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VOLUME 24 | ISSUE 3 | APRIL 2012 | $10.00

This issue NEW: Monthly CFP速 Practitioner Strategy NEW: Financial Planning magazine goes digital 12-page feature: Six-steps to fee-for-service

Going defensive PP243096/00011

The new breed of hybrids and capital protected products

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16 19

34 Features April 2012 8

Regulars 4

CEO Message








Chapter Event Review


Event Calendar



Financial Planning goes online

19 Six-steps to fee-for-service

The launch of Financial Planning online provides a content-rich site that will host a wealth of technical, practice management, and education content.

In just under three months, FPA practitioner members are required to have transitioned their remuneration structure across to a fee-forservice model. Financial Planning provides a refresher of the six-step process involved.

14 Watchdog outlines priorities 32 NEW: CFP® Practitioner Strategy

The chairman of ASIC, Greg Medcraft, answers a range of policy questions concerning financial planners and the industry.

In a new monthly section, GEORGE FLACK CFP® outlines a strategy he is using to maximise Centrelink age pension entitlements for women under 65 years.

16 Stalwart clocks up 25 years On April 6 the FPA’s longest serving employee – Di Bungey – notches up 25 years service in the financial planning profession. JAYSON FORREST spoke with the industry veteran.

34 The defensive play In times of market volatility, a good offense can be a good defence – and the new breed of hybrids and capital protected products might be the type of defensive play investors are looking for, writes JANINE MACE.

Financial Planning is the official publication of the Financial Planning Association of Australia Limited (ABN 62 054 174 453) Web: | E-mail | Level 4,75 Castlereagh Street, Sydney NSW 200 | Phone (02) 9220 4500 | Facsimile: (02) 9220 4580

EDITOR Jayson Forrest Locked Bag 2999, Chatswood NSW 2067 Phone: (02) 9422 2906 Facsimile: (02) 9422 2822 EDITORIAL DIRECTOR Lindy Jones Phone: (02) 9220 4532 PUBLISHER Zeina Khodr Phone: (02) 9422 2198 Facsimile: (02) 9422 2822 ADVERTISING Jimmy Gupta Phone: (02) 9422 2850 Mobile: 0421 422 722 ADVERTISING Suma Donnelly Phone: (02) 9422 8796 Mobile: 0416 815 429

© Financial Planning Association of Australia Limited. All material published in Financial Planning is copyright. Reproduction in whole or part is prohibited without the written permission of the FPA Chief Executive Officer. Applications to use material should be made in writing and sent to the Chief Executive Officer at the above e-mail address. Material published in Financial Planning is of a general nature only and is not intended to be comprehensive nor does it constitute advice. The material should not be relied on without seeking independent professional advice and the Financial Planning Association of Australia Limited is not liable for any loss suffered in connection with the use of such material. Any views expressed in this publication are those of the individual author,

except where they are specifically stated to be the views of the FPA. All advertising is sourced by Reed Business Information. The FPA does not endorse any products or services advertised in the magazine. References or web links to products or services do not constitute endorsement. Supplied images © 2012 Shutterstock. ISNN 1033-0046 Financial Planning is published by Reed Business Information Pty Ltd on behalf of the Financial Planning Association of Australia Limited. , CFP ® and CERTIFIED FINANCIAL PLANNER® are certification marks owned outside the U.S. by the Financial Planning Standards Board Ltd. The Financial Planning Association of Australia Limited is the mark’s licensing authority for the CFP marks in Australia, through agreement with the FPSB.

Average Net Distribution Period ending Sep’11 10,818

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KEEPING MEMBERS AT THE HEART OF IT Working to further the interests of members and the greater community remains at the core of everything we do at the FPA. It has been an extremely busy month with respect to our work with Government and also around some exciting new initiatives we are developing to help and support you. An FPA exclusive event: Beyond the Shadow Shopper I could not help but be disheartened by the results of ASIC’s recent Shadow Shopper report, as I am sure you were. If anything, the findings only reinforce the importance in making consumers aware of where to look for quality financial advice. My team and I continue to tackle this issue head on, and we have made great progress in lifting the bar on standards and accountability within the profession. Additionally, we are driven in our campaign to Government to restrict the term ‘financial planner’ to those who commit to a professional framework and work to high standards. We see this as a critical step in building and preserving the reputation of the profession, and in securing a better deal for all Australians through access to trusted advice. To support you in delivering the highest quality advice to clients, we are delighted to bring to you an insightful and engaging major event, ‘Beyond the Shadow Shopper’. To be held in May across five locations, the workshop will provide you with a unique opportunity to hear directly from ASIC about the criteria, methodology and results from the ASIC report. Those who attend will be taken through case studies covered in the report, and will also be given an exclusive opportunity to put questions to an expert panel that includes leaders from ASIC, FOS, FPA and the practitioner community. We are confident you will take away many useful and practical ideas from this workshop that you can apply immediately in your own business. You can find out more at

Financial Planning magazine goes online Taking the FPA community online has provided you with new ways of connecting with the FPA, and with fellow members. The FPA’s LinkedIn group has already reached an astounding 900 members, and the recently launched Twitter account is attracting more followers by the day. 4 | financial

planning | APRIL 2012 | www.

...we have made great progress in lifting the bar on standards and accountability within the profession.

Our digital developments continue with the exciting launch of Financial Planning online. The new content-rich website is designed to support and equip you with a wealth of technical, practice management and educational content. The site will also offer you additional ways of keeping up-to-date, connecting and staying in touch with both the FPA and your professional colleagues. Make sure you visit the site at


Focus on CFP Professionals We are also pleased to introduce this month a new regular addition to Financial Planning magazine. Each month, ‘CFP ® Practitioner Strategy’ will present leading strategies adopted by CFP ® Professionals when dealing with the issues of today. This month’s article will focus on maximising Centrelink Age Pension entitlements for women under 65 years. We also interview some new CFP ® Professionals and ask them what it means to be a globally recognised financial planning professional. We have plenty of other exciting initiatives coming up over the next few months. As a valued FPA member, stay tuned and get involved in the many opportunities we offer to add value to you and your business. Mark Rantall CFP ® Chief Executive Officer

Some see investment as an abstract game of numbers.

We see it as your clients do; it’s real money and it’s theirs. At Aberdeen, we have always felt uneasy about complex financial engineering – our investment approach is simple and grounded in the real world. We search for quality companies, buy into the ones that tick all the right boxes and hold on to them for as long as it makes sense. Nothing too obscure or elaborate, just straightforward investing.

In line with our old-fashioned values, we treat money with a great deal of care, especially when it’s not ours. Your clients should particularly like our equity funds’ long-term returns and strong performance in turbulent times. If you’d like to find out more about Aberdeen’s Australian, Asian and Global Equities funds‚ call us on 1800 636 888 or visit our website.

Issued by Aberdeen Asset Management Ltd ABN 59 002 123 364 AFSL 240263. You should carefully consider the relevant Product Disclosure Statement and seek advice which takes into account your own circumstances, objectives and financial situation in deciding to invest, or continue to hold an investment. 3CAB1FP_2


Shorten extends FoFA date The FPA has expressed disappointment at the decision by the Senate Economics Legislation Committee (SEC) to largely back the findings made by the Parliamentary Joint Committee (PJC) on FoFA, with the FoFA Bills now before parliament. However, despite the Minister for Financial Services, Bill Shorten, agreeing with the SEC’s recommendation of a 1 July, 2012 start date, he has thrown the profession a temporary reprieve, announcing this start date would be voluntary, with the reforms becoming mandatory one year later on 1 July, 2013. FPA chief executive officer Mark Rantall said that, whilst he was pleased with the Minister’s announcement of an extension to the FoFA implementation date, he was disappointed in the SEC’s recommendations on FoFA, saying it had missed an opportunity to recommend improvements that would deliver on the consumer protections and benefits that FoFA was originally intended for –

namely, to improve access to financial advice for all Australians.

Bill Shorten, Minister for Financial Services

The FoFA Bills are currently before the House of Representatives for debate, with any likelihood of change coming from the four independents – Rob Oakeshott, Tony Windsor, Andrew Wilkie and Bob Katter. “The FPA has been very consistent and clear about what amendments we believe are needed to improve FoFA and actually deliver on the intent and objectives,” Rantall said. “We have more recently provided these key amendments through individual letters to each MP. We hope that, whilst key industry recommendations have not been considered in the PJC or SEC reports, they are taken into account during the government debate on FoFA.” Rantall was pleased the SEC had recommended that the FoFA reforms be subject to independent

reviews in 12 and 24 month intervals following the commencement of the legislation. This was one successful outcome amongst a number of other issues the FPA was campaigning for. These include: • The removal of the Opt-in renewal requirement; • The removal of the retrospective annual fee disclosure statement requirement; • A request for an amendment to the Best Interest duty to better facilitate scaled advice; and • A request to amend the definition of ‘group life’ within superannuation to allow for commissions to be payable on individually advised insurance cover.

Client behaviour challenges beliefs Clients of financial planners are more engaged with them, compared to those of Industry Superannuation Funds, and believe their planners are more connected to them around their financial and lifestyle goals, who they are as a person and the context of previous discussions. These are some of the key findings to emerge from The 2011 Client Engagement Behaviour Survey Report, conducted by CRMNow, which measured the attitudes of financial planning clients. According to the report, 91 per cent of respondents said their financial planner ‘understands me as a person’, with 44 per cent saying the same for their Industry 6 | financial

Super Fund. When it came to ‘understands my financial goals’, 96 per cent were in favour of financial planners, compared to 37 per cent for Industry Super Funds. The figure was just as high for ‘recalls previous discussions’, with a 95 per cent approval for financial planners, and only 33 per cent for Industry Super Funds. “As Industry Superannuation Schemes look to provide additional financial services, they have some challenges ahead with a client base focused on zero fees,” said survey contributor Keith Wright. Wright, the chief executive officer of Leap of Faith, said that while the financial planning profession remains pre-occupied with

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legislative changes surrounding annual fee disclosure, the research reassuringly showed that 83 per cent of clients are already discussing fees with their planner by telephone at least once every 12 months. However, while there is a desire by some planners to be remunerated for the services they provide to clients based on a percentage of monies under management, the research showed that an overwhelming 75 per cent of consumers rejected this method, preferring instead: 1. A form of ‘success-based fee’ (33 per cent); 2. A flat annual fee (29 per cent); and 3. An hourly rate (13 per cent).

Of the remaining 25 per cent, 12 per cent of clients prefer to pay as a percentage of funds under management, 7 per cent wanted a range of payment options, while 6 per cent “didn’t care because they really have no idea what they’re paying anyway”, Wright said. The report was conducted by CRMNow in the last four months of 2011. Over 10 financial planning practices participated in the survey, with the survey sent to 2,000 of their clients. One-fifth of these clients completed the survey. For your opportunity to participate in the 2012 survey, go to www.crmnow.


ETFs poised for growth and change

Aussies tighten spending belt Despite the global economic malaise, 65 per cent of Australian households are feeling more optimistic about their financial wellbeing, saying their financial position improved or at least stabilised in 2011, with higher savings and sensible budgeting building greater confidence for 2012. This was one of the key findings to emerge from the ING Direct Financial Wellbeing Index (Q4 2011). Analysing data over several quarters of the Index, ING Direct manager – adviser distribution, Rachna Chandna said there was a continuing trend of deleveraging among Australian households. “While 54 per cent of households are ‘very comfortable’ with their credit card debt, 17 per cent of Australians no longer own a credit card, compared to 11 per cent in the first quarter of 2011,” Chandna said. “This should eliminate any doubt about our national focus on paying down debt.” However, Chandna added that the level of savings and investments of Australians continued to be a

concern, with only one in 10 saying they were confident with their savings (12 per cent) and the value of their long term assets (10 per cent). According to the report’s findings, 27 per cent of households have less than $50,000 worth of assets including equity in the family home (excluding superannuation). Over half (52 per cent) have no investments at all outside their home and 50 per cent have less than $17,000 in personal savings. Among low income households, 30 per cent have zero savings. The ING Direct Household Financial Wellbeing Index measures the financial wellbeing of households across six financial parameters: short term debt, long term debt, household income, household savings, assets and investments, and household bills. The Index also provides an attitudinal measure of a household’s level of comfort on each dimension, providing an overall perspective of financial wellbeing at the household level.

Who’s falling behind? Nat






Proportion of households 32% who say their personal finances deteriorated in 2011






Proportion who expect to be worse off in 2012







Source: ING Direct Household Financial Wellbeing Index Q4 2011

The availability of exchange traded funds (ETFs) listed on the ASX is poised to ramp-up significantly this year, with iShares Australia last month launching three new fixed income ETFs. More than 20 new ETFs are likely to be listed on the ASX this year, adding to the 64 now trading, according to ETF Consulting chief executive officer Tim Bradbury. Bradbury, an ETFs specialist who co-launched and managed the team that initiated iShares ETFs in Australia, predicts 2012 will be a very active year for ETFs, where emphasis will soon start to turn away from the equitiesbacked focus that has dominated for the past five years. “We expect to see more dramatic growth and change, with stiffer competition, lowered fees, more product launches, consolidation, and the potential for more regulatory influence,” Bradbury said. The industry is awaiting more fixed interest ETFs to hit the market, with each of the major ETF issuers planning to introduce a selection of bondbacked ETFs. “This will fill the last big gap in asset classes offered and spark renewed interest in the ETF sector,” he said. “Commodities, other than precious metals, have been slow to be delivered in an ETF format, so 2012 will see more offerings in this space for institutional investors. This could pose an issue for regulators, as many commodities cannot be stored indefinitely and require derivativestyle ETFs,” he said.

