Money Management | Vol. 35 No 8 | May 27, 2021

MAGAZINE OF CHOICE FOR AUSTRALIA’S WEALTH INDUSTRY

www.moneymanagement.com.au

Vol. 35 No 8 | May 27, 2021

12

INFOCUS

Budget super changes

26

FIXED INCOME

Greenwashing in ESG bonds

FINANCIAL ADVICE

Advising across generations

Federal Budget points to fewer staff within ASIC

Hyperion AM crowned Fund Manager of the Year 2021

BY MIKE TAYLOR

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BY JASSMYN GOH

IT has taken eight years for Hyperion Asset Management to reclaim its crown as Fund Manager of the Year.

The fund manager was given the highest award at Money Management's 2021 Fund Manager of the Year awards after winning two category awards and receiving a ‘highly commended’ for another.

This year, Hyperion won the Australian Large Cap Equities and the Australian Small/Mid Cap Equities categories while it received a ‘highly commended’ for the Global Equities category.

Speaking to Money Management, the fund’s chief investment officer and managing director, Mark Arnold, said the team was very excited and that it was a great honour.

“We are a small investment team of 13 and our values are that we are investment driven, not market driven. Our decision making is evidence based, we think long-term, and are alpha focused,” Arnold said.

Its lead portfolio manager and deputy chief investment officer, Jason Orthman, said it was nice to be recognised after working hard day-to-day.

He said moving to remote working during COVID-19 had been quite easy and that productivity

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28

FUND MANAGER

OF THE YEAR 2021 MARK ARNOLD

increased as they had a group of driven individuals.

Orthman said their largest alpha capture points or outperformance tended to be during a crisis so while the pandemic caused a “real flux point in markets”, all three nominated funds performed very strongly.

The portfolios, he said, were a collection of modern businesses that had a relevant product or service to the next generation.

“Many of the market leaders have become really stale, are old world, and dominate the benchmarks they haven’t really innovated or invested in their businesses heavily as a general assumption,” Orthman said.

“There’s a whole range of businesses that started with a blank piece of paper, often that are

AUSTRALIA’S FIRST INDEPENDENT AND WHOLE OF MARKET AWARDS

founder-led and tend to be more modern and relevant in this digital smartphone internet-enabled world. The next generation, whether it’s the millennials or Generation Z, are clearly digital natives and behave completely differently to baby boomers.

“Many of these large firms have struggled to transition their business model and their products to be relevant to the next group of users. We really look for firms that are made for the times with products that are really disruptive.”

Arnold said the funds were more active last year as there were more opportunities to buy high-quality business at lower prices.

“We’ve added quite a few Continued on page 3

Full coverage on page 14

THE Australian Securities and Investments Commission (ASIC) has emerged as one of the few Government agencies to take a resourcing cut out of the Federal Budget.

At the same time as financial advisers continue to complain about the impact of the increased ASIC funding levy, the Budget documents reveal that while the Australian Prudential Regulation Authority (APRA) is budgeted to have around 44 more staff next financial year, ASIC is budgeted to have around 218 fewer staff.

Continued on page 3

Demand for financial advice jumps from younger clients

BY LAURA DEW

FINANCIAL advisory group deVere has seen a 54% rise in enquiries from investors aged under-30.

The 54% year-on-year jump was attributed to the risks created by the pandemic as many considered their health and future financial security.

The firm said this ‘debunked’ the myth that younger people were disinterested in their finances.

Nigel Green, deVere chief executive, said: “[The pandemic] has brought into all-too-real focus how things Continued on page 3

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News

Wilson continues parliamentary probing of IFM

BY MIKE TAYLOR

INDUSTRY funds-owned fund manager, IFM is continuing to be pressed about its operations by the chair of the House of Representatives Standing Committee on Economics, Tim Wilson, despite pointing out that it is the only fund manager to be called before the committee.

IFM’s global head of external relations is the former chief executive of Industry Super Australia, David Whiteley, who in April noted that the company was the only fund manager to be called before the committee when most other organisations called before it were superannuation funds.

However, that did not stop Wilson writing to IFM Investors less than a fortnight later to ask: “Are any remuneration practices – salaries, bonuses or fees – covered by a ‘deed’ or ‘special deed’ or equivalent instrument for employees at IFM Investors?”

Wilson and the committee received IFM

Investor’s reply late last week stating: “Remuneration practices – salaries, bonuses or fees – are not covered by deeds, special deeds or equivalent instruments for employees at IFM Investors”.

“However, as is normal commercial practice for employers and employees when a separation of employment occurs, from timeto-time IFM enters into arrangements covered by a deed,” the fund manager’s response said.

In his April response, Whiteley stated: “IFM has co-operated with the committee since 2019, appearing at its request on two occasions, and responding to over 100 Questions on Notice and many more during hearings.

“To provide commercially sensitive information to the committee, which its global peers and competitors are not required to do, would place IFM at a competitive disadvantage and could risk the investment returns to members. Further, in some cases, disclosure would constitute a breach of a commercial contract.”

Budget points to fewer staff within ASIC Continued from page 1 At the same time, the Financial Adviser Standards and Ethics Authority (FASEA) whose functions are being devolved between Treasury and ASIC is being budgeted to continue having 10 staff on board.

The Department of

Treasury itself is to get an increase of 190 staff.

The Budget documents also confirmed that ASIC’s corporate registry would be transferred to the Australian Taxation Office (ATO) which would account for at least some of the ASIC personnel loss mentioned in the Budget papers.

Hyperion AM crowned Fund Manager of the Year 2021 Continued from page 1 names to the global fund and added names to the Australian large cap and small cap funds as well,” he said.

“We are long-term business owners so when we buy a stock we’re hopeful the economics will hold for decades and we don’t like selling stocks necessarily.

“We’ll hold it as long as the economics are there and growing at double digit rates and the compounding effects is what we think is key to superior wealth accumulation.”

Both Arnold and Orthman said they were positive on the outlook for the next 12 months as their businesses would be able to sustain high levels of growth over a long period of time.

“We have modern businesses with strong value propositions and we believe our businesses will grow at high rates,” Orthman said.

Full coverage on page 14

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Demand for financial advice jumps from younger clients Continued from page 1 can quickly change, how important it is to have a back-up/emergency plan, and value more than ever what really matters to them. For most, this includes ensuring that they can enjoy the opportunities and lifestyle that they desire.

“Perhaps more than ever, the under 30s are showing a desire to be financially resilient and put their long-term financial goals at the heart of their decision-making process,” he said.

It also created new areas to explore for financial advisers as younger clients had different demands to those who were older.

“Perhaps unsurprisingly, more than other generations, the under 30s – who are ‘digital natives’ having grown up under the ubiquitous influence of the internet and other technologies – demand digital solutions such as fintech apps alongside their personalised financial advice,” Green said.

“Our advisers say that, typically, younger people want to use their savings and their investments not only to improve their own lifestyles but for the betterment of their communities and the environments. Having more control over their financial affairs is a critical part of their wider activism on issues such as human rights and climate change.”

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4 | Money Management May 27, 2021

Editorial

mike.taylor@moneymanagement.com.au

SUCCESSIVE GOVTS, NOT ADVISERS, TO BLAME FOR ADVICE POLICY SHAMBLES

FE Money Management Pty Ltd Level 10 4 Martin Place, Sydney, 2000

Thousands of low-balance, high maintenance clients are being orphaned in the wash-up of what is emerging as significant failure by successive governments to understand the dynamics of the financial planning industry.

Managing Editor/Editorial Director: Mike Taylor Tel: 0438 789 214 mike.taylor@moneymanagement.com.au Associate Editor - Research: Oksana Patron Tel: 0439 137 814

THERE was a time, more than a decade ago, when Money Management’s Top Financial Planning Groups research would reveal groups such as Professional Investment Services (PIS) as having the most financial advisers, albeit that the average level of wealth held by clients was comparatively modest.

The reason that PIS advisers, and indeed AMP advisers, could service large numbers of clients of comparatively modest means was not related to their generosity. It was related to the existence of commission-based remuneration structures and the reality that volume rebates were being channelled to financial planning dealer groups by a variety of product manufacturers.

Bluntly, the delivery of affordable advice was being delivered as a result of subsidisation by product manufacturers.

All that changed in the face of the anti-commission campaign initiated in large part by industry superannuation funds which gave rise to the Future of Financial Advice (FoFA) legislation and the raft of regulatory initiatives which have attached to that legislation.

Fast forward to 2021 and the reality that the dealer group that

was PIS is now under the umbrella of the publicly-listed Centrepoint Alliance, that AMP is itself dropping sub-scale advice firms, that the Minister for Superannuation, Financial Services and the Digital Economy, Senator Jane Hume, is talking up the need for making advice more affordable and the Australian Securities and Investments Commission (ASIC) is undertaking an Affordable Advice Review.

Also, in 2021, is the harsh reality that financial advisers have been openly culling their client lists of those who they assess as being low-balance and high maintenance with the result that hundreds if not thousands of those clients are now finding themselves “orphaned”.

Little wonder, then, that as part of its Affordable Advice Review process ASIC has appeared drawn to advice delivered under the auspices of superannuation funds or via algorithmic/robo advice.

So, the end game may well be one in which instead of affordable advice to the masses being delivered as a result of subsidies provided by product manufacturers it is, instead, the result of subsidies provided by superannuation funds with algorithmic/robo advice providing an entry point.

So, the question arises. Are

low-balance clients going to be any better off under the evolving new regime or were they actually better-served in the supposedly conflicted old regime of product subsidies and commissions?

No one is suggesting that the provision of financial advice should go back to pre-FoFA days, but it is clear that a succession of policymakers in Canberra have failed to understand the implications of their legislative actions and to identify a sustainable end-game.

In the meantime, and despite successive surveys confirming the value of professional financial advice, thousands of clients are finding themselves orphaned and with few affordable options at a time when the investment environment has rarely been more complex.

In all the circumstances it is arguable that post-FoFA and in the wake of the Royal Commission, it is not financial advisers who have failed their clients, it has been a succession of Governments, policy advisers and inappropriately politically-ambitious senior executives within the financial services regulators. Their legacy is there for all to see but they do not want to own it.

Mike Taylor Managing Editor

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12/05/2021 1:32:52 PM

May 27, 2021 Money Management | 5

News

CBA increases Count Financial remediation indemnity by $32 million

BY MIKE TAYLOR

THE Commonwealth Bank’s arrangements around the sale of Count Financial to CountPlus have become more expensive, with the bank lifting its remediation provisioning by $32 million.

Both the bank and CountPlus announced to the Australian Securities Exchange (ASX) that the remediation provision had been revised from $220 million up to $252 million, subject to an audit review.

However, they said this was within the $300 million limit of the indemnity provided by the Commonwealth Bank to CountPlus for “certain post and pre completion conduct of Count

Financial arising from when Count Financial was owned by the Commonwealth Bank”.

At the time of the acquisition of Count Financial by CountPlus in October, 2019, the Commonwealth Bank provided an indemnity to cover remediation of certain conduct up to a maximum of $200 million.

In July, last year, CountPlus reported that it had entered into an agreement with the Commonwealth Bank to increase the limit of the indemnity to $300 million.

It said the potential for further increases to the indemnity limit remained subject to certain triggers relating to the failure rate for fee for no service remediation and the quantum of certain inappropriate advice remediation.

Key management changes at AMP Wealth AMP Limited has announced a new leadership team and operating model covering its wealth management business and AMP Bank.

AMP Australia chief executive, Scott Hartley, said the move was designed to increase performance and add greater efficiency via a flatter structure.

The move sees former MLC executive, Matt Lawler become managing director, advice, Anna Shelley become chief investment officer replacing Debbie Alliston who is retiring, Jason Sommer will be director transformations and investments, while Ilaine Anderson and Sean O’Malley, who have both been acting in the roles of super, retirement and platforms, and AMP Bank respectively, being permanently appointed to their roles.

Also on the leadership team will be Edwina Maloney as director of platforms covering wrap and self-managed superannaution fund (SMSF) platforms and James Kent as chief technology officer.

Hartley said the extended leadership team also consisted of client services led by Steve Vaid and adviser distribution which would be led by Nicole Mahan.

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FASEA March exam sees 69% pass rate

BY CHRIS DASTOOR

THE March sitting of the Financial Adviser Standards and Ethics Authority (FASEA) exam has a seen a 69% pass rate, up 2% from the January/February exam which was the lowest pass rate.

Over 13,500 advisers had passed the exam, which now represented 655 of advisers on the Australian Securities and Investment Commission’s (ASIC’s) Financial Adviser Register (FAR).

Overall, 89% of advisers who sat the exam had passed, with 1,182 unsuccessful candidates who had re-sat the exam having a 65% pass rate.

The March exam had 2,234 advisers sitting, compared with an average of 1,399 across all exams.

Stephen Glenfield, FASEA chief executive said over 15,200 advisers had sat the exam with nine-in-10 demonstrating they had the skills to apply their knowledge of advice construction, ethics and legal requirements to the practical scenarios tested in the exam.

“In recognition of their achievement, passing candidates who give consent, will have their names added to the successful candidates list on the FASEA website,” Glenfield said.

“Candidates who were unsuccessful in this exam will receive additional individual feedback to highlight the curriculum areas where they have underperformed.

