Money Management | Vol. 35 No 10 | June 17, 2021

MAGAZINE OF CHOICE FOR AUSTRALIA’S WEALTH INDUSTRY

www.moneymanagement.com.au

Vol. 35 No 10 | June 17, 2021

17

ETFS

Rise of thematics

20

ADVICE

Being a family CFO

COMPLIANCE

Responsible investing

Advisers surprised by breaches reported to ASIC

BY JASSMYN GOH

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Drowning in compliance FINANCIAL advisers are about to be hit with a raft of compliance obligations over the next few months, adding to the difficulty of trying to remain the industry with a viable business.

From now until October, the regulatory changes include the independence disclosure, ongoing fee arrangements and fixed term agreements requirements, new complaints handling requirements, new breach reporting requirements, and design and distribution obligations.

Financial services lawyers warn that advisers need to act now to make sure they are ready once these requirements come into place to avoid any compliance breaches.

Hall and Wilcox partner, Adrian Verdnik, said: “There’s this continuum that is pushing advisers to a particular way of practicing and it involves a whole lot of compliance, and this approach places a heavy unreasonable burden when giving advice to retail clients”.

Agreeing, Holley Nethercote partner, Paul Derham said the “landslide” of regulatory reforms was tough work for advisers who just wanted to provide good advice to clients.

“Politically, the Government wants to be seen to be implementing the Royal Commission recommendations and it seems to be just putting on more layers of obligations. Why doesn’t the Government remove obligations that doesn’t spark anyone’s joy?” he said.

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Full feature on page 14

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TOOLBOX

AN increasing number of financial advisers who are getting their own Australian financial services licence (AFSL) or moving to smaller boutiques have found themselves to be the subject of a breach notification without prior knowledge.

Speaking to Money Management, Holley Nethercote partner, Paul Derham, said this was the latest problem to arise from the raft of compliance layers that were coming into place over the next few months.

“There have been a number of advisers who have been subject to a breach notification or some other notification as a previous licensee has gone and told something negative to the Australian Securities and Investments Commission [ASIC] but the adviser did not know,” he said.

“We’re starting to see a lot of that happen with advisers going and getting their own licences and going to smaller boutiques and then discovering things have been said about them.

“This is not a problem for everyone but it’s a new problem now that larger dealer groups are reporting so much misconduct and that’s a new thing.”

The new breach reporting regime would commence on 1 October, 2021, and licensees must lodge a report within 30 days of when they believed there would be or had been a significant breach.

However, Derham said a lot of bigger dealer groups had been reporting things that “might not even meet the current definition of a breach”.

Continued on page 3

FASEA will indicate to advisers if an exam is worth re-marking

BY CHRIS DASTOOR

ALTHOUGH the Financial Adviser Standards and Ethics Authority (FASEA) exam is marked on a pass or fail basis, FASEA has indicated it gives advice to advisers that are close to a pass that they can apply for a re-mark.

The admission to a Senate Estimates committee should give some certainty to advisers who failed the exam and were unsure if it would be worth the effort to apply for a re-mark, which would cost $198 plus GST. This was particularly notable as with only three sittings left before the 1 January, 2022, deadline, applying for a re-mark might help advisers avoid any issues by being trying to get re-instated on the Australian Securities and Investment Commission (ASIC) Financial Adviser Register (FAR).

Continued on page 3

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June 17, 2021 Money Management | 3

News

Quay makes first office purchase in five years

BY LAURA DEW

QUAY Global Real Estate has made its first entry back into the office market in five years, as it is optimistic that offices are coming back following the pandemic.

The firm bought office buildings in Manhattan and said it did not foresee companies moving to a permanent work from home arrangement. Many banking and technology firms such as Goldman Sachs, Facebook and Google had already stated they would have staff returning to offices later this year.

“We didn’t own any offices for five years but they were so cheap during COVID-19,” Chris Bedingfield, Quay principal and portfolio manager said.

“We have cities for a reason, people may work from home but firms will still need an office space. To not give staff a desk or only have hot desking is creating a false narrative.

“In Manhattan, offices are dirt cheap. We like to buy offices below the cost of building and prior to COVID-19, they were trading above the cost of building. COVID-19 has now given us the opportunity and we think there is still upside there.”

He said it was “crazy” for firms to expect staff to work in offices outside of the CBD which was a trend during the pandemic.

“I think it is crazy. There is a reason that CBDs exist and that is to maximise the

Advisers surprised by breaches reported to ASIC Continued from page 1 “Advisers don’t know it’s happening and they’re applying for licences and then ASIC says ‘we’re going to impose a compliance consultant condition or limit you in this way or show us what your responses are to these allegations’,” he said.

“And sometimes advisers are surprised when they can’t get information from their dealer group [about the report].”

Derham noted there were shared support offerings by law firms and some banks for advisers looking to go out on their own.

“You can go out on your own these days and get that wrap around support that you need that’s more available than that’s been,” he said.

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catchment of employment pool,” he said.

“Infrastructure is geared towards the CBD and businesses deliberately set up here to have that catchment of labour.

“People don’t have the time or the money to be travelling out to business parks. We think the CBD is coming back, we are optimistic and the prices reflect that.”

Meanwhile, he criticised managers who were capitalising on the COVID-19 reopening trend as he felt they should take a more targeted approach.

“There is a big re-opening theme mostly being driven by equity managers who are

using a scattergun approach,” he said.

“People are only looking at the theme and not the fundamentals. There has been a torrent of capital going into reopening stocks and no one is taking a surgical look, they are just buying everything within that theme.”

The Quay Global Real Estate fund returned 20% over one year to 31 May, 2021, according to FE Analytics, versus returns of 16.7% by the global property sector within the Australian Core Strategies universe.

It was the winner of Money Management's Fund Manager of the Year Award for Global Property Securities last month.

Chart 1: Performance of Quay Global Real Estate versus global property sector over one year to 31 May 2021

Source: FE Analytics

FASEA will indicate to advisers if an exam is worth re-marking Continued from page 1 Money Management previously noted examples of a successful re-sit attempt, which would help advisers paying another $540 plus GST to sit the exam.

Stephen Glenfield, FASEA chief executive, said any adviser that did not pass could apply for a re-mark, but were warned it may not be worth it.

“If they’re nowhere near the pass mark, they’re advised [that] you can apply for a re-mark, but your mark is not sufficient,” Glenfield said.

“If your mark is close to the border, the opportunity is there to apply for a re-mark, so it gives them an idea of where they sit without giving an actual mark.”

Glenfield said FASEA had made “good progress” on the feedback it gave advisers after the exam.

“Candidates used to get feedback that said whether they’d underperformed in one, two or three of [the exam] areas,” Glenfield said.

“The feedback that unsuccessful advisers are now getting is, for example, ‘in the legal and regulatory compliance area, the areas you underperformed in were A, B, C and D’.

“It’s broken it right down into which bits they’ve struggled with. And we’ve gone back, so all those who have been unsuccessful in the past can access that depth as well.

“That can be really important

for someone who has perhaps failed two or three times, so they can look for any particular trends.”

Glenfield said FASEA now offered pre and post-exam webinars to help advisers at both ends of the process.

“Once you sign up for the exam, you’re invited to a pre-webinar that FASEA hosts, where you can ask questions and where FASEA gives a rundown of what the exam will be about, what it will look like and what types of questions will be on it,” Glenfield said.

“Post exam, we run a webinar for unsuccessful candidates, to talk about the areas that unsuccessful candidates struggled with and what they’ll need to look at going forward.”

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4 | Money Management June 17, 2021

Editorial

jassmyn.goh@moneymanagement.com.au

ADVISERS SHOULD LOOK TO PASS FASEA EXAM DESPITE ‘ALTERNATIVE’ PATHWAYS

FE Money Management Pty Ltd Level 10

With so much at stake the Financial Adviser Standards and Ethics Authority needs to provide proper clarity on pathways for advisers who do not pass the exam this year.

THE FINANCIAL ADVISER Standards and Ethics Authority (FASEA) chief executive, Stephen Glenfield, said during Senate Estimates that advisers who did not pass the exam this year could sit the exam next year without being classified as a ‘new entrant’.

Upon further investigation, it seems that this was not so straightforward and that financial advisers should not rely on this as a ‘plan B’.

FASEA has said that if an existing adviser had a ‘ceased’ status on the Australian Securities and Investments Commission (ASIC) Financial Adviser Register (FAR) by the end of 2021, and then were to be re-authorised after 1 January, 2022, they could indeed sit the exam in 2022 without being classified as a ‘new entrant’.

However, if an existing adviser were authorised on the FAR, had not passed the exam by the end of this year, and wanted to practice in 2022, they would be classified as a new entrant and would need to meet the new entrant requirements including the professional year.

This alternate route could see advisers who had failed the last exam of November take a “career break” and technically be ‘ceased’ on the FAR, giving more time to pass the exam in 2022 without being classified as a ‘new entrant’.

4 Martin Place, Sydney, 2000

Editor: Jassmyn Goh Tel: 0438 957 266 jassmyn.goh@moneymanagement.com.au Associate Editor - Research: Oksana Patron Tel: 0439 137 814 oksana.patron@moneymanagement.com.au Senior Journalist: Laura Dew Tel: 0438 836 560 laura.dew@moneymanagement.com.au Journalist: Chris Dastoor Tel: 0439 076 518 chris.dastoor@moneymanagement.com.au Events Executive: Candace Qi Tel: 0439 355 561 candace.qi@fefundinfo.com ADVERTISING Account Manager: Damien Quinn

While FASEA has offered this pathway as part of their FAQ on their website, they need to give advisers proper clarity of the pathway and not just technical work arounds.

Without appropriate clarity, advisers are left questioning what will happen in their own situations and whether this is viable for them.

Financial advisers should heed the advice of Association of Financial Advisers (AFA) chief executive, Phil Anderson, who said advisers should do everything they can to pass the exam this year if they wanted to continue to advise clients in 2022.

During their time as a ‘ceased’ existing adviser, advisers cannot advise clients meaning their clients are left in limbo for at least the first half of the year unless advisers make alternative

arrangements for clients.

Not only this, FASEA would hand over the reins of the exam’s administration, dates, costs and format to ASIC come 1 January, 2022, under draft legislation.

The gap between being ‘ceased’ and the ability to service clients is even more unclear as ASIC has not given guidance as to when the exam dates will be held next year nor details on its administration of the exam.

