financial simplicity

Adapt or Face Extinction

2012-02-20T15:10:00.004-08:00

Fascinating article on Darwinism and applicability to business from Ian Verrender from the Sydney Morning Herald at http://www.smh.com.au/business/adapt-or-face-extinction-20120220-1tjqa.html

Key quotes that I like:

'Successful businesses adapt to change and evolve. Those that don't become extinct.'
'Admittedly, the online threat to traditional retailers has hit with a bang. Consumer attitudes, and with them behaviour, shifted suddenly in the wake of the near recession in 2008 when debt repayment took precedence over consumption. Suddenly, everyone was looking for a bargain.'
'Regardless of technology, human beings are social animals. They crave interaction and demand personal service.
'There is no escaping, however, that the way we shop, and the way goods and services will be delivered is changing rapidly and those who fail to adapt will not survive.'

Clearly the article is focussed on the trends that the world is seeing in on-line 'retail' shopping, but many of the same trends are being seen in wealth management also. In translation:

Much of the old product distribution based business model is facing threat from either regulatory changes or consumer backlash - adapt to a client centric model rather than product centric model or face the risk of extinction
Consumers are more connected and comparing their wealth management services that they are receiveing. This is innevitably going to increase margin pressure, the days of the big salaries are going...
Humans are social, and when it comes to their monies, they want communication and consideration of the THEIR situation in such. Market commentaries are a plenty around the Internet, what they want is communication about THEM, personalised and relevant
There is no escaping that in a world of social media and the Internet, that the formula in the way that consumers seek out, and choose both investment strategies and solutions will, and is changing. The key trend here, like with retail shopping, is the unbundling of the process and doing at the pace that the consumer wants to. In Australia this trend is vastly accelerated as the SMSF structure even enables the consumer to have their own 'tax wrapper' and therefore free to invest (within reason) into whatever they seek, how they want, when they want.

No-one can argue that the world is changing, but are we now facing an acceleration in the change where there is now increasing confidence (and reward) for doing things a new way ? Has tradition become uncool and perhaps costly for those who are not preapred to make change ?

Mass Portfolio Customisation and the Unique Investor

2012-02-14T20:37:00.002-08:00

It has suprised me that an industry such as wealth management, which in reality is not actually physically delivering much in terms of a physical 'product', has taken so long to adapt to one of the most powerful marketing and consumer concepts of all time, that of mass customisation.

In the linked paper here, there is a discussion of the power of mass customisation, and how it can work in wealth management, that of delivering mass tailored portfolios for investors.

With consumer power on the continuing up, we are seeing this trend on the up.

Platforms in 2012

2012-01-18T15:54:00.000-08:00

Great article on the Tria Partners website about trends for investment platforms in 2012

http://www.triapartners.com/triapartners-blogs.php?article=content/Blog-Platforms%20in%202012&type=MjQ=

Industry pressures acknowledged are:

As we all know, the retail platform business model is under pressure from:

• A large and growing self-directed investor segment which is using SMSFs as its preferred vehicle

• Rotation by planners away from managed funds to direct assets (including equities and term deposits)

• Improvements in technology which are allowing planners to rotate away from traditional platforms entirely

and I love the lines to get people thinking like:

'Today’s direct customer may want advice tomorrow. '

'For incumbents, “do-nothing” looks increasingly unattractive, '

and the summary

'2012 needs to be about getting back in the game - regaining lost customers and restoring damaged confidence. There are many strands to this, but delivering quality, low-cost products to key customer segments, through whichever channels they want to buy, and with or without advice, is an important part of that journey. '

With the trends to the offering of direct owned assets, the need for wealth managers to both develop disciplines and tools for managing client portfolios is on the rise. Feel free to call to talk to me about the area.

Will increasing the SGC be good for the mainstream wealth management and superannuation industry ?

2011-12-18T17:55:00.000-08:00

Stuart Holdsworth:

Aren’t we living in interesting times ? There is so much change happening in most of our lives, and the wealth management industry does not appear to be immune from change either, in fact quite the opposite. With FOFA, increasingly aware and connected consumers, social media, a period of unprecedented innovation in both technology and business models, and other regulatory changes slated, sitting still is probably not a long term option for any business in the wealth management industry today.

We are seeing unprecedented levels of activity in the dissection of the overall superannuation industry proposition, and with it unprecedented amounts of what I call ‘supply chain pirating’ where industry players are starting to become predatory over their traditional trading partners in order to increase the relevance of their offer, increase profits or perhaps even just remain viable. It is perhaps no surprise that an increasing number of organisations are inviting me to look at direct to consumer or ‘do it with me’ investment propositions, remembering that ‘D2C’ was written off by many only a few years ago.

Amongst all of this, there is considerable debate about increasing the SGC from 9 to 12% which at face value appears to have considerable merit in a world where there are clear gaps in meeting pension obligations placing stress on governments and ultimately the overall financial system.

However is it really as simple as that ?, just increase the amount of the proportion of everyone’s income that has to go into retirement savings and off we go, another boost to the wealth management industry. In a world of voting consumers who are probably starting to apply an increasing focus to their financial affairs, I suspect many questions are being asked about increasing SGC, and decisions being considered.

So what are going to be some of the changes, decisions and innovations that the impact of increasing the SGC from 9 to 12% may fuel ? At one end, is could be just more monies for the industry to manage and perhaps increase profits, or at the other end, will such a change to the amount of employees monies going into super increase consumer focus, make SMSFs more attractive to the alternative, and perhaps further dissection of the supply chain, encouraging more DIY or DIWM (do it with me) investing, and the traditional mainstream industry loose out ?

Clearly the tipping point for making a decision to set up a SMSF, which is often the first step in dissecting superannuation administration from investment management for many, is different for everyone, and it is not just about fees either, it includes tax efficiency, control, trust, transparency, and probrally many other emotional and irrational considerations that when at 12% of income may become higher priorities.