“Rules-based funds, constructed and managed according to price earnings ratios, takeover prospects, or other criteria, will develop the ETF market beyond the existing high-dividend ‘rules’ ETFs,” he added. Bradbury forecasts fund managers with traditional managed funds outside the ETF sector are likely to make use of recent ASX rule changes to bring new styles of funds to market. “As pooled fund managers watch asset flow trends internationally, and as they seek ways to tap the significant self-managed superannuation fund market, they will realise recent ASX developments are worth investigating.” Bradbury cited the listing of the DIGGA Mining Fund (ASX:DGA) as a demonstration of how new fund managers could emerge by using the ETF structure and outsourcing many of the activities of a traditional fund manager to experts. “For a locally domiciled asset manager with much of the required infrastructure already in place (registry, custodian, trading, sales, legal, compliance, AFSL) the barriers to entry are even lower.”

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Highlights from the latest issue

Latest news Past issues of Financial Planning magazine

Member comments on articles

Connect with other members via LinkedIn Latest industry analysis

Member opinion

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This month sees the launch of Financial Planning magazine’s website. This month, Financial Planning magazine enters the digital space, offering financial planners a leading-edge knowledge hub of technical, practice management and educational content.

• Join in the conversation by commenting on articles.

In addition to hosting a wealth of valuable information, the site provides FPA members with the opportunity to get involved in discussion and debate, through article commentary and the FPA’s social media platforms.

• Follow the most read articles on the website.

In particular, the key features offer members the opportunity to: • Gain access to a library of practical and technical content for financial planners. • Keep up-to-date with the latest FPA and industry news.

• Read the comments of fellow FPA members.


• Refresh knowledge by accessing the last 12 editions of Financial Planning magazine. Prominently highlighted on the site’s homepage are the latest articles, research and reports relating to the current issue of Financial Planning magazine. The site is optimised for use with tablets and smart phones, providing members with what they need to know, anywhere, anytime.

• Connect with other FPA members through the FPA’s LinkedIn group discussions.

“The new website is much more than a repository of articles and information. It allows practitioners to participate in conversations and debate as they’re happening,” said Financial Planning editor Jayson Forrest. “The website brings to life the leading edge content of the print publication.”

• Follow the FPA and the FPA’s Dante De Gori via Twitter.

Make sure you visit the site at

• Read up on expert industry analysis.

FPA Twitter

Member comments

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The Government is expected to make an announcement soon on a replacement to the accountant’s licensing exemption. Should this exemption be removed and what, if anything should replace it? Want to have your say? Join the debate at decisions. The standards and skills involved vary, and their advice does affect the client’s financial outcome, either positively or negatively. However, the licensing standards of each vary considerably.

Charles Badenach CFP® Private Client Adviser and Principal, Shadforth Financial Group Licensee: Shadforth Financial Group Removing the accountant’s licensing exemption is likely to result in an increased number of professionals working in the financial planning space. The removal of the exemption will mean that accountants will have to be licensed should they wish to continue to provide advice on self-managed superannuation funds and related areas. Where a person provides financial advice to members of the public, it is logical that wherever possible, a uniform approach to licensing be adopted. There are a wide range of professionals, including lawyers, accountants, financial planners, insurance agents, mortgage brokers, valuers and real estate agents, who each contribute to clients being put into an informed position when making financial

Raising the professional standard in any industry is a positive, with consumers being the ultimate beneficiary. In many instances, financial planners are already collaborating with other professionals, such as accountants, working to achieve the best outcome for clients. Accountants, like other professionals, can choose to specialise in order to have the necessary skills and knowledge to effectively advise clients about specialist areas such as self-managed superannuation, and competently advise on the risks and issues unique to this area, or they can choose to refer their client to a financial planner with the skills and experience. Having only a general knowledge about isolated aspects of financial planning is likely to do more harm than good, and unlikely to meet the expectations of the majority of consumers to receive high quality, independent professional advice.

Daryl LaBrooy CFP® Financial Adviser, Hillross Financial Services Licensee: Hillross Financial Services The Howard government granted accountants an exemption from the Financial Services Reform Act (FSRA) due to heavy lobbying from the accounting bodies when FSRA became law in 2004. The accounting bodies argued their members weren’t providing financial planning advice in the traditional sense but rather advice about structures as they had always done, for example, for clients who may be setting up a new business. However, financial planners are deemed to be providing advice when they recommend clients set up a self-managed super fund.

10 | financial

Financial planners were similarly exempted from becoming Tax Agents because we weren’t deemed to be providing tax advice in isolation. The ‘Tax Agent’ exemption for financial planners is being removed and we’ll have to be accredited under a new regime when providing clients with incidental tax advice. The reason for the new regulations in relation to tax is due to the accounting bodies seeking an end to financial planners being exempted from being regulated as ‘Tax Agents’. Therefore, in the name of fairness, accountants

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should be licensed going forward to provide financial advice. This will ensure a level playing field and whether a client turns to a financial adviser or accountant, the same regulatory guidelines will be in place for both professionals. With the huge growth in the creation of self-managed super funds, mainly led by accountants, there is a need for this group to fall under the same licensing conditions as financial planners. A level playing field, even if full of red tape, is vitally important so that one group of professionals doesn’t have an undue advantage over another as there is at the moment. Many accountants believe they don’t need to be heavily regulated as they are better educated than financial planners and have more long standing relationships with their clients. This perception may have been true in the past, but the gap is closing as financial planning moves towards becoming a true profession.









WATCHDOG OUTLINES STRATEGIC PRIORITIES The chairman of ASIC, Greg Medcraft, responds to a range of policy questions from Michael Vrisakis. Q1: Is there a particular regulatory focus or theme for 2012? Our key themes for 2012 will revolve around our strategic priorities: confident and informed investors and financial consumers, fair and efficient financial markets, and efficient registration and licensing. Under the first priority of confident and informed investors and financial consumers, education will be a priority. Through our MoneySmart website, users will be able to login and save and create their own plans and budgets. Also under the banner of confident and informed investors and financial consumers, holding the ‘gatekeepers’ of the financial services system to account is another important aspect. These include accountants, directors, advisers, custodians, product manufacturers, market operators and participants. ASIC will take action where gatekeepers do not meet their responsibilities. Our supervision of the markets, including the introduction of Chi-X, will continue to ensure they are fair and efficient, and our priority of efficient registration and licensing will focus on small business. A large part of our organisation is dedicated to collecting corporate and company information - and information on regulated professions - so that it’s available to others. Our enhancements to our online search capability - ASIC Connect - will be a bit of a game changer, particularly for small business, in that you will be able to go online and obtain an extract directly from ASIC in a streamlined and cost effective way.

Q2: How do you see ASIC supporting the FoFA regime in terms of guidance in areas such as ‘best interest’ duty? ASIC supports measures like the proposed best interest duty and ban on conflicted remuneration. 14 | financial

We also support effective anti-avoidance measures that ensure the spirit of the proposed reforms around remuneration are not avoided through industry restructuring, for example, via vertical integration. In our discussions with Treasury, we always discuss the advantages and disadvantages of the respective approaches that they put forward. We always indicate to them an acknowledgement that it’s Treasury’s role to advise government, and it’s the government’s role to decide on the appropriate policy. Once the appropriate policy is decided upon, obviously, there will be a need to bring out regulatory guidance with respect to best interest duties and others.

Q3: Does ASIC see shorter PDSs as a fundamental change to the way disclosure is made, or is it just a matter of continued improvement of the system? This issue is about education, gatekeepers and understanding consumer behaviour. Consumers don’t read long PDSs and prospectuses, and we must face the reality of consumer behaviour and ensure that the shorter PDS has the key details that an investor needs. For the issue of prospectuses, the same applies here. The aim is to get key information into the investment overview at the front, to make sure it focuses on explaining the key elements of the business model and focuses on the key risks of the business model - not a shopping list of all known risks - so that people understand them and the consequences of those risks if they materialise. Do disclaimers have a role? We have to think about how consumers look at a potential investment and recognise reality. What we all want is for the consumer to understand what they’re getting. No responsible business wants a person buying a product they don’t understand.

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Greg Medcraft, ASIC

If you want investors to come back and buy from you again, they need to understand the risks and the consequences of those risks if they materialise.

Q4: Does ASIC see the role of electronic disclosure evolving in the foreseeable future so that more information will be able to be made available electronically, such as on websites? We recognise the increasing use of the internet by consumers to seek information and by providers to disseminate information. Our regulatory guidance, released in late 2010, sought to give the industry greater certainty and confidence in delivering information online. The desire to facilitate online disclosure, however, needs to be balanced against legitimate consumer concerns. There are still many consumers who, whilst they have access to the internet, don’t use it regularly or feel comfortable with online communication. We’re in a period of transition between paper and electronic. Clearly, over time there’s going to be a demographic change. Issuers of financial products need to understand how they can use social media, such as YouTube, Facebook and Twitter, and alternative channels to explain what’s behind a financial product.

Q5: How about the role of calculators? Will there be a continuation of the current exemptions under the FoFA regime? Calculators are a useful tool for consumers and

investors if done in a non-misleading way. Calculators are great for allowing people to explore ‘what if’ scenarios, or explore their particular circumstances.

REs need to be held to account as gatekeepers as they’re responsible for other people’s money. REs-forhire is one of our focus areas.

where we see something like this is to be proactive, to engage, educate, offer guidance and see how the products are targeted.

ASIC encourages the use of generic calculators. We have issued a class order so generic calculators are not treated as personal advice. By generic, we mean not recommending a particular product or brand. There is no reason for this policy to change under FoFA.

Q8: Are there continuing specific legacies of the GFC which ASIC is focusing on, such as complex financial products?

Q9: Thoughts on the market supervision role?

ASIC is comfortable with firms using technology to increase access to quality advice. Whether advice is face-to-face or online, the issue is whether it’s of acceptable quality. We are neutral about the delivery mechanism.

Q6: The Centro decision1 – a lifting of the benchmark, new law or just a heightening of awareness? Shareholders expect directors to be sceptical and to know how to read financial statements. Directors need to delegate, but at the end of the day they are responsible for the company and need to have control. I don’t think the decision is about moving the law. It’s more about clarifying the law. It means those who take on directorships shouldn’t take on the role lightly.

Q7: In relation to the proposed responsible entity (RE) regime announced recently, given the capital costs, do you think there will be an increase in REs for hire being appointed?

Globally, regulators are very concerned about complex products, in particular derivative products like contracts for difference (CFDs), capital guaranteed products, synthetic exchange-traded funds (ETFs), and products such as the current subordinated-long term retail bonds that have call options in them. The issues centre around education, suitability and making sure gatekeepers properly disclose the products’ risks. Another high risk area globally for regulators, with regard to manufacturers who are looking to generate higher returns, is to make sure the product is not going to the wrong investor. That’s one reason we’ve been encouraging the Australian Financial Markets Association (AFMA) to develop new product approval guidelines for its members to adopt. The same applies with CFD providers - we’re encouraging them to think how they can better self-regulate to ensure their products are not sold to inappropriate investors. Overseas, the Financial Conduct Authority now has the power to ban products that are regarded as too unsafe, and the Europeans are doing the same thing. There is discussion that there should be some reserve power to ban unsafe products. Clearly, that’s a matter for government. In the interim, our objective

The market supervision role is working well. We’re very determined. It’s a very high priority because we want a fair and efficient market for all Australians. The message to anybody thinking about insider trading is: we have the systems, the people and the powers. We most likely will find you. And if you are found guilty, you will most likely go to jail.

Q10. Conclusion In terms of our overall program, it’s important to constantly relate back to the strategic framework - the tools we use and how we set our priorities. That what we say we’re going to do, we do. Accordingly, the business plans here are well-aligned and structured to reflect our strategic priorities.

Michael Vrisakis is a partner at Freehills. Article republished with permission from Financial Services Newsletter (2012 – Vol 10, No 7).

Footnote 1. On June 27, 2011, the Federal Court found against seven directors of Centro Properties Group and Centro Retail Group for failing to discharge their duties with due care and diligence in approving the financial reports for Centro Properties Ltd, Centro Property Trust, and Centro Retail Trust for the year ended 30 June 2007.

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STALWART CLOCKS UP 25 YEARS This month is a milestone for long serving FPA staff member Di Bungey, who celebrates her silver anniversary with the Association. Jayson Forrest caught up with her.

There would be few members of the FPA who haven’t heard of Di Bungey. And there would be few member associations anywhere in the world that could boast the services and dedication to its members that Di has provided the FPA. This month represents a landmark for the FPA and Di who, on April 6, officially chalks up 25 years service. For 25 years, Di has been a predominant point of contact for members, serving in member liaison roles where she has helped practitioners organise workshops and Chapter events, and dealt with queries and complaints. But it hasn’t always been a smooth journey for the industry veteran, as she reflects on just how far the financial planning profession has come in the 25 years she has been involved with it.