There is too much at stake and too many unknowns for advisers to lean on this potential pathway especially given FASEA has not provided the clarity they need to prolong not passing the exam if they wish to practice next year.

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10/06/2021 5:28:03 PM

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6 | Money Management June 17, 2021

News

Pathway for advisers to avoid being classified as ‘new entrant’

BY JASSMYN GOH

EXISTING advisers who are “ceased” and have not passed the Financial Adviser Standards and Ethics Authority (FASEA) exam by the end of 2021 but are re-authorised to provide financial advice after 1 January, 2022, will not be classified as a new entrant.

During a parliamentary committee, FASEA chief executive, Stephen Glenfield said existing advisers who had not passed would be able to sit the exam next year due to a section under the Corporations Act. When Money Management asked FASEA to confirm whether existing advisers who were “ceased” on the Australian Securities and Investments Commission (ASIC)

Financial Adviser Register (FAR) would have to become a new entrant, a spokesperson said: “If you are an existing adviser and ceased on the FAR as at 1 January, 2022, then you must pass the exam before you are eligible to be reauthorised to provide financial advice by your licensee”.

This suggested that advisers who failed the last exam in November could then take a “career break” and could sit the exam in 2022 without being classified as a new entrant.

If an existing adviser who was “ceased” on the FAR and was re-authorised to provide advice before 1 January, 2022, and had not passed the FASEA exam, they would be classified as a new entrant.

“For an existing adviser who has not

passed the exam by 1 January, 2022, their licensee will be required to remove their authorisation to provide advice and notify ASIC that they have not met the examination requirements of the Corporations Act,” FASEA said.

“Their status on ASIC’s Financial Adviser Register will be updated to reflect that they are no longer authorised and therefore “ceased”.

“If they want to return to practice, they would be classified as a new entrant and would need to meet the new entrant requirements.”

Commenting, Association of Financial Advisers (AFA) chief executive, Phil Anderson said while this appeared to be an alternative for advisers who did not think they could pass the exam this year, there was a lack of certainty of when the exam would run in 2022.

“It appears there is an option for advisers that are on a career break as at 1 January, 2022, and this may be relevant in certain circumstances, however for the vast bulk of advisers we would encourage them to do everything they can to pass the exam before the end of 2021,” Anderson said.

“Next year the exam will pass from FASEA to ASIC to administer and I would still encourage advisers not to place a great deal of reliance on that pathway and instead focus on passing the exam this year to give the confidence to continue to operate in the new year.

“Plus if you don’t pass by the end of this year you can’t service clients in early part of next year and you would have to make an alternative arrangement for that gap and otherwise your ongoing fee arrangements would necessarily need to terminate.”

Lack of ‘natural pathway’ for generation of financial advisers

BY LAURA DEW

THE reluctance of business owners to sell their advice firms is leaving a generation of advisers unable to progress, according to Succession Plus.

Many owners were now working into their advanced years which meant there was “no natural pathway” for younger members of staff to take over the business.

Speaking to Money Management, chief executive, Craig West, said when advisers did eventually sell-up, they were often skipping a generation in their 50s and going directly to

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those younger staff in their 30s.

West said: “We are seeing people working until their 80s, they are in no rush to sell up.

They are loyal to their clients and stay too long which makes succession planning difficult.

“There has been a dramatic change, 10 to 15 years ago it was about selling the business, now baby boomers are already wealthy so they are less reliant on the sale and money is no longer the goal.

They want to be able to keep staff and clients and leave a legacy, that is their number one outcome now.”

As a result, many advisers of in

their 50s were leaving firms and setting up on their own but the costs of compliance meant this was not always a viable option for everyone. Others were leaving the industry and choosing new careers altogether to avoid taking the Financial Advisers Standards and Ethics Authority (FASEA) exam.

“When they do sell up, a generation is skipped and there is no natural pathway for younger members of staff. Then it has to become an external sale which is more difficult and a harder transition for clients,” West said.

“There are people aged 65-70,

then people aged 35-40, it is the generation aged 50-55 who are missing out and they don’t get the chance to take over the business, they are missing out completely.

“So then they don’t want to wait and end up taking their clients and setting up themselves which is something we are seeing more frequently.”

In light of this, he said an option for firms was to set up an employee succession ownership plan which enabled staff to buy the owner out over time which created a gradual transition and let staff feel invested in the business’ future.

10/06/2021 9:47:00 AM

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8 | Money Management June 17, 2021

News

ASIC levy final straw for accountants providing advice

BY OKSANA PATRON

A combination of factors, such as the Australian Securities and Investments Commission (ASIC) levy on top of licensing and Financial Adviser Standards and Ethics Authority (FASEA) requirements, are driving away a growing number of accountants with limited authority from providing financial advice.

Money Management previously reported that the accounting firms with limited advice support services and for which the financial advice was only a small part of their day-today work were driving the drops in overall adviser numbers observed by ASIC’s Financial Adviser Register (FAR).

Grahame Evans, the chief executive at Easton Wealth, told Money Management that for many accountants the impact of ASIC’s levy was a final straw, given it came on top of the cost of taking the FASEA exam, the licensing cost, the cost of extra study, and the cost of doing continuing professional development (CPD).

Easton Wealth, according to FAR data lost 10 adviser roles in the first week of June and lost over 60 adviser roles since the start of year.

“For many of them within the limited authority space ASIC’s levy has been really a nail in a coffin. The other aspect is the CPD and the [FASEA] exam and it’s all becoming too much for them, with very little returns, so many [the accountants] just decided to stop providing the advice in relation to selfmanaged super funds [SMSFs],” he said.

“These are not the people who have left the

accounting practices, these are the people who have made a conscious decision to hand back their authorisations and not have one going forward.”

Evans stressed that this number, those who would decide to opt out from the industry, would be even higher after 31 December, 2021, as accountants in the limited authorisation space would be joined by many experienced advisers who would, most likely, stop providing advice come 1 January, 2022.

“The whole process is going to lose quite a number of experienced advisers and because of what is going on we are going to see less advisers that we have seen before because people are opting of doing what is required to

be a financial adviser,” he said.

Evans also noted that since even the provision of general advice required to be authorised in some capacity, he expected many of the accountants, for whom the financial advice was always only a small part of their business, to move back to just providing tax advice which they were allowed to do under the Corporations Act. “I think it becomes difficult because the clients will be asking their accountants about some aspects in relation to self-managed super funds. And now they either have to tell the client they can’t give advice in this area, other than tax advice, or they will have to refer them on,” he said.

Adviser exodus mainly those with less experience: FASEA

BY JASSMYN GOH

IT is the less experienced advisers who are leaving the industry rather than more experienced advisers, according to the Financial Adviser Standards and Ethics Authority (FASEA).

In answering a question on notice by Liberal senator, Slade Brockman, on whether the authority was monitoring the trend that a disproportionate number of experienced, competent specialists were leaving the sector as a result, FASEA said most exits were from newer advisers.

FASEA said an analysis of the Australian Securities and Investments Commission’s Financial Adviser Register (FAR) between July 2019 and December 2020 indicated that over 60% of those who exited the FAR during that period had less than 10 years’ experience. “…only 7% of the exits represented advisers with more than 30 years’ experience indicating those less experienced advisers are

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leaving the industry at a proportionately higher rate than experienced advisers.”

Within the same answer, FASEA noted that specialist advisers or stockbrokers were not disadvantaged by the exam and that it might be that some firms just had better prepared advisers.

“Analysis of the composition of the 1,437 who have not passed the exam does not demonstrate a disadvantage between generalist financial planners and specialist financial advisers with a split of approximately 60/40% respectively composing those who had failed,” FASEA said. “…The analysis shows the majority of stockbroking Australian financial services license (AFSLs) are performing well it the exam. Of the 20 stockbroking AFSLs, 14 had a pass rate greater than the cohort average.

“FASEA considers this demonstrates the exam is not problematic to stockbrokers as a group, rather there are some firms whose advisers are better prepared than others to sit the exam.”

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10 | Money Management June 17, 2021

News

High number of advisers who passed FASEA exam do not practice

BY OKSANA PATRON

RECENT data has found that of 9,995 advisers who passed the Financial Adviser Standards and Ethics authority (FASEA) exam there were 699 who were classed as ‘ceased’ on the Australian Securities and Investments Commission (ASIC) Financial Adviser Register (FAR).

The data looked at the numbers of advisers who have passed the exam and had given permission to be on the list.

Colin Williams, director at consultancy analysing adviser movements Wealth Data (formerly known as HFS Consulting), said if that number were to be grossed up to account for those advisers who had passed the FASEA exam but did not disclose their pass, it would go up to 946.

Also, according to the data, of the 699 identified as having passed the FASEA exam, but currently ceased, 621 left the industry after 1 January, 2019, and there was a total of 784 resignations for this group of 621, highlighting that some lost their role more than once.

“Not all appear to be without a ‘job’,” Williams said.

“A small number work in advice support roles and have been released

BY LAURA DEW

from the FAR. We have seen this occur a number of times as licensees cut back on the number of non-client facing advisers listed on the FAR. “The median years experience for the group is 11 years and 495 had left the financial planning peer group.

One would expect that many will be keen to get back into advice. This could cushion the overall forecasted loss of advisers.”

Williams said of the 13,500 advisers who passed the exam to date (post the March 2021 sittings), according to the FASEA’s published data, 9,995 passes were matched by Wealth Data against advisers and licensees on the FAR listing. This excluded timeshare and the majority of foreign exchange advisers.

To extend the forecast to year end, Wealth Data reviewed the current number of advisers

expected to sit the May sitting – at 1,850 and estimated the number of advisers who would re-sit the exams by year end. “...We have ‘grossed up’ pass rates by 1.35 to make up for the advisers who have passed but not disclosed their pass on the FASEA Listing,” Williams said.

“Our estimate of remaining passes is a bit optimistic, but we feel there is now a concerted effort by all stakeholders including licensees, to help the remaining advisers to pass the exam. Using this 2,554 as a ‘pool’ of remaining advisers, we have shared this equally by the current pass rates at peer group and licensees levels to get to our final figures.

“To put this this into perspective, we have 9,293 actual adviser passes and the final number of actual advisers is forecasted to be 14,955.”

AUSTRAC investigating NAB over AML/CTF Act compliance

BY CHRIS DASTOOR

THE National Australia Bank (NAB) has been informed by AUSTRAC it has identified “serious concerns” with NAB’s compliance with the Anti-Money Laundering (AML) and Counter-Terrorism Financing (CTF) Act 2006 and the AML and CTF Financing Rules 2007.