But also, is the shift to a SMSF also about being a member of the pack, the pack of self-determined individuals who are increasingly informed by social networking and the world wide web, enabling stand up novices to be well informed in very short space of time, leveraging each other’s knowledge rather than relying on experts. This group of people are often less enthused about ‘products’ designed for a market segment, but more interested in ‘why is this right for me’ ?

What appears to be the situation here is that there is a continually moving and sensitive balance between government finances, personal finances, popular opinion (or protest) and wealth management industry efficiency to service an increasingly demanding, informed, price sensitive and challenging consumer.

So with an increased SGC and the emotion and practical changes that this brings, will this fuel an increased temptation for workers that were borderline before to set up an SMSF ?, and if this is the case, what does the mainstream industry need to do to counter such ?

The answer in my view has to lie in the broader industry providing a superior value proposition in terms of the client experience and outcomes, and probably with some examination of costs also through increased administrative and investments operational efficiency. There are so many aspects to customer experience that count, but key ones that come to mind are ones of communication to investors and investment management. The benchmark for comparison now and available to SMSFs is the ever evolving on-line world of self, or professionally managed, personalized portfolios that can their investments on low or no cost platforms, access to a broad array of investments to cover most asset classes, in some cases with associated portfolio analysis, available on smart phones and tablets, and perhaps with advisers on-hand to see the same information only a call away.

From an investment management perspective, will offers have to progress beyond a ‘product’ with a mandate that attempts to be a best fit for a broad range of investors, to something that demonstrates the accommodation of differing terms to retirement or different emotional or other needs of investors ? Does it really make sense that 20 year olds and 50 year olds may be invested in the same product or fund ?

The technology change is well under way and moving faster than ever, however there is also a challenge of changing an industry culture under way, to move beyond an theme of product distribution to that of client centricity, the way the consumer sees it, not the industry. After all service is what is received not what is given.

With many areas of the world recognizing that there is quite a shift required to attain a position in the new world, the race is on to deliver this new industry model in a scalable, viable, efficient manner, and yes it can and is being done. Many are saying that the benchmark to stem the flow to a more self-directed investment model may be the offering of mass personalized individual portfolios at considerably less than 100 basis points all up. Something has to give.

Adapt or face oblivion: FPA

2011-11-17T15:52:00.000-08:00

Andrew Starke

Financial Planning Association (FPA) chief executive, Mark Rantall, has called on all financial planners to aspire to the highest standards in what he called “extraordinary times”.

He also charged the estimated 6,000 financial planners not currently members of the FPA to join the industry association in its push for professionalism.

In a frank address to delegates at the FPA Conference in Brisbane yesterday (16 November), Rantall called for members to “step-up” or prepare for financial planning’s demise.

“There are two options for the future,” he said. “We either have a healthy new generation of financial planners who are committed professionals and who work to clear, enforceable standards supported by a strong, professional body and have earned consumer trust and confidence.

“Or there is the other option in which financial planning dissolves into oblivion with no future pipeline of new blood, having all but lost the battle for trust, credibility and respect.”

Rantall reiterated his organisation’s call for the term financial planner to be restricted to only those practitioners who operate to the highest standards in terms of education, experience and ethics.

FPA Chairman, Matthew Rowe, backed the call saying all FPA members should work to a future where financial planning is a universally respected profession.

“We envisage that there will be 20,000 financial planners in Australia over the next five to ten years who will be distinguished by law from product advisers, salespeople and others less qualified and experienced. Most, if not all, will be certified financial planner professionals.”

The FPA’s mission to not only raise professional standards but actively promote its intentions to the Australian public received a boost with independent endorsement of its recent national advertising campaign.

The independent research conducted by Ipsos ASI Australia described the FPA advertising as “strong on appeal, attention-grabbing and providing a relevant message”.

FW: platform shift

2011-11-16T19:14:00.000-08:00

Platforms shift from consolidation to upgrades

Major platform providers across the industry are now moving away from a heavy period of platform consolidation to focus on developing and upgrading the remaining products, particularly from a technological perspective.

IOOF completed a major overhaul of its platforms earlier this year that resulted in eight offerings being reduced to three. IOOF general manager of distribution Renato Mota said work in the next six to 12 months would revolve around upgrading the technology of platforms and systems.

There are still a couple of different technologies running across the three platforms, which will be something to work on in the longer term, he said.

The next wave of enhancements for IOOF's independent financial adviser-focused Pursuit platform will concentrate on front-end functionality and online portfolio management, and on developing online tools to help advisers with opt-in.

"We're trying to remove legacy products. We're trying to create an environment where we continue to evolve existing products rather than building new products," Mota said.

"As soon as you release new products you're creating legacy issues for your financial advisers, which creates administration issues in the back office, which we're trying to avoid."

AMP director of sales Barry Wyatt, who was previously general manager of marketing and strategy at AXA, said the group's flagship North platform had this year completed an upgrade to move beyond its traditional guarantee product to also include a full platform offering including a share trading service and term deposits from different banks, while increasing the managed funds available from roughly 100 to 200.

AXA's Summit and Generations platforms are still on sale and serve as a complement to North. Although they are unlikely to be consolidated further in the medium term, the group is looking to consolidate the technology behind them to run the same as North, Wyatt said.

North is now also being rolled out to some AMP Financial Planning and Hillross financial advisers and is seeing rapid take-up, he added.

Executive general manager of investment platforms for MLC and NAB Wealth Michael Clancy said the group had just finished a major migration of 30,000 clients, shifting from Masterkey Custom to MLC Wrap, and would be doing a major relaunch of mass offering Masterkey Fundamentals in the next few weeks.

The group would now look from consolidation to upgrades, and could look to implementing changes that would be required under Future of Financial Advice reforms once the Government provided some more clarity around them.