Early years “When I first came on board, it was a one man band,” Di says. “We were working out of what we called the ‘condemned building’ in the Sydney suburb of Chatswood, because that’s all we could afford at the time.” Di is referring back to April 1987, when she was recruited by Barry Lambert, Maurice Harris and Max Vardanega to become the first full-time employee of the fledgling Australian Investment Planners Association (AIPA), where she was responsible for looking after the principal 16 | financial

members. The association later changed its name to the Australian Society of Investment and Financial Advisers (ASIFA), which later merged with the International Association for Financial Planning (IAFP) on January 1, 1992, to form the FPA. In a previous interview with Financial Planning magazine, Maurice Harris – who has since passed on - recalled that back in 1987, Di worked in such dreadful and crowded accommodation that she had to “step outside to change her mind”. “Di inherited no records and had to open the register of members. A short time after she joined, there were the first AIPA exams and she had to issue over 1,300 certificates the old-fashioned way by hand. “Di grew up with the AIPA, ASIFA and FPA, and coped extremely well. She has a high recovery rate and enormous faith in the future.” It was a view shared by Lambert who remembers 25 years ago placing an ad for a secretary/assistant, but was too busy to follow up the applicants. “Di was very persistent and because of that, she eventually got the job – even without an interview. I think we gave it to her just to stop her terrorising us. Di was exactly the sort of person we were looking for; someone who would get off her backside and do things. To this day, Di’s best attribute is her

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friendly and helpful nature. She keeps people happy and is a great public relations resource.” Di looks back with pride at the early years of what was to become the FPA, and at the range of responsibilities she skilfully managed to juggle. “At the AIPA and ASIFA, I processed around 1,500 CFP® applications on my own,” she says – no mean feat when you consider Di worked through her weekends for eight months to complete the task. “But it had to be done, so I did it. In reflection, it was a challenging time for us.” But it was that very energy and enthusiasm that almost saw the end of her in 2000, during a Skandia sail on the ocean-going yacht Nicorette. “I was talking to Lin Burgess and was so engrossed in conversation that I didn’t hear the crew call us to shift to the other side of the yacht. “Lin slid back and the next thing I see, she is in the water,” Di recalls. “I thought I was going to fall in. I honestly thought my days had come to an end. I was so scared. It’s a good thing I wasn’t wearing a dress!” But Di survived to tell the tale, and today she is the longest serving employee at the FPA, with a corporate memory often in demand by colleagues and members alike.

Highlights With a career spanning a quarter of a century – “Don’t say that, it makes me sound old” – Di has many fond memories working at the FPA but when pressed, she nominates her 10, 15, 20 and now, 25 year anniversaries as all being memorable. But there was another occasion back in April 2002 that even tops these anniversaries for her. “Unknown to me, the FPA passed a special resolution to recognise the contribution made by non-financial planners to the Association. As it turned out, I was the first person to receive this award. It was a great honour and a personal highlight working at the FPA.” Having worked for eight CEOs at the FPA and more presidents and chairmen than she cares to recall, when asked to nominate a defining personality within the profession over the past 25 years, Di is reflective. “That’s a tough question. I don’t think there has been just one person,” she says. “It’s been an amalgamation of people and views that has made the FPA what it is today.” However, she does credit the late Jock Rankin as “putting the profession on the map”.

“Jock was really lovely. He was a ‘bull-at-the-gate’ type person, but we owe a lot to him for what he did, and many that knew him would agree. Even though he had left the FPA after his contract was up, his passing was, nonetheless, very sad for the FPA.”

“Over the past 20 years and beyond, Di has done so much for the FPA and the financial planning profession. I believe she is the glue that holds the FPA together. She is the FPA.”

What about the most inspirational person?

They are strong feelings from an industry icon who few would disagree with.

Di doesn’t hesitate: “That has to be Auntie Gwen.”

So, what is Di’s secret to longevity at the FPA?

Di is, of course, referring to Gwen Fletcher AM – long considered the first lady of financial planning and credited for establishing the profession in this country.

“There’s no secret,” she jokes. “Everyday is different for me. I enjoy getting up in the morning and going to work. I enjoy my role at the FPA, the people I deal with and work with, and the relationships I have developed with members and work colleagues over the years. It’s these friendships that make my job so rewarding. I feel that I am respected by the members, which I truly appreciate.”

“Auntie Gwen has done so much for building and furthering the cause of the financial planning profession in Australia and abroad. She has always made herself available to offer advice or assistance to anybody, whether they’re in the profession or outside it. She is a remarkable individual and the profession owes a great deal to her.”

As for the next 25 years, Di is adamant retirement is not on the horizon anytime soon. “When my time comes, they’re going to have to carry me out of this place on a stretcher!”

It’s a reciprocal feeling. “Di is one of my most faithful friends and an outstanding supporter of the FPA,” Fletcher says.

Let’s hope it doesn’t come to that.

www. | financial planning | APRIL 2012 | 17

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July 1 is a milestone for FPA practitioner members, who are required to have transitioned their remuneration structure across to a fee-for-service model. The following articles are designed to refresh planners on the six-step process involved in transitioning a business across to fee-for-service.

1 month

2 months

3 months

3 months

3 months

LAUNCH Roll out






Take the opportunity to review your business and professional goals. Ask yourself: > What business you are in? > What sort of business would you like to be in? > What five-year plan do you have in mind for you, your partners and staff? > Why are you successful today – how can you capitalise on those strengths in the future? > Which parts of your business would you like to keep doing? > If you were starting out today what would you do differently? > SWOT analysis.

Good decisions can only be made when you completely understand your current business as well as the cost and value of your services. > What does it cost to keep your doors open each day? > What does it cost for you to deliver different types of advice? > How does that cost differ according to your different clients? > Review and itemise your costs associated with providing initial and ongoing advice.

> Build your value proposition for this different business. > What services should you be offering? > How much should they cost? > Do you have the right staff on board? > What training will they need?

> Break it all down into manageable processes. > Set realistic and meaningful deadlines. > Identify contingencies. > Test the change with clients.

> Make the changes to documents, services and business. > Make the changes to staff and education.

> Launch the new business. > Measure the changes.

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PLANNING A TRANSITION STRATEGY The first step towards transitioning to fee-for-service is devising a strategy. Three practitioner members who have successfully made the transition share their insights on how they reached their strategy. What type of business do you operate? Lisa Weissel: We charge on a fee-for-service basis with a hybrid methodology for payments, or as negotiated with the client. This includes a service-linked fee and an investment-linked fee, depending on what the client wants. We find this works especially well for those clients with employer superannuation or government super, where they need structure and strategy advice, but have no actual investments for us to manage on their behalf. Rhonda McKenzie: We run a fee-for-advice business. Michelle Tate-Lovery: We focus on building a financial life plan and providing ongoing support to help our clients to implement their plan and achieve their goals. Our clients are looking for direction, guidance and a sounding board to make informed financial decisions. The placing of investments is only one aspect of our service.

What were the factors leading to your decision to transition, and how long did it take you to make this decision? LW: We made the move to a fee-for-service business when we realised that the future of good value financial planning was in strategy, not product, around 12 years ago. Since then we have tried out several pricing models and settled on the ‘hybrid’ version, to provide protection for both the client and the business. It also allows us to service DIY investors and Generation Y who prefer to do what they can for themselves. MT: For many years we have been charging a fee for our first meetings with clients and for our financial life plans. When FSR was introduced, it was a challenging time as it forced us to review the business. We decided at this stage we would see fewer clients (and more of the ideal client) and do 20 | financial

more for them than try to be everything to everyone. Prior to the GFC, we developed a professional services pricing model. This made good business sense to us, rather than have a lack of control over revenue and having it dependent on a client’s investment portfolio. This was especially clear due to the type of advice our health industry clients were looking for, including salary packaging, defined fund options, and lifelong cashflows.

How did you choose a fee model for your business and what factors did you consider when determining this structure? LW: We looked initially at charging an investment-linked fee only, but soon discovered this was a problem if the client had no investments held under management. We then looked at using a pure service-linked fee with a flat dollar value. The downside to this is that we quickly priced out the Gen X and Y clients who we were trying to attract. Through discussion with some of our clients and staff, we developed the ‘hybrid’, where a client pays a service-linked flat dollar fee for the strategic advice and pays a small asset/investmentlinked fee against any investments we manage for investment services and advice. This allows the best of both worlds without tying our total revenue to investment markets, which we cannot control. RM: Our fee model is constantly being reviewed and adapted as our business grows and the market evolves. We are currently assessing the viability and practicalities of moving towards a fixed ongoing fee structure and evaluating the suitability of different fixed fee approaches. Considerable work has been undertaken to document and detail our service offer to clients, and to understand the time commitment and the direct and indirect costs involved in delivering this. This approach, combined with an evaluation of the value we deliver to clients, has formed the basis of decisions relating to the commercial viability of different fee models for our business.

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Our experts Lisa Weissel CFP® Authorised Representative, Count Financial Limited and Senior Adviser, Evergreen Wealth Professionals Lisa is a senior planner with over 11 years’ experience in the financial planning profession, with her expertise directed to providing strategic lifestyle solutions. Rhonda McKenzie CFP® Principal, Planning for Life Rhonda has worked in the financial services industry as a financial planner since 1989. Prior to this, she managed a sales force, and has been an elected City Councillor and Deputy Mayor. Michelle Tate-Lovery CFP® Director and Representative, Unified Financial Services Michelle has been a financial planner since 1989, working with various privately owned firms before establishing Unified Financial Services in 1994. She specialises in providing financial advice to senior allied health professionals.

MT: Initially we focused a lot on time spent, and then developed an operating rate for the business. We are now focusing more on the value of advice provided, which is more difficult to account for. We feel it’s a mix of both time and value-add (tangible and intangible value-add). As such, we clearly list the tangible benefits of our advice in our financial life plan, such as how advice has saved a certain amount of capital gains tax, for example.

What were the aspects of your business that had to change at the same time you changed your fee structure? LW: Primarily our ongoing service agreement and how we delivered our services. We determined

what services our preferred type of clients valued and how best to deliver these. We then conducted a ‘cost to serve’ analysis. From that, we were able to present a service offering that was affordable, of value to the client, and still provided profit to the business. How we then presented this to existing clients became the next challenge, but as we had kept them informed throughout the process, we experienced no loss of clients or staff and rolled out the new packages across the normal 12-month review process. RM: As our fee model has evolved, we have also reviewed the segmentation of our client base to ensure there is a link between service offer and fee structure, and to ensure that not only are we acting in the best interests of our clients, but that this relationship is also commercial. MT: We had to become better at keeping track of the amount of work we were doing for clients, and at communicating what the service includes, what comes at an additional cost, what our expectations of the client are and what they can expect from us. We are still working on this.

Did you seek any advice on transitioning? LW: The most valuable contributions to our transition discussions came from workshops with our peers, conducted by both our licensee and Jim Stackpool. The different ideas and tools that came out of those sessions provided the backbone of our discussions in the office and helped frame our current advice model and fee structure. RM: We have engaged business consultants along the way to inform our decision-making. The process has been extremely valuable in opening up our eyes in terms of the approaches available and how best to transition our existing clients to our new fee model. MT: We sought advice from consultants, associates and small dealer networks. We also sought out fee-for-service practices, and implemented an advisory panel for the business. I have had a personal life and

business coach for years, which has helped bring it all together.

If you had to transition again, are there any strategic aspects you would consider this time? LW: I would do a complete SWOT analysis of each of the different fee models to see which would best suit our business. In doing so, I believe we would have moved straight to our current model, rather than trying three others. However, the experience has been worthwhile and certainly the GFC has had little impact on our business revenue. RM: The key message to anyone transitioning to a new fee model is do your research, clearly define your service model, evaluate the cost associated with delivering this service model, and determine an approach that is not only competitive but fair to the client. The most important aspect is that you need to ensure that your whole team firmly understands and believes in the approach. MT: Determine the ideal client first and build the service and pricing around them. If there are different ideal client scenarios, don’t try to fit them in the same service offering box – we tried to fit everyone in a coaching service, where some clients just needed a financial plan or maybe project work. Cost the different service offerings on an annual basis and just don’t stop! It’s a great opportunity to have the best financial planning practice you can.

SIX PRINCIPLES FOR FINANCIAL PLANNER REMUNERATION The FPA considers it essential that in order for financial planning to be recognised as a true profession, the remuneration of financial planners becomes clear, concise, comparable and aligned to a service that delivers value. To this end, in September 2009, the FPA approved a new remuneration policy for its members based on six key principles that would see financial planner remuneration transition to a fee-based, client directed payment model. This new fee-based, client directed payment model for practitioner members of the FPA is effective from 1 July, 2012. The six principles for financial planner remuneration are: 1. Clients must be able to understand the fees they are paying [Clarity]; 2. Clients must be able to compare the fees they are paying [Comparability]; 3. Clients must be presented with a fee structure that is true to label [Transparency]; 4. Clients must be presented with fees that are separated between advice and product;

Other articles relating to ‘strategy’ in step 1 of the change management process, include: • Case study: Defining and implementing a transition strategy by Nicholas Pantu CFP®. • Your Transition Questions Answered by Dante De Gori and Sue Viskovic. To read these articles, go to

5. Clients must agree the fee with their financial planner and can request that the fee is switched off if no ongoing advice is required; and 6. Clients, rather than product providers, should pay for financial planning services, so as to remove potential for bias. For more information about the FPA Remuneration Policy, please refer to the ‘Standards’ section on the FPA website at

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CASE STUDY: EVALUATING THE COSTS OF TRANSITIONING Louise Lakomy CFP®, principal of Yellow Brick Road Investment Services, describes her experience with transitioning to fee-for-service and some of the surprising things she discovered along the way. We decided to change the fee model in a former business (Calliva Wealth) from commissions to an asset-based fee-for-service model. Once we had decided this, it took about a year to transition all our clients. The time this took was the main challenge we faced in the process, as we didn’t want to just send letters to clients. While we did send a standard letter to some of our small clients, we met with the majority to discuss the changes.

Assessing the cost

All our clients switched to our new fee model, apart from two, who moved to a flat fee rather than a percentage fee.

In terms of costs to run the business, it now takes us less time to track fees and do an annual update. Our profit from the business increased prior to the GFC then dropped, but we are still better off than before we made the change, as our fee revenue is much smoother as a percentage of funds under management (FUM), rather than a combination of fee FUM and commissions from trades and fund managers.

Another challenge we faced during the process was the time taken to compare the commissions we used to receive with what we would now charge as fees. We wanted clients to know how much we were previously paid so they would understand the value of what we were proposing under our new model. This involved a large amount of time preparing spreadsheets and going through commission documentation. During the process, we didn’t use any external support services or provide any additional education or training for staff, but did everything in-house. 22 | financial

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While it is difficult to quantify the costs incurred in making the transition, there were obviously costs associated with time spent by planners meeting clients, preparing spreadsheets and letters, counselling clients post-change, and changing the fee collection method, which involved a transformation of our business processes. The update of our Financial Services Guide (FSG) was also a costly exercise.