AUSTRAC advised NAB in a letter on 4 June, 2021, that there was “potential serious and ongoing non-compliance” with customer identification procedures, ongoing customer due diligence and compliance with Part A of NAB’s AML/CTF program.

Those concerns were referred to AUSTRAC’s enforcement team which had initiated a formal enforcement investigation.

AUSTRAC said it had not made any decision about whether or not enforcement action would be taken, but at this stage it was not considering civil penalty proceedings and this decision was “reflective of the work undertaken”

by NAB to date.

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Which funds benefit from IOOF’s acquisition?

The referral followed regular engagement by NAB with AUSTRAC, to report issues and keep AUSTRAC informed of progress of NAB’s AML and CTF programs.

Ross McEwan, NAB chief executive, said the bank would continue to cooperate with any AUSTRAC investigation.

“NAB takes its financial crime obligations seriously.

We are very aware that we need to further improve our performance in relation to these matters. We have been working to improve and clearly have more to do,” McEwan said.

“NAB has important role in monitoring and reporting suspicious activity and keeping Australia’s financial system, our bank and our customers safe.

“It is a key priority for everyone at NAB to uplift our financial capabilities, minimise risk to customers and the bank, and improve operation performance. That’s why we are so focused on getting the basics right every time to protect our customers and our bank.”

THERE are four funds set to benefit from the completion of the acquisition of MLC Wealth by IOOF from National Australia Bank (NAB).

NAB completed its sale of MLC Wealth to IOOF, doubling the size of IOOF’s business to $494 billion in funds under management and an additional 406 MLC advisers would join the firm.

The deal had first been confirmed at the end of August 2020.

After a dip at the start of the year following the announcement that it had lost $400 million in funds under management, advice and administration, shares in IOOF had risen 15% since the start of the year to 28 May, 2021.

This compared to returns of 10.6% by the ASX 200.

However, IOOF had struggled over the long-term with losses of 43% over three years to 28 May, 2021.

According to FE Analytics, IOOF was held by Lazard Defensive Australian Equity, OC Premium Small Companies, VanEck Small Cap Dividend Payers ETF and Nikko Australian Share Income fund.

These funds each had around 2% to 3% weighting to the company.

Malcolm Whitten, Tyndall AM portfolio manager, which manages the Nikko fund following an acquisition by Yarra Capital Management, said: “IOOF has been on a journey of its own right, it has boldly advanced on MLC Wealth and it did a capital raising. It has a tremendous opportunity and has less problems than other players in the space”.

9/06/2021 10:26:25 AM

June 17, 2021 Money Management | 11

News

ASIC levy increase due to declining number of financial advisers

BY JASSMYN GOH

THE increase in the Australian Securities and Investments Commission (ASIC) 2019/20 levies for licensees was the result of funding, an increase in the regulator’s costs, and the declining number of financial advisers.

In an answer to a question on notice by Liberal backbencher Andrew Bragg, ASIC said the Government increased its budget by $404 million over four years meet the level of regulatory activity as a result of the Royal Commission findings.

“The Government agreed at

the time of increasing ASIC’s budget that the additional funding would be recovered under ASIC’s industry funding arrangements,” it said.

“Against this backdrop of additional funding and increase in ASIC costs, the total number of financial advisers decreased 17% from 24,919 in 2018/19 to 21,308 in 2019/20.

“The levy for licensees who provide personal advice on relevant financial products to retail clients comprises: 1) A fixed component of $1,500 per licensee; and 2) A graduated levy component calculated by reference to the number of advisers authorised by the licensee.

“A combination of an increase in total costs to be recovered, and a decrease in the number of advisers year-on-year, resulted in the graduated levy component increase from $1,142 in 2018/19 to $2,426 per adviser in 2019/20.”

Over 100 advisers leave the industry in a single week

BY OKSANA PATRON

SOME 103 financial advisers left the industry in one week driving down the total number of advisers to 19,850, according to data.

Wealth Data’s (formerly HFS Consulting) latest analysis of the Australian Securities and Investments Commission (ASIC) Financial Adviser Register (FAR) found adviser movements were dominated by IOOF finalising its acquisition of MLC Wealth and its advisers.

At the same time, the number of adviser roles fell by 107 to 20,199 and this was driven by IOOF which reported a loss of 64 adviser roles, based on the combined number of advisers at MLC and IOOF. However, Wealth Data’s director, Colin Williams, explained that many of these roles were non-client facing and therefore might have not have necessarily lost their jobs as their roles may have been reclassified.

“However, quite a few advisers have left and are appearing at other licensees,” he said.

IOOF was followed by AMP and Easton Group which were down 19 and 10 roles, respectively.

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Also, 43 licensee owners reported net losses for 155 adviser roles.

Another significant development this week was the ongoing race between the two largest licensee owners, AMP Group and IOOF, which now fully owned MLC. IOOF was well positioned to overtake its rival as it had almost 50 more adviser roles (1,470) than AMP which was sitting at 1,424.

Earlier in June, Money Management reported that with the acquisition of 406 advisers brought from MLC, IOOF expected to boost its total numbers of advisers to around 1,500.

This was further in line with Wealth Data’s estimate which indicated that the gap between AMP and IOOF could have been even closer given AMP’s additional loss of 19 adviser roles.

By comparison, in September 2020 when IOOF first announced the proposed deal with MLC, the combined IOOF/MLC had 1,964 advisers and AMP had 1,824, a variance of 140.

Counting year-to-date, the new IOOF was down 346 adviser roles, while AMP, NTAA-owned SMSF Advisers Network, and Easton Group saw a departure of 167, 67 and 64 roles, respectively.

Ex-adviser banned for three years

FORMER financial adviser Nathan Smith has been banned by the corporate regulator for three years after failing to provide appropriate advice that was in the best interests of clients.

The Australian Securities and Investments Commission (ASIC) said Brisbane-based Smith did not consider his clients’ existing products when making recommendations to switch products and did not align recommended investment strategies with client risk profiles.

“He also failed to properly disclose in advice documents all the costs and significant consequences of switching products,” ASIC said.

“Smith did not provide clients with fee disclosure statements within the 60 day statutory timeframe and he failed to provide compliant renewal notices in relation to ongoing fee arrangements.”

Smith had been a financial adviser since 2010 and was authorised by a number of Australian financial services licensees.

His misconduct occurred during the time he was an authorised representative of MyPlanner Professional Services and Total Financial Solutions Australia.

10/06/2021 9:47:35 AM

12 | Money Management June 17, 2021

InFocus

WILL THERE BE A SILVER LINING TO THE INDUSTRY’S ADVISER EXODUS? Oksana Patron writes that revised adviser number forecasts are shining a new light on the adviser exodus and how it will affect different adviser roles.

OVER THE LAST few months, the industry has undeniably experienced dwindling adviser numbers as shown on the Australian Securities and Investments Commission (ASIC) Financial Advisers Register (FAR).

The industry has now been additionally plagued by a growing trend among accounting practices, especially those with limited authority, who are consciously choosing to hand back their authorisations on the grounds of the unfavourable costto-return ratio given that financial advice was only a small part of their business.

Also, many of them said that ASIC’s levy was the nail in coffin as it came on top of other costs and requirements such as the Financial Adviser Standards and Ethics Authority (FASEA) exam and other associated costs with regards to licensing including the requirement of obtaining of the continuing professional development (CPD) points.

The shift in approaches to the provision of the financial advice, meaning that it will not be financially viable for all types of groups to remain in the business, is pointing everyone to the key question of how many of today’s advisers will stay in the industry and how many will really be out there working with clients next year. At the end of May 2021, the numbers of actual advisers, as evidenced by the FAR, broke the psychologically important threshold of 20,000 and sat at 19,953.

By comparison back in mid-2018, and right in the middle of the Royal Commission into Misconduct in the Banking,

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Superannuation and Financial Services, the number of financial advisers stood above 25,000 and the top 100 largest financial planning groups collectively accounted for 16,000 of advisers, according to Money Management’s 2018 TOP Financial Planning Groups ranking.

Fast forward to mid-2021 and the data is confirming the continuous exodus of advisers, with the revised forecasts often not shy from the predictions of around 15,000 FASEA-certified advisers who will be around next year to continue to advise their clients.

Colin Williams, director at Wealth Data which provides a weekly analysis of adviser movements, said that at a high level he would expect a major 25% reduction of adviser roles against the current number of 20,306, which compared to the high of 28,216 in 2018 and will translate into a 46% drop.

“If there is a silver lining in the

forecasts, the number of advisers who provide holistic advice, predominately the financial planning peer group, will hold up relatively well. And it is this sector that provides the bulk of advice across retail clients in Australia,” he said.

At the same time, he admitted that in the space of the accounting – limited advice, another peer group representing the licensees that have the majority of its advisers restricted to selfmanaged super funds (SMSFs) and superannuation, would be the hardest hit in percentage terms.

“This peer group is relatively new and took advantage of rule changes in 2016 allowing accountants to provide limited advice to their SMSF clients. The vast majority of advisers in this peer group would not view their role as financial adviser, rather they would spend the majority of their time working as an accountant. Therefore, few if any will lose their actual job in the

accounting firm,” Williams explained.

On the other hand, Wealth Data’s director stressed that even before ASIC’s FAR became available and limited licences got the green light, he said he was always of the opinion that there would be approximately 15,000 advisers working with clients.

But this is not necessary a bad thing for the industry. According to Williams, it could be the start of a “boom time” and for advisers, particularly those who will be here for the long-term, opportunities to gain referrals and clients from accountants will improve.

“To put this into perspective, when dividing the total number of SMSFs by the current number of advisers, the current ratio of 28.8 per adviser, if we get down to 15,000 advisers, it will be 38.3 per advisers. Assets held in SMSFs will move from 37.1 million per adviser to 49.3 million per adviser,” he said.

Grahame Evans, chief executive at Easton Wealth, was of a similar opinion.

“We would probably suggest the number of advisers will decrease to around 15,000, but you will need to take off all of these people doing the timeshare, and you’ve also got stockbrokers in that, but the numbers of advisers are dropping substantially”.

He said the other important time which will see a lot of advisers come off from the register will be the beginning of 2022, given that under the Corporations Act existing advisers are required to pass the FASEA exam before 1 January, 2022.

