesses from unfair terms in loan contracts.

Following a round table hosted by ASBFEO and ASIC, the big four banks have committed to a series of comprehensive changes to ensure all small business loans entered into or renewed from 12 November 2016 will be protected from unfair contract terms.

ASBFEO and ASIC have publicly raised concerns that lenders, including the big four banks, needed to lift their game in meeting the unfair contract terms legislation.

The big four banks have committed to:

• Removing ‘entire agreement clauses’ from small business contracts. These are concerning terms that absolve the lender from responsibility for conduct, statements or representations they make to borrowers outside of the contract.
• Removing financial indicator covenants from many applicable small business contracts. For example, loan-to-valuation ratio covenants that give lenders the power to call a default when the value of secured property falls, even where a small business customer has met financial repayments, will be removed.
• Removing material adverse event clauses from all small business contracts. These are concerning terms that give lenders the power to call a default for an unspecified negative change in the circumstances of the small business customer.
• Significantly limiting the operation of indemnification clauses. These are concerning terms that aim to broadly protect the lender against losses, costs, liabilities and expenses that arise even outside the control of the small business borrower.
• Significantly limiting the operation of unilateral variation clauses. In addition to providing applicable small business customers with a minimum of 30 days notice for any contract changes, banks will clearly limit the circumstances in which unilateral variations can be made.

The banks have agreed to contact all small business customers who entered into or renewed a loan from 12 November 2016, about the changes to their loans. In many cases, banks have agreed to implement the changes so that they apply to all existing applicable small business customers.

The banks have agreed to significantly limit the operation of potentially concerning contract clauses (such as financial indicator covenants) to loan products where such clauses are essential to the operation of the product (such as margin lending contracts). Where such clauses continue to exist, banks will re-draft them to ensure that they are clear, transparent and limited to the appropriate circumstances.

ASBFEO and ASIC have made it clear to the banks that simply including the word ‘reasonable’ in contracts does not go far enough.

The ASBFEO, Kate Carnell, said that her role was to consider the interests of small business and to ensure that the unfair contract term legislation was working across all industries. She said it was clear what “unfair” means – to protect the interests of the advantaged party, in this case it is the banks, against the interests of small business.

Ms Carnell said: “The banks have been given every opportunity, including a one-year transition period from November 2015, to eliminate unfair contract terms from their loan agreements and their response has been unsatisfactory.”

ASIC Deputy Chairman Peter Kell said: “We made it clear that lenders had to significantly improve their lending agreements to small business to ensure they meet the new rules.”

“It is important that the banks have committed to improving
their small business loan contracts. ASIC will be following up with the big four banks – and other lenders – to ensure that small business contracts do not contain unfair terms.”

Background

From 12 November 2016, the unfair contract terms legislation was extended to cover standard form small business contracts with the same protections consumers are afforded. In the context of small business loans, this means that loans of up to $1 million that are provided in standard form contracts to small businesses employing fewer than 20 staff are covered by the legal protections.

In March 2017, ASBFEO and ASIC completed a review of small business standard form contracts and called on lenders across Australia to take immediate steps to ensure their standard form loan agreements comply with the law (refer: 17-056MR).

ASIC has released Information Sheet 211 Unfair contract term protections for small businesses (INFO 211) which gives guidance to assist small businesses understand how the law deals with unfair terms in small business contracts for financial products and services, and the protections that are available for small businesses.

SOURCE: ASIC

Financial software company myprosperity has strategically partnered with The Institute of Public
Accountants (IPA) to assist accountants to better service their clients.
The partnership, which joins one of the country’s oldest representative professional bodies with a
relatively recent addition to the fintech scene, aims to help accountants implement technology into
their practices to make them more efficient.
Chris Ridd, CEO of myprosperity, sees the partnership as an exciting opportunity for accountants as
he believes there is a gap in the wealth advice space when it comes to personal finance.
“In a digitally-driven financial market, myprosperity helps accountants thrive by providing up to data,
so they can get a real-time snapshot of their clients’ finances and provide informed advice. I think
getting this data is something accountants struggle with and myprosperity is an elegant solution to
this problem,” Chris Ridd said.
myprosperity automates data feeds from providers such as Class Super, Redbook, Yodlee, RP and the
ASX to provide information about clients’ bank accounts, credit cards, home loans, real estate,
insurances and superannuation.
The portal has functionality that is advantageous to accountants, including digital document signing,
lead generation, uploading documents and receipts, and tagging tax items.
Upon being introduced to myprosperity, Andrew Conway, CEO of the Institute of Public Accountants
was immediately aware of the potential that myprosperity had to transform the client/public
accounting relationship.
“Having seen myprosperity in detail, I am convinced that is can power the transformation of the
client/Public Accountant relationship. The ability to provide real time, bespoke information to clients on their personal financial position will greatly assist informed decisions and a much deeper
relationship between public accountants and their clients,” said Mr Conway.