The transition also made it possible for the business to be sold about a year after our transition. Being a feefor-service business gave it greater value, as clients want transparency and new clients come through the door because the business doesn’t charge commissions.

Hallmarks of the new model Under the new fee-based model, fees are clearly displayed to clients on a monthly basis, rather than being out of sight after their financial plan is prepared. Our clients were, for the most part, very happy with our changed business model, as they understood we were trying to be ahead of the game in removing conflicts of interest and getting rid of commissions, which they all agreed with. We did lose about five fee-sensitive clients, but given the amount of time they required overall, we were probably making a loss on servicing them. Overall, we did not experience a loss of revenue or impact on financial results, and we have not had to turn very many clients away because they do not fit our new business model. As business owners, we are better off, as our income is more level than previously, when commissions were received from trading on stocks. We repriced the fee to our clients for advice to more accurately represent the value of our service offering and our underlying costs base. We also built a strong ongoing service proposition that we are comfortable will continue to add value to our clients and ensure we have a profitable revenue stream over the course of a typical 10-year client relationship.

Advice for others If I had my time again, I would have sped up the process and probably sent a few more letters to clients. For planning businesses just beginning the process of transitioning, my advice would be to segment your client base, identify a target market, work out your costs per client, identify your most profitable clients, and prepare a new fee schedule focusing on the chosen target market. As you move through the process, I would suggest reviewing your plan, ensuring there is consistency

between planners and that the same message is being relayed to all clients. Be strong and don’t give in to clients wanting a discount! I would definitely recommend avoiding this for non-profitable and difficult clients, even if they do not receive the changes well. As clients are informed of the changes, reflecting with colleagues on your experiences during these periods of change can be helpful, as can discussing better methods for communicating this message. The top five benefits of the change we have seen for our business are: 1. profitability, 2. transparency, 3. a reduction in conflicts of interest, 4. not trading to increase profitability, and 5. new clients seek our services as they don’t want to be charged commissions. At a personal level, I like the fact that we are free from perceptions of conflicts and the clients recognise that, as their planner, I am offering advice that is in their best interest.

Other articles relating to ‘analysing your business’ in step 2 of the change management process, include: • Crunching the Numbers for a New Service Model by Michelle Tate-Lovery CFP®, Greg Connolly and Nicholas Pantu CFP®. • Your Transition Questions Answered by Dante De Gori and Sue Viskovic. To read these articles, go to

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BUILDING A NEW VALUE PROPOSITION A new fee model brings with it the need for practices to articulate the value of their services to clients. Financial Planning spoke to three FPA practitioner members about how they arrived at their new value proposition. How did you go about building your value proposition?

How did you decide what services to offer in your new business?

Mark Harding: We sat down and looked at what we were offering clients. We spoke to some of our existing clients about our services and advice, and asked for their feedback on what we did, what they valued, what was important to them and whether there was anything else they wanted or valued that we didn’t currently offer.

MH: Once we established our value proposition, we confirmed that we wanted to continue specialising in retirement advice. We then looked at our current services and explored what else we could offer clients to add value to the advice we already gave them – for example, aged care advice.

We analysed this information and put together a list outlining different aspects of our service, image and relationship, including the value we believed we were providing for our clients. This enabled us to articulate our client value proposition, which is to provide personalised retirement advice to give our clients peace-of-mind. Ian Heraud: It took us time to properly consider our value proposition, as we simply always tried to give the very best advice and genuinely act in a fiduciary capacity with our clients. This clearly worked as we often received more new client referrals than we could cope with. Since merging to form Shadforth Financial Group (SFG), we now have the resources to thoroughly review our value proposition and it is something that is constantly being redefined and improved. Dean Gilkison: We defined the result we wanted to achieve as a group and asked our clients where they feel value exists. We have now set our focus on how it feels to be a client of Gilkison Investments, so we built our value proposition around that. 24 | financial

IH: In the early days we tried to be all things to all people, but quickly realised this did not make sense and instead focused on what we were good at, which was tax-related issues and the use of superannuation. We outsourced many other services such as risk, legal and accounting. We used to think that we could truly add value by picking various investments for our clients, but realised that the evidence was against this being of value to our clients, and now generally use a core and satellite approach. DG: The information we gathered when building our value proposition allowed us to choose what services we would provide and how these services would be delivered. We found there were a lot of ‘traditional’ services that were no longer relevant to many of our clients, so it was a very positive process.

Was pricing the services difficult? MH: Pricing was a relatively simple process as we already knew our value proposition and the services we were going to offer. From there, we were able to analyse the time involved in providing our services, who would provide each service and the associated

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Mark Harding, Harding Financial Group

infrastructure and operating costs. We then analysed our cost to serve and came up with a cost for the services we provide. The costs were similar to what we had previously assumed, but going through the process has enabled us to be more explicit in the dollar amount charged for our advice and services, compared to a percentage-based model. IH: We had great difficulty determining the pricing of our services except for the initial financial plan. We determined this on a notional time cost basis which several years ago was in the range of $350 per hour. This meant that the cost of a financial plan could be anywhere from a couple of thousand dollars upward. It was rare, however, to charge more than $10,000 for a plan. The ongoing servicing was harder to price and in the first place, it was done on the basis of a best guess. Again, since becoming part of SFG, this has been analysed in a far more rigorous manner. DG: Not really – it was more time-consuming than difficult. If you understand the cost of operating your business and then add a

Our experts Mark Harding CFP® AMP financial planner and director, Harding Financial Group Mark has been a financial planner since 1983 and established Harding Financial Group in June 2001. He specialises in providing personalised retirement advice to pre-retirees and retirees. Ian Heraud CFP® Principal, Shadforth Financial Group Ian is a Fellow and Life Member of the FPA as well as a previous director of the FPA and the Financial Planning Standards Board. He founded Heraud Harrison in 1990, which merged with 11 other similar businesses to form Shadforth Financial Group (SFG) in April 2008. Dean Gilkison CFP® Managing director, Gilkison Investments Dean has been in the industry for over 11 years. reasonable profit margin, you have a clear and well-defined target.

How did you decide on the mix of cost and value in determining your pricing structure? MH: To determine the mix of cost and value in our pricing structure, we looked at the time and work involved for each level of service we provided. We also analysed our existing client base to see how much time and work was involved in providing our advice and what value we believed we could offer our clients based on their personal objectives and circumstances. In addition to this, we considered our costs relative to our competitors, taking into account the fact that we are in a regional area where relationships are important. We also considered the value we felt our client value proposition gave to our clients, and from here, we established fees we believed to be fair and reasonable.

IH: We probably always under-charged for the value that we provided to our clients and again have only recently really been addressing this in a truly objective fashion. DG: We keep it as scientific as possible by understanding the costs and then deciding on an individual client basis what value premium is to be added, depending on what service is being provided. More complex advice and service naturally attracts a higher value premium.

Did you discover the need to change the roles of existing staff or hire new staff? MH: With the transition to fee-for-service, our staffing remained unchanged. Our existing staff had an excellent understanding of our systems and processes and what level of service our clients deserve and expect. Everyone works together as a team to deliver our value proposition so our clients get the right advice, experience and value from us. IH: We have changed the way our staff work and have a mixture of advisers, client service managers and customer relationship managers. Some staff were not suited to the change and some new staff were employed. DG: Yes, we did. The positive results of this process have allowed us to expand our team and help our existing staff develop their skills.

Did anyone in your business undergo training in preparation for the transition? MH: We participated in AMP Financial Planning’s ‘fee-based advice readiness’ program over the last six months. This confirmed in our minds that our business was going in the right direction. The program helped us to review and improve our value proposition and assisted us in articulating to clients the transition from percentage-based fees to flat dollar

Dean Gilkison, Gilkison Investments

amounts, based on the advice and value added. IH: During the transition to the charging of fees, all advisers and management met on a regular basis, often a couple of times a week to review the progress that we were making and to discuss hurdles and successes so that all could benefit from the group’s experiences. Looking back, most of the hurdles were in our own minds and we lost virtually no clients in the switch to working on a fee basis, which also turned out to make the business more profitable. DG: Not formally, no. Obviously there were practical issues that required attention, which have been relatively easy to handle. However, from an adviser’s point of view, we did find it helpful to spend a significant amount of time sharing our experiences as we informed each client of the change.

Other articles relating to ‘building a new value proposition’ in step 3 of the change management process, include: • Case study: The Experience of an Early Adopter by Lisa Weissel CFP®. • Your Transition Questions Answered by Dante De Gori and Sue Viskovic. To read these articles, go to

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PLANNING MAKES PERFECT Once practices have defined their business model and value proposition, the next step is to make a plan for the transition. While it can seem overwhelming at first, a clear plan makes the process much more manageable. Financial Planning asked some FPA practitioner members to share their transition plan. What elements were included in your transition plan? Lisa Weissel: Our roll-out timetable included the following elements: • We sent a letter to clients advising them of the change to the way we charge for our services and inviting them to call to discuss it, but reassuring them there would be no changes implemented until we met for their next review. • We put together a new Financial Services Guide with service package and pricing attached for all new clients. • We provided staff training on the fee structure and ensured they updated internal systems and processes to allow efficient delivery of services. • We updated our procedures manual to reflect changes for any new staff joining and ensured that old systems were also maintained until all existing clients moved across. However, this did create some duplicated effort for 12 months but was well worth the effort. Michelle Tate-Lovery: We transitioned to fee-forservice gradually and over many years. Our plan of action was mainly developed through much discussion with staff, clients and business coaches. This helped us identify the issues, prioritise, work out who was doing what and more importantly, the timeline to get things done. Our issues were: 1. Research and data collection – with questions to be answered such as: • Fund managers – who would allow us to move to a flat dollar fee, who wouldn’t? Were the fees able to be indexed? 26 | financial

• What dollar amount did we receive per annum from each client? Most clients had an investment portfolio but there were some clients who were just paying for advice around budgeting or around an event in their life that they were facing.

Lisa Weissel, Count Financial Limited, Evergreen Wealth Professionals

• Cost of providing service – working out the per hour business operating rate and ongoing service rates for our three levels of service and what differentiated each service package. 2. Confirming our core service offering and developing a formal pricing policy, including separating advice/strategy fees and investment management fees. 3. Developing a communication plan, including regular contact with clients and staff regarding the changes, why we were making them and what was in it for them. The plan focused on communicating the value of our service, our belief in transparency and that the move away from commissions was where we felt the industry was going – and needed to go – to increase professionalism and protect the consumer. 4. When to implement: we made sure we implemented the change at the client’s annual service agreement renewal date, providing relevant paperwork and conducting discussions with advisers as needed. 5. Method of fee collection: we gave clients a choice around the method of collection – invoice upfront half-yearly or yearly, monthly direct to our bank or through their portfolio as a flat fee. 6. Pricing policy: we are still reviewing our pricing policy and each individual client contract annually. We are now pricing separately for ongoing service and project management work.

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If we were transitioning to fee-for-service in a short period of time, I would not go it alone and would appoint someone in the practice to manage the process, or outsource.

What was the most difficult part of the planning process? LW: Explaining to clients the differences of each level of service, and reminding ourselves not to keep providing ‘platinum’ service to ‘bronze’ level clients. This takes time and each staff member needs to believe in what they are saying. Sometimes it’s all too easy to fall into old ways of thinking because what is familiar is easier. MT: Learning how to communicate the value of advice. At first we thought a time system would be the best approach, given time is tangible and can be measured. This system has served us well and we will continue to keep tracking time, however, we are moving away from this method of communicating our service offering to clients. This is because clients are not just buying service time from us. The intangible value of our ongoing relationship, responsiveness, continuity of planner, and our care and dedication to their personal plan are not represented in a per hour operating rate.

We are still refining how to demonstrate the link between price and value.

Did you meet your deadlines? LW: Yes, however, there were some clients who had to be brought into the new model more slowly due to their age and capacity for payment. We call these our legacy clients and they are usually the ones we have been looking after for decades and who really need our help, but cannot necessarily afford it. In some cases, these almost become ‘pro bono’ type clients. MT: Frankly, we didn’t set deadlines because we started the transition to fee-for-service well before the GFC. We always took the view that we wanted to have a high level of recurrent income in the practice and developed a belief that this income had to be secure regardless of market fluctuations, as we wanted to have a sustainable business and be there to service clients when they needed it the most. We did not launch a mass level campaign which was rolled out in one go across the client base, but grouped clients or addressed them individually and worked with them in transitioning.

Did you set or need any contingencies? LW: We kept percentage-based fees in place until the new fee structure was adopted by the client, then adjusted to the agreed structure so that there was no overlap. Other than that, we had no further contingencies, but we do continue to review and refine our fees and services so they remain relevant to our clients. MT: We developed another service level that we offered to clients who wanted to continue as a client of the firm but did not require our full suite of services. I felt we really knew our numbers/ financials and did ‘what if?’ scenario modelling in the event clients did not adopt our new service offering. Once again, at every opportunity, we kept staff engaged and communicated to clients why we were transitioning to fee-for-service and the benefits to them. I suppose in the end, clients were loyal and they valued the relationship they

Michelle Tate-Lovery, Unified Financial Services

Our experts Lisa Weissel CFP ® Authorised Representative, Count Financial Limited and Senior Adviser, Evergreen Wealth Professionals Lisa is a senior planner with over 11 years’ experience in the financial planning profession, with her expertise directed to providing strategic lifestyle solutions. Michelle Tate-Lovery CFP ® Director and Representative, Unified Financial Services Michelle has been a financial planner since 1989, working with various privately owned firms before establishing Unified Financial Services in 1994. She specialises in providing financial advice to senior allied health professionals.

had with us, so they felt comfortable to journey with us through the transition.