10/06/2021 11:26:34 AM

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7/06/2021 2:55:21 PM

14 | Money Management June 17, 2021

Compliance

DROWNING IN COMPLIANCE

There is a raft of compliance obligations coming into place over the next few months and advisers need to ensure they have all their ducks in a row to avoid any breaches, Jassmyn Goh writes.

THERE IS NO doubt that financial advisers have a lot on their plate and in the months from the time of writing leading up to October 2021, advisers will be hit with five heavy regulatory changes.

These are the independence disclosure on 1 July, ongoing fee arrangements and fixed term agreements requirements on 1 July, new breach reporting requirements on 1 October ,new complaints handling requirements on 5 October, and design and distribution obligations (DDO) on 5 October.

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Holley Nethercote partner, Paul Derham, told Money Management that advisers were facing a “landslide” of regulatory reform.

Derham said the load of compliance was tough work for advisers who just wanted to provide good advice to their clients.

“Politically, the Government wants to be seen to be implementing the Royal Commission recommendations and it seems to be just putting on more layers of obligations. Why doesn’t the Government remove obligations that doesn’t spark

anyone’s joy?” he said.

“They introduced best interests in 2013, why don’t they get rid of statement of advice (SoA) content requirements and just leave it as best interests obligations?

“They introduced this new fee arrangement regime and they’ve made it more rigid than before.

This is not ASIC [the Australian Securities and Investments Commission], it is the government that has introduced a new breach regime that is so onerous that it’s going to drastically increase the amount of reportable situations.”

ONGOING FEE ARRANGEMENTS From 1 July, advisers must introduce an annual renewal of ongoing fee arrangements and there is a requirement that Australian financial services (AFS) licensees cannot deduct ongoing fees without the client’s consent.

Herbert Smith Freehills partner, Michael Vrisakis, said from a compliance and regulatory point of view there were provisions in the legislation which were very turgid and quite difficult to achieve 100% compliance around.

Vrisakis pointed to the ongoing

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June 17, 2021 Money Management | 15

Compliance

fee arrangements as being one where it was difficult to achieve 100% compliance due to the technical requirements.

“It’s not just the technical requirements but the actual reporting obligations that you need to get completely correct otherwise you could potentially breach the Fee Disclosure Statement [FDS] provisions,” he said.

“For clients under ongoing fee arrangements for more than 12 months, advisers have got to do an FDS, and the FDS is only satisfied if you record all the fees 100% accurately and all the services 100% accurately.

“If you have any of the fees wrong even if they’re a $1 out then technically you have not got a compliant FDS. That’s something I think was unintended. But it’s pretty significant in terms of advisers being aware that the regime is one that is difficult to navigate.”

Vrisakis noted this compliance complexity was the reason there would be many advisers preferring to go with 12 months or less fee arrangements.

“It’s not that people don’t want to comply, it’s just really hard to achieve 100% compliance because of some of the technical nature of some of those provisions,” he said.

To avoid a breach advisers would need more automation and compliance controls to verify inputs, Vrisakis said.

However, spending more money on technology on top of all the other financial advice business costs was another stress point, which he said was a reason why advice businesses were more challenged from a compliance perspective and from a financial outlay point of view.

“The majority of advisers have responded to the challenges but

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there’s a difference between bona fide energetic responses to the challenges and actually sometimes not being able to achieve impossible standards of legislative compliance,” he said.

Derham said the ongoing fee arrangements was the main legal pitfall for advisers at the moment and that advice practices should have a proactive compliance framework.

“They need some kind of compliance and risk committee to look ahead and not just to react. It’s not a legal requirement per se but I think it’s the best way to go,” he said.

“Any company should have regular board meetings and the role of that is part of their governance structure, but most businesses can’t deal with everything on the board level.

“So, the idea of having a purpose-built committee that can be really lean is an efficient way to deal with things. They might only need external support once a year and then run it internally the rest of the year.”

Derham noted there were many inexpensive compliance committee tools advisers could use.

DECLARATION OF (NON)-INDEPENDENCE According to an analysis by The Fold Legal, only 2% of advisers would be able to declare themselves as ‘independent’ under the new obligations. From 1 July, advisers and advice firms that issued an FSG would need to disclose their lack of independence on the front page of the FSG. The Fold said to qualify as ‘independent’ advisers, their AFS licensee and all authorised representatives: • Do not receive insurance

“There’s a difference between bona fide energetic responses to the challenges and actually sometimes not being able to achieve impossible standards of legislative compliance.”

– Michael Vrisakis commissions (or rebate them back to clients in full); • Do not receive any gifts or benefits from product providers; • Have no restrictions regarding the products you can recommend; and • Do not own, are not owned by, and do not have any interest or association with any product providers.

If advisers did not qualify as ‘independent’ they needed to disclose if they were not independent, impartial, or unbiased, and explain why.

Derham said if advisers wanted to meet the definition of ‘independent’ they needed to answer the question of “how far are you willing to go?”.

“Are you willing to not even let clients pay for your lunch? It’s not a black and white question this definition of being eligible for independence and you’ve got to be able to apply some analysis to it,” he said.

He noted that there was behavioural science research that found that that kind of disclosure often had a trust-building impact rather than leading to the audience questioning whether they should go ahead as a counter-intuitive effect.

Vrisakis warned that to qualify as ‘independent’ advisers needed

to ensure they had a “clean slate” before they could make this claim and that he had been seeing some auditing done by licensees to make sure these claims could be made.

Hall and Wilcox partner, Adrian Verdnik’s main concern with this obligation is that it would further alarm clients as to whether the advice they received was independently considered.

He said this was another burden for advisers in terms of servicing retail clients.

“Advisers will have to have discussions with clients as to why that disclosure is necessary and appropriate and how that has an impact on the adviser’s ability to discharge their obligations to ensure the advice given is in best interest of clients,” he said.

“It’s going to require advisers think through how they have that discussion with clients and give them some assurance they are still going to be delivering advice as they are required to do in the best interest of their clients.”

Verdnik said he had seen a number of approaches by advisers to articulate the disclosure which ranged from long disclosures to brief statements that complied with the law.

“As with the case with any new law, it’s open to take different Continued on page 16

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16 | Money Management June 17, 2021

Compliance

Continued from page 15 approaches until some stage the regulator or a court gives guidance as to what the appropriate approach is [to articulate the disclosure],” he said.

“That’s another challenge for advisers to face and it will prompt discussions with clients who read that and ask ‘what does that mean for me and does that mean I cannot trust advice you give me?’.

“Advisers need to have a clear idea as to how to respond to queries from clients.”

DESIGN AND DISTRIBUTION OBLIGATIONS Verdnik also said the new DDO laws were yet another onerous compliance layer that would make dealing with retail clients under a fee-for-service basis much more difficult.

He said there were exemptions in the DDO laws around personal advice but they were strictly limited to giving personal advice and implementing recommendations from personal advice.

“For dealer groups and advisers who don’t just give personal advice but have other work streams that are likely going to get drawn into complying with DDO, that’s going to be a lot of work because there are reporting obligations, recordkeeping obligations, and obligations notifying issuers about significant dealings with financial products,” he said.

“If an issuer comes up with target market determination for a particular financial product and the adviser recommends two clients who are not in this target market that require this product, then there seems to be a misalignment

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between what the product issuer thinks what the product does and who the target market is and what adviser thinks. That needs to be notified to issuers.

“For dealer groups who have complex products having to now comply with yet another onerous compliance obligation when dealing with retail clients is just going to make a fee-for-service basis so much more difficult.”

Vrisakis said the exemption from personal advice related to enquiring about client’s “personal circumstances for the purposes of ascertaining if they fit within the target market determination”.

“But you can only use the exception for that purpose and where a target market determination is required to be made,” Vrisakis said.

“Advisers therefore need to be careful that it’s only for such enquiry purposes and not for the purposes of actually giving personal advice more broadly in circumstances unconnected with this ascertaining process.”

Verdnik warned that a lot of advisers felt the personal advice exemption in DDO was a complete carve-out but it was not.

To avoid issues with DDO,

Verdnik said, advisers needed to engage with product issuers now to understand what their target market determinations for those products were going to look like and what kind of distribution conditions the issuer was going to place, before the obligations went live in October.

“There’s some conjecture in the industry now as to whether product issuers will or will not enter into formal legal distribution agreements with advisers that commonly distribute their product,” he said.

“Advisers need to make sure they have arrangements in place including internal governance arrangements to make sure they understand those conditions and to meet them.”

Verdnik stressed advisers needed to start thinking about it now but that it was difficult given the amount of compliance obligations coming into place over the next few months.

“There’s this continuum that is pushing advisers to a particular way of practicing and it involves a whole lot of compliance, and this approach places a heavy unreasonable burden when giving advice to retail clients,” he said.

10/06/2021 11:55:20 AM

June 17, 2021 Money Management | 17

ETFs

PLAYING A THEME Opting for a core/satellite approach can be an easier way for advisers to utilise thematic exchange traded funds, writes Chris Dastoor, as they navigate an abundance of options.

EXCHANGE TRADED FUNDS (ETFs) have been a game changer for investors – the ease of access to a fund that tracked an index has meant, for as little as the minimum investment on an exchange, investors are exposed to a diverse range of equities.

At its most basic level, the ETF market offers products that track indices like the ASX 300, NASDAQ or S&P 500, as well as diversified multi-asset funds that mix equities and bonds – giving the holder a

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diversified portfolio within a single product.

That broad focus has meant investors missed out on gains from specific themes; this is where thematic ETFs can play an impactful role in customising portfolios to gain exposure to future themes and megatrends.

Instead of focusing on broad market indices or sectors, thematic ETFs are designed around potential structural shifts the market is expected to react to, taking the

game to another level by investing in trends like gaming or cloud computing, climate change, robotics and healthcare.

This type of exposure fills the void between investing in a broadbased fund and investing in stocks directly, meaning investors still reduce the risk of playing the stockmarket directly.

Over the six months to 30 April, 2021, funds under management in thematic ETFs grew 70% to $4.3 billion.

Over the year to 30 April, 2021, according to FE Analytics, the bestperforming thematic ETFs were ETF Securities (ETFS) Battery Tech and Lithium (93.48%), ETFS FANG+ (61.46%), BetaShares Asia Technology Tigers (60.85%), VanEck Australian Banks (60.73%), and BetaShares Global Agriculture Companies (53.76%).