“They will also receive an invitation to a FASEA-led webinar to help them understand their results and provide guidance on how to prepare for their next sitting.”

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6 | Money Management May 27, 2021

News

Federal Treasury, not ASIC will ultimately determine ‘general advice’ outcome

BY MIKE TAYLOR

THE Australian Securities and Investments Commission (ASIC) will not be the final arbiter of the status of ‘general advice’ with the ultimate decision residing with the Federal Treasury in a process which will be considered in the broader context of financial advice, including the status of the Life Insurance Framework (LIF).

Despite ASIC having provoked the ire of the Financial Planning Association (FPA) by using consumer research to conclude it did not believe changing the description of “general” advice was warranted, the decision ultimately resides with the Treasury and will not be known until at least the end of next year.

Just as deciding the future of the LIF was stripped from ASIC and directed to the Treasury, the future status of general advice will also be determined by the Government-initiated Quality of Advice Review to be conducted under the auspices of Treasury next year, notwithstanding ASIC’s current affordable advice review.

What is more, ASIC has acknowledged its limited role in the general advice debate, noting that while it was adopting a no-action position on ‘general’ advice, the findings of its consumer research had been sent off to Treasury “to assist with the broad view”.

Treasury is expected to call for industry submissions around the Quality of Advice Review towards the end of this year which will give the major planning groups the opportunity

to put their arguments some of which have already been canvassed in the Financial Services Council’s (FSC’s) recently-released advice green paper which argues that the recent High Court Westpac Securities v ASIC ‘general advice decision’ demonstrated that “the traditional model of general advice is unworkable in almost all circumstances”.

As well, Association of Financial Advisers (AFA) acting chief executive, Phil Anderson

pointed to his organisation’s position that the middle ground of “general advice” sitting between product information and personal advice should be removed altogether thus eliminating any scope for confusion.

He said the existence of “general advice” left too much room for manipulation.

The FPA’s dissatisfaction with the no-change position taken by ASIC is that it leaves the word “advice” in place, thus continuing to confuse consumers.

“The Quality of Advice review won’t be completed until at least 2022 and ASIC’s decision to ignore the problem with ‘general advice’ until then condemns consumers to another year of confusion and the risk of harm,” the FPA chief executive, Dante De Gori said.

The bottom line from an industry standpoint, is that while the FSC, FPA and AFA are each coming at the status of ‘general advice’ from different standpoints, they all agree that it should cease to exist in its current form.

‘Wholesale investor’ term outdated: Corporate regulator

BY LAURA DEW

THE term ‘wholesale investor’ needs to be updated, according to the Australian Securities and Investments Commission (ASIC), as wealthy investors who haven’t sought advice are being aggressively targeted by some firms.

In a webcast with the Financial Services Council, Rhys Bollen, senior executive leader, investment managers at ASIC, said the Mayfair 101 case was a good example of where a product was not ‘true to label’ and targeted the wrong audience.

The firm’s advertising was found by the Federal Court to have been deceptive and misleading and inaccurately likened the

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products to term deposits. The firm was targeting wholesale investors, classed as those who were willing to invest $500,000 in a fund but who may not seek advice.

Bollen said: “The term wholesale needs to be updated, it was created in the early 90s and then included in the Corporations Act in 2001. It is a matter for the Government to decide whether it needs to be updated but there has been a lot of change since it was introduced and it is time for it to be reconsidered.

“Mayfair was a clear case of [a firm] targeting unsophisticated, vulnerable, wholesale consumers who were seeking a regular income and higher returns. It had a very aggressive online presence via

metadata, sponsored links and Google searches in an attempt to divert investors who were interested in term deposits to invest in Mayfair products.

“We have seen an increase in firms targeting those investors who are avoiding advice.”

He said there were “at least two other firms” being investigated by ASIC of true to label marketing of their products in 2020/21 which were as yet unresolved.

In order to be true to label, ASIC would be looking at whether a fund included the risk/return focus, balanced and meaningful explanation of risk, how returns were calculated and disclosed and appropriate use of benchmarks.

13/05/2021 9:44:34 AM

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News

ESG funds do not add outperformance: Scientific Beta

BY LAURA DEW

ENVIRONMENTAL, social and governance (ESG) investing does not add outperformance, according to a research paper by Scientific Beta, as firms are failing to consider estimation risk.

In its paper ‘Honey, I Shrunk the ESG Alpha: Risk-Adjusting ESG Portfolio Returns’, the organisation said investors who were looking for added value through ESG outperformance were “looking in the wrong place”.

Contrary to many findings over the last few years, Scientific Beta said while many ESG strategies did have positive returns, when these returns were adjusted for risk, the alpha shrank to zero. Instead, the return was captured by sector biases and exposures to equity style factors.

It also claimed fund promoters were taking advantage of increased investor attention in

ESG in recent years. The estimated alpha during period of ESG inattention was four times lower than during high interest periods, indicating recent funds were overestimating ESG return.

Dr Noel Amenc, chief executive of Scientific Beta, said: “Omitting necessary risk adjustments and selecting a recent period with upward attention shifts enables outperformance to be documented where in reality there is none.

“Investors should ask how ESG strategies can help them to achieve objectives other than alpha such as aligning investments with their values and norms, making a positive social impact and reducing climate and litigation risk.

“By relying on biased research results, which as such as have no value, the promoters of alpha in ESG investing are taking the great risk of disappointing investors on this

AZ NGA acquires two Qld advice firms

BY JASSMYN GOH

AZIMUT-BACKED AZ Next Generation Advisory (AZ NGA) has acquired two Queensland financial planning firms – Blue Harbour Financial Partners (formerly Bridges Brisbane Bayside) and Henderson Matusch Group.

AZ NGA chief executive, Paul Barrett, said the acquisition broadened the capability inside AZ NGA’s network of small-to-medium accounting and financial advisory businesses and expanded its capacity for long-term growth.

Blue Harbour’s chief financial officer and partner, Blake Roberts, said: “We want to develop the breadth and depth of our client value proposition, and we are excited about utilising AZ NGA’s business coaching, mentoring and small to medium enterprise (SME) resources to take us to the next level”.

Henderson Matusch Group’s chief executive, Paul Fog, said the increasing level of complexity in financial services made it advantageous for advice firms to leverage the scale, insights, and resources of an experienced partner.

“Running a successful business today is vastly different to a decade ago

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supposed outperformance and diverting them in time from an investment theme that is important for sustainable economic development.”

COVID-19 vaccine will not invalidate life insurance

BY CHRIS DASTOOR

or even five years ago,” he said.

“AZ NGA is the most experienced player in the market when it comes to mergers and acquisitions, succession solutions and business growth. It has the vision, know-how and capitalbacking to invest in strategic advice for the long-term and our partnership ensures that Henderson Matusch will continue to grow and meet our obligations to clients, staff and other stakeholders.”

To date, AZ NGA had completed almost 80 acquisitions.

THE Financial Services Council (FSC) is reassuring Australians that taking the COVID-19 vaccine will not invalidate their life insurance policies despite rumours suggesting otherwise.

Sally Loane, FSC chief executive, said the false rumours which had been circulating on social media, incorrectly suggested the COVID-19 vaccine was an “experimental medical treatment” and therefore having the vaccine was a “self-inflicted injury” which could void life insurance policies.

“To be clear – the COVID-19 vaccine is not experimental treatment. Receiving approved treatment from a qualified medical professional at an approved medical facility is not a self-inflicted injury,” Loane said.

“One of the main reasons why people hold life insurance policies is to provide peace of mind for themselves and their families.”

Loane said the FSC wanted to reassure Australians that when they were vaccinated, their life insurance would be there for them, completely unaffected.

“This scare mongering is wrong, it is entirely inappropriate and it needs to stop immediately,” Loane said.

“This is a good time for all Australians to take five minutes out of their days to check what life insurance cover you hold.

“Don’t wait until it is time to claim, get in touch with your superannuation fund, life insurer or financial adviser and be prepared.”

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May 27, 2021 Money Management | 9

News

Treasury urged to investigate AFCA ‘coaching’

BY MIKE TAYLOR

AMID continuing complaints from advisers that they believe they have witnessed the Australian Financial Complaints Authority (AFCA) “coaching” complainants, the Federal Treasury is under pressure to address the issue.

The concerns about AFCA coaching have been raised in the context of Treasury’s current review of AFCA alongside equal concerns about the manner in which the authority has also been perceived as inappropriately handling complaints from wholesale clients.

The concerns around AFCA coaching became public last year when the authority was censured by the NSW Supreme Court – something which then led to a change in the AFCA rules to address the issue.

Notwithstanding that rule change, the Financial Planning Association (FPA) has pointed out to Treasury that members have been raising complaints about the coaching by AFCA.

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In its submission to Treasury as part of the AFCA review, the FPA said that its members had raised concerns about AFCA “coaching complainants through the EDR process”.

“This is not something we can provide case study evidence on. However, the FPA believe the concerns raised warrant Treasury investigating this issue further,” it said.

The FPA also suggested that “there is a need to assess AFCA’s internal systems and processes to ensure the scheme is performing in a manner consistent with its obligation to be independent and impartial to all parties”.

A dealer group director also told Money Management that he had first-hand experience of the terms of a complaint becoming progressively polished as the complainant had increasingly close contact with AFCA. The concerns about complainant coaching come at the same time as both the Stockbrokers and Financial Advisers Association (SFAA) and the Association of Financial Advisers (AFA) raised

concerns about AFCA’s willingness to deal with complaints from wholesale clients in seeming contravention of the intent of the legislation.

The SFAA submission told Treasury that different provisions in the Corporations Act apply to clients depending on whether they are retail or wholesale.

“For example, wholesale clients are not subject to the statement of advice requirements that retail clients are. Financial advisers who advise wholesale clients are not subject to the FASEA code of ethics or education requirements. This is because the Parliament has decided that wholesale clients don’t require the consumer protections that are afforded retail clients,” it said.

“It is not uncommon, however, for a client to suddenly ‘transform’ from a wholesale to a retail client when an investment does not perform as well as was hoped, and for them to lodge a complaint with AFCA to reimburse them for the market risk they took.”

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10 | Money Management May 27, 2021

News

Westpac still considering sale of platforms and super business

BY MIKE TAYLOR

WESTPAC has used its first-half results announcement to confirm that both its life insurance business and its major platforms business remain under consideration for sale.

In an investor briefing, the big four banking group confirmed the expected completion dates for the sale of its vendor finance, general insurance and lender mortgage insurance businesses and confirmed that its life insurance, auto finance and superannuation, platforms and investments businesses were “under consideration”.

The businesses fall within the bank’s so-called specialist business division, with the briefing pack nominating the BT, BT Panorama, Advance Asset

Management, and Asgard brands.

The vendor finance, general insurance and Westpac Pacific

sale transactions are all slated to complete in the second half of this year written with a different insurer.

Adviser charged with 12 counts of dishonest conduct and three counts of false certification

BY JASSMYN GOH

FINANCIAL adviser Rahul Goel has been charged with 12 counts of dishonest conduct and three counts of false certification of documents by the Perth Magistrates Court, in addition to four counts of dishonest conduct laid by the corporate regulator.

The Australian Securities and Investments Commission (ASIC) said the adviser of Success in Western Australia contravened the Corporations Act by engaging in dishonest conduct while carrying on a financial services business through his company AR Wealth and Finance.

If Goel was convicted: • For each count of dishonest conduct, he would receive a maximum penalty of either 10 or 15 years imprisonment; and • For each count of false certification of documents, he would receive a maximum penalty of seven years imprisonment.

The matter had been adjourned to 18 June, 2021.

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Including ‘financial’ in ‘best interests duty’ an overreach THE proposal to insert the word ‘financial’ into ‘best interests duty’ as part of the Your Future, Your Super bill is Parliamentary overreach and will have upfront negative financial implications for funds and beneficiaries, according to Market Forces.

In its submission to the Senate Economics Legislation Committee, the advocacy group said it strongly recommended to reject the proposal. It said including the word ‘financial’ was unnecessary as the existing duty required no further legislative clarification or amendment.

It said amending the duty: • Was unnecessary and amounts to parliamentary overreach; • Would have upfront negative financial implications for funds and beneficiaries; • Offended existing trust law principles developed cautiously over time by the judiciary; • Clashed with existing legislative requirements; and • Was in direct contrast to the final recommendations of the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry (Royal Commission).

“THE new duty will create legal uncertainty and is not consistent with limiting the financial burden on superannuation fund members. At the outset trustees will be obliged to incur costs for advice and compliance. For example, a suite of internal processes – those based upon the existing duty and case law that interprets it – are likely to require amendment,” the submission said.

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May 27, 2021 Money Management | 11

News

ACCC would investigate advice within superannuation, if only someone asked

BY MIKE TAYLOR

THE Australian Competition and Consumer Commission (ACCC) has said it would investigate superannuation funds who refuse to allow members to use their funds to pay for third-party financial advisers, but no one has actually bothered to complain.

Facing questions within the House of Representatives Standing Committee on Economics, the ACCC said it stood ready to investigate the issue if the matter of how superannuation funds treated external advisers was ever raised.

The competition regulator was responding to a question on notice from NSW Liberal backbencher, Jason Falinski, who PPS_031_Average Lapsehad Rate previously ad_220x155mm_AW.pdf noted that the committee provided evidence to the ACCC of

superannuation funds limiting a customer’s ability to use their superannuation funds to pay for financial advice from a third-party adviser and asking what, so far, had been done about it.