How did you go about testing the change with your clients? LW: We talked a small survey group through the service and pricing model, after doing so with the staff, and took their feedback and comments on board. Overall, our clients were happy with whatever we charged, as long as we were there for them and they could see the value in what we did. MT: Overall it was a two-year process to move all of our clients. In year one, we tested our pricing policy mainly on new clients entering service; in year two, we moved our existing clients into the structure. We prepared annual agreements for clients, depending on their individual 12-month renewal dates. We implemented the pricing policy changes as the renewal date came up for the client. Agreements in our practice were started years ago, so clients had to think about whether they engaged us for another year. Their annual fee (back then it was trail brokerage and percentage-based) was disclosed in their agreement.

We continue to have open and frank discussions with clients around fees, asking them what they value most. With each conversation you have with a client around fees, you become more confident and believe that you really do add value to people’s lives, and they really can’t be without you and the service you provide.

Did the testing require you to change your plan or business model at all? LW: Not particularly, as we had already spoken to our survey group in the earlier part of development to ask them what they wanted from us and our services. We simply had to put the package together in a cost-effective and valuable manner. The actual pricing was not an issue – you just have to believe in your own value and your clients will appreciate what you offer. MT: Our core service offering, business plan and pricing policy are always evolving. Our business model has also changed to provide a better service. We find the conversation around price and value is becoming easier, and with the fine-tuning of who our ideal client is and what we can offer, we have had more quality work over the last three or so years.

Other articles relating to ‘planning for the transition’ in step 4 of the change management process, include: • Q&A: Where to Draw the Line by John Bacon. To read this article, go to

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BUMPS ON THE ROAD: MANAGING COMMON TRANSITION PROBLEMS Lap-Tin Tsun examines some common transition issues and shares tips on how your business can successfully avoid or manage its way through these challenges to make your fee-for-service transition smoother and more effective. Financial planning practices should have already transitioned across or at least be in the planning stages of their fee-for-service transition. However, implementing the transition is also where most practices start running into problems that befall many a transition. Unfortunately, if these problems are not managed properly they can very quickly and easily derail your fee-for-service transition, which can result in a very timeconsuming and expensive experience. Combine this with the potential negative impact on your customers and to the reputation of your practice, and it is clearly something that is worth investing your time and effort into avoiding. Fortunately, when it comes to these problems, there are some common themes that practices encounter over and over again. While this is perhaps a painful learning experience for those who have experienced them, it also means that you have the opportunity to learn from their experience and see how, with the right planning, you can effectively manage and mitigate these issues, minimising the cost and impact on your business.

1. Cashflow impacts: Managing your money The number one problem faced by the majority of practices is the impact on their cashflow during the transition period, which can be quite significant. Often this is caused by: • the timing gap between turning off commissions and receiving upfront fees; • additional transition costs over and above normal operating expenses; • reduced team performance while new changes are being made and bedded down; 28 | financial

• reduced focus on clients during the transition period; and • in some cases, lower income received from fees versus commissions. However, as unavoidable as it may seem, the reality is that cashflow impacts can be managed to a minimal level through some of the tips below. Plan, plan, plan When it comes to minimising the impact on your cashflow, what you want to do as quickly and effectively as possible with your fee-for-service transition is to: • ensure the highest level of conversion from commissions to fees; • reduce the lag time between switching off commissions to fee payment; and • reduce the amount of time that your business spends in the transition phase. This allows you to transition your clients to fee-forservice quickly and effectively, boosting your cashflow back up as soon as possible. However, the only way to do this is to have a detailed transition plan that clearly lays out how your practice will achieve the above objectives. Therefore, ensuring that you have a robust plan in place is the most powerful action you can take to help manage the cashflow of your practice during the transition period. Pilot in pockets It is worth remembering that, once you present your fee-for-service offering to your client, it is impossible to take back. Therefore, an alternative is to test or pilot your fee-for-service business model first with a

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small set of your clients before extending it to the rest of your clients. This gives you the opportunity to finetune your business model without risking your entire client base (and corresponding cashflow). Once your business model has been tested and refined, you can move confidently and quickly to transition your clients, thereby limiting the potential negative impact on your cashflow. Key lesson Do not delay or procrastinate on your transition and do not use the marketplace as your primary testing ground (unless you are piloting). Leaving it in limbo is the surest way to impact your cashflow. Either be sure of your plans and move quickly, or make sure you are sure and then move quickly.

2. Communication difficulties: Selling the fee Fee-for-service requires a different mindset, and some practices find it difficult to engage clients with fee-for-service, or ‘sell’ it to existing clients who are well-established on commissions. Much of this stems predominantly from a lack of confidence. Fortunately, the following tips can give you and your team the confidence it needs to communicate fee-for-service effectively to your clients. Ensure the client-proposition alignment Part of being able to effectively ‘sell’ to your client is being able to demonstrate that the propositions and services you have developed relate directly back to what your client wants. By ensuring that you can logically and rationally relate your proposition back to the needs of the client, and more importantly, ensuring that your team can also make that connection, it makes the ‘sell’ far more natural and intuitive for both the client and the planner, taking much of the fear and uncertainty out of the equation.

Train and practice Sales training or role-playing can also provide a safe environment to test out your sales process. This not only enhances the confidence of your team, but also provides an opportunity to identify areas for improvement in your fee-for-service sales process.

disengagement and disillusionment starts, it can be very difficult to turn it back around. It is always better to manage proactively and avoid it in the first place.

Key lesson At the end of the day, selling fee-for-service is all about confidence. Believe in what you are offering and clients will believe in you.

Undoubtedly, the most expensive issue you will face during the transition journey is managing the changes to the systems and processes that your practice will require for fee-for-service. Unfortunately, many practices stumble in this area because they fail to anticipate the extent of the changes that are required, especially when it comes to new tools or software that the practice requires.

3. Staff impacts: Managing the human element Despite their best intentions, some businesses will find that certain staff roles and responsibilities will be impacted upon by the transition. This can result in staff conflict, demotivation of staff, lower performance, resignations and other outcomes that are generally undesirable to your business, especially at a time when you need your staff to be operating at their peak and contributing positively to your business. Acknowledge, do not ignore The first piece of advice is to not ignore potential staffing issues, even if they are not explicitly raised as issues. While some concerns may seem trivial, if left festering, they can cause significant damage to your business in terms of poor performance and customer service. Tackling the issue directly in the open is the best way of defusing any issues before they become a situation. Encourage your team to step up In some cases, training and development, mentoring or coaching may help bridge certain capability gaps for some staff. The transition journey itself may also provide an opportunity for staff to ‘step up’, take on more responsibility and in doing so, contribute more to your business. Business is business However, at the end of the day, there may be a need to either recruit and/or retrench staff to fulfil certain capability requirements. In either case, a recruitment/ outplacement specialist is the most appropriate starting point. As an alternative to recruitment, you may also want to consider other ideas including sub-contracting or outsourcing of certain functions, which may be more cost-effective depending on the nature of your business. Key lesson Once the conflict and downward spiral of

4. System and process changes: Delivering service

In this case, a few forward-thinking steps can save your business a significant amount of money and headaches. Don’t follow the fad When deciding on the right tools and platforms for your business, the danger is getting swept up by what other practices are using. The problem is that any tool, platform, or process you integrate into your business will be very difficult and costly to take out afterwards, so it is important to make sure in the first instance that you choose the solution that is right for your practice. Due diligence is king. Seek specialist help We can’t all be great at everything. Sometimes, seeking specialist assistance is the smartest and most effective thing to do. It might cost more upfront, but it could save you significantly in time, money, and headaches later on. Key lesson Due diligence is critical. If your instinct tells you something is wrong, there probably is. Make sure you check and double-check everything before you sign on the dotted line. It could be very difficult or expensive to get out of the agreement after you have. Lap-Tin Tsun is managing director of E&W Strategic Partners, which specialises in business planning, strategy and improvement services for the financial planning industry. The above is a condensed excerpt from ‘The Fee-For-Service Handbook’.

Other articles relating to ‘making the change’ in step 5 of the change management process, include: • Bedding Down the Changes by Michelle Tate-Lovery CFP®, Lisa Weissel CFP®, Matthew Walker CFP®, and Greg Connolly. • Q&A: Managing ‘Opt-in’ and Client-Directed Payments by Peter Fysh. To read these articles, go to

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ROLLING OUT A FEEBASED PRICING MODEL SUE VISKOVIC provides a plan of action in the face of uncertainty. Sue Viskovic - Managing Director, Elixir Consulting

Sue Viskovic, Elixir Consulting

It will soon be illegal to place a client into an investment product and receive commission from the product provider. Do not underestimate the length of time it will take to undertake this transition. Consider the following actions that will occur in the process: 1. Planners need to select and then ‘emotionally connect’ with the style of fee structure they will implement (flat fees, asset-based, hourly rates or a hybrid model). 2. Segmented service offerings need to be articulated (sometimes created). Often this will entail the creation of documentation and supporting materials. 3. Structured processes need to be created (or refined) to deliver upon the service offerings. 4. Some science must be applied to understand the cost to deliver each task in the business, including an appropriate profit margin.

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5. Minimum fees must be derived, and then a method of how to apply the fee structure in any given client situation. 6. Advisers and staff need to be trained and rehearse how to communicate and ‘sell’ the new fee to clients – both existing and new. Adviser confidence will be one of the largest drivers of your success in making this transition. 7. Only then can you start to implement your new fee structure. New clients are easy – you simply quote your fee structure with the next enquiry you receive. Existing clients are a separate issue altogether. The business must decide how to transition its existing clients, and indeed whether or not they will do so with all of them.

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Consider where you are in the evolution of your pricing model. Even if you are towards the end of the process listed, you will find that the last stage of implementation can take over 12 months. The steps leading to that can take anywhere from one to six months, depending on the starting point of the business. We have been delivering our Pricing Advice Program with financial planners around the country for some time now, and I can share with you that those who undertake our online program in their own time spend between 10 and 30 hours to reach point five in the process listed above, and this can be spaced over a few days or a month, depending on how quickly they can access current data on their clients. Those who complete our Evolution Program come away from the two-day workshop having reached point six in this list, but with long lists of action items they need to complete in making the transition. Even the most evolved businesses typically have at least four A4 pages of action items, and this can extend easily into double-digits for other businesses who started ‘further behind’ on the business evolution scale.

So despite the fact that there are still some unanswered questions about some of the detail of FoFA, smart businesses are already taking this evolution seriously. There is nothing in the fine print that should stop you from taking a proactive approach to this issue right now. Sue Viskovic is the managing director of Elixir Consulting, and author of ‘Pricing Advice – creating the right fee model for your financial planning business’. Visit Please note these opinions are of the author only, and do not necessarily represent the view of the FPA.

The six-step process The articles in this feature have been republished due to popular demand. They are designed to refresh planners on the six-step process involved in transitioning a business accross to fee-for-service.

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Financial Planning caught up with two new CFP® Professionals, and asked their thoughts on their vocation and the CFP designation. Name: Gareth Colgan CFP® Practice: Sidney Lloyd Licensee: Fortnum Financial Advisers Date of receiving CFP designation: November 2011 No. of years as a financial planner: Seven years

Name: Megan Aikman CFP® Licensee: Mercer Financial Advice Date of receiving CFP designation: July 2011 No. of years as a financial planner: 11 years

The FPA congratulates the following members who have been admitted as CERTIFIED FINANCIAL PLANNER® practitioners:

QLD Amanda Engenheiro CFP® Centric Wealth Advisers James Lonergan CFP® Gold Hurst

SA 1. Why did you become a financial planner?

1. Why did you become a financial planner?

I moved to Australia in 2003 at which point I was qualified in IT. My father-in-law had an opening in his financial planning practice, so I joined the firm as I really liked the idea of being my own boss and emulating his success as a financial planner. His name is Guy Carrington CFP.

Financial planning appealed to me as it offered the opportunity to work with people and assist them to achieve real change in their lives. By ensuring financial security, this will empower clients and increase the choices they will have.

2. Why did you decide to become a CFP Professional? After completing my Advanced Diploma, I wanted to continue to develop my education and attain the highest standards for my chosen field.

3. How did you find the four Pathways to CFP certification program (ethics, education, examination and experience)? Good – I particularly enjoyed the ethics module as the educative component was familiar to me through my current role. The four Pathways came together very well and left me in a position where I feel that I’m at the top of my game.

4. Would you recommend other planners become CFP Professionals? Yes – this is an achievement I am proud of. Some criticism (rightly or wrongly) of CFP has been the fact that many were grandfathered this designation. But as far as I’m concerned, I know I applied myself and deserve to be recognised as having attained this high standard of professionalism.

5. What’s the best part of being a CFP Professional? Knowing that I have reached a level whereby I’m confident that I can add value to almost any client given the opportunity to do so.

Peter Arnell CFP® National Australia Bank

NSW Rebecca Sainsbury CFP® National Australia Bank

2. Why did you decide to become a CFP Professional? The CFP is an internationally recognised qualification that has stringent entry requirements with a focus on ethics and professionalism. With the increased promotion of the CFP, I was finding that clients expected me to have this accreditation.

3. How did you find the four Pathways to CFP certification program (ethics, education, examination and experience)? I found the four pathways program to be very comprehensive. The educational material was of a very high level and the webinars and the chat rooms provided an opportunity to ask questions to consolidate my learning. The course material provided practical application through the use of case studies.

Alysia Laird CFP® ANZ Iain Jeffery CFP® State Super Financial Services Nigel Butement CFP® State Super Financial Services Joanna Potts CFP® Crowe Horwath Sydney

4. Would you recommend other planners become CFP Professionals? I strongly recommend other planners become CFP practitioners as this will assist in lifting the public perception of the financial planning profession. I believe the FPA promotion of the CFP designation will increase public awareness of the additional accreditation undertaken by a CFP compared with other financial planners, and assists in positioning financial planning as a universally respected profession.