Kanish Chugh, head of distribution at ETFS, said the Continued on page 18

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18 | Money Management June 17, 2021

ETFs

Continued from page 17 advantage of thematic ETFs is that it gives exposure to the underlying megatrends.

“You can get those exposures in part by investing in the S&P 500 or the NASDAQ, but you’re investing in the broad index and not getting the actual true exposure,” Chugh said.

“When I’m looking at the overlap of some of the thematic ETFs that we have with some of the broad indices – it’s quite small.

“People that want to get those exposures – now they’ve got the tools to do them.”

Alex Vynokur, BetaShares chief executive, said thematic ETFs offered the benefits of diversified exposure to a particular theme.

“Thematic ETFs are less diversified, unlike whole market ETFs, but the flip side is that it provides a more targeted exposure,” Vynokur said. “It’s a good way for investors to obtain exposure to a theme or sector

– traditionally, the way investors used to get these sort of exposures was by trying to pick individual stocks.”

As to what classified as a ‘thematic’, Arian Neiron, VanEck chief executive and managing director – Asia Pacific, defined it as a persistent, structural growth trend that they foresaw over a 10 to 20-year time horizon.

“First thing we do to define it

as a thematic is whether we believe it is a structural growth trend,” Neiron said.

“We spend years on this, it’s not something that we go ‘oh, that’s kind of cool, it’s happening in the US’ so it can’t be something that’s in vogue.

“We’re not going to launch an ETF that we think is in vogue or may catch the Reddit or social media momentum.”

Chugh agreed and said the

Chart 1: Performance of best-performing thematic funds over one year to 30 April

approach to product design meant investors would be putting their money in a fund with longevity.

“When we’re looking to launch an ETF it needs to be long-term, it can’t be a short-term view, so as we build our range we’re going to be looking at long-term structural trends,” Chugh said.

Vynokur said BetaShares had particularly found success with its global cybersecurity, agriculture, and cloud computing ETFs. “Cybersecurity is a very important theme – fighting cybercrime on one hand is a need for Governments, individuals and companies, but at the same time it’s a tremendous long-term investment opportunity for investors,” Vynokur said.

“One ETF on a lot of people’s minds as there are a lot of concerns over inflation is the global agriculture ETF; a significant portion of investors are expecting some of the largest agricultural companies in the world to continue to benefit as inflation rears its head.

“COVID-19 has accelerated a lot of the trends that we have seen before which is a lot of our business interactions, our entertainment, and transactions are now in the cloud.”

Neiron said he had a personal

Source: FE Analytics

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June 17, 2021 Money Management | 19

ETFs

“We’re not going to launch an ETF that we think is in vogue or may catch the Reddit or social media momentum.”

– Arian Neiron, VanEck bias on which thematic fund he thought was most exciting, as his mother was the chief executive of a computer leasing company when he grew up.

“I was fortunate enough to have an Atari 2600… so I do like our video gaming and esports fund,” Neiron said.

“You have three billion gamers and growing, everyone’s got a mobile phone, most people have tablets… and these companies exhibit high earnings profiles.”

IMPACT FUNDS While funds focused on environmental, social and governance (ESG) had started out as a thematic investment, Christian Obrist, head of iShares Australasia, said it had now “graduated from being a thematic to becoming more mainstream”.

Reflecting this, the BetaShares Global Sustainability Leaders fund now had over $1.3 billion in assets under management, far larger than smaller thematic options which could be less than $100 million.

These types of ESG funds tended to negatively exclude companies such as those which had an impact on greenhouse gases.

Although the US and UK had developed impact investing ETFs, a type of ESG ETF that allowed investors to invest directly in companies that had a positive impact, there were fewer options available in Australia.

BetaShares and VanEck both launched climate change focused ETFs this year and Neiron said there was a transformation in how energy would be produced going forward. “[We are] moving away from fossil fuels into renewables like hydro, geothermal, biomass, solar

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and the technologies are becoming cheaper and more feasible,” Neiron said.

Chugh said ETFS had seen a lot of investors come on board its Battery and Lithium Tech ETF recently, which also aided technology being produced for the Green Revolution.

“We’ve had a lot more flows since October last year through the US election,” Chugh said. “There was this heightened media attention on [US] Government policy around battery technology, carbon emission and electric vehicles.”

The transition in the profile of ESG funds was an indication that areas currently seen as ‘thematics’ now could possibly become much larger areas in the future.

PORTFOLIO FIT Having an abundance of alternative options could be overwhelming for advisers however when it came to constructing client portfolios, so thematic products were best used as a smaller segment of an overall portfolio.

Vynokur said the best way to implement thematic ETFs into a portfolio was by using the core/ satellite approach. “[That] approach has been very popular with institutional investors over many decades and now has become very popular in Australia with financial advisers,” Vynokur said.

“It’s a very effective way of ensuring the core portfolio can be built from diversified, low cost, broad-market index exposures and then as satellites investors are able to implement a variety of thematic ETFs. “We see a lot of advisers go down that path were 80% of the

assets will be allocated towards core, low cost, long-term strategies, and then have a 20% towards satellite exposures.”

However, that concept could become complicated depending on the fund and there was flexibility to how that might be approached.

Big technology stocks were an example, as Chugh said, that could often end up making up the core investment if the core of a portfolio was based around the NASDAQ or S&P 500.

“Say the FAANG [Facebook, Amazon, Apple, Netflix and Google] ETF – that’s multithematic, that’s not focused on one theme – it is focused on e-commerce, e-entertainment, autonomous vehicles and even cloud computing,” Chugh said.

“That could be given as a core in a portfolio – a lot of people might say they don’t mind having Facebook, Apple, Google, Netflix, etc., as the core of a portfolio.

“If you’ve got a NASDAQ 100 or S&P 500 [fund] it’s part of your core allocation anyway.”

LIQUIDITY As thematic ETFs had a narrower scope, there was the perception they could be less liquid than traditional ETFs which was a concern of advisers.

Minh Tieu, Vanguard head of ETF capital markets Asia Pacific, said, as a general rule, they did not have thematic ETFs for this reason.

“It’s definitely something investors should consider, the liquidity,” Tieu said.

“The focus of the ETF is going to be narrower so the universe so the universe of securities it can invest in are narrower.

“Having a broadly diversified index to track allows you to have some of the winners and some of the losers during market volatility and inevitably when markets go up and down, and face some sort of turmoil, you’ll have some winners and losers, but they’ll offset each other.”

However, Chugh said the size of the ETF was somewhat irrelevant because the liquidity of an ETF was based on what it was trying to invest in.

“If you’re trying to invest in micro-cap emerging markets stocks, then yes, you’re going to have liquidity concerns,” Chugh said. “If you’re investing in the big FAANG names, you’re not going to have an issue.

“As a provider, we have to do due diligence when we create a product to ensure the index that we’re going to be tracking and the stocks that are going to be included are liquid enough for investor to buy or sell out of.”

“How much funds under management a fund has is redundant. Why? It’s only as liquid as the underlying [stocks],” added Neiron.

Vynokur said it was important for investors to do their homework and understand the methodology of a particular index they were looking to allocate to.

“Every ETF in that thematic category applies a liquidity screen to ensure the companies that end up being constituents pass stringent liquidity criteria,” Vynokur said.

“That is done to ensure investors are able to buy or sell their investment at a competitive unit sort of with plentiful liquidity.”

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20 | Money Management June 17, 2021

Financial advice

FROM ONE-STOP SHOP TO FAMILY CFO Advisers should stop trying to ‘do it all’ and know when to outsource to other professionals, writes Scott Fitzpatrick, allowing them to focus on the advice.

THE FUTURE OF advice for me is about transitioning from the traditional multi-service model to sitting on the family board and coordinating the complex financial affairs of fewer, but higher-net-worth clients; enabling advisers to deepen relationships while reinventing themselves for success.

With around a quarter of Australians having received financial advice in the past but about 40% intending to seek it in the future, opportunities exist for forward-thinking advisers wanting to grow sustainable businesses in the post-Royal Commission era. However, clients now tend to know more – and expect more – meaning many advisers will need to transform the way they position their services and the value they bring.

To do this, advisers will need to offer more than financial expertise alone in satisfying clients’ expectations – and it will be those advisers who can connect with clients’ hearts as well as their minds that will be best placed to prosper. Academic qualifications and technical skills may no longer be enough on their own – advisers need to demonstrate value in the context of clients’ lives and legacies, not just in terms of investments or insurance, and that requires a new set of psychological and emotional skills.

With product-related commission remuneration

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structures largely obsolete as a business model, many advisers may feel they are at a crossroads: whether to continue offering a wide range of one-stop shop financial services to dozens or possibly hundreds of low-fee-paying clients, or reinvent themselves as true fee-based professionals able to nurture deeper relationships with a smaller but higher value client base.

A NEW LEVEL OF FINANCIAL ADVICE We encourage advisers to embrace this change by shifting from traditional ‘one-stop shop financial advice’ driven by products towards a clients’ life vision approach; thereby learning to professionally service the needs of high-net-worth individuals, families and business owners.

Advisers can articulate their value proposition for successful families and business owners so that the client adopts a new way of thinking about advice services.

Client-centricity is also how advisers can attract the ideal fee-paying client and build a valuable, sustainable business they continue to enjoy working in.

A SEAT ON THE FAMILY BOARD High-net-worth clients typically have clear perceptions of value around financial advice. They also respond well to the notion that their adviser is essentially their chief financial officer (CFO), with a seat on the family board and

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June 17, 2021 Money Management | 21

FinancialStrap advice

responsibility for helping them protect and grow their family’s balance sheet.

Crucially, this higher-level role sees advisers step back from being – or trying to be – a client’s one-stop shop for all financial matters; a concept counterintuitive to how many advisers perceive clients’ needs. Whether it’s creating a financial plan, making buy and sell investment decisions or describing how a family trust operates, many advisers try to do it all themselves.

We would argue that advisers should be less immersed in topics like insurance, investing and tax and assume an overarching communication role, helping clients articulate their feelings or concerns about their financial progress. As the family CFO, skilled advisers would then outsource and ‘project manage’ the services of other professions such as tax, accountancy, insurance and legal. We liken the role to that of an orchestra conductor, the over-arching expert able to lead a team of professionals and ensure all the moving pieces of a complex arrangement go smoothly.