The ACCC said that, while it had a number of investigations on foot with respect to anticompetitive conduct in financial services, none related to financial advice within superannuation and using member funds to pay external advisers.

“The ACCC has not received any consumer complaints in relation to the superannuation fund issue previously presented,” it said.

“The ACCC has a number of active investigations into anti-competitive conduct in the financial services sector. The ACCC’s 1 06/04/2021 09:32confidential,” the regulator investigations are said.

“The ACCC continues to consider competition issues across the financial services sector, including in the superannuation industry, through its engagement with other financial regulators and as part of its advocacy role.”

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11/05/2021 5:20:39 PM

12 | Money Management May 27, 2021

InFocus

CLEARING THE DECKS OF SUPERANNUATION LOOSE-ENDS The Government has used the Federal Budget to tidy up some longstanding superannuation policy loose-ends with some usually noisy backbenchers remaining comparatively silent, Mike Taylor writes.

IF ANYONE DOUBTED the Government wants to keep its options open with respect to the timing of the next Federal Election then they need only have looked at the Federal Budget, the treatment of superannuation and the relative silence of otherwise restive backbenchers.

Nothing announced on superannuation in the Budget was new. The various superannuation industry representative organisations had been lobbying the Government for years to fix things such as abolishing the $450 a month income threshold, removing the superannuation contribution work test for those aged between 67 and 74 and allowing legacy product conversions.

There were, of course, tweaks to more recent Government superannuation policy initiatives such as allowing a higher withdrawal limit for the First Home Super Saver Scheme and lowering the age threshold for the super downsizer scheme but they were refinements to things which needed to be made to work more effectively.

Then, too, there was no announcement of a change to the timetable for increasing the superannuation guarantee (SG) to 12% meaning that in all likelihood the next 0.5% rise to 10% will go ahead as expected.

The point if that none of these measures will have a major impact on the Budget itself with most of them coming at negligible cost with the cost of the First Home Super Saver Scheme have been estimated to cost just $25 million when it ultimately comes into effect from 1 July, next year, while the abolition of the work test for those aged between 67

08MM200521_01-12.indd 12

and 74 will cost just $33.7 million.

And, indeed, measures such as legacy product conversions and the removal of the $450 a month income threshold are likely to have some positive benefits in circumstances where they have proved administratively costly over a number of years.

Organisations such as the Financial Services Council (FSC) had been lobbying successive Governments for years on the question of legacy products, not just in the superannuation sphere but with respect to life insurance and other financial services offerings.

Under the proposed new arrangements a two-year period will be provided for conversion of market-linked, life-expectancy and lifetime pension and annuity products and, importantly, it will not be compulsory for individuals to take part.

Retirees who choose to will be able completely exit these products by fully commuting the product and transferring the underlying capital, including any

reserves, back into a superannuation fund account in the accumulation phase. From there they can decide to commence a new retirement product, take a lump sum benefit, or retain the funds in that account.

Any commuted reserves will not be counted towards an individual’s concessional contribution cap and will not trigger excess contributions.

Instead, they will be taxed as an assessable contribution of the fund (with a 15% tax rate), recognising the prior concessional tax treatment received when the reserve was accumulated and held to pay a pension.

Equally, just about every superannuation industry lobby group including the Association of Superannuation Funds of Australia (ASFA) and the Australian Institute of Superannuation Trustees (AIST) had been lobbying for years for the removal of the $450 a month income threshold.

For many of those who had been tracking Coalition rhetoric

around superannuation over the past 18 months the most surprising thing from the Budget might have been the relative silence of those who had been strong advocates of COVID-19 hardship early release superannuation and who have been advocating for the use of superannuation for first home deposits.

Those advocates, including the chairman of the House of Representatives Standing Committee on Economics, Tim Wilson, and former FSC policy executive and now NSW Liberal Senator Andrew Bragg, remained silent as the Treasurer, Josh Frydenberg, and the Prime Minister, Scott Morrison, got on with the job of selling the Budget.

How long the advocates of using super for home deposits remain silent seems likely to depend on the Government’s electoral timetable but, for now, the Government has succeeded in tidying the superannuation loose ends and in doing so has largely cleared the decks to go to the polls at a time of its choosing.

13/05/2021 11:47:48 AM

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12/05/2021 10:13:51 AM

14 | Money Management May 27, 2021

FUND MANAGER

OF THE YEAR 2021

AUSTRALIA’S FIRST INDEPENDENT AND WHOLE OF MARKET AWARDS

CONTENTS 1 FUND MANAGER OF THE YEAR 15 AUSTRALIAN LARGE CAP EQUITIES

18 AUSTRALIAN PROPERTY SECURITIES

METHODOLOGY 16 AUSTRALIAN SMALL/MID CAP EQUITIES GLOBAL EQUITIES 17 GLOBAL EMERGING MARKETS EQUITIES INFRASTRUCTURE SECURITIES – CURRENCY HEDGED

19 AUSTRALIAN FIXED INTEREST

GLOBAL PROPERTY SECURITIES GLOBAL FIXED INCOME 20 MULTI-ASSET GROWTH

LONG/SHORT EQUITIES 21 EMERGING FUND MANAGER

SMA: AUSTRALIAN EQUITY 22 RESPONSIBLE INVESTMENTS ETF PROVIDER OF THE YEAR

2021 PARTNERS GOLD SPONSOR

DATA PARTNER

08MM200521_14-29.indd 14

ESG PARTNER

SILVER SPONSOR

AWARDS PARTNERS

13/05/2021 10:35:12 AM

May 27, 2021 Money Management | 15

Fund Manager of the Year 2021

FOCUS ON HIGHQUALITY GROWTH

BY OKSANA PATRON

A STRONG FOCUS on highquality growth businesses in undervalued market segments has helped Hyperion Australian Growth Companies to claim victory in the Australian Large Cap Equities category at this year’s Money Management’s Fund Manager of the Year awards.

Hyperion’s lead portfolio manager, chief investment officer and managing director, Mark Arnold, and lead portfolio manager and deputy chief investment officer, Jason Orthman, said the fund’s portfolio was ‘really well placed’ getting through COVID-19, helped by the strong view to remain focused on finding modern market leaders with structural tailwinds.

“We believe as we come out

AUSTRALIAN LARGE CAP EQUITIES WINNER: HYPERION AUSTRALIAN GROWTH COMPANIES

of this [COVID-19] some of those software-placed businesses and healthcare-related businesses will do particularly well,” they said.

“Our portfolios are really well placed after we get through COVID-19. We think we are returning to a low growth competitive disruptive world and we believe modern businesses with strong value propositions will grow a lot higher rates.

“As the vaccine rollout continues and we come out of COVID-19 and go back to a normal grind we are really optimistic how the portfolios are placed particularly over the coming years.”

The fund also added Afterpay to its portfolio last year and tapped into the buy now, pay later (BNPL) category which overall performed very well, particularly in the second half of 2020.

FINALISTS: • BENNELONG AUSTRALIAN EQUITIES • BENNELONG CONCENTRATED AUSTRALIAN EQUITIES • FIRST SENTIER WHOLESALE CONCENTRATED AUSTRALIAN SHARE

“If you look at the Australian growth companies – we think businesses like CSL and Cochlear will continue to lead in their markets and we think they will do really well as the world normalises,” the managers said.

“Those modern software and healthcare businesses are going to do well for structural fundamental reasons as the world gets through COVID-19.”

Arnold noted that highquality, structural growth businesses tended to outperform over the long term

MARK ARNOLD

and his fund would continue to focus on the businesses that were undervalued by the market in broader terms.

“The market focuses on shortterm and they don’t really look out longer-term and identify the businesses that will give doubledigit returns and consequently those sorts of businesses tend to be undervalued. We try to identify those businesses and take advantage of that,” he said.

A WHOLE OF MARKET APPROACH FOR THE 2021 FUND MANAGER OF THE YEAR THIS year’s Money Management Fund Manager of the Year awards again takes a whole of market approach by drawing individual expertise and knowledge of research and ratings houses involved, and with the outcome moderated by an independent third party.

All funds available for sale in Australia are eligible for the awards.

The judging methodology consists of three main stages and combines FE fundinfo’s quantitative fund data with the expertise of our research partners

08MM200521_14-29.indd 15

Lonsec, Mercer, and SQM Research.

The first stage is a quantitative screening for the top performing 15 funds for each category over the past three years, and then a one-year performance will be used to find the top seven shortlisted funds.

The second stage is a qualitative evaluation in two parts: judging panel to rate the shortlisted funds with their in-house methodology, and a qualitative data collection by Money Management.

The last stage has the judging panel sending in their results to be rated

by Money Management through a scoring system to determine the winner for each category.

The overall Fund Manager of the Year award takes account of the results across all categories with the winner polling consistently well or winning multiple categories.

Where any of the research and ratings houses or industry partners have their own investment products in market, they will be excluded from judging in the segment within which they are seen to be compromised.

RECENT FUND MANAGERS OF THE YEAR 2020:

BENNELONG FUNDS MANAGEMENT

2019:

ALLIANCE BERNSTEIN

2018:

LEGG MASON ASSET MANAGEMENT AUSTRALIA

2017:

LEGG MASON ASSET MANAGEMENT AUSTRALIA

2016:

MACQUARIE INVESTMENT MANAGEMENT

2015:

LEGG MASON ASSET MANAGEMENT AUSTRALIA

2014:

LAZARD ASSET MANAGEMENT PACIFIC CO

2013:

HYPERION ASSET MANAGEMENT LIMITED

2012:

SCHRODER INVESTMENT MANAGEMENT

2011:

SCHRODER INVESTMENT MANAGEMENT

12/05/2021 1:38:25 PM

16 | Money Management May 27, 2021

Fund Manager of the Year 2021

SHINING THROUGH PERIODS OF DISLOCATION

BY JASSMYN GOH

THE DEPTH OF Hyperion’s research and its long-term track record of outperformance has led to the Hyperion Small Growth Companies fund to win Money Management’s Fund Manager of the Year Australian Small/Mid Cap Equities category.

The judges were impressed by the quality of the senior investment team and high calibre insights.

“The depth of research is assessed as top tier and is deemed an important ingredient for a high conviction, ‘growth’ biased smaller companies strategy. Importantly, the fund has achieved an enviable longterm track record of outperformance,” they said.

Lead portfolio manager, chief investment officer, and managing director, Mark Arnold,

said the quality of the portfolio shone in periods of dislocation and the fund had outperformed during COVID-19.

“We manage on a bottom-up basis and we invest in really high-quality businesses with strong value propositions and their growth is not reliant on the economy growing,” Arnold said.

Lead portfolio manager and deputy chief investment officer, Jason Orthman, said the fund purchased US medical imaging firm Pro Medicus during the depths of COVID-19. The company’s share price was initially impacted when hospitals shut down through the pandemic but it had rebounded strongly when hospitals opened up due to its digital modern offering.

“People realise it’s a modern way to engage and so it has won a number of large contracts

WINNER: CFS FC BAILLIE GIFFORD LONG TERM GLOBAL GROWTH FINALISTS: • HYPERION GLOBAL GROWTH COMPANIES • T. ROWE PRICE GLOBAL EQUITY • LAKEHOUSE GLOBAL GROWTH • LOFTUS PEAK GLOBAL DISRUPTION

AN INVESTMENT CULTURE of open-mindedness and the willingness to take risks and back conviction has led CFS FC Baillie Gifford Long Term Global Growth to win the Global Equities award at the 2021 Money Management’s Fund Manager of the Year Awards.

The award judges said the fund’s strategy was led by a historically highly stable core

08MM200521_14-29.indd 16

WINNER: HYPERION SMALL GROWTH COMPANIES FINALISTS: • OC MICRO-CAP • PERENNIAL VALUE MICROCAP OPPORTUNITIES TRUST • LAKEHOUSE SMALL COMPANIES • AUSTRALIAN ETHICAL EMERGING COMPANIES

with leading US hospitals and share prices has rebounded through the second half of the year,” he said.

“Modern businesses really have got a more relevant product or service to the next generation so they tend to be disrupting your average large incumbent businesses.”

The OC Micro-Cap fund was given a ‘highly commended’ by the judges who said the fund was well-structured and had bedded down its investment approach.

OC Funds head of

MARK ARNOLD

investments, Rob Frost, said the fund’s investment philosophy revolved around three pillars: that markets could be emotional, backward-looking, and inefficient; securities could trade below their intrinsic value; and risk was investing in companies OC did not understand.

A DEVOTED AND CONSISTENT RESEARCH EFFORT

GLOBAL EQUITIES

BY JASSMYN GOH

AUSTRALIAN SMALL/MID CAP EQUITIES

GEORGE WALKER

group of experienced investors who were all partners in the firm.

“Differentiated long-term, concentrated, high growth equity investment style that has been consistently applied through time.

The strategy’s performance has been strong, albeit having benefited from a tailwind assisting the manager’s ‘growth’ style,” the judges said.

“We like the fact that Baillie Gifford has a consistent philosophy across the firm and the firm’s research effort is devoted to this; there is no distraction of having to find ideas that meet the needs of different philosophies nor competition for resources. This facilitates a truly collaborative, long-term culture across the firm.”