5. What’s the best part of being a CFP Professional? Clients are assured they are dealing with an adviser they can trust. Promoting the higher standards of education and professionalism of CFPs will boost the standards of financial planners as a whole. It will also instill faith and trust in our profession from consumers, which may lead to more people seeking advice. * Megan had previously completed a financial planning course at the Securities Institute and as such, was exempted from having to complete components CFP 2-4.

Ryan Sparks CFP® Dixon Advisory Robert Wolski CFP® Critique Private Clients

VIC James Williams CFP® Westpac Roel Burghouwt CFP® WHK Simon Lucas CFP® Unison Wealth Management

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GOING DEFENSIVE In times of market volatility, a good offense can be a good defence – and the new breed of hybrids and capital protected products might be the type of defensive play investors are looking for, writes Janine Mace.

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Preserving assets. Protecting capital. Call it what you like, it’s the phrase on everyone’s lips these days.

Recep Peker, Investment Trends

With continuing market uncertainty, investors remain fearful but recognise the easy choice of heading for cash and term deposits is becoming less attractive as interest rates fall away. This is leaving planners with a dilemma – add extra risk for extra return or stay put and hope for the best. At present, most planners are opting for the latter choice as they remain focused on asset preservation, explains Recep Peker, a senior analyst with Investment Trends. “The highest priority for financial planners at the moment in investing client money is capital preservation.” This was highlighted in the Investment Trends December 2011 Retirement Planner Report, which is based on a survey of 1,027 planners. The research asked planners about their key motivation for new investments and over half nominated capital preservation. “It’s all about protecting capital – not high interest rates – with only 25 per cent of planners nominating this motivator,” Peker notes. However, there may be change in the air. “Over the next three years we expect to see less cash and term deposits and a move back into listed investments.” Peker believes the key will be improving investor confidence. “A move back into the market is more likely to be motivated by increased confidence than a decrease in interest rates.” The Investment Trends finding that 58 per cent of planners intend making changes to existing client holdings will be welcome news for investment houses, many of which have found the going tough in recent years. Peter van der Westhuyzen, executive director of Macquarie Specialist Investments, agrees views are slowly changing. “We are seeing a slight shift away from the previous rigid thinking about term deposit allocations.”

While planners are still worried about preserving assets, he believes they are also aware high term deposit rates are fading and this can now result in a negative return after tax and inflation. “This means it’s not sustainable to put 100 cents in the dollar into term deposits in the long-term. People are chasing higher yields in the face of lower term deposit rates,” van der Westhuyzen argues. Opinion among planners about where to head is split into two groups, he says. “With term deposit rates falling, a portion of the money is being rolled over but another portion (about 20 per cent of every $100) is being rolled over into growth oriented portfolios.” A strong demand for yield is forcing this group to look at some of the more exotic income instruments such as market linked income notes and hybrids, van der Westhuyzen says. In contrast, other planners are ready to re-embrace growth assets as they believe current valuations present good opportunities. “The second group highlights the very different views on where the market is going in the future,” he notes.

What’s available? The financial planners willing to consider moving out of cash and term deposits are looking in a number of places for yield, according to Geoff Watkins, managing director of research firm Path Independent. One of the most noticeable is the current ‘mini-boom’ in hybrids or subordinated note issues. In recent months, household names like ANZ, Westpac, AGL and Tabcorp have all issued notes with rates slightly higher than term deposits. Continued on p36

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“Hybrids are very popular as they offer a bit more yield and have a familiar name,” Watkins explains.

cent. We found 11 per cent of planners are interested in using fixed interest.”

Stewart Gault, Lonsec

Desire for higher yields is also generating interest in new investment approaches. “For the past 12 months we have been seeing increased interest in real return or objectivebased products,” Gault says.

“There has been huge demand for them, as investors seem to be taking little perceived risk for higher yields.” There has also been fresh interest in corporate bonds, he says. “Some advisers are even going into higher yields through residential mortgage backed securities, as they have performed well in Australia in recent years.” Lonsec senior investment analyst, Stewart Gault, is also seeing growing interest in different assets. “Despite there still being a lot of money in cash and deposits, we are seeing positive inflows into diversified and global fixed interest. There is demand to diversify away from term deposits, but not in an aggressive way.” Global fixed interest managers are providing good returns by rolling down the yield

curve and then returning the proceeds into Australian dollars. “You are getting 4.5 per cent yield in Australia, but by using global bonds you can generate a return of 6-7 per cent,” he explains.

Peker agrees there is interest in new approaches: “The most popular defensive approach has been to use bond funds, absolute return products and dynamic asset allocation funds.”

“We have heard a lot about these strategies and they have translated into solid returns which are much more attractive than term deposits.”

Preserving and protecting

Peker agrees there is increasing demand for corporate bonds, with the 18 per cent of planners wanting to use them in 2010 growing to 22 per cent in 2011. “In 2010, 6 per cent said they would like to use inflation-linked bonds and in 2011 this had risen to 13 per

In keeping with the interest in preserving capital but finding additional yield, capital protected products are once again receiving attention. “The strongest feedback from advisers is that capital protected is attractive, as it is there to protect the downside and that makes clients comfortable. It provides a safety net in case markets turn down again and it also helps in

Common capital protection structures Capital protected products fall into three general categories, according to Lonsec senior analyst, Stewart Gault. These are:

1. Bond plus call products With bond plus call products, for every $100 invested, 80-90 per cent goes into a bond within the product to provide the downside protection. The investor receives $100 at maturity. The other $10-$20 is used to buy call options and this provides the upside for the product. The payoff profile for these products depends on the pricing of the call options.

percentage of the performance. An example is Commonwealth Bank’s Vantage Plus.

3. Reverse convertible products Reverse convertibles take advantage of market volatility and usually involve three to five stocks blended by the issuer to provide a customisable, defined level of income. Investors do not participate in the upside if the stocks rise but instead receive a strong income stream. This is generated by the issuer selling options over the basket of what are usually high volatility stocks.

Examples are Macquarie Flexi and InStreet’s Mast Series.

2. Call only products Call only products are a cheaper alternative for capital protection. They act as an overlay for existing assets. Compared to bond plus call products, the investor may only pay $20, but all of this money is at risk. If the underlying assets do not perform, the investor gets nothing back, but if the assets do perform, they receive a 36 | financial

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If the stock value falls below a pre-set barrier (usually around 60-70 per cent), the investor does not receive the full investment back. The return is determined by the value of the worst performer. Reverse convertibles are income focused and suit investors who do not have a bullish outlook. “If stocks have fallen a long way and the investor believes they will not rebound but volatility is high, they can be an attractive option,” Gault explains.

discussions with clients when you are talking about re-entry into growth markets,” van der Westhuyzen explains. This view is borne out by Investment Trends’ data, which in 2010 found 9 per cent of planners intended to start using capital protection products. In 2011, this rose to 14 per cent.

–– “The demand for capital protection reiterates the capital preservation story, but with growth assets.”

The feedback has led to product simplification and a back-to-basics approach. “We are seeing fewer products with compulsory loans. Advisers do not want to be hamstrung by lock-in contracts,” he explains. Where there is compulsory borrowing, the product often includes a ‘walk away’ feature allowing clients to exit the product if they have pre-paid the first year’s annual interest. “This is a direct response to clients being locked into interest payments. Also, there has been a trend to shorter-term 12-18 month products,” Gault notes.

Sniffing out opportunity Product manufacturers have been quick to sense the renewed interest by planners. Late last year, Macquarie released its new generation STEP product, which offers capital protection at no cost. “The response to STEP has been really good from financial planners, especially as it has no leverage. It usually takes two to three series to gain favour with these sorts of products,” van der Westhuyzen explains. “We are not advocating people get out of term

For investors, capital protected products offer many attractions, with one of the biggest being the comfort factor. As Gault says: “You know what the worst case will be.” Watkins views these products as “a halfway house” giving access to growth when share prices rise and protection when they fall. “It gives you a bit each way, but you pay for it.”

Recep Peker

“The demand for capital protection reiterates the capital preservation story, but with growth assets,” explains Peker. New risk management technologies and more responsive issuers are also helping to woo planners. “There are lots of bespoke, tailored products being built to satisfy single groups of investors. This is good, as it’s not just issuers waiting for demand to appear, users are having greater input,” Gault says.

Looking for the benefits

deposits and into the market, but there are clever ways to use capital protection products to help with that process.” Watkins believes planners will be seeing many more capital protected offerings targeting clients moving out of cash. “With capital protected growth products, more are going to come out in 2012 than has been the case for the past few years and that will generate a lot of interest,” he says. “AXA North will soon have competition from BT and MLC. Instead of having to put money into the product and paying a fee for capital protection around it, these products will use existing assets. They will make capital protection an even more important topic this year.” Although the offerings from the big boys are likely to steal most of the attention, smaller platforms are also getting active. An example is the P2 Protected Solution available through Fortnum Financial Advisers and its e-Clipse platform. “The P2 strategy is overlaid as a capital protection technique to protect against the downside and give exposure to lots of upside,” Watkins explains. There have also been product releases from Deutsche, HSBC (100+ Series) and NAB (Equity Referenced Term Investment or NERTI). “There are a lot of little bits and pieces being offered and they can be grouped together as they give a higher headline return but take some risk along the way,” Watkins explains.

He believes their suitability depends on what clients want. “With subordinate notes and hybrids you know the upside and it’s fixed, but the downside is uncertain. Capital protected growth is the flipside of this, as they are less likely to have downside risk but the upside is more variable.” Capital protected products also provide some benefits for the planner’s own business. “They provide you with a way to get clients back into the sharemarket with some level of comfort. There will be less client calls and angst during market drops, as they know they are protected,” Watkins says. Aside from comforting nervous clients, these products can also utilise leverage to provide broader market exposure. “For example, all you may be risking is $10,000 for a $100,000 exposure to the market,” van der Westhuyzen explains. “This resonates with clients as it removes many of the unknowns and you can quantify the maximum loss they will face – unlike with their own money. All of that makes the conversation a lot easier for advisers.” Gault agrees: “With some product styles you can participate in equity exposure for a lower amount than going direct.” But like everything in life, where there are benefits, there are also drawbacks. One of the major ones is cost. Gault likens this to paying insurance premiums: Continued on p38

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“It’s no different to car insurance. You are willing to pay an amount just in case something goes wrong. You know what the outcome will be.” Limiting the cost usually involves tradeoffs. “For example, AXA North offers a lot of protection and costs a lot, whereas P2 is cheaper but has less protection,” Watkins explains.

Gault believes the main drawback is the total cost, which can be hard to determine as these products are based on derivatives. “Uncertainty is in their nature, so if advisers are not comfortable with that, then these products are not for them.” In assessing the value of capital protection, van der Westhuyzen argues it is essential to ensure all the costs and risks are included.

“There is no point saying a bond is returning 8 per cent and a capital protection product 6 per cent but not including that the bond can lose value.” The length of the protection also needs to be evaluated. “You need to be aware of the timeframes you are committing to and whether the capital protection is at all times or only on maturity,” he notes.

Case study: Using a term deposit and a capital protected investment The following example illustrates how investors can take advantage of the good data coming out of the US sharemarket but still protect their capital. As Macquarie’s van der Westhuyzen explains: “Combining a term deposit with a leveraged capital protected investment can help achieve the best of both worlds. Worst case, the money in the term deposit will gradually regrow the investor’s capital and all that has been lost is the after-tax holding cost of the equity-based investment.” In this example, Sally has $100,000 currently sitting in a term deposit with a major bank which is about to mature.

Possible investment strategy: • Borrow $100,000 to invest in a product with continuous protection and a ‘Walk Away’ feature. • Sally’s upfront cashflow requirement is $11,100 based on a fixed interest rate of 9.10% pa and a 2% loan establishment fee. • Invest the remaining $88,900 ($100,000 - $11,100 = $88,900) in a 5.5 year term deposit at 6.00% pa. • Deposit any future tax refunds Sally expects to receive into the term deposit.

Her financial planner is considering several strategies for the capital. The simplest is to roll over the term deposit at the new, lower interest rate and ensure it is fully preserved. This strategy may, however, deliver a low real rate of return on an after tax basis.

• Future interest payments on the product are fully funded by the Fixed Distributions from the product and a portion of the interest earned from the term deposit.

Alternatively, the planner could roll over $88,900 of the total amount at the new rate and allow the interest to accumulate, slowly rebuilding the original capital balance.

This investment provides Sally with both a fixed level of income and an exposure of $100,000 to the growth potential of the US S&P500 Index, while at the same time providing protection against a market decline and taking advantage of some tax efficiencies.

Sally’s initial capital Investment with 100% loan Term deposit (net of costs associated with investment in the product) Fixed Distributions from the product Accrued interest on term deposit Remaining product interest and fees Total tax refund / payment Product Reference Asset gain at maturity Tax refund / payment at maturity Equals post tax return less initial capital


There are some risks:

• Sally has $100,000 in cash and a marginal tax rate of 47.5% (including flood levy) in the year ending June 2012, then 46.5% in the years after.

• US S&P500 Index does not perform.

• Investment of 5.5 years to gain some US equity market exposure.

• Returns may be less than the interest cost.

• AUD:USD foreign exchange rate reduces from $1.10 to $0.90 at maturity.

• Counterparty that offers the product does not meet its obligations.

• Term deposit rate of 6.00% pa for 5.5 years.

• Foreign exchange rate moves negatively.

• Assumes US S&P500 Index grows at 10%pa.

Source: Macquarie Specialist Investments

The remaining $11,100 can then be used to pay the interest charged on a capital protected investment product invested in US equities.