As an example, asset protection is a crucial requirement for wealthy families, many of whom need to ‘build a wall’ to separate their personal wealth from any business risk. Asset protection is an often-overlooked part of strategy that advisers need to be more involved in if they’re positioning themselves as riskmanaging CFOs sitting on the family board. The adviser is ideally at the centre of a best-of-breed team, including legal counsel and accountants. This should be a collaborative effort.

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HEART TO HEART, NOT HEAD-TO-HEAD At the practical level, advice is about understanding what a client wants out of life, then creating a program to deliver it. As an industry, we can do more to equip advisers with humanistic skills and the right mindset to get clients talking about themselves.

Emotional intelligence (EQ) is the ability to recognise and manage our emotions and understand and influence the emotions of others.

Put more simply, EQ has been defined as the ability to get along with other people.

What distinguishes great professionals from the rest is their non-technical skills – the world of relationships and communication. The ability to master EQ is one of the key ingredients to great advice. Too often advisers work so hard in trying to play it head-to-head with clients and engage them in the world of intellect, but the successful ones are those who can also operate in the emotional realm. This is because logic makes people think but emotions make people act.

The upside is that the more advisers can understand how clients are feeling, the better they can ask the right questions to draw out what the client wants from their life and the legacies they will leave behind.

Conversations about how to deliver on those aspirations can then follow – but money and financial products are never the starting point. This also helps to put everyone in the room at greater ease, allowing advisers to bring real value and give the client an opportunity to articulate dreams, goals and aspirations.

This reversal of the old product-first approach helps establish real trust between adviser and client. This concept of the trusted adviser is one of the most overused phrases in financial advice. Having a qualification doesn’t of itself generate trust.

Real trust comes from credibility and reliability but also from intimacy – advisers must be able to uncover the client’s agenda, and then have the ability to create a lifetime plan for them rather than just a financial one.

A BLUEPRINT FOR CLIENT INTERACTIONS Advisers can combine these soft skills in people relationships with actionable skills around business practice, including practical tools and cheat sheets on how to conduct client interviews. This will enable them to stay within the context of the client’s life and ask the right questions to understand how the client is really feeling.

Context gives meaning to the content, it’s the why, content is the what, and clients respond well when we understand the spirit behind their big life why’s. It’s less about delivering products and more about listening deeply. One of the setbacks with our industry is that we go into solution mode too early, the opportunity is to spend more time looking contextually at what makes a great life for the client.

Advisers are then encouraged to conclude interviews with a clear set of actions to help the client get where they want to go.

The adviser lists each area where the client needs help to achieve their lifetime dreams – be it legacy goals, risk

“We liken the role [of family CFO] to that of an orchestra conductor, the over-arching expert able to lead a team of professionals.”

– Scott Fitzpatrick management etc, so that they have a scope of work for which they can price their services. The only two potential obstacles then are price, or if the client wants to do it themselves.

THE ADVICE BUSINESS OF THE FUTURE? In the current environment of an advice industry in a state of flux, it may be that proactively embracing change is something even many already successful advisers must contemplate.

There is a real competitive advantage for those advisers who can deliver well-articulated value.

Even seasoned advisers who have done dozens of courses over the years find that developing their EQ skills and re-positioning their offering, offers tangible benefits that they can implement for future success.

There’s a lot of noise in the industry at the moment as we merge into a profession but we feel optimistic about what the future could look like.

Scott Fitzpatrick is founder of Fitzpatricks Private Wealth.

9/06/2021 10:24:36 AM

22 | Money Management June 17, 2021

Fixed income

PRICING ESG RISK IN CREDIT MARKETS Mitch Reznick and Michael Viehs explain the role that environmental, social and governance practices play in affecting fixed income spreads.

BACK IN 2017, we analysed the link between environmental, social and governance (ESG) factors, and credit spreads in an effort to refine our ability as fixed income investors to more accurately price factors beyond traditional operating and financial risks. We presented the results of that analysis in which we demonstrated that companies with better ESG practices tended to have lower credit default swap (CDS) spreads, even after controlling for credit ratings and other risk factors. Using the results, we plotted predictions of CDS spreads for given values of ESG scores, drawing an innovative implied ESG pricing curve.

In 2018, we published an updated study with a longer sample period which produced similar results. We have now conducted our third

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iteration, expanding the sample period to include the period from the start of 2012 to the end of a volatile 2020. We launched the process of updating the original study in 2020, however with COVID-19 impacting fundamentals and sentiment and triggering violent moves in credit spreads, we decided to wait and use the full ESG-CDS dataset for whole calendar year 2020. This would allow us to test the resilience of our model and the relationship between ESG and credit risk through the volatility as a measure of its veracity and strength.

We have now proved that the significant relationship between ESG factors and CDS spreads persists and the explanatory power of the model increased from both the 2017 and 2018 studies. High levels of market volatility

throughout 2020 did not significantly affect this relationship (a closer investigation of the relationship within 2020 is, however, warranted).

THE RELATIONSHIP RECONFIRMED Our latest research shows that even when controlling for operating and financial risks (measured by credit ratings), as ESG factors deteriorate, credit spreads widen.

Because the reverse is also true, this relationship has very important investment implications. Chart 1 shows the implied ESG pricing curve using the full dataset from 2012 to 2020.

Our results suggest that credit markets are likely to reward companies that make the transition from ESG laggards to leaders with tighter CDS spreads. This

observation is particularly poignant given that asset owners and fund managers are increasingly looking to ‘screen in’ companies seen as ESG and sustainability leaders to reinforce the ESG credentials of their portfolios. In this environment, companies with credible transition stories represent an excellent investment opportunity as they join the elite sustainable leaders of their industries.

Moreover, the desire by companies themselves to be ‘screened in’ explains much of their acceptance of sustainability. We believe senior management who embrace the consideration of non-fundamental factors appreciate that being a sustainability leader brings measurable operational, reputational, and cost-of-capital benefits.

9/06/2021 3:28:33 PM

June 17, 2021 Money Management | 23

Fixed income Chart 2: CDS spreads by QESG decile, 2012-2020

GIVING CREDIT TO ESG There is no shortage of evidence of the benefits of investing in sustainability leaders. Companies with better ESG practices tend to have a lower cost of capital, lower operational costs and are less vulnerable to negative cash events than their less sustainable peer. It has also been shown that successful company engagement by institutional investors on ESG considerations can have positive implications for a company’s performance.

Conversely, companies with poor ESG characteristics tend to have a higher cost of capital because they are exposed to more risks and costs stemming from non-financial externalities – such as fines for not complying with environmental or health and safety regulations – that undermine corporate financial performance.

ESG RISK AND CREDIT SPREADS With financial markets having undergone significant changes since our original study in 2017, we wanted to test whether the conclusions of our previous research held true. As demand for more sustainable investment products increases, does the market continue to reward ESG leaders as expressed through relatively tighter CDS spreads? And how is this dynamic affected by periods of high volatility?

The results are comparable to those in our original paper (Chart 2): companies with the lowest QESG scores have the widest spreads, while companies with the highest

QESG scores have the tightest spreads. A QESG score ranks each stock worldwide in accordance with its ESG risk. Also, as with our previous studies, the widest dispersion of spreads is in the first decile, which is occupied by the band of lowest QESG scores. We believe this band is more likely to include stressed or distressed companies who either do not have the capacity to focus on ESG factors and/or whose weakened ESG factors have transitioned into operating and financial risks. These factors eclipse the influence of ESG factors, being so elevated that the vitality of the companies at the wide end of the range is in doubt.

As you can see, the boxplots in Chart 2 show that for the full sample period 2012-2020 the median CDS spread for deciles four to 10 are very similar, with a median range between 64 and 77 basis points (bps) – this is again in line with the original study. Noteworthy is the fact that the median CDS spreads for deciles two and three are lower than in the original study and much more similar to the median values of the other deciles. This implies that median CDS spreads for these deciles came down in 2019 and 2020.

To make these observed trends more visible, we repeated the exercise but calculated the boxplots across ESG quintiles so that there were more observations in each group. Companies with the worst ESG credentials, on average, in quintile one, have the highest CDS spreads along with the widest variation in observed CDS spreads.

Source: Federated Hermes

CONCLUSION Having completed this third review, we are encouraged that our pricing model for ESG factors not only remains robust but it’s explanatory power, as measured by the R-squared, has actually increased.

What’s more, the model has performed effectively through one of the most volatile periods ever in credit markets. This makes us confident that when we use the model in credit committees it is providing that additional precision that we seek.

Looking at the trajectory of the implied ESG pricing curve, we can see that in the higher quality QESG categories there is little differentiation in credit spreads (this will be the subject of future analysis). However, at 75 bps, the difference between high quality and low quality is stark. In multiple terms, the weakest bucket is nearly twice as wide in spread as the strongest bucket. This tells us that

Chart 1: Implied CDS spreads and corresponding QESG Scores, 2012-2020

Source: Federated Hermes

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the market recognises ESG quality – and dramatically so.

The investment implications of the market’s ability to differentiate between low ESG quality and high ESG quality creates real opportunities. While it is important to control for operating and financial risks, we believe buying into credible transition stories can deliver alpha – whilst also benefiting society – as the market recognises an improving ESG story. Our own investors have increased their scrutiny of sustainability credentials, whether mainstream or thematic (e.g. UN Sustainable Development Goals; climate change). Given the rising interest in ESG throughout the investment industry and the surge in sustainability-themed funds and strategies, we see rising demand for the so-called ESG leaders.

Demand for sustainabilitythemed bonds in the primary market is often stronger than for mainstream bonds, suggesting investors are pining for ESG leaders to strengthen the underlying sustainability credentials of their portfolios. With this in mind, we believe buying credible transition stories will deliver alpha as they evolve into leaders and become ‘screened-in’. Our ESG pricing model shows that our investors will be rewarded for identifying these transition opportunities.

Mitch Reznick is head of sustainable fixed income, and Michael Viehs is head of ESG integration at the international business of Federated Hermes.

9/06/2021 3:29:09 PM

24 | Money Management June 17, 2021

ESG

INTEGRATING ESG INTO PORTFOLIOS Advisers can play a fundamental role in navigating how clients pursue their goals to incorporate ESG components into their investment portfolios, Brie Williams writes.

GLOBAL FLOWS INTO environmental social and governance (ESG) exchange traded funds (ETFs) have sky-rocketed, amassing US $31.9 billion ($41.2 billion) in the first quarter of this year. The trajectory is unmistakable: ESG investing is reaching a tipping point. Between 2017 and 2019, ESG investing grew by more than a third, to US$30+ trillion, over a quarter of the world’s professionally-managed assets.