Commenting on the win, CFS head of investment sales, George Walker, said the fund’s long-term investment philosophy, investment strategy and longevity came to the fore last year during a period of extreme change.

“The team works from a so-called ‘10 question stock research framework’ that identifies key attributes within companies including exceptional long-term opportunities, visionary leadership and adaptability, loyal stakeholders as well as strong

governance, financial strengths and extreme payoffs,” he said.

“The Long Term Global Growth fund prides its self on running winners, and in Tesla, Amazon, Tencent and others is exactly what has been achieved for years. The result is that in 2020, 10% of the portfolio alone was recycled out of Tesla into new stocks.

“In response to the strong performance last year the team has trimmed some holdings and reinvested into eight new ones.

The holdings ranged from areas such as video streaming and digital payments through to innovative companies re-imagining the future of food.”

Hyperion Global Growth Companies fund was given a ‘highly commended’ by judges thanks to its clear philosophy, disciplined process and concentrated portfolios.

12/05/2021 1:37:38 PM

May 27, 2021 Money Management | 17

Fund Manager of the Year 2021

NAVIGATING A ‘TRICKY PERIOD’

BY LAURA DEW

FIDELITY GLOBAL EMERGING Markets has held onto the crown for the second year in the row in this year’s Money Management Fund Manager of the Year award.

Winning the Global Emerging Markets Equities category, the fund aimed to achieve returns over the MSCI Emerging Markets index.

Despite the ongoing volatility, manager Alex Duffy, who was stepping down from the fund at the end of May after seven years as manager, said emerging markets (EM) had outperformed although it had been a “tricky period” for him to navigate.

“Valuations have remained supportive with emerging markets trading at historical lows compared with developed markets. More broadly the composition of the EM universe has improved markedly over the

last few decades, with many of the largest companies favourably positioned for the long-term and to withstand periods of disruption such as the pandemic,” he said.

“The pandemic resulted in a genuine ‘at home’ culture, whether it be in the form of working, schooling, shopping or even the burgeoning area of telehealth. Companies which could capitalise on that trend, especially those with established technology sectors, were strong contributors to performance.”

The tricky period allowed the fund to upgrade into quality names at a discounted price during periods of indiscriminate selling. It particularly looked for high-quality businesses which had wellcapitalised balance sheets and sound corporate governance structures which would enable the companies to weather challenging environments.

FINDING THE BEST IDEAS TO WIN

BY OKSANA PATRON

FOCUSING ON THE best ideas and staying index unaware led the ClearBridge RARE Infrastructure Income fund to win the top spot in the Infrastructure Securities

SHANE HURST

08MM200521_14-29.indd 17

– Currency Hedged at this year’s 2021 Money Management’s Fund Manager of the Year’s award.

ClearBridge Investments’ managing directors and portfolio managers, Shane Hurst and Charles Hamieh, said the ability to construct their own portfolio and be free from benchmarks was a key differentiating factor.

“I think the point we made right from the start is we are index unaware which means we construct our universe and what that means is we are able to have very different views on companies, different top 10s, different portfolio than other indices and other managers,” they said.

“We have a focus very much on the risk and return profiles, a risk profile is something that some managers do not focus enough on. We also have a very

GLOBAL EMERGING MARKETS EQUITIES WINNER: FIDELITY GLOBAL EMERGING MARKETS FINALISTS: • NORTHCAPE CAPITAL GLOBAL EMERGING MARKETS • GQG PARTNERS EMERGING MARKETS EQUITY • LEGG MASON MARTIN CURRIE EMERGING MARKETS • MACQUARIE ARROWSTREET EMERGING MARKETS

This went beyond well-known Chinese technology names such as Baidu and Tencent and encompassed areas such as autos, sportswear, cookware which could perform well even in periods of low international trade.

But, Duffy said, 2021 was looking like a “mixed bag” for the region as there were near-term risks at play regarding vaccine delays and the subsequent economic impact and the fact that emerging market valuations were no longer as

ALEX DUFFY

compelling as previously.

“In the long-term the case for EM remains intact and will continue to offer many opportunities, supported by structural growth drivers such as urbanisation and lifestyle changes. The rising purchasing power of EM consumers indicates opportunities also in many consumer-related businesses across a range of segments.”

INFRASTRUCTURE SECURITIES – CURRENCY HEDGED integrated environmental, social, governance (ESG) process which uses our proprietary knowledge to integrate ESG factors into our decision making. But really, it is about our ability to not have to use the benchmarks and just pick the best ideas that hopefully go into the strategy.”

The managers also stressed that the fund had been able to provide consistent results for more than 15 years which remained resilient through any cycle.

The judges also highly commended the ATLAS Infrastructure Australian Feeder Hedged fund in the same category for its appealing investment strategy with a clear philosophy, followed by a disciplined process and an attractive business structure.

The fund, which aimed to provide investors with exposure to a selection of high-quality

WINNER: CLEARBRIDGE RARE INFRASTRUCTURE INCOME FINALISTS: • ATLAS INFRASTRUCTURE AUSTRALIAN FEEDER HEDGED • CLEARBRIDGE RARE INFRASTRUCTURE VALUE HEDGED • INVEST UNLISTED CORE INFRASTRUCTURE

infrastructure equities, applied a high conviction approach that focused on investing in only those high-quality listed infrastructure assets which provided the best risk/return characteristics.

The approach also concentrated on the underlying long-term cashflows of these companies through analysis of their component assets, adopting a private markets approach to modelling investment returns.

12/05/2021 1:37:27 PM

18 | Money Management May 27, 2021

Fund Manager of the Year 2021

OUTPERFORMING WHEN PEERS POST NEGATIVE RETURNS

BY JASSMYN GOH

BEING A TOP performer at a time when most of its peers posted negative returns was key for the Pendal Property Securities Fund to win the Australian Property Securities award at this year’s Money Management Fund Manager of the Year awards.

The judges found the fund had a strong team and a sound process that was well-managed by Peter Davidson, who they said was a property stalwart who was widely respected within the industry.

“The Pendal Australian property securities team is one of the most stable, long-serving and experienced teams within the sector and has strong investormanager alignment of interest,” the judges said.

“The ‘bottom-up’ investment process has been proven over

multiple investment cycles. Despite being a relatively benchmark aware strategy, the fund in 2020 once again was one of the top performers in a year when the majority of the competition posted negative returns.

“The manager has bettered its internal performance objective (over three-years) and recorded superior medium to long-term performance relative to both peer median and benchmark. In addition, the fee is one of the lowest.”

The fund’s factsheet said its investment philosophy was based on beliefs that market inefficiencies provided opportunities for well researched and disciplined investors to identify and purchase securities that were mispriced, quality companies would outperform over time, and active investment management would outperform

WINNER: QUAY GLOBAL REAL ESTATE FINALISTS: • IOOF STRATEGIC GLOBAL PROPERTY • REITWAY GLOBAL PROPERTY PORTFOLIO • APN ASIAN REIT

BY OKSANA PATRON

BEING DEFENSIVELY POSITIONED before and during the worst of the pandemic has helped the Quay Global Real Estate fund win the Global Property Securities category at this year’s Money Management Fund Manager of the Year awards.

The fund, which employed a deep research process, said it rotated towards the sectors and stocks least affected by COVID19 in April last year. Justin

08MM200521_14-29.indd 18

WINNER: PENDAL PROPERTY SECURITIES FINALISTS: • AMP CAPITAL LISTED PROPERTY TRUSTS • CHARTER HALL MAXIM PROPERTY SECURITIES • IRONBARK PALADIN PROPERTY SECURITIES • UBS PROPERTY SECURITIES FUND

passive alternatives over a full market cycle.

AMP Capital Listed Property Trusts fund received a ‘highly commended’ from the judges who said team’s early underweight to discretionary retail and overweight to industrial, funds management and other niche property sectors continued to keep the fund at the top of the performance tables.

AMP head of global listed real estate, James Maydew, said the fund had be to be nimble during

PETER DAVIDSON

2020 and make early calls on setting its portfolio for the COVID-19 pandemic.

However, for the next 12 months, the property sector was poised for a renaissance year, he said.

“Also supporting the sector are very low interest rates, and an abundance of capital for acquisitions and developments,” Maydew said.

“More deal activity through initial public offerings, secondary stock issues and merger and acquisition activity should see a very exciting 2021, especially as ‘new’ alternative property sectors seek listing.”

DEFENSIVE DURING THE PANDEMIC

GLOBAL PROPERTY SECURITIES

• UBS CLARION GLOBAL PROPERTY SECURITIES FUND

AUSTRALIAN PROPERTY SECURITIES

JUSTIN BLAESS AND CHRIS BEDINGFIELD

Blaess, principal and co-portfolio manager with Chris Bedingfield, said, at the time the risk of the pandemic became apparent, the fund reduced holdings in sectors such as senior housing and student accommodation and increased its exposure to data centres and life science office, those sectors with much lower impact from the global pandemic.

According to Blaess, sitting at the real asset end of global equities offered investors

long-term real estate returns that actually outperformed global equities over the long term and with lower risk.

“This is because land is a store of wealth and does not suffer the same level of obsolescence and/or creative destruction as general equities,” he said.

“We think the outlook for returns is positive. There are still many pockets of value where fundamentals are still improving and our positioning has been to rotate away from overvalued sectors such as industrial and increase our weighting to sectors such as senior housing and retail landlords, where prices are still well below pre-pandemic levels yet in many instances the fundamentals are better.”

The judges also highly commended the IOOF Strategic Global Property fund, which was aimed at investors seeking longterm growth and access to property-related income streams by gaining exposure to a diversified portfolio of predominantly listed Australian and international real estate securities.

IOOF’s head of property, Simon Gross, said: “At IOOF we have the advantage of a specialist, internal property team that have selected a group of first-class global real estate investment trusts (REIT) managers with a variety of complimentary styles.

“This has led the portfolio to deliver strong relative returns over most years and great outcomes for our clients.”

12/05/2021 1:36:58 PM

May 27, 2021 Money Management | 19

Fund Manager of the Year 2021

DIVERGING FROM THE BENCHMARK

BY LAURA DEW

A ‘ONCE IN a decade’ opportunity for active managers in fixed interest helped the Janus Henderson Australian Fixed Interest fund claim victory at this year’s Money Management Fund Manager of the Year awards.

Winning the category of Australian fixed interest, Janus Henderson said the fund took the opportunity to act on market dislocations that had been created.

Manager and head of Australian fixed interest, Jay Sivapalan, who had run the fund since 2015, said the fund had taken an approach which was “quite different” to that of its Bloomberg AusBond Composite 0+ Year Index benchmark. While the benchmark had 57% allocated to government bonds, the fund had just 12% and instead had 54% allocation to credit.

“[We are] actively seeking opportunities for higher yields and managing duration (interest rate risk) to preserve capital and enhance returns,” he said.

“2020 created a once-in-adecade opportunity for active investors to outperform should they have acted on the many dislocations available throughout the year.

“With the cash rate falling to an all-time low of 0.1% and bond yields dropping below 1%, returns mostly came from capital movements.”

Successful strategies implemented by Sivapalan last year included active duration management, sizeable positions in inflation-linked bonds, overweight assets in low-risk assets such as semi-government bonds and taking advantage of wide spreads in recession-proof credits.

GLOBAL BOND DOMINATION

BY CHRIS DASTOOR

PIMCO HAVE TAKEN both the winning fund (Global Bond Wholesale) and highly commended (ESG Global Bond Wholesale) spots for the 2021 Money Management Fund

ANDREW BALLS

08MM200521_14-29.indd 19

Manager of the Year Global Fixed Income award.

Andrew Balls, PIMCO fixed income chief investment officer (CIO), said the performance of both funds was driven by the firm’s philosophy of seeking to generate consistent value through multiple sources.

“During the first quarter of 2020, top-down themes, in particular an emphasis on taking interest rate risk in the US, were the primary drivers of performance as yields fell broadly alongside a sharp deterioration in risk sentiment as COVID-19 spread across the globe,” Balls said.

“Our top-down focus, which included insights from medical experts, allowed us to navigate a highly uncertain economic environment and adjust our overall level of risk as economic and market conditions rapidly evolved.”

AUSTRALIAN FIXED INTEREST WINNER: JANUS HENDERSON AUSTRALIAN FIXED INTEREST FINALISTS: • LEGG MASON WESTERN ASSET AUSTRALIAN BOND • PENDAL SUSTAINABLE AUSTRALIAN FIXED INTEREST • SCHRODER FIXED INCOME • MACQUARIE CORE AUSTRALIAN FIXED INTEREST

Many investors were currently concerned about rising bond yields and the threat of rising inflation but Sivapalan said this would create better value for the asset class.

A higher bond yield when rates were near zero would present a steep yield curve which would give investors the opportunity to participate in the yield and the rolldown effect, he said.

“This year is shaping up to be one where active interest rate strategies, including taking advantage of higher yields, may

JAY SIVAPALAN

overshadow excess returns from spread sectors,” he said.

“Accordingly, our strategies will emphasise this from time to time as prevailing market conditions offer investment opportunities.

“While we expect some volatility and drawdown, nearterm volatility presents an opportunity for active managers.

Ultimately, higher bond yields restore the defensive characteristics and create better value for the asset class.”

GLOBAL FIXED INCOME On the environmental, social and governance (ESG) fund specifically, Balls said 2020 saw an increase in issuance across the sustainable bond market, which included green, social, and sustainability bonds.