38 | financial

planning | APRIL 2012 | www.

Outcome: $100,000 $100,000 $88,900 $22,000 $30,901 ($40,950) ($769) $56,405 ($27,831) $28,657

Portfolio protection Although financial planners may be interested in capital protection, the decision is not as simple as whether or not to use it. How these products should be used in a portfolio is still being debated. According to van der Westhuyzen, there are two schools of thought. “The first is capital protection sits in the alternatives portion of the allocation, while the other view is it complements the underlying asset allocation. We believe very firmly it should complement the underlying asset allocation. All you are doing is putting downside risk protection in place.” With capital protection, he believes the key decision is the asset allocation, not whether or not to use it. “Capital protection should be the secondary decision.” According to Watkins, products like HSBC’s

a medium-term bucket. “The middle is where capital protected growth products can be useful, as they have a known minimum but offer the prospect of some growth.”

Peter van der Westhuyzen, Macquarie Specialist Investments

According to van der Westhuyzen, capital protection is attractive to clients wanting to take advantage of current growth opportunities (see case study p38). 100+ Series or Macquarie’s STEP are generally used in an “ad hoc way” in a portfolio. “They are often used to get clients back up the risk spectrum as part of the overall asset allocation,” he explains. “With AXA North and P2 it is broader than that, as you already have the assets there and then add capital protection as an overlay to that.” Watkins believes capital protection is also compatible with the ‘three-bucket strategy’ which divides a client’s assets into cash for immediate use, money for the long-term and

“We are picking up from advisers that there is elevated interest in the US and the S&P Index in particular. There is also a strong belief in the Asia story through countries like Indonesia, Malaysia and Thailand,” he explains. “So this can be a good way to get into these markets. If you are using your own money, capital protection has a higher value for overseas thematic or emerging markets than in Australian equities, where many investors feel more comfortable investing directly.”

Macquarie Step.

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www. | financial planning | APRIL 2012 | 39

Andrea Slattery, SMSF Professionals’ Association of Australia

contributions cap for individuals aged 50 and over who have less than $500,000 in superannuation from 1 July this year. While the increase of the superannuation guarantee rate was helpful, Slattery says compulsion is not enough to boost retirement incomes and people should be able to invest in their superannuation when they are able to do so.

Slattery says the objectives of the superannuation system are to provide a savings pool for the nation, to provide retirement incomes to individual investors and to alleviate the burden on the Age Pension system. As such, any moves to boost the retirement incomes of Australians has a wider effect than just upping the account balances of consumers. Yet boosting the account balances of consumers through more generous concessional contribution amounts has been a campaign that both SPAA and Slattery have embraced and actively promoted. used while you are still alive. This can be done while working or at the point of retirement.” However, Dexx&r managing director Mark Kachor says the move away from the lump sum approach to a greater adoption of retirement income stream products will have to overcome some significant inertia that is inherent in the current retirement regime. “Taking a lump sum at retirement is the way the accumulation system works for many people, particularly given the weakened incentives to keep money in a retirement income stream,” Kachor says. “The interaction between assets and income tests make it unattractive to opt for a retirement income stream. Many people facing retirement at present don’t have large lump sums to work with, with the average balance between $200,000 to $300,000. Given these factors and the fact they can still access the pension when the lump sum is gone, people are behaving rationally within the system as it stands.” While any push to get retirees into using professionally managed investments and the advice which precedes it may sound like the financial services industry justifying its own existence, the SMSF Professionals’ Association of Australia (SPAA) chief executive officer, Andrea Slattery, says there is an underlying social issue at work.

Slattery says the issue of reducing the level of concessional contributions to $25,000 has been presented as one of making the system equitable but rather, it has affected those who need to do the most to boost their superannuation. “In the past few years, the Federal Government has reduced the Age Pension and concessional contributions. In doing so it has not impacted the wealthy but those with superannuation balances below $80,000, which represents 61 per cent of superannuants,” Slattery says. “The Government has been worried about giving tax concessions to the wrong people when, in fact, those most affected have lower balances to begin with and will likely be forced to rely on the Government purse in retirement.”

Compulsion not enough At the recent Superannuation Roundtable, attended by representatives from 15 industry bodies and hosted by the Minister for Financial Services and Superannuation, Bill Shorten, it was confirmed the Government would go ahead with changes announced last year. These include lifting the superannuation guarantee rate from 9 per cent to 12 per cent over the next seven years, and introducing a $50,000 concessional

“The problem with the current $25,000 concessional contribution cap is that it assumes that people are putting that much into superannuation each year, when it is clear from research that this is not the case,” Slattery says. “At the same time, the Government wants to encourage people with low balances and broken working patterns to contribute to their retirement savings now but then it restricts the level at which they can do that.”

Generational problem It seems getting the Government to act to boost retirement incomes is something that is not unique to superannuation. Howes says the whole issue of addressing retirement income streams has always seemed like a future issue but with the first of the ‘baby-boomers’ reaching retirement age in 2011, the time to tackle the problem has moved into the present. “This problem will not go away as the generations age. The current generation will live longer than any before them and the pressure to reduce the burden on the pension will increase.” As such, Howes says there needs to be a change in legislation to make retirement income stream products attractive and useful to those heading into retirement. “At present, few annuity products are being written at the lifetime level, partly because of the current low interest rates but also because of the tax treatment of a deferred annuity product.” Howes says this inadvertent tax on annuities is due to the aspects of the Superannuation Industry Continued on p42

www. | financial planning | APRIL 2012 | 41


Supervision Act bumping up against tax law which could be overcome with a reworking of the definition of an annuity to allow product innovation, as well as greater consumer uptake. However, the tax treatment under aged care and Centrelink rules are another matter, with Howes saying the position is both unfavourable to annuities and in real need of a reversal on the 2007 decision to tax annuities. “The problem with these tax treatments is that fewer people are buying annuities and so there is a smaller pool of funds to draw from. This in turn limits their use and their appeal, and increases both costs and risks to those within the annuity pool,” she says. “Annuities remain an important retirement income stream vehicle and people still want flexibility and control of capital (see case study p43), and while they could move into a pension, they would then be exposed to both longevity and market risk.”

Investor concern It appears these are also issues which occupy the minds of Australian investors – many of whom also want to attain the same goals that those in financial services are looking towards. According to research conducted by Investment Trends late last year in which it surveyed nearly 1,500 people aged over 40, 52 per cent were concerned about not having enough money to retire and only 27 per cent felt they were on track to reaching their retirement goals. Investment Trends senior analyst Recep Peker says that advisers will continue to have a role to play, with about a quarter of those surveyed still in the accumulation phase wanting further advice on choosing a retirement income stream and ensuring their superannuation lasts in retirement. At the same time, Peker says product providers should be encouraged, with half of those surveyed in the accumulation phase interested in using allocated pensions or account-based pensions, and a quarter expressing interest in some form of annuity. According to Cooper, this has not been a static area and while the most popular retirement income product, the heavily equitised account-based pension, has not fared well in recent years, advisers are still finding ways to use off-the-shelf products to boost the retirement incomes of clients. 42 | financial

Melinda Howes, Actuaries Institute

actually do the work. According to Kachor, the current crop of retirees have not been able to build substantial retirement incomes, and therefore see the lump sum benefit as a way to pay off debt before retiring. They do not see it as being large enough to fund retirement in the long-term.

“We are seeing advisers combine public and private pension streams (in the form of annuities) to create a ‘bedrock’ of retirement income, which then frees up remaining capital for riskier investment and hopefully longer term growth.”

“The easiest thing the Government can do is to increase the retirement age up to 67 or even 70. This is not a big fix and while there may be health issues, it does allow people more time to accumulate a retirement income,” Kachor says.

Merlon Capital Partners lead portfolio manager Neil Margolis sees that some of this extra growth, as well as income, can still be found in actively managed equities-based investments used in retirement.

And it’s this idea that there is a suitable level of retirement income, that is the key. Cooper says at present the task of the financial services industry is not merely to build savings but to ensure they are maintained into retirement age.

Margolis states that many equity funds are focused on highest total return, which is suitable in the accumulation phase but not suitable for retirees seeking income and lower risk.

“The issue today is more than just encouraging higher levels of savings for retirement. It’s the arguably more critical task of converting that lump sum into a reliable lifetime income stream. The role of super is not to accrue the greatest level of wealth up until retirement age. That’s only half the job done. A smaller balance that’s better managed in the drawdown phase is more valuable to the member than a larger balance exposed to too much market, inflation and longevity risk in retirement.”

“At present, retirees face an investment choice of equities or bonds but both of these focus on shortterm risk and ignore the longer term risk of inflation eroding at the level of savings. While annuities and term deposits deal with that, they remain illiquid and tax-ineffective and have a set income level,” Margolis says. He says advisers looking to managed funds that generate income for clients should consider those that have risk managed within the fund at a stock level and not managed by shifting within asset classes. “Active funds have been seen as an accumulation vehicle only because they have not managed risk and income well. However, it is possible to reduce risk, not by spreading the risk but by looking at what the fund holds and where the risks are in each stock,” Margolis says. “Advisers are starting to see the benefit of this approach in generating income because they know that to create a reasonable income yield that is greater than inflation, then it must be beyond just bonds and term deposits in retirement.” Kachor says that despite the work by Government and the financial services industry to boost the level of retirement savings, it will be time that will

planning | APRIL 2012 | www.

Howes says if the necessary shifts in public mindset, government policy, advice and product provision can be made, then the benefits also extend to lifting the burden on the public purse. “We should be looking to make a time where retirees can continue to be active consumers, instead of eking out an existence. Retirement incomes should be spent and returned into the economy, not hoarded, given that many have benefitted from tax concessions in the accumulation phase. It is a view shared by Slattery who says the goal of raising retirement incomes should be more than just a bigger lump sum but should meet the objectives of superannuation by boosting national savings, retirement incomes and the level of financially independent retirees. “We should be aiming to have the minimum number of people on the aged pension and we should not aim to just get people above the pension rate - we should aim to get them off it.”

The Spotter’s Guide to Retirement Income Streams As a financial planner, you are well aware that each client is different and matching a retirement income product to their future needs requires some work. What works best for one client will not work well for another, but presenting the pros and cons of each retirement income product can make life easier for both client and adviser. So what are the advantages and disadvantages for each kind of retirement income stream? Sadly, it’s not as easy as picking the retirement income stream that offers the most features or least fees, as evidenced by the table below. Given that retirees are also looking at not being tied into one product during their postworking years, flexibility can be an important factor. With this in mind, Account-Based Income Streams, such as allocated and market-linked pensions and annuities, offer the most flexibility. Allocated

How secure is my capital? Can I withdraw lump sums sums at any time? Can I choose the level of I receive? Is my income guaranteed?

Must I use superannuation money? When must payments commence?

Can there be tax benefits? Is it subject to Centrelink/ Veterans’ Affairs Assets Tests? Is it subject to Centrelink/ Veterans’ Affairs Income Tests? How are death benefits treated?

Account-based Income streams Allocated Pensions (flexible) Depends on investment options chosen Yes

Transition to Retirement Income streams Depends on investment options chosen Yes

Yes - as long as age based minimum taken Only until money in the account runs out Yes

Yes – between age based minimum and maximum 10% Only until money in the account runs out Yes

By 30 June in financial year of purchase. May be deferred if purchased after 1 June Yes Yes

By 30 June in financial year of purchase. May be deferred if purchased after 1 June Yes Yes

Yes. Special rules apply Can continue to spouse or if to a dependant, for a limited time, or as a lump sum. Non dependents can only receive as a lump sum

Yes. Special rules apply Can continue to spouse or if to a dependant, for a limited time, or as a lump sum. Non dependents can only receive as a lump sum

pensions and annuities offer minimum income levels but at the same time can draw down on the capital faster than expected if income levels are increased. Market-linked pensions and annuities offer less flexibility in terms of their income, as they are limited by payment factors linked to the purchase price of the income stream and the length of the term. However, these offer certainty that income will be paid out annually for the term selected. While Non-Account Based Income Streams, such as Lifetime and Fixed Term pensions and annuities, offer less flexibility, they do offer greater certainty in the length of time that an income will be received. Lifetime pensions and annuities, as the name implies, offers payment for life but income flexibility is restricted to the level of indexation that applies to the capital in the income stream. Fixed Term pensions and annuities work in much the same way, offering an income for the set term, yet also may expose the retiree to longevity risk if the term is shorter than life expectancy. Non Account-based Income streams Defined Benefit Super Pensions High

Lifetime Pension and Annuities High

Life Expectancy Pensions and Annuities High

Depends on fund rules


Depends on fund rules




Yes. By paying institution

Yes. By paying institution

Yes. By paying institution


Can be either super or non-superannuation By at least first anniversary of purchase

Can be either super or non-superannuation By at least first anniversary of purchase

Yes Yes. If purchased before 20 September 2007

Yes If purchased before 20 September 2007

Yes. Special rules apply Superannuation money – fund regulations apply. Non-superannuation – income to nominated reversionary. Lump sums available in guarantee period

Yes. Special rules apply Superannuation money – fund regulations apply. Non-superannuation – income to nominated reversionary or estate. Lump sums payable

Depends on fund rules

Yes Depends on fund compliance with exemption characteristics Yes. Special rules apply Portion continues to spouse or if to a dependant, for a limited time

Source: National Information Centre on Retirement Investments – www. | financial planning | APRIL 2012 | 43


BUSINESS ONLINE SERVICES Centrelink is providing planners with online services to complete Centrelink business on behalf of their client and clients’ businesses. If registered for Nominee Online Services, organisations can choose from a number of service options, including: • managing their organisation’s details; • requesting a new service or contact; • accessing the Organisational Online Mail System; and • choosing to act on behalf of one of the organisation’s principals. Organisation Nominee Online Services allow an authorised person for an organisation acting as a nominee to view and update a client’s Centrelink record. Organisations can also subscribe to view and print online letters for the person/s they are a nominee for. The range of options available online will depend on the type of nominee arrangement the organisation has with each person. For example, if an organisation is a payment nominee only, the organisation will only have access to options relating to payments. An added functionality is the ability for an organisation to search for the principal they are acting for. Clients that an organisation is a nominee for will be listed on the ‘Search/Select who you wish to act for’ page. An organisation can select the person they wish to act for by their Customer Reference Number (CRN), name or date of birth. Once registered, organisations will also be able to receive requests to become a nominee for customers who are registered for Online Services in their own right. Organisations will be notified of any requests when they log on to their Online Services account and will have the ability to accept or decline the arrangements. This will minimise the need to complete a paper appointment form for both the organisation and the client. 44 | financial

• When an organisation is appointed as a nominee they must always act in the best interests of their principal in all their dealings with the department.