Some estimates say it could reach US$50 trillion over the next two decades. Locally, we know that ESG is a priority for many Australian investors. Research conducted by the Responsible Investment Association of Australasia (RIAA) last year showed 86% of Australians expect their super and investments to be managed responsibly.

Some think ESG is all about investing for impact. Others think it is about imposing a certain set of

values on companies. But we’ve found, ESG is about informing better decision-making by adding the assessment of material, environmental, social and governance issues to the investment process. It enriches traditional research like analysing financial statements, industry trends and company growth strategies.

ESG may have started out with moral goals at the forefront, but as society changes, ESG is now viewed as an imperative metric when looking at a company’s future potential. Addressing material ESG issues is not just good business practice but essential to a company’s long-term financial performance—a matter of value, not just values.

Recent research highlighting long-term risk-adjusted returns and lower downside has challenged the notion that ESG investing could mean sacrificing returns. State

Chart 1: Quarterly global sustainable fund flows (USD, billion)

Source: Morningstar Direct, Manager Research. As of March 2021

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10/06/2021 9:49:11 AM

June 17, 2021 Money Management | 25

Strap ESG

G Chart 2: Evolution of ESG investing

“ESG may have started out with moral goals at the forefront, but as society changes, ESG is now viewed as an imperative metric when looking at a company’s future potential.”

Source: State Street Global Advisors

Street Global Advisors’ research finds that 69% of ESG adopters say pursuing an ESG strategy has helped with managing volatility and 75% expect the same returns from those investments as they do from others.

While the benefits of ESG investing may be clear, the best path for individual investors to take isn’t as obvious. Some may want to dip a toe into ESG investing; others may want to commit a significant part of their portfolio.

Education in this space is critical to progress and success.

Phrases such as ‘impact investing’ and ‘ESG integration’ have become widespread, but what they actually mean is not always clear. This lack of clarity can impede progress.

Investors need a solid understanding of ESG terminology and their investment rationale to fully appreciate ESG options and benefits. And providing portfolio examples that are relatable and connect back to their motivations brings ESG investing to life.

An investor’s need for advice in navigating these options is an opportunity for advisers to add value and strengthen their

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relationship with their client. That’s backed up by fact: 64% of Australian investors have said it is important advisers are able to help with ESG investing. So where to begin?

It is important to remember that the client must come first. Effective integration of ESG principles into a portfolio begins with a clientfocused process, not a productfocused process. Using a client-centric approach requires advisers to identify suitable ESG strategies, offer beneficial education, and track clients’ progress toward longer-term objectives.

1) Review all the angles to identify a clear entry point • What are the client’s investment objectives? Determine if integrating ESG considerations fits the long-term plan.

• What are the client’s ESG priorities? Educate as part of the discovery process. Clarify the motivation to inform the journey, narrow the focus and shape priorities.

• Where are the market opportunities? Target opportunities to identify resources and select ESG investment strategies.

2) Keep risk in perspective • What are the client’s desired outcome priorities? (Valuesbased and risk-based aspects of implementation). Select degree of portfolio integration.

• How much of a client’s portfolio will be allocated to ESG strategies? Assess the broader asset allocation to keep the investment plan level properly balanced. Avoid introducing sector or style biases.

• How inclusive does the client want to be in applying ESG? Review personal values and risk framework with clients to help them understand ESG investing considerations.

3) Take the long-view • What is the client’s time horizon and intended impact?

(Identification of tactical opportunities; sleeve of a portfolio or total integration).

Understand the client’s perspective and align expectations on non-financial outcomes and reporting.

• How does the client define and measure success? (Strategies, optimisation techniques ,and expense considerations). Define success as part of the investment

– Brie Williams plan evaluation. Maintain the principle of high-impact investing. ESG does not require sacrificing performance. Modify ongoing reporting to address client’s priorities. Reallocate portfolio as motivations shift.

Some of these objectives span different ESG strategies to varying degrees. And they are not mutually exclusive—multiple ESG strategies can be combined in a single investment vehicle to achieve the investor’s specific goals. Whatever the client’s aim, financial advisers will need to optimise ESG investment opportunities across a range of asset classes and risk spectrum.

ESG enables clients to invest with greater precision—to apply a broader lens to more deeply analyse investments. Whether they want to match investments with their mission or pursue enhancing long-term performance, ESG can help meet their goals. It’s a new way of valuing the future.

Brie Williams is head of practice management at State Street Global Advisors.

10/06/2021 9:49:19 AM

26 | Money Management June 17, 2021

Toolbox

ASSESSING RESPONSIBLE INVESTMENT OPTIONS There are two approaches to responsible investing, top-down and bottom-up, writes Angela Ashton, but how they do differ and is one preferable to the other?

WHAT IS RESPONSIBLE investing (RI)? It is essentially the catch-all term for allocating capital in an ethical, sustainable, impact, or environmental, social, and governance (ESG) risk aware manner. ESG is typically used to highlight key risks faced by a company.

The demand for RI products has been growing strongly in the past few years, but the events of 2020 will be remembered as the catalyst for projecting ESG from the sidelines to the mainstream.

The extraordinary combination of fires, floods, plagues, pandemics, Black Lives Matter, the #MeToo movement, and a Trump US Government led many people to reflect on their impact

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on society and the planet, and how they can “do their bit”.

Research suggests that one way that people want to express these beliefs and values is through their investment choices.

Demand for RI options is not just being driven by younger generations, it is increasing across all age cohorts. And demand for retail investment options is continuing to grow.

However, the world of RI has grown exponentially in complexity, as well as size, over the past decade or so. If you have not kept up with the changes and progression in this area, you may find yourself struggling to understand where to even start.

There are two primary ways

funds can be assessed for RI credentials, being what we have termed ‘bottom-up’ and ‘top-down’ methods.

This paper looks at the advantages and disadvantages of each method. This should help to provide a clear way forward to understanding how to interpret the RI or ESG information you might be presented with on any fund.

THE BOTTOM-UP APPROACH Globally, there are over 160 ESG or RI data providers that collect and provide what we call ‘bottomup’ data. Examples include the Morningstar-owned Sustainalytics, MSCI and RobecoSAM.

These providers take publicly available data on companies, in addition to their own surveys and company questionnaires, to create a proprietary ESG analysis and rating of a company.

Across the various ESG data providers, there are thousands of data points that are collected and measured on companies. Examples include: • Environmental: Carbon footprints, total energy usage, CO2 emissions; • Social: Employee turnover, total injury rate, lost working days, proportion of women in senior positions; and • Governance: Board gender diversity, senior executive total compensation, board

10/06/2021 9:48:27 AM

June 17, 2021 Money Management | 27

Toolbox

Chart 1: The difference in ratings between companies across different market capitalisations

Source: Gulf International Bank

controversies.

This information is then sold to investors, such as fund managers.

Most providers come up with one score or rating for a company, such as 77/100 or a B+ for example.

Fund portfolios can also be given scores, based on the scores of the underlying holdings.

Fund managers may also have their own proprietary models with a number of data provider feeds, thus creating their own ESG scores for a company as well. They might use this data only as a supplement to their own work, as a filter or even the major driver of their ESG work.

There are a few things to watch out for though. Although there is a plethora of information available, it can be difficult to decipher and interpret because, unfortunately, there are at least 160 methodologies employed by those agencies.

And wrapping up all of this company information in one score means that a lot of the detail is lost.

There is sometimes little clarity as to whether a particular score means a company is good at, say, governance and pooer at say, environmental issues. In other words, the complexity of ESG can

be lost in a simple score.

There seem to be some structural problems as well.

Smaller companies, or those with less resources to respond to lengthy questionnaires consistently, generally do poorly.

From the point of view of funds and funds management, there is one further important drawback.

One way of thinking about a portfolio’s sustainability score is akin to the price to earnings ratio (P/E) multiple for a portfolio. A combination of stocks in a portfolio gives you the P/E of the overall portfolio, the same way in which a

Chart 2: Responsible and Ethical Investment Spectrum

Source: Evergreen Consultants

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combination of companies’ sustainability scores gives you an overall portfolio ‘sustainability’ score.

Using this analogy and thinking about how we consider portfolios and fund managers, a portfolio with a low P/E doesn’t necessarily imply the manager is a value manager. It can just be the ‘luck of the draw’, the time in the investment cycle or some other issue. We think of it as a necessary, but not sufficient, condition.

Similarly, a high sustainability score does not imply the style or in this case, the RI approach being used by the manager. The sustainability score for the portfolio can potentially mask a host of underlying moving variables.

THE TOP-DOWN APPROACH Another way to think about fund manager RI capabilities is to consider it from a ‘top-down’ perspective. This top-down approach assesses how a manager has integrated ESG and RI issues within their investment process. This method aligns more closely with the standard methodologies many consultants use to assess fund managers, and therefore may make more intuitive sense to consultants and advisers than a bottom-up approach.

In terms of our earlier analogy, this approach essentially looks at whether the manager’s style and process means they are a value manager. That is, we look at the managers’ intentions, rather than their actual portfolio on any given day.

A strong framework to consider various managers’ approaches is the “Responsible and Ethical Spectrum” adopted by the Responsible Investment Association Australasia (RIAA) and which is shown in Chart 2.

RIAA is the peak body for Continued on page 28

10/06/2021 9:48:37 AM

28 | Money Management June 17, 2021

Toolbox

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.

Continued from page 27 ethical investment in Australia, and many superannuation funds, institutional consultants and financial advisers have become members.

The framework also aligns with the work of the United Nations Principals for Responsible Investment (UN PRI), meaning that it offers an approach that is globally accepted.

The spectrum classifies RI approaches at a high level from the lens of three primary objectives. Firstly, from the level of avoiding harm, secondly whether there is a benefit to stakeholders, and, finally, whether there is a positive contribution to changes to the environment or society.

The approaches on the spectrum are ESG integration, negative screening and norms-based screening. These are the approaches that seek to mitigate risks through avoidance of owning companies subject to higher ESG factor risks. Active stewardship seeks change through engagement as shareholders. Positive screening, sustainable investing and impact investing target solutions – indirectly in the case of positive screening, or directly in the case of the latter two approaches.

A distinct disadvantage of this approach is that it is much more time consuming for fund managers and consultants to build and maintain a database of RI approaches than buying bottom-up data. And smaller fund managers who don’t have the resources to devote to completing questionnaires may be at some disadvantage, in a similar way to smaller companies are in a bottom-up approach.