BT Financial Group general manager adviser distribution Chris Freeman said the group is looking to spend $150 million over the next three years on project Next Gen, a whole new platform to take the group's business and platform offering to the next level.

It is currently cumbersome trying to make changes because the systems that the current BT Wrap platform was built on were developed in the late '90s.

The new platform would be built on current technology, which is modular and internet-based, and would be more nimble with less paper, he said.

The group will also spend around $20 million in the next 12 months on compliance-related platform enhancements, he said.

Australian ETF growth surges

2011-11-08T16:30:00.001-08:00

By Keith Griffiths on 9 November 2011
Money Management

Australian exchange traded fund (ETF) market capitalisation continued to grow in October, more than doubling its September intake, according to the latest BetaShares Australian ETF Review.

Currently the ASX ETF market cap is trading around $5.2 billion. The review also highlighted that October was one of the largest month-on-month increases in ETF growth, with 7 per cent or $342 million in new units created. This compares to 3 per cent on average over the last 24 months.

"Also encouraging was the strong trading and inflows across a variety of asset classes," said Drew Corbett, head of investment strategy of BetaShares.

International ETFs saw net buying and trading volumes increase "indicating a perceived value in global equities," the report stated.

With the increased volatility in the AUD/USD the currency ETF also was also popular, increasing 32 per cent in traded volume over the period.

Precious metals had a mixed couple of months with new money going into silver, platinum and palladium. However, unhedged gold holdings had net outflows of $14 million, with hedged gold ETFs receiving approximately $5 million in new money.

Creation and redemption activity was mixed across the providers. The State Street broad S&P/ASX 200 ETF had significant net new money of around $64 million, while the Russell Dividend ETF had a significant net redemption of $42 million. iShares had increased interest in emerging market ETFs and experienced a 23 per cent increase in October to over $600,000 per day, the report found.

Gen Yers turn to social media for financial advice

2011-03-14T18:37:00.000-07:00

Interesting article about trends for sourcing financial advice.

Gen Yers turn to social media for financial advice
Monday, 14 March 2011 1:00pm
By Elise Burgess

Generation Yers are seeking advice much sooner than their parents, but not always from the usual sources, with around 33 per cent using social media for financial advice.

Based on a survey of 963 adults aged between 21 and 80 years, conducted by TD Ameritrade Holding Corporation late last year in the US, Gen Y is now adopting a far more collaborative approach to handling their financial matters, using multiple sources when seeking advice.

The Annual Investor Index survey found that some 60 per cent of survey respondents aged between 22 to 34 ask friends, relatives and colleagues about finances and investing.

This compares to just 43 per cent of Baby Boomers and 31 per cent of Boomers' parents that reported the same sources.

Further differentiating Gen Y, around 33 per cent or one in three respondents look to social media to get financial advice and to learn more about financial markets.

The survey also found that Gen Y are starting to take care of their finances at a far earlier age then their predecessors, learning from the Global Financial Crisis and actively engaging in their own savings.

"Many of them witnessed their parents' and grandparents' financial struggles firsthand," said Stuart Rubinstein, managing director of client engagement at TD Ameritrade.

"They're not afraid to ask for help or information —in fact, the more the better. At the end of the day, they just want to be able to make educated decisions, and that's a very healthy attitude for today's investors to have."

Bernard Salt, KPMG partner, said that it will be the Baby Boomers and Gen Y that will present the biggest shift for advisers and that these are markets advisers must cater for if they are to maintain a high quality of advice.

According to Salt, it is the shifting attitudes of Baby Boomers and Gen Y that is changing the face of financial advice.

"This will be a big opportunity for financial planners… we are not just going to see a volume shift in the next few years but also a value shift," said Salt

Rise of in-house fund mgmt a game changer

2010-10-05T19:39:00.000-07:00

Are pressures on the overall supply chain forcing systemic change in the industry ?

Rise of in-house fund mgmt a game changer

Wednesday, 6 October 2010 12:55pm

A shift of government super funds towards in-house management could threaten the raison d'etre of some of Australia's largest investment managers.

In its recently released results, state owned fund manager Queensland Investment Corporation (QIC) disclosed that its after-tax operating profits fell almost 30 per cent in the year to 30 June to $26.3 million.

Its funds under management (FUM) fell by a whopping $10.5 billion after QSuper - the super fund for Queensland government employees - decided to become a regulated superannuation fund and begin in-sourcing functions such as strategic investment advice and investment administration, which had previously been provided by QIC.

A weaker relationship between QSuper and QIC raises questions around the latter's reason to exist, potentially creating concerns for other state owned fund managers including VFMC and Funds SA.

QIC paid a dividend of $13.2 million to the Queensland government, down from $18 million in the preceding year - but that is small change for a government operating on a $42 billion dollar budget.

QIC said that it remains QSuper's largest provider of investment services, managing over $17 billion for the super fund across a variety of asset classes.

And despite the decline in FUM stemming from QSuper's shift, with $51.6 billion under management, QIC remains one of the country's ten largest fund managers as of June 30th, according to data complied by Rainmaker Information.

The fund manager has over 70 institutional clients and recent business wins include a $500 million property mandate from the country's largest industry fund, AustralianSuper, back in April.

Investors call planners to charge performance-based fees

2010-08-26T15:43:00.000-07:00

Investors call planners to charge performance-based fees

Thursday, 26 August 2010 11:50am

Performance-based fees have traditionally been the domain of fund managers - but research shows a growing number of investors are urging financial planners to start adopting this fee structure.

Mark Johnston, principal of research firm Investment Trends and speaker at this morning's Rainmaker Marketing Symposium, said an emerging trend among retail clients is their preference for advisers to charge performance-based fees, rather than a commission or asset-based model.

"About 19 per cent of investors say their preferred model for paying an adviser is performance-based fee."

"That's one area that has a little bit of differentiation, [in that] advisers try and convince their clients that an asset-based fee for service [model] is really like a performance-based fee anyway," he said.