“This growth of the sustainable bond market has enriched the opportunity set for a strategy that is focused on both ESG optimisation as well as generating a strong performance,” Balls said.

The judges said PIMCO was a global leader in fixed income and that both funds had a highly sophisticated process, with deep research and huge resources.

They also said PIMCO harnessed a wealth of experienced investors and plentiful resources to contribute to this strategy.

“The combined quality and depth of the macro perspective which feeds into their secular and cyclical outlooks, the sophistication of their fundamental

WINNER: PIMCO GLOBAL BOND WHOLESALE FINALISTS: • PIMCO ESG GLOBAL BOND WHOLESALE • LEGG MASON WESTERN ASSET GLOBAL BOND • MERCER GLOBAL SOVEREIGN BOND

and quantitative credit analysis process, and the robust framework of risk controls which govern portfolio construction all positively differentiate their approach,” the judges said.

“The firm’s longer-term focus and extensive use of synthetic instruments play a substantial role in enabling PIMCO to manage their large asset base effectively.

“Furthermore, the scale and extensive scope of the firm ensures that they are well positioned to investigate emerging ideas.”

12/05/2021 1:36:48 PM

20 | Money Management May 27, 2021

Fund Manager of the Year 2021

LOOKING BEYOND THE MAINSTREAM

BY LAURA DEW

TAKING THE TIME to look away from industry leaders and source boutique investment managers has helped the IOOF MultiMix Balanced Growth win at this year’s Money Management Fund Manager of the Year awards.

The fund, which was launched in 2008, took the title in the Multi-Asset Growth category, beating off strong rivals from BlackRock, Bendigo and Macquarie.

IOOF described the multiasset strategy as an option for investors ‘paralysed by a proliferation of investment products’ by offering one single investment which accessed a wide of variety of markets and strategies.

It aimed to provide capital growth over the medium to long-term by investing in a diversified portfolio from asset managers of growth assets such

as Australian and international equities and property with a smaller defensive exposure from cash, fixed interest and alternatives.

At the end of March, allocations included 23% to Australian shares, 27% in international shares and 10% to Australian fixed interest, all of which, management said, had contributed to outperformance over the last 12 months. In the fixed interest space specifically, the management team increased the firm’s exposure to credit after the COVID-19 sell-off.

IOOF deputy chief investment officer and head of equities, Stanley Yeo, said the fund particularly looked at boutique managers as well as the mainstream players to find the best options available.

“We have the confidence to utilise a unique approach to boutique investing to

WINNER: AUSBIL 130/30 FOCUS FINALISTS: • TRIBECA ALPHA PLUS • ALLERON AUSTRALIAN EAGLE TRUST LONG-SHORT • BENNELONG LONG SHORT EQUITY • REGAL AUSTRALIAN SMALL COMPANIES

BY CHRIS DASTOOR

08MM200521_14-29.indd 20

WINNER: IOOF MULTIMIX BALANCED GROWTH FINALISTS: • BLACKROCK TACTICAL GROWTH • MACQUARIE BALANCED GROWTH • BENDIGO GROWTH WHOLESALE

meaningfully enhance returns which involves finding and investing in a new up and coming boutique investment managers, who have the drive and flexibility to perform well.”

As well as well-known names like Janus Henderson and Pendal, the fund held assets from smaller firms such as Northcape Capital, Alphinity and Ardea.

Looking ahead to 2021 performance, Yeo said the fund had pro-growth positioning and was also looking to add to property.

“We are still reasonably pro-growth assets and within

STANLEY YEO

Australian equities, we maintain a bias to small caps and within international equities, we maintain an overweight to emerging markets. We will also seek exposures to real assets such as property and infrastructure.

“Our diversified fixed interest portfolio continues to perform very strongly with the short duration position adding a lot of value. Although somewhat decreased, the diversified fixed interest portfolio continues to be short duration versus its benchmark.”

A COHESIVE APPROACH TO WIN

LONG/SHORT EQUITIES

THE AUSBIL 130/30 Focus has taken out the 2021 Money Management Fund Manager of the Year Long/Short equities award.

Judges praised the managers’ track record and the firm’s risk management and active positioning.

Judges said manager Gian Pandit was a strong investor with a

MULTI-ASSET GROWTH

GIAN PANDIT

successful long-term track record managing long/short strategies.

“Furthermore, [it] highlights the considerable experience of senior Ausbil investors and their cohesive decision-making approach, which is supported by a repeatable research process and a well-resourced

investment team,” they said.

They also said Ausbil’s risk management and active positioning were key to performance, and the fund had focussed research and strong interaction between portfolio managers and analysts.

Highly commended was awarded to Tribeca Alpha Plus, which portfolio manager, Jun Bei Liu, said had seen significant inflows at a time when other managers were seeing outflows and now had almost $1 billion in funds under management (FUM).

“There’s something very exciting about this fund; I took over it two years ago and it was sitting at $350 million [FUM] and was struggling,” Liu said.

“The previous portfolio

manager left, and I took over and I made changes to the portfolio – we hired a lot of smart people.

“I ran the portfolio with my philosophy because I’m a stockpicker, very much focused on fundamental stock ideas. And being very active in the markets and pragmatic about where the returns are coming from, and keep a style neutral [philosophy].”

Judges said Liu was a capable investor who was deeply experienced with the strategy.

“In addition, the fund’s investment process is considered differentiated bringing an intuitively appealing combination of both quantitative and fundamental aspects to long/short investing,” the judges said.

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May 27, 2021 Money Management | 21

Fund Manager of the Year 2021

STRONG RESEARCH COMBINED WITH INTRINSIC VALUE PROCESS

BY OKSANA PATRON

THE FUNDAMENTAL, PROPRIETARY research into industries and companies combined with consistent application of intrinsic value process and cashflow valuation methodology has seen Eiger Australian Small Companies A take out the 2021 Money Management Emerging Fund Manager award.

Eiger’s principal and portfolio manager, Stephen Wood, said this process had been used by the team for over 10 years with comparable valuation history and it ranked companies according to their ability to generate cashflow.

“Discrepancies between the market price and estimated intrinsic value arise from market behaviour and differing

fundamental estimates. This provides opportunities to outperform. This opportunity is particularly pronounced in the lessresearched, small-cap segment of the market,” he explained.

The fund’s investment objective was to outperform the benchmark S&P/ASX Small Ordinaries Accumulation index after fees over rolling five-year periods.

As at 31 March, 2021, the fiveyear net return for the strategy was 15.26% compared to the index return of 10.69%.

Wood said that one of the differentiating factors of his fund was “Eiger’s nine commandments”, an investment thesis which consisted of a template completed for every investment and a document which formed the basis of the conviction

DEPTH OF TEAM KNOWLEDGE HELPS PENDAL FUND

BY LAURA DEW

MANAGED BY ONE of the largest equity teams in Australia, the Pendal Australian Share fund has scooped victory in the category of separately managed accounts (SMA) – Australian equity.

At this year’s Money Management Fund Manager of the Year awards, the firm beat off

CRISPIN MURRAY

08MM200521_14-29.indd 21

competition from Bennelong, Blackmore Capital and Macquarie to score the win.

Positioned as an activelymanaged portfolio of Australian shares, it aimed to provide a return that exceeded the ASX 300 over the medium to long term.

“Pendal’s investment process for Australian shares is based on our core investment style and aims to add value through active stock selection and fundamental company research. Pendal’s core investment style is to select stocks based on our assessment of their long-term worth and ability to outperform the market, without being restricted by a growth or value bias. Our fundamental company research focuses on valuation, franchise, management quality and risk factors (both financial and non-financial risk).”

EMERGING FUND MANAGER WINNER: EIGER AUSTRALIAN SMALL COMPANIES A FINALISTS: • 1851 EMERGING COMPANIES IN AU • CC SAGE CAPITAL ABSOLUTE RETURN

level regarding the investment.

“These are aimed at ensuring that the team only invests in companies it understands, and that are managed by trustworthy management teams with an appropriate track record,” Wood said.

On top of this, the fund was managed by an experienced team with a focus on portfolio management.

“The three-member Eiger team has over 70 years in financial markets combined. In addition, the team do not get involved in share dealing or mandate compliance issues, which are handled by the

STEPHEN WOOD

responsible entity, Fidante Partners.”

Eiger also believed, over the long-term, a company’s operations were unsustainable if they caused irreparable damage to the environment, workplace or end consumers, and would not knowingly invest in such companies.

“All companies that Eiger considers for in-depth fundamental research must first pass a qualitative screening process that specifically measures and assesses a company’s governance structure and the environmental and social consequences of its business.”

SMA: AUSTRALIAN EQUITY Comments from the award judges said they had a “strong regard” for lead manager Crispin Murray, who had 28 years experience in the industry, and the outcomes that he had generated alongside a 20-strong investment team.

“The investment process is considered to be robust, that is unrestricted by growth or value styles and aims to capitalise on stock mispricings, before they are recognised by the market,” judges said.

In its most recent factsheet, the fund had its largest weightings to financials ex property trusts at 26.1%, materials at 22.8% and 8.6% to industrials while its top three holdings were BHP Billiton, CSL and Westpac.

“We maintain the portfolio’s balanced construction, positioned for performance in a range of scenarios, however in recent times we have been adding to some of the more cyclical exposure as the scale

WINNER: PENDAL AUSTRALIAN SHARE FINALISTS: • BENNELONG AUST EQUITIES MODEL PORTFOLIO CORE • BLACKMORE CAPITAL BLENDED AUSTRALIAN EQUITIES PORTFOLIO • MACQUARIE PPM CORE AUST EQUITIES PORTFOLIO

of policy support has looked likely to increase,” Pendal added.

Performance in the last quarter had been helped by overweight positions to Xero and Nine Entertainment and detracted by Evolution Mining and National Australia Bank.

Highly commended in this category was Bennelong Australian Equities Model Portfolio Core which was regarded by judges for its “robust and logical investment process”. They also noted it had an impressive long-term track record of outperformance relative to the benchmark and peers.

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22 | Money Management May 27, 2021

Fund Manager of the Year 2021

MORE THAN A ‘FEEL GOOD’ PORTFOLIO

BY CHRIS DASTOOR

THE AUSTRALIAN ETHICAL Australia Shares fund is more than just a “feel good” portfolio and it has taken out the 2021 Money Management Fund Manager of the Year Responsible Investments award.

Andy Gracey, Australian Ethical portfolio manager, said the fund’s inflows had ramped up because of the bushfires in late 2019/early 2020, with the COVID-19 pandemic being another boost.

“If you’re in front of the curve in terms of environmental, social and governance (ESG), you can financially benefit… it’s not just a feel good portfolio,” Gracey said.

Gracey said the firm was one of the most aggressive ESG screeners.

“In 2020, the stars aligned as our ethical universes were the outperforming sectors and we had some great stock selection,” Gracey said.

“We’re fundamental small cap investors, our universe is quite growthy, but we put on our fundamental valuation hat – we describe ourselves as GARP: growth at a reasonable price.”

The judges said the Australian Ethical Australian Shares fund delivered a thoughtfully considered and deeply researched true-tolabel ethical approach to investing.

“Supported by a detailed ethical charter the fund employs a benchmark-unaware approach to actively seek out companies that are contributing positively to society and the environment, and

WINNER: VANGUARD INVESTMENTS AUSTRALIA FINALISTS: • BLACKROCK INVESTMENT MANAGEMENT • BETASHARES CAPITAL • VANECK

BY CHRIS DASTOOR

08MM200521_14-29.indd 22

WINNER: AUSTRALIAN ETHICAL AUSTRALIAN SHARES FINALISTS: • AUSBIL ACTIVE SUSTAINABLE EQUITY • PENGANA WHEB SUSTAINABLE IMPACT

avoiding those involved in harmful activities,” Lonsec said.

“The fund provides one of the most comprehensive ethical screening approaches in the market.”

The Ausbil Active Sustainable Equity fund was highly commended and the judges said the fund integrated ESG into the investment process to identify potential earnings risk and help make better informed investment decisions.

“The fund exemplifies an ‘active ownership’ approach to

ANDY GRACEY

stewardship,” they said.

“A key strength is the manager’s proprietary ranking tool which takes into consideration both financial analyst conviction scores and ESG sustainability scores into a single measure allowing an integrated ranking of stocks.”

BALANCING COST AND QUALITY

ETF PROVIDER OF THE YEAR

LOW COST AND high-quality products – that is what Vanguard says puts them ahead of other exchange traded fund (ETF) providers as they take out the 2021 Money Management Fund Manager of the Year ETF Provider of the Year award.

Minh Tieu, Vanguard head of ETF capital markets Asia Pacific, said the firm was proud of its broadly diversified product range which gave investors the best chance for investment success.

RESPONSIBLE INVESTMENTS

MINH TIEU

“We’re all about ensuring the best outcome and making sure our investors get the best outcome,” Tieu said.

“We can achieve that by offering low-cost products – cost is an important factor in the long scheme of returns.

“We try to cater to what clients are wanting in terms of exposure to different markets and exposure to global versus local, and different asset classes as well.”

Tieu said the firm’s flagship ETF, Australian Shares, had been a solid performer throughout the last couple of years and continued to be.

“It’s proven to be a great way to get access to the local Australian market; outside of that, we’ve seen a trend in the international space,” Tieu said.