Further, the results are unlikely to be simply expressed as a single number. One approach to using this framework might be to score or rate managers across each of the seven areas of the spectrum, so that the depth of each manager’s investment methodology in each area is measured. The resulting scores may be a little trickier to interpret but do provide a depth of insight not available through a bottom-up approach. In particular, this approach would allow analysts to classify managers such that they could have multiple approaches.

CONCLUSION As the world faces issues as diverse as the #MeToo movement, pandemics and climate change, it is clear that the appeal of, and the demand for, RI will continue to grow. In fact, it is likely something that most financial advisers will have to consider in more depth over the coming years.

Given we are in a nascent phase in the growth of RI, the approaches that the industry will use to assess managed funds are in the initial stages of being developed. This is the stage where we all can have a hand in developing a robust methodology that will become the new industry standard.

We have outlined above two broad methodologies, both of which clearly aim to provide industry participants with a framework to assess the RI features of managed funds.

In our view, the top-down approach is superior, as it aligns more closely with the approach many analysts have used to assess fund managers’ investment processes. It also provides a degree of granularity that is sometimes lost in the ‘single score’ approach of the bottom-up methodology.

Angela Ashton is founder and director of Evergreen Consultants.

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1. Globally, there are approximately how many RI data providers? a) 77 b) 100 c) 120 d) 160 2. The most common ‘top-down’ RI approach that fund managers utilise is a) ESG integration b) Negative screening c) Positive screening d) CO2 emissions 3. One advantage of the ‘top-down” approach to considering RI approaches is: a) It is easier than buying bottom-up data b) It is easy to express the results as one number c) It considers funds management processes, rather than companies d) It is not time consuming for fund managers to complete 4. Some of the considerations for bottom-up data providers include: a) CO2 emissions b) Negative screening c) Team size d) P/E multiples 5. RIAA is a) A provider of bottom-up RI information b) A provider of top-down RI information c) The peak global RI think tank d) The peak Australian RI association

TO SUBMIT YOUR ANSWERS VISIT https://www.moneymanagement.com.au/ features/tools-guides/ role-top-down-analysis-responsible-investing For more information about the CPD Quiz, please email education@moneymanagement.com.au

10/06/2021 9:48:12 AM

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25/05/2021 4:03:33 PM

30 | Money Management June 17, 2021

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

Appointments

Move of the WEEK Jaime Johns General manager Madison Financial Group

Clime Investment Management, which acquired Madison Financial Group in June 2020, has announced the appointment of Jaime Johns as the new general manager, effective immediately.

Fitzpatricks Private Wealth has appointed Matthew Nicholson and Oswaldo Duque to its advice team based in Brisbane.

Nicholson had over 20 years’ experience within the Australian financial services industry, most recently working at VISIS Private Wealth as a private client adviser.

Prior to that, Nicholson was a senior financial planner at Westpac for over four years and held paraplanning, state management and financial advisory roles at financial planning and advice firms including Whittaker MacNaught, Commonwealth Bank and Planwealth.

Duque had worked within the financial services industry since 2013 and joined from ipac, a subsidiary of AMP Group, where he was a private client adviser for nearly five years, which followed his role at Corporation U as a financial planner.

Duque’s expertise centred around providing personalised strategic advice on wealth creation and retirement planning strategies.

The Australian Financial Complaints Authority (AFCA) has appointed Emma Curtis as lead ombudsman for insurance and Suanne Russell as lead ombudsman for small business.

Curtis would join on 9 August, 2021, taking over from John Price who would retire from the role, while Russell would join on 2 August, 2021.

10MM170621_26-32.indd 30

Johns has over 20 years’ experience in senior leadership roles and most recently she was head of advice at Madison. Prior to joining Madison, Johns served as national network manager, Capstone Financial Planning.

Curtis joined from the Australian Securities and Investment Commission (ASIC) and had 25 years’ experience in financial services law and governance, which included 10 years as a regulator.

Her most recent role with ASIC was as senior executive leader – insurers and developed its standalone insurance supervision team.

Curtis was joint acting executive director of ASIC’s Financial Services Group through the period that included the 2019/20 bushfires and the unfolding of the COVID-19 pandemic. She established and led ASIC’s bushfire disaster working group and sought to ensure fair treatment of consumers as the pandemic emerged, working with financial firms on minimum hardship practice.

Russell joined from Westpac, where she had been head of business bank legal with oversight of business lending disputes, business bank remediation projects and regulatory projects.

In this role she worked with industry bodies and regulators such as ASIC and the Australian Prudential Regulation Authority (APRA) on matters related to small business.

Russell was also part of the Westpac team that worked on the development of business relief packages and special facilities for small business and consumers during the COVID-19 pandemic.

Johns also had extensive experience in mergers and acquisitions for financial planning practices, business coaching and product development, in addition to involvement in industry working groups and licensee forums.

Gold Coast-based boutique investment manager, Swell Asset Management, has appointed Stephen Poole, former general manager of NAB’s Meritum Financial Group, as its head of distribution.

Lachlan Hughes, chief executive at Swell, said that Poole’s knowledge of the industry, that spanned 25 years, and understanding of financial advice and product solutions would help expand the business.

Hughes set up Swell in 2014 and the firm’s strategy focused on globally-listed companies trading at a discount to their conservatively estimated intrinsic value.

BlackRock Australia has combined its local client business and iShares teams, appointing Chantal Giles as head of iShares Wealth (iSW) Australasia and James Kingston as head of iShares Australasia.

Christian Obrist, who held the role of head of iShares Australasia for three years, was promoted to iShares distribution Asia ex-Japan, based in Hong Kong.

In addition to his new role which would commence from 1 July, 2021, Kingston would continue his responsibility as head of APAC portfolio analysis and solutions.

Giles would lead a team responsible for the distribution of BlackRock’s alpha-seeking strategies, index and iShares

exchange traded funds offerings, as well as whole portfolio services to its wealth management, bank and platform clients.

The firm also appointed Elanor Menniti to the newlycreated role of head of client product strategy and consultant relations, leading the distribution strategy behind the design and delivery of BlackRock’s products.

J.P. Morgan Asset Management (JPMAM) has appointed Tomomi Shimada as lead APAC sustainable investing strategist.

Shimada would lead regionwide commercial efforts and would be responsible for working with key regional teams across the business to help advance JPMAM’s efforts to promote and manage sustainable investing solutions.

She would focus on working with clients to drive the growth of JPMAM’s sustainable investing capabilities, including contributing to product development and investor education initiatives.

Shimada was previously working as a EMEA sustainable investing strategist with the firm based in London and relocate to Hong Kong for the new role where she would report to Jennifer Wu, global head of sustainable investing.

Since joined JPMAM in 2010 held a variety of investment stewardship and client adviser roles in London and Tokyo.

9/06/2021 10:22:02 AM

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OUTSIDER OUT

ManagementJune April17, 2, 2015 32 | Money Management 2021

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

Dressing from one to the nines

No property woes for De Ferrari

OUTSIDER was delighted to see some familiar and friendly faces at this year’s Money Management Fund Manager of the Year awards which invited guests to join as a live studio audience for the live streamed event.

Everybody was looking spiffy in their freshly pressed clothes especially given they were to be on camera for our viewers.

But everything is never as it seems.

Outsider caught wind that a particular winning manager’s colleagues were utterly shocked upon watching their award being received.

Why were they shocked you ask dear reader? Outsider understands the award recipient in question usually looked like he was dressed as if he just left prison and his colleagues could not believe their eyes when they saw him cleanly shaved and well dressed.

The good thing about having a

OUTSIDER is not worried for AMP’s Francesco de Ferrari even though he may be out of job, having recently exited his role as chief executive to make way for ANZ’s Alexis George, as it seems his property portfolio is still booming.

Like many Australians lucky enough to own a house in a booming property market, De Ferrari is reaping the rewards of rising house prices.

Having previously lived in Switzerland and Singapore before moving to Sydney in 2018, De Ferrari is no doubt used to expensive property prices and has been putting that experience to good use with his Eastern suburbs purchase.

The Woollahra mansion, which he bought with wife Elisabetta De Ferrari-Wicki a year ago for $7.5 million, has almost doubled in value to $13 million. The couple also completed an extensive renovation at a cost of $650,000.

However, neither De Ferrari nor real estate firm Richardson and Wrench commented on whether the property was actually up for sale.

Outsider wonders if, given those AMP shares in his contract have been steadily falling, De Ferrari needs to hold onto what assets he has left.

For what it’s worth, Outsider is more than happy with his humble red brick home that he and Mrs O have occupied for over 30 years.

live-streamed event available on demand is that you can watch the video again and again and again.

And Outsider knows that is exactly what the winning manager’s team did while roaring with laughter.

Outsider is just glad the camera did not pan to him as he was frequently checking the time to count down to when the canapés would be served.

Something to Bragg about SENATOR Andrew Bragg, considered by very few to be a friend of the super industry, has once again called into question whether it was fair for compulsory public funds to be used to fund a publication that can be used for “political attacks”.

Don’t worry, he’s not referring to Money Management, but of The New Daily.

Industry Super Holdings, of which industry super funds are a key benefactor, owns The New Daily which hasn’t been kind to Bragg’s attacks on the industry.

“If you look at the content on this platform, it’s political propaganda which sits there and smears people, it is not an independent media outlet,” Bragg said.

Merit of the attacks aside, Outsider would note that

OUT OF CONTEXT www.moneymanagement.com.au

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being attacked by the media is a badge of honour.

Now Money Management has never viewed itself as a mud-slinging propaganda outfit, but margins in the industry are tight and, for the right price, perhaps Outsider would be wise to consider becoming a political attack dog.

The New Daily currently boasted 1.7 million subscribers – this is quite the gargantuan subscription base, which perhaps Outsider’s audience might not be able to match.

That is, until you discount the fact APRA is investigating AustralianSuper for adding its two million members to the subscription base without any approval.

But Outsider could never stoop to inappropriately taking on an unsolicited mailing list.

"James [Packer] loves his pies. The premier [Barry O'Farrell] was trying to loosen the waistline somewhat so I'm not too sure if he accepted the pies."

"What do you look for in a spouse?

The answer is someone with low expectations."

- Alan Jones' important details about the secret Crown Sydney meeting

- Brett Cairns, Magellan chief executive

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9/06/2021 1:06:02 PM