• the name and contact details of the organisation’s Primary Business Contact/User (if not the applicant) who will then be the main contact for the department, the main user of the service(s) and advise the department on the access requirements of other users to the service(s); and

• The nominee should be aware of their obligations to their principal and notify the department of any change in circumstances within the notification provisions.

• the name and contact details of the Authorised Person (if not the applicant) that the organisation designates to accept the Terms and Conditions to use Centrelink Online Services on its behalf.

• The Organisation Nominee representative’s access will be managed by the Organisation. This includes roles required to access and update organisation details held by the department.

Part of the registration process includes linking of the organisation’s AUSkey (digital credential). An AUSkey enables the secure access to a range of government online services on behalf of a business. To register for an AUSkey or for more information visit

Organisation Nominee responsibilities

• The organisation must ensure that appropriate measures are in place to safeguard the Customer Reference Number against improper access, use or disclosure and commit to the privacy of their principal’s information. • The Organisation Nominee representative agrees to only submit data relating to principals for which it is authorised. To access Nominee Services Online, an organisation needs to register for Centrelink Business Online Services as an organisation. This can be done via the ‘Register’ button in the ‘Business Online Services’ page via the Centrelink website. To register, an organisation will need the following information:

The department accesses the Australian Business Register to validate information provided during an organisation’s application. Registration should take less than 10 minutes if the applicant has all the information at hand. Online Services is a new way for organisations to do business for the client/s they are a nominee for. Registering and conducting business online will not affect the online services access of any client the organisation is a nominee for. If a client is not already registered for online services, they may also register themselves separately to conduct business online. To find out more about Business Online Services for nominee organisations visit or contact the Centrelink Business Hotline on 131 158 or via email to

• the organisation’s ABN; • the AUSkey for the organisation; • the organisation’s name and business address; • the name and contact details of the applicant;

planning | APRIL 2012 | www.

On 1 July 2011 Centrelink, Medicare Australia, Child Support Agency, the Family Assistance Office and CRS Australia became the Australian Government Department of Human Services. The department is now responsible for their payments and services. Learn more at



Last month, various FPA Chapters were busy hosting local charity golf days, with money raised going to the Future2 Foundation.

Eighty golfers attended the Ballarat Chapter’s annual golf day. The deserved winner of the Jamie Gear Memorial Trophy was Ben Stevens from Seery Hill Financial Services. For other golf days, please continue reading.

Thank you to our Chapter supporters Aberdeen Asset Management AMP AMP Capital Austock Life Australian Unity Aviva AXA Australia BNP Paribas Investment Partners BT Financial Group BT Investment Management Challenger Colonial First State Equity Trustees Fidelity Grant Samuel Funds Management

BT Financial Team: Warwick Gribble, Bryce Quirk, Russell Smith and Ryan Sealey.

Australian Unity Team: Daniel Thomas, Marcus Clearly, Garry Ransome and David Russell.

Longest Drive winner: Ryan Sealey with Andrew Havers (nabInvest).

The Melbourne Chapter golf day saw 118 keen golfers hit the green for a shotgun start, followed by lunch and a presentation ceremony. The Shadforth Financial Services team were the overall winners on the day, followed by the AON Hewitt, Australian Unity and BT Financial Group teams. Attendees were encouraged to purchase raffle tickets, raising $1,100 for the Future2 Foundation.

Hays Hunter Hall ING Investment Management Invesco iShares IOOF Keep it Simple K2 Asset Management MLC Nabinvest Newcastle Permanent Building Society Netwealth Orbis Investments Perpetual

Ray Errington, Brandy Ross, Nathan Walker and Mitchell Ross.

Mike Parker and Julie Jones.

To the west, and on a picture postcard course with perfect weather, 25 teams of golfers turned out to play in the Western Australia Chapter golf day. Keeping up the fundraising tradition, attendees were encouraged to purchase raffle tickets, with all proceeds again going to the Future2 Foundation.

The Western Australia Chapter continued its busy month of activities by also engaging with Curtin University students at their Business School Orientation and Expo. First year students are at a critical time in deciding their course majors and Chapter committee members were at hand to encourage students to consider financial planning as a career path.

Plato Investment Management Rankin Nathan Lawyers Russell Investments Schroder Investment Management Securitor Financial Group T.Rowe Price Tyndall Investment Management Vanguard Wealth Within

For more information about Chapter events, contact Di Bungey on 02 9220 4503 or www. ďŹ | financial planning | APRIL 2012 | 45



FoFA in Practice - Your implementation guide Presenter: Claire Wivell Plater Date: 27 April, 12:30pm-2:00pm (AEST) CPD: 1.5 points This session will guide you through the final FoFA legislation and provide guidance on the practical steps you will need to take to meet the new requirements. The session will cover: • Ensuring your revenue models are suitable for commission-free business. • Setting up your client engagement process to comply with Opt-in. • Using engagement letters to simplify the Opt-in process, secure your revenue and protect you from PI claims. • Understanding FoFA’s grandfathering provisions and how to utilise them. • Risk managing the best interest obligation and the provision of scaled advice. Claire Wivell Plater is the managing director and owner of Gold Seal, which provides legal, compliance and human resource services and training to AFS and credit licensees. She is passionate about simplifying complex legal concepts and making them accessible for SME businesses.

2 April Geelong: Member Lunch 16 April South Australia: Mount Gambier Centrelink Update 18 April Townsville: Chapter Lunch 19 April Western Division (Dubbo): Technical Workshop 20 April Western Division (Orange): Technical Workshop 20 April Sydney: Central Coast Half Day Seminar 20 April Far North Coast: Seminar

Claire Wivell Plater Wivell Plater has spent the first 17 years of her career at Phillips Fox before joining ING to work with its financial planning dealer groups on mergers, acquisitions and strategy. In 2002, Wivell Plater co-founded Gold Seal, which has grown to become a leading compliance provider to the financial services industry.

23 April Melbourne: Young Planner Evening 27 April Sunshine Coast: Member Lunch For more information please contact Di Bungey on (02) 9220 4503 or


Estate and Succession Planning – Fee models and advice propositions Presenter: Andrew Andreyev Date: 16 May, 12:30pm-2:00pm (AEST) CPD: 1.5 points This webinar will give you an insight into the value proposition behind estate planning and the role you can play in assisting your clients with this specialist area of advice. It will cover: • How to create a genuine sense of urgency within your SME client 46 | financial

base about addressing estate and succession planning issues. • The role you play and the planning process you can follow. • Working with lawyers and other advisers for better outcomes and better client relationships. • The types of strategic advice you can provide, and how you can make money and improve client relationships through the process. • Recent client scenarios – what

planning | APRIL 2012 | www.

has proven to work and what you can learn. • Where things typically go wrong and what to avoid. Andrew Andreyev is well known for his business and investment structures, as well as his breadth of practical knowledge in the area of corporate, taxation and superannuation law. Andrew has a genuine interest in the commercial side of business

and investment transactions. He is a clear communicator and can break down very complex issues into meaningful commercial alternatives. Andrew holds Bachelor degrees in Commerce and Law from Adelaide University. He also holds a Masters of Law (in Taxation and International Law) from Melbourne University. He is admitted to practice law in Australia and the United Kingdom. He is principal at Andreyev Doman.



Member Services: 1300 337 301 Tel: (02) 9220 4500 Fax: (02) 9220 4582 Email: Web:

Education and Member Services Julie Matheson CFP ® Email:



Member Engagement Board Committee Matthew Rowe CFP ® Email:

Chair Matthew Rowe CFP ® (SA) Chief Executive Officer Mark Rantall CFP ®

Professional Conduct Guyon Cates Email:

Professional and Policy Board Committee Peter O’Toole CFP ® Email:

Directors Matthew Brown CFP ® (QLD) Patrick Canion CFP ® (WA) Bruce Foy (NSW) Neil Kendall CFP ® (QLD) Louise Lakomy CFP ® (NSW) Julie Matheson CFP ® (WA)

Policy and Regulations Mark Spiers CFP ® Email:

FPA COMMITTEES Professional Designations Martin McIntosh CFP ® Email:

Marketing and Member Growth Patrick Canion CFP ® Email:





Melbourne Julian Place CFP ® Chairperson Tel: (03) 9622 5921 Email:

Brisbane Ian Chester-Master CFP ® Chairperson Tel: 0412 579 679 Email:

Sydney Scot Andrews CFP ® Chairperson Tel: (02) 8916 4281 Email: Mid North Coast Debbie Gampe AFP ® Chairperson Tel: 1300 425 943 Email: Newcastle Mark Reeson CFP ® Chairperson Tel: (02) 4927 4370 Email: New England John Green CFP ® Chairperson Tel: (02) 6766 5747 Email: Riverina Pat Ingram CFP ® Chairperson Tel: (02) 6921 0777 Email: Western Division Peter Roan CFP ® Chairperson Tel: (02) 6361 8100 Email: Wollongong Mark Lockhart CFP ® Chairperson Tel: (02) 4244 0624 Email:

ACT Canberra Claus Merck CFP ® Chairperson Tel: (02) 6262 5542 Email:

Albury Wodonga Wayne Barber CFP ® Chairperson Tel: (02) 6056 2229 Email: Ballarat Paul Bilson CFP ® Chairperson Tel: (03) 5332 3344 Email: Bendigo Gary Jones AFP ® Chairperson Tel: (03) 5441 8043 Email: Geelong Brian Quarrell CFP ® Chairperson Tel: (03) 5222 3055 Email: Gippsland Rod Lavin CFP ® Chairperson Tel: (03) 5176 0618 Email: Goulburn Valley John Foster CFP ® Chairperson Tel: (03) 5821 4711 Email: South East Melbourne Scott Brouwer CFP ® Chairperson Tel: 0447 538 216 Email: Sunraysia Matt Tuohey CFP ® Chairperson Tel: (03) 5021 2212 Email:

Cairns Danny Maher CFP ® Chairperson Tel: (07) 4051 7799 Email:

Townsville Deirdre Walsh CFP ® Chairperson Tel: (07) 4775 5703 Email: Wide Bay Naomi Nicholls AFP ® Chairperson Tel: (07) 3070 3066 Email:

SOUTH AUSTRALIA Far North Coast NSW Brian Davis AFP ® Chairperson Tel: (02) 6686 7600 Email: Gold Coast Matthew Brown CFP ® Chairperson Tel: (07) 5554 4000 Email: Mackay James Harris CFP ® Chairperson Tel: (07) 4968 3100 Email: Rockhampton/Central Qld David French AFP ® Chairperson Tel: (07) 4920 4600 Email: Sunshine Coast Greg Tindall CFP ® Chairperson Tel: (07) 5474 1608 Email: Toowoomba/Darling Downs John Gouldson CFP ® Chairperson Tel: (07) 4639 2588 Email:

Adelaide Carl Wilkin CFP ® Chairperson Tel: (08) 8407 6931 Email:

NORTHERN TERRITORY Darwin Glen Boath CFP ® Chairperson Tel: (08) 8941 7599 Email:

WESTERN AUSTRALIA Perth Sue Viskovic CFP ® Chairperson Tel: 1300 683 680 Email:

TASMANIA Hobart Todd Kennedy CFP ® Chairperson Tel: (03) 6233 0651 Email: Northern Tasmania Chris Elliott CFP ® Chairperson Tel: (03) 6323 2323 Email:

www. | financial planning | APRIL 2012 | 47

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Past performance is not a reliable indicator of future performance. This document was issued by FIL Responsible Entity (Australia) Limited ABN 33 148 059 009 AFSL No. 409340 (“Fidelity Australia”). Fidelity Australia is a member of the FIL Limited group of companies commonly known as Fidelity Worldwide Investment. You should consider whether this product is appropriate for you. You should consider the Product Disclosure Statements (“PDS”) for Fidelity products before making a decision whether to acquire or hold the product. The relevant PDS can be obtained by contacting Fidelity Australia on 1800 119 270 or by downloading from our website at This document may not be reproduced or transmitted without the prior written permission of Fidelity Australia. The issuer of Fidelity’s managed investment schemes is FIL Responsible Entity (Australia) Limited ABN 33 148 059 009. ^Benchmark for the Fidelity Global Equities Fund is MSCI ACWI (All Country World Index) Index (effective 1 November 2011). The benchmark before 1 November 2011 was MSCI World Index. The major difference between the two indices is the inclusion of 21 emerging market country indices in the MSCI ACWI Index. In December 2006, the benchmark for the fund changed from MSCI World Index ex Australia to the MSCI World Index. *Company contact data is based on FIL Limited coverage of the MSCI World Index as at 30 November 2011. Fidelity, Fidelity Worldwide Investment, and the Fidelity Worldwide Investment logo and F symbol are trademarks of FIL Limited. © 2012 FIL Responsible Entity (Australia) Limited.

Financial Planning Magazine - April 2012  

The official publication of the Financial Planning Association of Australia.

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