SOURCE: Institute of Public Accountants

Global equity markets continued to drift higher in April 2017, led by growth and small cap stocks. The global economy has strengthened, reflecting the strongest and most synchronised growth since 2010 among developed and emerging markets. The International Monetary Fund (IMF) revised its 2017 growth forecast for the world economy to 3.5% from 3.4%. Headline inflation rates have increased while long-term bond yields are also higher than last year. These conditions have lowered expectations of additional monetary easing policies from major economies across the globe.

A strong start to first quarter earnings season and hopes that potential US tax reforms or cuts can pass in August drove near-term momentum. Volatility temporarily rose and then fell due to tensions in North Korea and South Africa, as well as the terror attacks in St Petersburg and Paris. Political risks remain elevated with the United Kingdom (UK) Prime Minister Theresa May calling for an early general election on 8 June 2017 to strengthen the Brexit negotiating position. Analysts also paid close attention to the decisive second round of the French election on 7 May 2017 between the centrist candidate Emmanuel Macron and the populist candidate Marine Le Pen.

Meanwhile, the equity market rally pushed valuations ever higher. The Shiller P/E ratio on United States (US) equities is at its highest level since the tech bubble. While Trump’s tax agenda has been delayed, corporate tax cuts still appear likely in the next year, which should give a boost to earnings. It is still unclear what a final tax package might look like, but it is more likely to favour small-caps over large-caps.

Emerging markets benefitted from improved sentiment and stronger macro-economic conditions. A softer US dollar and signs of a more dovish Federal Reserve (Fed) rate policy stimulated investors’ sentiments. Emerging markets performance was led by China after stronger than expected gross domestic product (GDP) growth of 6.9% was recorded for Q1 2017.

Domestically, support from low interest rates continues, although lenders have increased mortgage rates in its wake, particularly focused on investors and interest-only loans. Growth in household borrowing is still outpacing growth in household income. The new recent supervisory measures are expected to curb the risks of this rising household debt. The housing market situation continues to vary across the nation, with attention focused on the uptick of apartments scheduled to flood eastern seaboard capital cities in the next few years.

The broad Australian equity market grew modestly over April, as the S&P/ASX 300 Accumulation Index increased 1.0% for the month. Returns were positive across most of the market spectrum, with the best relative performer being the S&P/ASX mid 50 Accum, increasing 1.7% for the month. The worst performer was the S&P/ASX Small Ordinaries, decreasing by 0.3% over the month. The best performing sectors were Industrials (+4.1%) and IT (+3.5%). The weakest performing sectors were Telecom Services (-9.5%) and Consumer Staples (-2.5%). The largest positive contributors to the return of the index were CSL, ANZ and CBA, with absolute returns of 5.9%, 3.4% and 1.7% respectively. In contrast, the most significant detractors from performance were Telstra, Wesfarmers and Fortescue Metals with absolute returns of -8.9%, -4.3% and -14.4% respectively.

“The market’s dramatic rotation over the year is clearly demonstrated in the return profile of Hyperion, a quality growth manager which delivered the best return for April, up nearly 5%, in the peer universe but with the strong returns of the cyclical stocks and the de rating of growth names over 2016 impacting its portfolio, it is the weakest performer over the last year, up 8.1%” said Clare Armstrong, a principal in Mercer’s Manager Research team.  “The stronger quarter for quality has bolstered the portfolios of many stock pickers so we now see very healthy returns posted for different investment styles over the year, Dimensional Fund Advisors, Allan Gray and Martin Currie are flying the flag for value approaches to investing alongside high conviction strategies like Macquarie and Alleron each returning close to 25%, well ahead of the market’s healthy gain of 17.5%”

“With the Australian market performing well so far in 2017 the issue that divides opinion amongst the managers relates to the outlook for resources. Today  the key risk to portfolios is that valuations in most sectors other than Resources are starting to look a bit stretched, especially in the so-called yield proxy stocks many of which are trading at the most expensive they have been relative to bonds in the last 12 months”  commented Armstrong. “This makes the decision to take profits from value portfolios a more difficult one”

The broad MSCI World ex Australia (NR) Index was up 1.3% in hedged terms and 3.6% in unhedged terms over the month, as the Australian dollar depreciated against the major currencies. The strongest performing sectors were Consumer Discretionary (+4.9%) and Industrials (+4.9%), while Energy (-0.3%) and Telecommunication Services (+0.6%) were the worst performers. In Australian dollar terms, the Global Small Cap sector increased by 4.1% while Emerging Markets increased 4.2% in unhedged Australian dollar terms.

Over April, the NASDAQ returned 2.3%, the S&P 500 Composite Index rose by 1.0% and the Dow Jones Industrial Average increased by 1.4%, all in US dollar terms. Major European equity markets also experienced mostly positive returns as the CAC 40 (France) increased 3.1% and the DAX 30 (Germany) increased 1.0%. The FTSE 100 (UK) retreated by 1.3% however. In Asia, the Japanese TOPIX was up 1.3%, the Indian BSE 500 was up 2.7% and the Hang Seng Index was up 2.1%. The SSE Composite (China) decreased 2.1% over April.

SOURCE: Mercer