However, its diversified product range, which included the Diversified High Growth fund, also saw significant uptake and had been popular with retail investors.

“We’ve seen a lot more interest in that and that’s a great way for investors to start off investing in ETFs because it gives

you a pre-defined risk mix and exposure to multiple asset classes,” Tieu said.

“It’s one of those ETFs that are great for someone who’s just getting started – especially when you’re not sure which ETF to buy.”

BlackRock received a highly commended and Christian Obrist, head of iShares – BlackRock Australasia, said three things defined the iShares franchise: quality, transparency, and resiliency of the products.

The iShares Core S&P/ASX 200 ETF and the iShares Core Composite Bond ETF were cited

by Obrist as the two standouts.

“They’re very plain vanilla products – long only, non-levered, fully transparent, and very popular with investors,” Obrist said.

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May 27, 2021 Money Management | 23

Asset allocation

POSITIONING PORTFOLIOS FOR RISING INFLATION RISK It would be a mistake to assume inflation will remain low, writes Hamish Tadgell, so advisers need to position portfolios to protect against this threat.

SINCE THE START of the year, markets have continued to shift from hope to growth, buoyed by economies reopening and the vaccine roll-out, extremely easy monetary policy and fiscal stimulus working its way through the economy, and improving consumer and business confidence.

However, the strength of the recovery and scale of the policy response has resulted in growing concerns about rising inflation expectations. This came to the fore in February, when we saw a sharp rise in bond yields on the back of growing inflation concerns.

The inflation debate and implications for interest rates is arguably now the central issue for investors and markets. It is generally understood that the supply shock from mandated COVID-19 lockdowns and subsequent sharp rebound in demand on the back of economies reopening and Government stimulus is a recipe for a pick-up in inflation. The degree to which this is cyclical and temporary versus more structural and permanent is the question.

08MM200521_14-29.indd 23

INFLATION SCARE OR REGIME CHANGE? It is not unusual following an economic shock and recession to see an increase in inflation. The maths and year-on-year base effect alone tends to see inflation numbers print higher. This was the case following the global financial crisis when US consumer price index (CPI) rose close to 4%. However, it proved temporary and soon declined.

The Federal Reserve’s preferred inflation measure – the core personal consumption expenditure (PCE) inflation – hit a low of 0.9% year-on-year last April and was 1.4% year-on-year in February (see Chart 1). Most commentators now expect it will be above the 2% target in the April data, and potentially above 3%.

For the time being, both the Reserve Bank of Australia (RBA) and the Federal Reserve in the US (as well as other central banks) are maintaining the position that inflation will be transitory, resulting from a short-term rise in prices as economies reopen.

Continued on page 24

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24 | Money Management May 27, 2021

Asset allocation

Continued from page 23 Their view is that the factors combining to push inflation up are temporary, including pent-up demand, an increase in household disposable income from enforced savings and government stimulus payments, disruptions to supply chains, and travel restrictions.

They have indicated that, considering these factors, they are prepared to allow the inflation to temporarily overshoot their official targets.

They believe that the current inflation rise is cyclical and temporary in nature and will retreat. But what if it isn’t cyclical? What if it is being driven by structural forces that are more permanent? It’s a question that is worth serious consideration.

There are several significant structural changes in play that could drive inflation up more permanently.

One key issue is that of political populism and financial inequality. Post-COVID, the debate around rising inequality in wealth is likely to continue dominating political and economic decisionmaking, perhaps even more than it did before. The unique and

global nature of the pandemic has seen a radical and co-ordinated pivot by governments globally to fiscal politics. The risk as we see it now is that the moral and political hazard of withdrawing fiscal support may prove too much, and temporary government programs become more permanent, as has become the case with ultra-easy monetary policy in the wake of the Global Financial Crisis (GFC).

It is also important to recognise that the nature of COVID crisis is very different to the GFC and more cyclical recession events. This is an event-driven crisis resulting in a major supply side shock and Government spending response not seen since war time. The result has seen household savings increase to multi decade highs along with house prices.

This is very different to the situation after the GFC when households were forced to deleverage on falling house prices.

We think it would also be a mistake to extrapolate the lack of inflation post-GFC to mean

Chart 1: US Inflation –CPI and Core PCE % change year-on-year

that inflation will remain low now, given the different dynamics at play.

Whether or not consumers spend this money, or continue to save, remains to be seen. The indications are that there will be a strong resurgence in spending, but the key question is whether this will be sustained – which is considered a necessary condition for a more persistent rise in prices and inflation.

The COVID-19 crisis has also seen a marked shift in politics and sentiment to decarbonisation and climate change. The transition to a lower carbon world is expected to be much more commodityintensive than the digital technology transformation and capital light business models that have delivered the productivity

Source: Bloomberg

08MM200521_14-29.indd 24

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May 27, 2021 Money Management | 25

Asset allocation

Chart 2: Returns financial versus real economy prices since 2009

Source: Bloomberg

gains of the last few decades.

Technology is going to play a significant role, but decarbonisation is also going mean an increase in, for example, electric vehicles, which use for about four times more copper than a combustion engine.

Likewise, wind turbines use between three to six tonnes of copper per megawatt. The impact of this on commodity prices is likely to be inflationary.

But whether these inflation pressures are structural in nature, or more temporary, remains hard to predict.

Certainly, the absence of inflation in developed markets over the last three decades suggests that longer-term inflation fears may be unwarranted, and the drivers of deflation remain strong, including extreme monetary policy, technology disruption and ageing population.

Overall, we believe that both the RBA and the Federal Reserve will continue with their view that tightening policy too early will adversely impact the goal of reaching their inflation targets.

08MM200521_14-29.indd 25

The risk is that if things go too far, and the economy starts to overheat, then inflation could become more problematic than they expect.

This would have far more profound implications for markets and equity valuations and the extreme dispersion policy intervention has had on prices and returns between financial assets, which have soared, versus real economy assets like wages and commodity prices, which have stayed low (see Chart 2).

Our view is therefore that it is a good idea to take into account the risk of higher inflation, even if we think the inflation risk is moderate over the medium to longer term.

The first way we are doing this is to ensure that any quality companies that we hold have got robust growth characteristics and pricing power. This means that if inflation rises, they could pass on the cost and maintain margins.

The second step is to ensure exposure to quality cyclical companies that have leverage to the economic recovery. For instance, we think energy will

benefit through this higher inflationary period, so we have exposure to some energy companies. We also think that inflation, resulting in higher rates, is good for the banks. There are still some headwinds for banks in terms of growth, but we believe that valuations already reflect that.

Thirdly, we’re cautious about longer duration assets that don’t have a margin of safety or a clear catalyst. And the final step is removing any companies that will struggle to recover from the COVID-19 crisis or lack pricing power Overall, we believe that the shift from ‘hope’ to ‘growth’ in investment markets is continuing.

This has been evident in the strong earnings growth reported during the February reporting season in Australia, as well as in the more recent US reporting season. We expect ongoing momentum will continue to be driven by the vaccine rollout and the rebound in consumer spending, as well as the recovery of business confidence.

Growing prospects of a strong global rebound and the unique nature of this crisis and policy response also brings with it the risk of rising inflation expectations, and arguably the biggest risk of a regime change in deflationary trends that have dominated markets for 30 years.

In light of all this, we think it seems prudent and good portfolio risk management to think about how to position the portfolio in the face of higher inflation risks.

“The risk is the moral and political hazard of withdrawing fiscal support may prove too much, and temporary Government programs become more permanent.”

– Hamish Tadgell

Hamish Tadgell is portfolio manager at SG Hiscock & Company.

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26 | Money Management May 27, 2021

Fixed income

A NEW PLATFORM FOR GREENWASHING?

Sustainability-linked bonds might be the new hot topic, writes Paul Lukaszewski, but could they be presenting more problems than they solve?

ETHICAL INVESTMENTS HAVE never been hotter. Assets under management in all investment strategies governed by environmental, social and governance (ESG) principles grew more last year than in the preceding decade.

Looking more closely at the fixed income and, more specifically, the corporate bond market, there has also been a significant acceleration in the growth of ESG-driven investment strategies, as fund flows into ESG-dedicated portfolios picked up pace.

While many will be familiar with the US$1 trillion ($1.28 trillion) green bonds market, issuance of other debt securities designed around ESG considerations has been gathering pace.

For example, new social bond

08MM200521_14-29.indd 26

issues totalled US$154 billion in 2020, up from US$18 billion in 2019. Sustainability bond issuance hit US$69 billion in 2020, from US$38 billion a year earlier. Sales of both instruments are on track to more than double this year, according to Institute of International Finance (IIF) data.

Much of this activity can be attributed to a combination of regulatory pressure, rising corporate awareness and investor demand. The popularity of this investment theme has also been boosted by growing awareness of the social problems that have worsened during the pandemic.

While we applaud the amazing speed of this growth, we’re also concerned. When markets move this far this quickly, inevitably some corners end up being cut.

We see a risk that money will flow into investments whose ESG credentials don’t stand up to closer scrutiny.

One illustration of the frenzy that has built up around ESG can be seen in the world of emerging market corporate debt, where ESG-labelled bond issues rose to more than 21% of total issuance in the first quarter of this year.

SUSTAINABILITYLINKED BONDS Within this evolution of ESG-labelled bonds, we are seeing a new instrument gain popularity: sustainability-linked bonds (SLBs).

SLBs allow borrowers to set a sustainability target, while committing to pay a penalty if they fail to achieve that target.

Investors are attracted to them

because issuers are tied to specific outcomes rather than a simple expenditure goal. This, in theory, more closely aligns the interests of borrowers with those of investors who want a clearer idea of the positive effects of their capital.

Bank of America expects global SLB issuance to reach US$100 billion in 2021. This is extraordinary considering the market for SLBs only started in 2019; US$10.9bn of SLB transactions were priced in 2020, according to the IIF. Growth is accelerating as issuance in the first quarter of 2021 almost matched the value of bonds issued last year.

Although this is global data, we’ve also seen SLB issuance grow with the same momentum in Asia. What’s more, European markets will likely be fertile ground given the region’s history

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May 27, 2021 Money Management | 27

Fixed income Chart 1: ESG ETF Flows (US$bn)

at the forefront of developments in responsible investing.

WHAT’S THE PROBLEM? Financial instruments that are marketed with an ESG label often come with a second-party opinion from a ESG ratings agency, such as Sustainalytics or Vigeo Eiris.

This is to ensure alignment with a recognised framework – for SLBs this would be the International Capital Market Association’s SLB principles. This framework contains five components: • Selection of key performance indicators (KPIs); • Calibration of sustainability performance targets (SPTs); • Bond characteristics; • Reporting; and • Verification.

The framework states that SPTs should be ‘ambitious’ and ‘beyond a business as usual trajectory’. It also requires that variation from original terms should be ‘meaningful’.

Unfortunately, these requirements are qualitative. So far, second-party opinion providers have been unable to establish requirements that are quantifiable. In particular, the issue of ‘meaningful’ variation has been problematic.

For example, all but one of the US dollar-denominated SLBs issued this year feature a penalty of less than 10% of the original coupon rate. Nearly half of these SLBs have a variation of less than 5% of the original coupon rate.

In several cases, the coupon variation, or step-up, only applies to the final year of the SLB’s life, making the present-value impact of the potential financial cost even less significant.

What’s more, there are other examples where the measurement of KPIs and financial costs coincide with times when the bonds are callable. This gives the issuer an option to redeem the bonds early and avoid paying a financial penalty.

CASE STUDIES: • A five-year bond from Asia with KPIs that only require the installation of certain assets at a total cost of US$1 million (from annual capital expenditure of up to US$200 million). The penalty for failing

08MM200521_14-29.indd 27

Source: MSCI ESG Research LLC/Lipper, 31 Dec 2020

Chart 2: ESG Fund Flows (US$bn)

Source: BofA Global Research, April 2021

to meet this target is a 25 basis points-increase to the interest rate for 15 months prior to maturity – a period of time when the bonds are callable.

• An 8.5-year bond from the US with a 12.5 basis points-coupon step-up if the issuer fails to achieve emissions-reduction targets. However, the step-up applies from the fifth year onwards – when the bond becomes callable at par.

• A 10-year bond from Asia with a KPI based on achieving emissions reduction targets.

While the coupon step-up is a meaningful 75 basis points, KPI assessment doesn’t take place until nine years after the bonds have been issued. That means the economic cost to the issuer for failing to meet the target would be immaterial.

WHAT SHOULD INVESTORS DO? ‘Greenwashing’ is when a company deliberately overstates green credentials. This is a risk in the SLB market where we see great diversity in the quality of bonds.

That’s why the bottom-up assessment of issuers and the specific features of individual SLBs, is critical.

Investors need to be more discerning, not skimp on due diligence, and speak out whenever they find something that needs addressing. They need to ask themselves whether an issuer is undertaking substantive changes to transform its business. Is it benefiting from the retirement of aging assets to meet its KPIs? Are the costs of failing to meet SPTs significant, immaterial, or can they be avoided?

Investors can also push issuers to improve the quality of SLB issuance by demanding: • That KPIs are assessed on multiple dates that span most, if not all, of a bond’s life; • Greater use of milestones to track progress on meeting KPIs over time; • Financial penalties that reflect a higher proportion of the original borrowing cost; and • Call features don’t allow issuers to circumvent the costs of failing to meet KPIs. Being a good ESG bond investor involves more than reading what’s written on the tin. There can be no substitute for the hard work that lies behind active investing.