Calls for changes in adviser remuneration also go along with increasing client dissatisfaction with fee levels.

Around 40 per cent of investors expect to pay lower advice fees following the dent to their portfolios in the wake of the GFC.

And while discussions continue to swirl around fees for service versus commissions, with the government proposals to ban commissions by July 2012, the difference of fees charged for both models can sometimes be negligible.

"Above a certain threshold of assets ... the actual advice fees, not counting the product and administration fees, is almost always about 70 to 80 basis points on average.

"That's actually true regardless of how it's collected. You'll find that 70 to 80 basis points come through whether it's an asset-based fee, fee for service or commission model," he said.

Johnston said the renewed focus on low-cost investing has accelerated demand for exchange traded funds (ETFs), direct shares and separately managed accounts (SMAs).

More planners bypass managed funds: study

2010-08-16T21:59:00.000-07:00

More planners bypass managed funds: study

Tuesday, 17 August 2010 1:10pm

Fund managers are put on notice in a recent investment study that found a growing number of planners are placing their clients' funds into direct shares, ETFs, REITs and SMAs, leaving only a fraction of inflows into traditional managed funds.

The survey pooled the views of over 700 planners in April and May this year, a small sample when compared to the 18,000-plus financial planners in Australia. However, their collective insight still gives some indication on where new money is flowing post-GFC.

The Investment Trends research found that more than two thirds of all planners now advise on direct shares, and this group expect their allocation to direct equities to rise from 23 per cent of their funds under advice (FUA) today to 34 per cent by 2013.

Mark Johnston, principal of the firm said that the move to offer direct equities started in 2008, but the combination of poor returns from some managed funds and lower costs of non-managed fund alternatives, have accelerated the trend.

"Direct equities spiked to 20 per cent of new inflows invested for clients, with growth also seen in the proportion going into ETFs, REITs and SMAs," he said.

This meant inflows into unlisted managed funds dropped from 62 per cent to 50 per cent compared to the year before.

"This is a massive shift in planner behaviour," he said.

According to the research, the planners that poured more than half of their recent client inflows into direct listed investments only invested 7 per cent into managed funds.

Johnston said that direct equities, once the domain of stockbrokers, is now a core part of a planner offering. Planners currently advising on direct shares expect to increase the proportion of their clients using this advice to grow from 30 per cent to 43 per cent over the next three years.

But it's not all bad news. Practically all the major fund managers in the country offer planners 'model portfolios', which are exactly the same portfolios they run except they're not managed within a unit trust structure. Planners pay them fees for their 'intellectual property' and, in return for lower fees, the fund manager does not have to do all the admin-related duties attached to these model portfolios.

Planners flock to direct equities

2010-08-16T16:03:00.000-07:00

Planners flock to direct equities

Driven by client demand

Victoria Papandrea

By Victoria Papandrea
Tue 17 Aug 2010

Advisers are increasingly turning to direct equity investments for new client funds, according to an Investment Trends report.

Financial planners are increasingly turning to direct equity investments for new client funds, according to the latest report from Investment Trends.

The research, which was based on a survey of over 700 financial planners in April and May 2010, revealed a surge in direct equity investments driven by client demand.

Direct equities spiked to 20 per cent of new inflows invested for clients, with growth also seen in the proportion going into exchange traded funds (ETFs), real estate investment trusts (REITs) and separately managed accounts (SMAs).

"Planners have been gradually increasing their use of direct shares and other listed investments since 2008. But this year has seen a dramatically larger shift," Investment Trends principal Mark Johnston said.

The survey indicated that just half of recent inflows were directed to unlisted managed funds, down from 62 per cent the year before.

"This is a massive shift in planner behaviour," Johnston said. "Planners estimated just 39 per cent of inflows would be directed to unlisted managed funds by 2013.

"Two thirds of all planners now advise on direct shares, and this group expect their allocation to direct equities to rise from 23 per cent of FUA [funds under advice] now to 34 per cent by 2013."

The research indicated a third of planners placed more than half of recent client inflows into direct listed investments broadly, which included shares, hybrids, ETFs, REITs, SMAs, and listed investment companies.

"Planners in this high usage segment placed just 7 per cent of recent inflows in managed funds", Johnston said.

"That appears in part to be a response to the increased investor fee aversion, and dissatisfaction with managed fund performance identified by our research. Client demand was a major catalyst for higher direct equities use."

The survey also found the number of planners advising clients on direct shares is also on the rise; two-thirds of planners currently advising on direct shares intend to continue doing so, while another 10 per cent of planners expect to begin over the next three years.

Direct Equities

2009-06-15T17:02:00.001-07:00

HNW investors to favour direct equities

Advisers focus resources on shares

Victoria Papandrea

By Victoria Papandrea
Tue 16 Jun 2009

High net worth investors are likely to have the strongest product demand for shares over the next two years.

Australia's high net worth (HNW) investors will have the majority of their money invested in direct equities over the next two years, according to a new survey by Datamonitor.

HNW investors are expected to have up to a quarter of their total investment portfolio in shares by 2011, the survey found.

Wealth managers servicing the financial needs of HNW individuals expect more than 90 per cent of their clients will demand direct equity investments over the period.

While many investors have lost money in shares over the last 18 months, the demand for equities from HNW clients is set to increase as signs of a market recovery begin to emerge, Datamonitor wealth analyst David Lalich said.

"If the stock market continues to rally this year we should see a wave of new investment from HNW individuals, and while many will have learnt lessons from the equity crash, ultimately this will not discourage them," he said.

"These are typically opportunistic individuals that want exposure to the best opportunities for growth in the market."

With client demand expected to be so strong in the area of direct equities, the survey found 44 per cent of wealth managers expect to focus their resources into these investment products over the next two years.

A smaller percentage of wealth managers surveyed said they would focus on developing other investment areas such as property funds, capital-protected funds, exchange-traded funds and currency trading.