Paul Lukaszewski is head of corporate debt – Asia Pacific at Aberdeen Standard Investments.

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28 | Money Management May 27, 2021

Advice

THE LOW BALANCE CLIENT GROWTH OPPORTUNITY As more focus is given to intergenerational wealth transfer as clients get older, writes Shannon Bernasconi, advisers must ensure they can meet the needs of the younger generation.

LOWER BALANCE CLIENTS – and the ability to provide a reasonably priced advice offering to them, while also making a reasonable margin – present a particular challenge for advisers.

The challenge becomes more pronounced when it comes to servicing larger balance, higher margin, typically older clients, while also considering the financial needs of their (usually lower balance) children, along with the importance of planning for the tax-effective transfer of intergenerational wealth.

As a child I could watch the Newton’s pendulum for hours, soothed by the continuity of the swinging spheres. This effortless transfer of energy and momentum from one end of the row of spheres to the other end, and back, also services as a good analogy to how the transfer of intergenerational wealth should also be effortless.

All too often, however, it is not.

Nevertheless, the intergenerational wealth transfer challenge is increasingly relevant with Australia’s superannuation market rapidly maturing. In all, 65% of Australia’s $2.8 trillion in superannuation is held by fund members who are aged 50 years and older. This is not surprising, when you consider that baby boomers typically had children and bought properties earlier, and have benefitted from huge house appreciation. By the time they reached their 50s, their liabilities are relatively low and excess income is higher, giving increased relevance to the role of advice for this cohort.

08MM200521_14-29.indd 28

ADVICE PRACTICE VALUATION CHALLENGE Intergenerational wealth transfer will become even more important in the future when advisers are valuing their business for potential sale or merger.

When valuing an advice practice in 2021, an astute buyer not only considers profitability and size but also the client demographics of the book. An ageing client base is a mortality risk to any prospective buyers. Smart practitioners are increasingly realising that this mortality risk can be offset by providing aged care services and by focusing on the need for intergenerational advice.

All up, Australians will inherit an estimated $3.5 trillion over the next 20 years, and this amount is growing at 7% a year. Griffith University researchers have estimated that each recipient will inherit an average of $320,000. When you consider that in many cases it will no doubt be much more – the need to ensure the next generation is provided with an affordable advice offering, before they inherit, is clear.

CLIENT SEGMENTATION AND PROFITABILITY The second challenge of providing a profitable advice offering for low balance clients is actually also an opportunity. The recent Adviser Ratings 2020 Australian Financial Advice Landscape report, an annual study of the Australian financial advice industry, highlighted that around 34% of those aged 25 to 34 said they would be open to seeing an adviser, while

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May 27, 2021 Money Management | 29

Strap Advice

45% of those under-25 were also interested in seeking advice.

Equipping advisers with the right tools to enable both a smooth transfer of intergenerational wealth, and growth in lower balanced clientele, is key to resolving these challenges.

One of the primary solutions in the advice value chain is the investment platform. And the ongoing challenges facing financial advisers only serve to highlight the importance of the platform’s role in increasing efficiency, driving down the cost of advice, increasing practice profitability and providing intergenerational low balance solutions.

AN INVESTMENT PLATFORM TOOLKIT Some options are quite straightforward. Removing superannuation minimum fees or additional per account fees, for example, are areas where platforms can simply and easily lower the barriers to advising lower balance clients. Low-cost offerings, family fee linking, and increasing digital experiences are other areas that can lead to a lower client of advice and better client engagement. And all of these options are needed to cater for financial advice needs of the dependants of clients.

Advisers who partner with platforms that offer these options, as a matter of course, as part of an intergenerational play, help to improve loyalty with the next generation. It can also help hedge against large outflows from the advice practice when clients pass away.

Advisers with family office style clients have long been using effective tax strategies that result in variable income for members of the family in portfolio construction – thus optimising the tax outcome of each individual for the benefit of the family whole.

This practice of portfolio optimisation could be further deployed within the intergenerational construct to further engage the children and demonstrate the value of advice.

Involving the adult children in the

08MM200521_14-29.indd 29

discussion – and demonstrating the value to them of that advice in retaining and growing the inheritance – can be a mechanism of engagement and promotion of the profession.

Family trusts with goals-based portfolios aligning to the underlying beneficiaries (including the adult children) is another approach often used in private client advice practices.

The automation of administration such as the generation of electronic signing of records of advice for investment switches, and the seamless integration between consent and execution, is one example where platforms can reduce the administration and compliance burden. Another example is the use of managed accounts – specifically, using an investment platform that provides the ability to advise within best interest duties while gaining access to the efficiencies of managed accounts.

According to a State Street Global Advisors (SSGA) report, 25% of managed account users (advisers) prefer using managed account structures for lower balance clients (<$100,000), while 22% said they were appropriate for millennials (aged under-35) or self-managed super funds (SMSFs).

While record of advice (ROA) generation and managed accounts assist in efficiency, adviser support and client experience, it is when this is coupled with a significant investment in the technology that it becomes key to the overall client experience.

TRANSPARENCY, CONTROL AND INNOVATION There are other ways to engage the children of clients as well. An investment platform offering holder identification number (HIN) based accounts, for instance, provides the younger clientele with a nice segue into the current post pandemic rise of the DIY share trader. Indeed a recent Investment Trends survey found a marked increase – of 34.8% – in the number of people who considered themselves active traders in 2020. Of those who were

new to share trading altogether, nearly 18% were younger than 25 years of age, and 49% were aged between 25 and 39. It is clear that millennial and Gen Z Australians have taken to trading with gusto.

Hence the ability to track online their portfolio of stocks, listed investment companies (LICs) or exchange traded funds (ETFs) held in the name of these younger Australians – as a result of the advice received – can aid in bridging the gap between the perception that their parents are only invested in opaque investments or managed funds.

Add to this the option of using instruments such as Chi-X transferable custody receipts (TraCRs) means the advisers of these younger clients can easily, and at a low transaction cost, add holdings of the likes of Facebook or Tesla to align to the younger client’s interests. Investing internationally typically adds an increased platform cost, and a high foreign exchange cost and exposure, not to mention the brokerage transaction costs.

Using these innovative paths like Chi-X TraCRs through a domestic broker via an on HIN investment platform can keep the costs low, whilst delivering to the demographic.

Of course, the question of profitability in providing advice to lower balanced clients doesn’t rely solely with the platform. However, the total cost to client and to the adviser practice is certainly influenced by the investment platform and its fee structure and investment options.

The total cost to client comes from both the cost to access the platform and the cost the adviser charges. The resulting profit margin for the adviser comes from how much the upfront advice document and process costs, and how efficiently that ongoing advice is managed.

NOT ALL PLATFORMS ARE CREATED EQUAL When it comes to lowering advice costs and increasing practice profitability, only the newer technology platforms can afford to

SHANNON BERNASCONI

shift the margin from a product-led/ product-paid approach, to an advice-led and advice-paid focus.

Platforms that haven’t kept up with the latest developments in technology have a higher cost of operation that is often recouped through hidden or layered fees.

Hence the newer investment platforms that don’t rely on cash fees, MER uplift or separately managed accounts (SMA) fees for revenue, can lower the overall cost to the client even further.

The next generation of client is one who has lived with Royal Commission and the resultant media focus on poor advice practices. This means clients are now much more aware of possible hidden fees. Transparency of assets and of fees through a digital client experience is key to engaging this client demographic.

The new generation of platform, for the next generation of client, is not only client-centric, delivering efficiency and scale, but is one that uses technology innovation to deliver a digital client experience, to make advice more affordable, advisers more profitable and replaces revenue bias from products to service.

Putting the newer generation of advisers’ clients at the heart of the experience, engaging with them through the digital medium and demonstrating that value and transparency can coexist, will aid in the transfer of great advice from one generation to another. The advisers who adopt the newer technology and innovation are already on that road to success.

Shannon Bernasconi is managing director of WealthO2.

13/05/2021 1:15:57 PM

30 | Money Management May 27, 2021

Toolbox

SUPER CHANGES FROM THE BUDGET This year’s Federal Budget brought in numerous changes to superannuation including making contributions and managing retirement income streams, writes Tim Howard and Neil Sparks.

CONTINUING TO PROVIDE for a safer environment and incentives to increase spending by taxpayers to stimulate the economy remained a consistent measure and is in line with the October 2020 Federal Budget. Whilst many measures had been announced prior to the formal delivery of the 2021/22 Federal Budget, there were a number of additional measures released that have the potential to impact on the wealth plans of a number of Australians. Many of these announcements could be regarded as a soft start to an election campaign by the Government, with expected commencement dates of 1 July, 2022 – which is later than when the next Federal election will be held.

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For many, the key takeouts may have centred on the extension of the low and middle income tax offset (worth up to $1,080) for another 12 months through to 30 June, 2022, or the absence of any announcement of a change to the rate of superannuation guarantee (SG) payments. From this it can be inferred that the rate of SG will increase to 10% from 1 July, 2021, and then continue to rise in annual increments of 0.5% until it reaches 12% from 1 July, 2025.

However, there were also a number of other superannuation announcements that could have a significant (and positive) impact on the wealth plans of many Australians, which include increasing the amount that can be

accessed from super towards the purchase of a first home and, at the other end of the home ownership journey, a lowering of the eligibility age to make a downsizer contribution to super.

It is proposed that the work test will only apply for personal deducted contributions from age 67, with application for non-concessional or salary sacrificed contributions not applying until age 75. This has the potential to remove the need for any bring-forward provisions under the legislation or can at least allow for advisers to discuss alternative potential arrangements for those still waiting for the legislated increase in eligibility age from 65 to 67 to pass through Parliament.

Beyond wealth, the Budget did also have a focus on health issues for Australians, with measures announced to improve access to mental health services which, for a number of people, has had a heightened focus since the onset of COVID-19. Additionally, a number of measures were focussed on women, with some aimed at addressing the retirement savings gap between males and females – an issue noted in the Retirement Income Review (RIR) report delivered at the end of 2020.

For advisers, the 2021/22 Federal Budget certainly provides a great opportunity to engage with clients and discuss what opportunities are ahead.

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May 27, 2021 Money Management | 31

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Whilst they may not be available until 1 July, 2022, planning for the potential opportunities can start now.

Following is a summary of some of the major proposals and how they may affect your clients. Of course, it is always important to remember that at this point, the Budget night announcements are only statements of intended change and are not yet law.

SUPERANNUATION REFORMS The 2021/22 Federal Budget contained a number of superannuation measures. These measures include making contributions and managing retirement income stream, providing prospective first home buyers additional opportunities to save for a home using their superannuation and self-managed superannuation fund (SMSF) members greater access to making contributions while overseas.

Repealing the work test for certain voluntary superannuation contributions Effective date: From 1 July, 2022.

Affected clients: Individuals aged 67 to 74 (inclusive).

Individuals aged 67 to 74 (inclusive) will be eligible to make, or receive, certain voluntary super contributions without the need to meet the work test. Eligible contributions will include non-concessional contributions (including bringforward contributions), or salary sacrifice contributions, subject to existing contribution cap limits.

Individuals aged 67 to 74 (inclusive) will still have to meet the work test (or work test exemption) to make personal deductible contributions.

The Government has stated that removing the requirement to meet

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the work test under the above conditions will simplify the rules governing super contributions and will increase flexibility for older Australians to save for their retirement.

Reducing the eligibility age for downsizer contributions Effective date: From 1 July, 2022.

Affected clients: Individuals aged 60 plus.

The eligibility age to make a downsizer contribution into superannuation will be reduced from 65 to 60 years of age.

The downsizer contribution was first introduced from 1 July, 2018, allowing eligible individuals to make a one-off, post-tax contribution to super of up to $300,000 (per person) from the sale proceeds of their home.

Downsizer contributions do not count toward an individual’s non-concessional contribution cap, and do not have a total superannuation balance eligibility criterion.

The Government has stated that this measure will allow more older Australians to consider downsizing to a home that better suits their needs, thereby freeing up the stock of larger homes for younger families.

First Home Super Saver Scheme – Increasing the maximum releasable amount to $50,000 Effective date: From 1 July, 2022.

Affected clients: Prospective first home buyers.

Under the existing First Home Super Saver Scheme (FHSSS), the maximum releasable amount of voluntary concessional and non-concessional contributions will be increased from $30,000 to $50,000.

There is no change to the existing eligible voluntary

contribution limit of $15,000 per year. Eligible voluntary contributions (up to $15,000 per year) made from 1 July, 2017, will continue to count towards the total amount able to be released.

The Government has stated that this measure will ensure the FHSSS continues to help first home buyers in raising a deposit more quickly.

First Home Super Saver Scheme – Technical changes Effective date: Retrospectively from 1 July, 2018.

Affected clients: Prospective first home buyers.

Further to the increase in the maximum releasable amount, the Government will make four technical changes to the legislation underpinning the FHSSS. These changes aim to improve the schemes operation, as well as the experience of first home buyers using the scheme.