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Financial Planners Facing Crisis of Confidence

2009-05-31T18:20:00.001-07:00

Financial planners need to decide if now is the time to face their industry’s poor perception, according to the Australian Securities and Investments Commission (ASIC) senior executive leader, financial advisers, Deborah Koromilas.

Speaking at a Financial Planning Association (FPA) update, Koromilas acknowledged that the planner has become linked to the performance of the investment.

The industry is being hit by a perception that “you’re all bad, you’re all crooked and you all have conflicts of interest”, Koromilas said.

The industry needs to question how much of an influence that conflict should have, Koromilas said.

“How much do you want that to affect the entire industry as a whole?”

She also questioned whether there was more of a focus on obtaining good performance at the expense of good advice.

“Was advice just given off the back of a rising market? Should there be more products collapsing. Will the industry survive?”

Koromilas painted the picture of an industry where it was too hard to get new clients and too hard to retain them.

Financial Planners Feel Under Attack

2009-04-28T19:14:00.001-07:00

Planners feel under attack

29 April 2009 | by Amal Awad and Lucinda Beaman

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Some financial planners are feeling increasingly despondent, and some are feeling let down by their dealer groups and the industry in general – a situation which is leading planners to reassess their business models.

Wealth Insights managing director Vanessa McMahon said her latest research shows that planner sentiment has fallen to new lows, with 38 per cent of planners having a negative outlook compared to 12 per cent last year. This is on the back of most practices reporting a “serious drop in revenue and profit”, McMahon said.

“Some are running at a loss, and most smaller practices don’t have much fat to cut out of their businesses but have the same expenses, including dealer group costs."

At the same time, some financial planners are expressing disappointment with dealer groups, feeling that they are not receiving additional help, McMahon said.

McMahon said planners are “doing it tough”, facing the pressures of lost income, dealing with clients who have lost money and a sense of being over-regulated. Some planners also feel they have no back-up from the industry and feel under attack, McMahon said.

Financial Planning Association chief Jo-Anne Bloch said adviser sentiment in the US is also very low, while countries such as Japan and Ireland face serious problems.

“If you think things are bad here, [it’s nothing] compared to what's happening around the world,” Bloch said.

“Our research is echoing what Vanessa McMahon is saying: [there is] real anxiety among our membership,” Bloch said.

“There are some real issues and certainly we need to acknowledge that.”

Bloch said financial planners seem to be “fair game” and “under attack” by self-interested, sectional groups.

Bloch said some planners are now looking at different business models and how they might better manage their costs and run their businesses.

However, McMahon did note that well-established practices and those with strong referral services were generally doing well.

Platform fees trim dividends from investors' portfolios

2009-04-28T19:11:00.000-07:00

Platform fees trim dividends from investors' portfolios

29 April 2009 | by Benjamin Levy

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Platform fees that are charged by platform providers are taking too much out of advisers’ clients, and clients don’t realise how platform fees can impact on their dividend income over time, according to the director of Capel and Associates, Rick Capel.

While there is proper disclosure in terms of external platform fees, clients don’t understand whether the fees are reasonable or not. Advisers who forgo investing their clients’ money through an external platform and invest their clients’ shares directly with their own internal platform can save clients up to 80 basis points in fees, Capel said.

Capel said that in a normal market environment when an asset class does particularly well, when the profits are realised in rebalancing the portfolio, part of those profits will go towards paying platform fees. That practice was questionable in the current market turmoil.

“In this period where most of the asset classes have gone south, I question the practice of rebalancing a client’s portfolio, which may crystallise losses simply to refloat the cash account in order to pay the adviser or dealer fees.

“This rebalancing exercise creates an unethical bias, which any professional adviser should avoid because their fees have to be paid out of asset sales,” Capel said.

Portfolios should be modelled around cash flows so that clients can tell how much of their investment dividend is going towards the cost of operating the platform, he said.

UK consumers embrace online comparison tools

2009-04-08T22:13:00.000-07:00

UK consumers embrace online comparison tools

Thursday, 9 April 2009 10:15am

New research on UK consumers shows they are rapidly embracing online finance price comparisons, with big implications for how firms market their products.

According to the Datamonitor research, online price comparison websites are now the most trusted source of information for consumers regarding wealth management products.

"Consumers have embraced online channels for advice and are increasingly depending on technology to compare products in their search for transparent and competitive policies," noted Datamonitor.

Datamonitor said consumers becoming more self-directed means financial services firms need to enhance the way they interact with their clients.

"Providers should consider the implications of these changes that will increase the likelihood that existing clients will seek and find viable alternatives," they said.

Part of this is to dramatically increase avenues for engagement and segmenting clients or prospects into those representing high long term value in contrast to those offering firms lower value.

"Providers need to put the most retention effort towards existing customers who have the highest lifetime value against the cost of servicing them," said Mya Myat Moe, analyst at Datamonitor and author of the report.

Segmenting strategies however require firms to think differently regarding their marketing strategies, she said.

For example, life insurance and pension companies need to understand changing consumer attitudes towards long-term savings while also realising they are becoming more risk-averse, preferring products which offer safer or guaranteed returns over those which offer the highest

Masterfund market plummets

2009-03-03T11:18:00.001-08:00

Drops 15 per cent

By Alice Uribe
Wed 04 Mar 2009

All three Masterfund sub-markets report falls in FUM.

The total Masterfund market, comprising platforms, wraps and master trusts, dropped nearly 15 per cent for the year to 30 September 2008, according to the latest statistics from Plan for Life Actuaries and Researchers.

The research firm reported that wraps, which make up 29.7 per cent of the market, fell by 15.8 per cent. Platforms, which make up 53.4 per cent of the market, fell by 15.2 per cent.

Master trusts, which comprise 16.9 per cent of the market, dropped 11.7 per cent.