The four changes include: • Increasing the discretion of the Commissioner of Taxation to amend and revoke FHSSS applications; • Allowing individuals to withdraw or amend their applications prior to them receiving a FHSSS amount, and allow those who withdraw to re-apply for FHSSS releases in the future; • Allowing the Commissioner of Taxation to return any released FHSSS money to superannuation funds, provided that the money has not yet been released to the individual; and • Clarifying that money returned by the Commissioner of Taxation to superannuation funds is treated as funds’ non-assessable non-exempt income and does not count towards the individual’s contribution caps.

Continued on page 32

13/05/2021 10:36:25 AM

32 | Money Management May 27, 2021

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Continued from page 31

Remove the $450 per month threshold for superannuation guarantee eligibility Effective date: From 1 July, 2022.

Affected clients: Low income and part time workers.

The current $450 per month minimum income threshold, under which employees do not have to be paid the SG by their employer, will be removed.

Expanding the SG coverage for lower income workers is intended to improve equality in the superannuation system.

The Government has stated, citing the RIR, that around 300,000 individuals would receive additional SG payments each month.

SMSF – legacy retirement product conversion Effective date: From the beginning of the first financial year after Royal Assent of the enabling legislation.

Affected clients: Members with a market-linked, life-expectancy and lifetime product.

The Government is providing individuals the ability to exit specific legacy retirement income products over a limited two year period.

The concession will be provided for any conversion of the following legacy retirement products which first commenced prior to 20 September, 2007: • Market Linked Income Streams (MLIS); • Term Allocated Pensions (TAPs); and • Lifetime Pension and Annuity products.

Individuals will have the option to voluntarily transition to more flexible retirement products such as an account-based pension. Individuals will be able to choose to exit these products by fully commuting the legacy pension and rolling over the underlying capital, including any reserves, into an accumulation account. The choice can then be made to commence a new retirement product, take a lump sum benefit, or retain the funds in the accumulation account.

Importantly, any commuted reserves will not count towards an individual’s concessional contribution cap and will not trigger excess contributions. Instead, they will be taxed as an assessable contribution of the fund at the 15% tax rate.

If an individual does elect to commute an eligible pension, they will not be subject to a re-assessment of the social security treatment of the legacy product for the period before conversion. Flexi-pension products, lifetime products offered by large Australian Prudential Regulation Authority (APRA) regulated or public sector defined benefit schemes are not included in the measure.

SMSF – relaxing residency requirements Effective date: From the beginning of the first financial year after Royal Assent of the enabling legislation.

Affected clients: Members of SMSFs or a small APRA-regulated fund (SAF).

The Government will relax the residency requirements for SMSFs and SAFs by extending the central management and control temporary absence period for members of SMSFs from the current two years up to five years, and removing the active member test.

SMSF and SAF members will now have the opportunity to continue to make contributions to their preferred fund while temporarily overseas.

This measure will allow comparable contribution treatment to members of SMSFs and SAFs to that of APRA-regulated funds while overseas.

Tim Howard is technical consultant and Neil Sparks is national manager for SMSF strategy at BT.

08MM200521_30-36.indd 32

CPD QUIZ This activity has been pre-accredited by the Financial Planning Association for 0.25 CPD credit, which may be used by financial planners as supporting evidence of ongoing professional development.

1. Which of these statements is false? a) Individuals aged 67 to 74 (inclusive) will be eligible to make, or receive, certain voluntary super contributions without the need to meet the work test. b) Eligible contributions will include non-concessional contributions or salary sacrifice contributions, subject to existing contribution cap limits. c) Individuals aged 67 to 74 (inclusive) do not have to meet the work test (or work test exemption) to make personal deductible contributions. d) None of the above; all are true.

2. The Budget includes a proposed measure to reduce the eligibility age to make a downsizer contribution into superannuation from 65 to 60 years of age. This reduction is proposed to be effective from: a) 1 July, 2021 b) 1 July, 2022 c) 1 January, 2023 d) 1 July, 2023 3. The Federal Government proposes to remove the current $450 per month minimum income threshold, under which employees do not have to be paid the superannuation guarantee by their employer. How many people are expected to receive additional superannuation guarantee payments each month? a) 3,000,000 b) 300,000 c) 130,000 d) 30,000 4. The Government is proposing to provide individuals with SMSFs the ability to exit specific legacy retirement income products over a limited two-year period. Which products are included in this proposed measure? a) Market Linked Income Streams b) Term Allocated Pensions c) Lifetime Pension and Annuity products d) All of the above 5. Complete this sentence: The Government plans to relax the residency requirements for SMSFs and small APRA-regulated funds by: a) Extending the central management and control temporary absence period for members of SMSFs from the current two years up to five years and removing the active member test. b) Extending the central management and control temporary absence period for members of SMSFs from the current two years up to five years but retaining the active member test. c) Extending the central management and control temporary absence period for members of SMSFs from the current two years up to four years and removing the active member test. d) Extending the central management and control temporary absence period for members of SMSFs from the current two years up to four years but retaining the active member test.

TO SUBMIT YOUR ANSWERS VISIT https://www.moneymanagement.com.au/ features/tools-guides/super-changes-budget

For more information about the CPD Quiz, please email education@moneymanagement.com.au

13/05/2021 10:37:01 AM

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26/02/2021 10:18:18 AM

34 | Money Management May 27, 2021

Send your appointments to chris.dastoor@moneymanagement.com.au

Appointments

Move of the WEEK Steve Davison Chief commercial officer Midwinter Financial Services

Former AMP and AXA Wealth Management executive, Steve Davison has been appointed as chief commercial officer at Midwinter Financial Services.

Midwinter’s parent company, Bravura Solutions Limited announced Davison’s appointment noting that he was joining from Singapore-based Fintech, Better Trade Off, which had

MLC Life Insurance has appointed Bozenna Hinton as its new general manager – product, pricing and retail insurance proposition.

Hinton would report directly to chief life insurance officer, Michael Rogers, and become a member of the life insurance team.

She would be responsible for ensuring the sustainability of MLC Life Insurance’s portfolio, which included the new income protection product to be launched later this year.

Hinton was most recently the head of portfolio management – individual life at TAL, where she was responsible for overseeing the commercial performance of the retail and direct businesses.

She had more than 20 years’ experience in the life insurance industry, which included in roles spanning customer retention, claims and underwriting insights, pricing, analytics, and portfolio management.

She had also spent a significant portion of her career in actuarial consulting for Trowbridge Consulting and Ernst & Young.

Hinton was currently the chair of the international committee for the Actuaries Institute of Australia.

She had also been chair of the

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been developing digital financial planning services.

It said his previous experience included senior roles across AMP and AXA’s wealth management, transformation and advice divisions.

Bravura chief executive, Tony Klim, said: “We are delighted to welcome Steve as the chief commercial officer for Midwinter”.

International Actuarial Association education committee since 2016.

Crestone Wealth Management has expanded its South Australian office with five new appointments, including Kieran Purcell as manager of advisory SA. Sonya Brocklehurst, James McBride, Nicholas Hamersley and Ida Wong Taylor had also been appointed to new roles in the South Australian office.

Purcell had over 25 years’ experience in the wealth management industry and joined from Morgans Financial where he was previously general manager for Adelaide.

Prior to Morgans, Purcell was Macquarie’s office head in South Australia where he was responsible for over 100 employees.

Brocklehurst had over 20 years’ experience and joined from NAB Australia where she was previously a senior private client manager.

McBride joined from ANZ Banking Group where he was a private banker, responsible for managing a portfolio of high net worth (HNW) families.

Hamersley joined from Westpac Private Bank SA where he was associate director for the SA Global

“This new role would involve building on the combined Midwinter and Bravura offering, supporting the needs of existing and new clients and pursuing opportunities to expand the Midwinter business in Australia and internationally.

“An accomplished senior executive with diverse experience in digital platforms,

Investment Service and had over 20 years’ industry experience with HNW clients.

Taylor joined from Westpac Premier where she was a lending area manager and had almost 20 years’ experience.

All four would report to Purcell, while Purcell would report to head of advisory for NSW/QLD/SA, Michel Tritton.

The investment and financial management partner of the NSW public sector, TCorp, has appointed Rob Kenna as head of its funding and balance sheet team, responsible for raising debt for NSW and for managing the state’s balance sheet.

Kenna was head of programmatic funding at the Commonwealth Bank of Australia (CBA) and over the course of his 20-year career at CBA, he held a number of leadership positions across a range of financial markets disciplines which included head of debt capital markets origination and managing director debt markets.

ClearView Wealth has appointed former Zurich head of mental health and wellness, Maria Falas, to

SaaS, fintech, financial advice, sales and corporate strategy, we are confident Steve’s appointment will strengthen our existing capabilities and experience in the financial advice market.”

The appointment followed the departure of Jeff Hall from his position as Midwinter’s chief operating officer in April.

the newly-created position of head of life strategy and transformation.

The firm was on a multiyear transformation program which included the delivery of an integrated life insurance policy administrative system, underwriting rules engine and adviser portal which would coincide with the launch of a new life insurance offer in the second half of the year.

Falas would report to Gerard Kerr, ClearView general manager – life insurance, and would be responsible for the ongoing development and implementation of ClearView’s life insurance strategy and facilitate greater collaboration across business functions.

She had also previously held senior positions at ANZ/OnePath.

The Government has appointed Joe Longo as the Australian Securities and Investments Commission chair, replacing James Shipton, for a fiveyear period starting 1 June, 2021.

Longo was a senior adviser at law firm Herbert Smith Freehills.

He previously worked at Deutsche Bank for 17 years.

He would replace James Shipton who stepped down from his position following an investigation into his expenses.

11/05/2021 5:00:48 PM

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26/02/2021 10:55:29 AM

OUTSIDER OUT

ManagementMay April27, 2, 2021 2015 36 | Money Management

A light-hearted look at the other side of making money

Rhythm or blues: Getting the old BTFP band back together at Lonsec

Waxing up to surf the second adviser exodus wave OUTSIDER wishes his hearty congratulations to his old mate, Wayne Leggett, who is amongst a bevy of highly experienced financial advisers to announce they passed the latest Financial Adviser Standards and Ethics Authority (FASEA) exam.

As everyone knows, passing the exam represents a ticket to keep playing in the financial advice space at least until the end of 2025, when those who have passed will be expected to have obtained a FASEA-approved bachelor degree or equivalent.

Outsider doesn’t know Wayne’s long-term intentions or, indeed, that of the many other advisers who have passed the exam, but he notes Leggett’s social media suggestion that he has qualified to continue in practice until 31 December, 2025.

“After that, my lack of a ‘relevant’ degree, in spite of years of continuing professional development, will force

me to step away,” he said. “Oh well...I’ll just have to make the most of the next 4.5 years.”

For his part, Outsider hopes it is longer than that but as someone who has spent well over 40 years plying his own trade, Outsider appreciates that life is about so much more than trying to acquire a not-entirely-relevant tertiary qualification to keep doing so.

So, for all those people who thought the adviser exodus would taper after the last FASEA exam in December, a second wave seems inevitable in 2025.

OUTSIDER loves it when old bands get back together but acknowledges that not all the fans appreciate a trip down memory lane.

And so it turns out that well-known industry lead guitarist from that retro group, the BT Financial Planning Head-Banging Quintet, Mark Spiers, has used his position as chair to prevail upon the group’s former drummer, Mike Wright, to do it one more time at a new gig venue, Lonsec.

Outsider figures Spiers must have made an attractive offer to Wright who had been trying to drum up a storm of interest at Xplore Wealth until a bunch of roadies and others from HUB24 came along and changed that band’s tour schedule.

Still, from what Outsider hears a lot of the Lonsec support crew have high hopes for Wright as Lonsec’s new chief executive and drummer in circumstances where there appeared to have been some artistic differences with his predecessor, Charlie Hayne.

Seems the artistic differences revolved around Charlie mistaking head-slaps for head-banging and Outsider knows how that can lead to trouble not just in the band but in the mosh pit.

Time and the fans will tell whether the band can generate any new hits but Outsider suggests that the old institutional dealer group blues have had their day.

Taylor moves to new pastures but Outsider remains in the MM paddock OUTSIDER knows that a lot of readers have believed that he is the nom-de-plume of Money Management managing editor, Mike Taylor – something which Taylor has frequently, albeit not always convincingly, denied.

But the proof of Taylor’s denials will become clear in coming editions of Money Management as Taylor takes his leave from this publication after a long 18 years at the helm to pursue what he has told Outsider is a new project which will not have room for an elderly,

OUT OF CONTEXT www.moneymanagement.com.au

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golf-playing, single malt whisky connoisseur and inveterate gossip.

Outsider was, initially, hurt by Taylor’s rejection but has grown to accept that he and the departing managing editor were too much alike to get along for another 18 years and so it was best to part ways before what has been a mostly tolerable relationship turned intolerable.

Taylor has been decidedly vague about his new ‘project’ but Outsider heard him mumble something about leaving “Little Britain” and

returning to his ANZAC roots, which is perhaps appropriate for a man who enjoyed a brief but colourful military career.

All Outsider knows is that Taylor says he isn’t retiring and that his writing about the financial services sector will continue.

What Outsider can assure all readers is that, having been rejected by Taylor, he will be continuing to write for Money Management and annoying the new editor who rumour suggests may be a woman.

"Nobody tells you when the clock is going to strike 12 and it all turns to pumpkins and mice."

"It's business as usual... for businesses."

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13/05/2021 10:35:51 AM