The total Masterfund market is now worth $386.8 billion, a fall of $67.4 billion from 30 September 2007.

The biggest loser was Macquarie Investment Management, which saw its funds under management (FUM) fall by a whopping 23 per cent from the previous year.

Large falls were also felt by Asgard, whose FUM fell 16.6 per cent. MLC Ltd saw its FUM fall by 18.4 per cent.

Even AMP Financial Services, which took pole position for the total Masterfund market, reported a drop in FUM of 11.9 per cent to $41.1 billion.

Inflows for the market were also down to $110.9 billion from a record $145.7 billion in the previous year.

The research firm said all major companies reported small to medium negative growth over the year.

Are More Practices Going Independent

2009-02-19T19:14:00.000-08:00

Paragem tips scales for small planners

Friday, 20 February 2009 12:55pm

Small-size planning groups keen to cut their licensing and admin costs without sacrificing their independence and quality of service are driving the demand for the ‘shared services' model, said Paragem's managing director Ian Knox.

Knox said some planning groups are taking a different approach to stay ahead of the pack even as the market continues to bite.

For example, Paragem has set up a new service, Paragem Wholesale AFSL, which allows advisers the option to share a ‘non-aligned licence'.

This means that they don't have to shoulder the full cost of keeping the business compliant but, more importantly, they can tap into Paragem's business, which allows them to provide advice without potential conflicts-of-interest normally associated with planning groups that are part of bigger firms that also manufacture investment products.

An additional feature of the group's licensing facility is that, as part of the planning firm's contractual agreement with Paragem, all volume-based bonuses provided by select platform groups go directly to the clients.

"We've undertaken agreements with a couple of platforms, Macquarie and Avanteos, where all volume rebates attributable to Paragem has to go to the client. This is about fostering and developing steps towards where the market is heading, which is advice-based activities," he said.

Knox added that the scale advantage they provide also extends to Professional Indemnity (PI) insurance costs for each licensee. By negotiating PI insurance for one or more licensees, provided they are all high-quality businesses, the annual PI costs would come down too, he said.

In separate news, Knox said that in contrast to the doom-and-gloom stories about planning groups struggling in the current climate, Paragem saw a spike in business activity in the two months to January, when they lodged more than 20 new AFSL applications.

"This implies these practices are leaving networks to establish and run their own affairs, in many instances they actually receive a financial boost as their running costs are lower," he said.

The regulators fiddled while we got burnt

2009-01-07T13:52:00.000-08:00

The regulators fiddled while we got burnt
Ian Verrender
January 8, 2009
Forget the 1980s. That was just a warm-up for the main act. These are the dying days of the real decade of greed. And there is no greater example than in the recent trading in Babcock & Brown shares.

The past couple of days has seen some wild gyrations in the share price of a company that clearly has no future. Even John Cleese at his Monty Pythonesque best would have difficulty arguing that it was just resting or "pining for the fiords".

This is a dead company, gone to meet its maker. So who in their right mind would bother buying shares in a company that was a dead cert to collapse? And particularly on the very day the corporation announced it had "negative net assets"?

The answer? A hedge fund that finally was calling in a short selling position. A what position, I hear you ask.
About a year ago, an unnamed international hedge fund sold shares in Babcock & Brown around the $18 mark. In fact, it sold about $400 million worth of Babcock & Brown shares. That's right, it banked $400 million.

The slight technical hitch is that it didn't actually own the shares it sold. Instead, it borrowed them, presumably from some dumb insurance company or superannuation fund for a nominal fee.

This week, that very same hedge fund figured it would maximise its gain by closing out its position. That means it had to buy them back. And it is that buying that has pushed up the share price.

The shares it sold for $18 - which it didn't even own - this week were bought back for an average price of 40c, delivering an enormous profit to the hedge fund. And it relieved its debt by delivering back those shares it borrowed. Forget the fact they are almost worthless.

Due to the appalling lack of disclosure rules on our sharemarket, we will never know the identity of the hedge fund.
More importantly, for those people who have their money tied up in the super fund or insurance group that lent this stock out a year ago, we will never discover the identity of the schmuck who earnt a couple of thousand dollars commission while he watched close to half a billion dollars of his clients' investment almost totally evaporate.

Like just about everyone in businesss these days, managed investment funds have discovered new and interesting ways of masking these types of transactions. A mixing pot suddenly emerges in which the very bad deals become blended with great ones. And if the overall result is negative, this year we have the best example ever as to why your super funds have shrunk. Haven't you heard of the global financial crisis and the global recession?

The meltdown in stock and debt markets has provided an easy excuse behind which almost every incompetent player now can hide.

Take a look at Babcock's recent trading. On New Year's Eve, Babcock shares were trading at 15.5c. Yesterday they hit a 46c peak before closing 15 per cent lower at 32.5c.

The official line from the company is that the price spike followed a decision by its banking syndicate to give the company enough leeway to conduct its own liquidation rather than have administrators or receivers appointed.

That means no forced sales. That means creditors will end up with a bigger proportion of the bad debts repaid, which is terrific news for creditors.

But has everyone overlooked the basics? If there is not enough cash to repay the secured creditors in full, the share price should be, at best, zero because as we all know, shareholders stand last in line.

Share prices can't really go any lower than 0.1c (just look at the Macquarie-backed tollroad company Brisconnect) but B&B keeps on bouncing around even though it is in unofficial liquidation.

It is a year since it became obvious that something was horribly amiss on our sharemarkets. The dearth of information, the arrogance of the bullmarket high-flyers have been overshadowed only by the stupendous incompetence of our market regulators.

Where has the Australian Securities and Investment Commission been during the past year? Just think of the accounting irregularities, conflicts of interest, insider trading, fraud on a grand scale with stock lending and undisclosed short selling, the total absence of rigour in terms of enforcing disclosure. Even those involved are stunned that there has been precious little in the way of prosecutions or even investigation of their activities.

Maybe this year will be different. But don't bet on it.

Institutional advisers are increasingly flocking to independently-owned dealer groups, according to RIAA.

2008-12-09T14:19:00.001-08:00

Advisers flock to independent firms

Increasing market trend

Victoria Papandrea

By Victoria Papandrea
Wed 10 Dec 2008

Institutional advisers are increasingly flocking to independently-owned dealer groups, according to RIAA.

There is an increasing trend for institutional advisers to pack up and join independent dealer groups, according to Risk and Investment Advisors Australia (RIAA).

RIAA has experienced an influx of institutional advisers flocking to join the independently-owned boutique dealer group over the past 12 months, RIAA managing director Grant Scalmer told InvestorDaily.

"With now around 85 per cent of dealer groups owned by institutions, a lot of advisers are looking for that dealer group where they are not owned and dictated to by institutions," he said.

Advisers that are currently looking to join RIAA or who have joined the group over the past year have predominantly come from dealer groups owned by large institutions, Scalmer said.

"In a couple of instances their colleagues or friends have joined us from big institutions and they are seriously unhappy where they are," he said.

"One of the groups that I spoke to recently has been with their existing dealer group for a long period of time and is now starting to question what sort of value they are getting from these dealer groups," he said.

Scalmer believes this is a big trend as now is the time when advisers are starting to look at the value they are getting from their dealer groups.

"They feel that they are paying these fees and not getting any help or assistance in running and managing their business," he said.

Downturn to spur resurgence in direct investing

2008-12-01T22:25:00.000-08:00

Mike Taylor

Australian investors are more likely to go it alone and invest directly in a rebounding share market following a decline of trust in the funds management industry, according to research by financial services agencies Endgame Communications and Investment Trends.

The report identifies a significant trend towards more hands-on investing in the wake of the volatility.

Investment Trends principal Mark Johnston said perhaps the most worrying figure for the industry is the fact that 42 per cent of managed fund investors at least somewhat agree that their trust in fund managers has been damaged and they would prefer to invest directly going forward.

“We believe another significant surge in SMSF [self-managed super fund] establishment is likely to occur over the coming years, which would be consistent with the last bear market.”

Three in 10 investors were conducting their own investment research, stating their own Internet research had the most significant influence on their investment decisions, with daily newspapers being the second most significant influence.

Johnston said just a third of these clients said their planner was currently having the most influence on their investment decisions; many added “their own online research and the media are persuasive factors”.

Meanwhile, family and friends continued to influence 74 per cent of investors during the financial crisis.

The research shows a strong link between investor satisfaction with communication received from their fund manager and the propensity to switch funds, with investors less likely to abandon their provider if they are satisfied with the information they are receiving about their investment.

One in four investors using managed funds intended to switch or were considering switching all or part of their managed funds investments while almost one in five investors were considering switching super providers.

However, despite the deep concerns about the current climate, the vast majority of respondents recognise the importance of taking a long-term view, with 75 per cent of investors holding on to their investments during the crisis.

Johnston said there are also encouraging signs that investors are considering heading back into the market.

“Many are now on the hunt for bargains, with 52 per cent of SMSF investors planning to buy undervalued assets.

“Balancing this, there has been a large increase in the number of investors choosing to wait on the sidelines, with 42 per cent of SMSFs refusing to invest new money until the volatility subsides.”

High-net-worth clients want control

2008-11-09T15:42:00.000-08:00

High-net-worth clients want control

Mike Taylor

Australian high-net-worth clients want to retain a fair degree of control over both their wealth and the manner in which it is invested, according to new research released this week by Brisbane-based firm Goodman Private Wealth Advisers.

The research, undertaken by the Australian Centre for Philanthropy and Non-profit Studies (CPNS) at Queensland University of Technology (QUT), found that while high-net-worth investors were prepared to obtain the advice of specialists such as financial advisers, they nonetheless wanted to remain in control.

The study found that the personal and financial needs of high-net-worth individuals were complex and therefore needed to be met by a range of financial advisers and planners, private bankers, investment advisers, stockbrokers and tax and estate lawyers.

It found that while clients expected advisers’ financial and investment knowledge to be greater than their own, they also sought advisers who were genuinely interested in helping them and expressed a need for education to increase their own understanding and knowledge.

The broad findings of the research were that:

1. high-net-worth individuals like to take responsibility for their financial affairs and like to maintain control, although their level of involvement may drop as they age;

2. they do not want to be told what to do, preferring to obtain expert input and guidance for their own decision making;

3. high-net-worth individuals are looking for advisory services that:

* offer what they don’t know or can’t access quickly or cost-effectively;

* put client needs and circumstances first. Active listening, responsiveness, and taking the time necessary to build a strong relationship are all critical components;

* deliver value for money. They did not mind so much paying for great service, but the real value to them had to be very clear.

4. few were organised in their approach to charitable giving despite making donations and awareness of philanthropic options and benefits was low;

5. there was a need for wealth management advice and services from a family perspective, including intergenerational wealth preservation, ageing and aged care and philanthropy while maintaining family values and connections despite geographic spread; and

6. there was interest in the benefits of philanthropy to wealthy families as well as to the charities that needed funds.

Advisers Shy Away From Platforms

2008-09-07T16:12:00.000-07:00

Advisers shy away from main platforms

Fees, poor support to blame

By Kate Kachor Mon 08 Sep 2008

A large number of financial advisers have stopped using one main platform in favour of many, new industry data has found.

A large proportion of financial planners have admitted to dropping given retail platforms in the last 12 months, new data from researcher Investment Trends has found.

Thirty per cent of advisers have stopped using a platform in the last year, according to the 2008 Planner Technology survey.

"There has been an increase, and fairly dramatic numbers of advisers, saying they have stopped using platform x. So 30 per cent have actually ceased using a platform in the last 12 months," Investment Trends principal Mark Johnston told delegates at the Wraps, Platforms and Masterfunds conference last week.

"There is also a bit of an increase in the number of planners saying they want to change their main platform, which is a pretty dramatic step."

The main reasons advisers cited for leaving platforms are poor service and support, slow turnaround time on transactions and fees, he said.

As well as exiting selected platforms, there has also been a substantial rebound of advisers who admitted to using a number of other platforms alongside one main platform, according to Johnston.

In terms of potential threats, a number of advisers believe financial planning software will start to displace platforms in the near future.

"Advisers can definitely envisage a world where the planning software becomes the dominant tool." Johnston said.

Meanwhile, the number of advisers wanting to change their planning application has not really changed in the last 12 months, the survey found.

SMAs are Not Enough

2008-09-07T16:11:00.000-07:00

Interesting article highlighting the lack of clarity between SMAs / Platforms etc. It would appear that this has begun to be a war of words rather than of service levels to clients.

Limited investment choice

By Vishal Teckchandani
Mon 08 Sep 2008

Using SMAs alone to build client portfolios does not provide enough asset class diversification.

Using only separately managed accounts (SMAs) to build clients' portfolios does not provide enough asset class diversification, according to BT Financial Group (BT) head of product and wrap solutions Craig Lawrenson.

"One aspect that a platform has, that I believe SMAs do not currently have, is investment choice," Lawrenson said at the Wraps, Platforms and Masterfunds conference last week.

"I do not think at this stage, advisers are able to establish a well-diversified client portfolio entirely using SMAs."

While SMAs provide clients with superior tax solutions to managed funds due to the direct ownership of stocks, platforms could be useful for accessing other products including term deposits, alternative assets and structured products.

Lawrenson said platforms should house SMAs, and they can benefit customers together.

"I do not see the SMA... being an alternative to the platform, and being able to manage and adminster those assets," he said.

Lawrenson's comments came after the year-long credit crunch sent global stock markets into bear territory, sparking high demand for term deposits, capital protected instruments and other cash products.

The catalyst for takeovers of SMAs will come when platforms seek to become full-service providers, Lawrenson said.

Historic Announcement of a Mutual Recognition of Securities Regulation Arrangement with the US Securities And Exchange Commission

2008-08-31T20:06:00.001-07:00

WASHINGTON, U.S. – The Rudd Government today signed a world-leading arrangement between Australia and the U.S. that will pave the way for easier access by investors and financial markets to each other’s financial systems.

The mutual recognition arrangement between Australia and the United States was signed today by Senator the Hon Nick Sherry, Minister for Superannuation and Corporate Law, Mr Tony D’Aloisio, Chairman of the Australian Securities and Investments Commission (ASIC), and Mr Christopher Cox, Chairman of the U.S. Securities and Exchange Commission (SEC), at a signing ceremony at the SEC’s head office in Washington D.C.

One of the most critical ways in which the Government can act to build Australia as a financial services hub is to enable greater access to overseas markets.

Today’s event follows an agreement by Prime Minister, the Hon Kevin Rudd and Chairman Cox in March to begin negotiations on a mutual recognition arrangement.

The arrangement will provide greater access to U.S. markets for Australian investors, while maintaining strong investor protection and ensuring market integrity. It will also make Australian markets more attractive and accessible to investment from the United States.

This will mean that retail investors in Australia will be able to access the U.S. market directly through Australian brokers and enjoy Australian regulatory protection.

The arrangement will also help reduce red tape and compliance costs as brokers and markets will primarily only have to comply with one substantive set of regulations – namely in their home jurisdiction.

Australia is the first jurisdiction with which the U.S. has sought such an arrangement. Australia was selected by the U.S. on the basis of the quality of our regulation and the effectiveness of both ASIC-SEC and Australian Treasury-U.S. Treasury relations.

The SEC and ASIC have entered into new, strengthened enforcement and supervision arrangements to enable them to better cooperate and coordinate efforts to secure investor protection and market integrity under the Arrangement.

At the signing ceremony, Minister Sherry thanked Chairman Cox on behalf of the Australian Government for the personal leadership he has shown on this deal. Minster Sherry was joined at the signing by the CEO of the Australian Investment and Financial Services Association (IFSA), Mr Richard Gilbert.

Today’s agreement is another example of the Rudd Government’s commitment to developing Australia as financial services hub.

This is Australia’s third mutual recognition arrangement. The first was with New Zealand and covers securities offer documents. The second arrangement was with Hong Kong and covers the sale of retail funds to investors in each other’s market.

These arrangements build upon the Government’s success in gaining approval under the Chinese Qualified Domestic Institutional Investor Scheme and domestic initiatives such as cutting withholding tax rates for established real estate investment trusts to a final rate of 7.5 per cent by 2010-11 from 30 per cent.

Quote from Graham Bradley, Chairman of HSBC Bank Australia

2008-07-17T15:58:00.001-07:00

"It seems to me there is a need for the financial services industry to ensure their interests are realigned with investors. A priority is to ensure genuine transparency, not boilerplate disclosure, particularly about risk and risk management," said Graham Bradley, chairman of HSBC Bank Australia.

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Are More Practices Going Independent

The regulators fiddled while we got burnt

Institutional advisers are increasingly flocking to independently-owned dealer groups, according to RIAA.

Downturn to spur resurgence in direct investing

High-net-worth clients want control

Advisers Shy Away From Platforms

Advisers shy away from main platforms

Fees, poor support to blame

By Kate Kachor Mon 08 Sep 2008

SMAs are Not Enough

Limited investment choice

By Vishal TeckchandaniMon 08 Sep 2008

Historic Announcement of a Mutual Recognition of Securities Regulation Arrangement with the US Securities And Exchange Commission

Quote from Graham Bradley, Chairman of HSBC Bank Australia

By Vishal Teckchandani
Mon 08 Sep 2008