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Vol.25 No.34 | September 8, 2011 | $6.95 INC GST

The publication for the personal investment professional


Opt-in removal key to FOFA support By Mike Taylor THE Federal Government would be likely to garner grudging (but majority) financial planning industry support for its Future of Financial Advice (FOFA) legislation if it were to drop the two-year ‘opt-in’ requirement. That is the key finding of a Money Management survey conducted in the immediate wake of Assistant Treasurer Bill Shorten releasing the first FOFA legislation. As well, the survey found that even some of the flexibility negotiated by the Financial Planning Association around the manner in which opt-in can be managed by individual planners has failed to win too many fans. The survey found 56 per cent of respondents believed the flexibility around optin would make the exercise easier or less costly, whereas 35 per cent believed that while it might make life easier, there would be no diminution in costs. Ten per cent of respondents believed the more flexible approach would make handling opt-in both easier and less costly. With the Government having conceded

If the two-year opt-in were removed from the Government’s FOFA package, would you regard the legislation as delivering broadly sensible reforms? 32%

RICE Warner will present a submission explaining how it arrived at the contentious $11 per client cost of opt-in that was quoted by Financial Services Minister Bill Shorten when announcing opt-in requirements in draft Future of Financial Advice (FOFA) legislation. The financial planning industry has raised questions around the validity of the research, which was commissioned and paid for by the Industry Super Network (ISN), which has been vocal in its support of opt-in requirements throughout the FOFA consultation process. “It is clear there is some confusion about this topic, so we thought we would provide a public analysis to clear up all the misinformation,” Rice Warner managing director Michael Rice said. The research is thorough, and looks at the cost of opt-in in isolation rather than the full costs of the FOFA reforms, and the submission will detail how Rice Warner determined the costs per client, he said. “We took into account all systems development work, and we have held discussions with a few of the major platforms. We amortised these over a

$100 per client

3% Yes No

$50 per client


$11 per client 8%

$75 per client $20 per client




Source: Money Management

ground by allowing a continuation of commissions on individually-advised risk commissions inside superannuation, survey respondents were asked whether – if the two-year opt-in were removed – they would regard the legislation as delivering broadly sensible reforms. In answer to the question, 68 per cent agreed that removal of the two-year opt-in would leave a broadly sensible package for the industry. However, what also became clear from

Rice Warner to justify $11 cost of opt-in By Chris Kennedy

The Government has accepted an assessment that the two-year opt-in will cost around $11 per client. What do you believe it will cost?

reasonable period and also assumed a significant portion of these would be passed on to dealer groups,” he said. One of the contentious issues is that the research ignored all dealer groups outside the top 100 largest groups when arriving at its figure of a total cost to the industry of $46 million initially, and $22 million per annum ongoing. This is because smaller advice firms tend to use in-house systems that can be easily enhanced, or use external providers who would provide necessary IT enhancements at a modest cost, the report stated. “Furthermore, the majority of the funds under advice across the industry relate to the top 100 dealer groups… For these reasons, small dealer groups (outside the top 100) have been ignored,” the report stated. Financial Planning Association chief executive Mark Rantall described this as “an amazing assumption”, and said to remove the last portion of the industry would tilt any of the results that come from that research. “We would reject that $11 per client is a reasonable figure for opt-in; even Continued on page 3

the survey was that the Government’s use of Rice Warner research suggesting the two-year opt-in would cost an average of around $11 per client was well wide of the mark, with 66 per cent of respondents believing it would cost closer to $100 a client and a further 18 per cent believing it would cost $50 per client. Only 8 per cent of respondents were prepared to agree with the Rice Warner figure, which resulted from research commissioned by the Industry Super

Network. The survey also revealed the degree to which Shorten had been wise to move away from its original position of imposing a total ban on risk commissions inside superannuation, with 60 per cent of respondents saying they believed the concession had made the overall FOFA package more palatable. The Money Management survey found that while a majority of planners believed they might be able to live with the FOFA legislation – minus the two-year opt-in – many held ongoing concerns about other elements of the legislation, particularly the approach to platform rebates and asset-based fees. In a week during which the Commonwealth Bank revealed it was moving to acquire Count Financial, many survey respondents expressed concern that the FOFA legislation would serve to increase the power and influence of the banks and the industry funds, while doing nothing more than reducing the number of independent dealer groups operating in the industry.

Taking the technology path By Milana Pokrajac EMBRACING new technology and maintaining consistency after a major rebrand were the two deciding factors which carried OnePath across the line this year in the Money Management/Dexx&r Adviser Choice Risk Company of the Year Awards. Apart from winning the top spot, OnePath also took out gold in two product categories and silver in one. The risk insurance market has become more competitive over the past 12 months due to the steady demand which has seen life companies try harder in terms of product innovation and their response to adviser feedback. Technology was a big part of OnePath’s product development over the past year, as the company launched a number of new online features for its OneCare product, and enhanced the existing ones such as electronic underwriting and online and phone claims processing. The company’s head of

Gerard Kerr product marketing and reinsurance, Gerard Kerr, said product enhancement on the technology front was a result of a natural progression into the online world, as well as adviser demand. He said the proposed Future of Financial Advice changes would force advisers to be more involved in their clients’ affairs, which has created a socalled ‘need for speed’. “If you can remove inefficiencies from your business

with your customers still getting that quality service – that’s obviously going to take you down the [technology] path,” Kerr said. “Reforms are possibly helping support that, and we’re obviously still waiting for some of the fine detail to come through,” he added. The company had also gone through one of the most challenging rebrands in the life industry to date – ditching the well established ING Australia brand and introducing OnePath to consumers after being taken over by ANZ. “ING Australia was a very strong brand, so it added challenge to it,” Kerr said, adding the company had planned carefully and tasked itself with keeping the momentum going in the business. OnePath had a core group of people focused on the activity around the rebrand, engaging different parts of the company only when necessary. The company separated the two activities, which gave Continued on page 3


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Financial services more than just super


hen the Assistant Treasurer and Minister for Financial Services, Bill Shorten, last week released the draft legislation making up the first tranche of his Future of Financial Advice (FOFA) legislation, he utilised research undertaken by actuarial consultancy Rice Warner suggesting opt-in would cost around $11 per client. In doing so, the minister failed to acknowledge that the Rice Warner research to which he referred was actually commissioned by the Industry Super Network (ISN) and was premised on a peculiar set of criteria which have been strongly and persistently questioned by key figures in the financial planning industry. On all the evidence available to Money Management, opt-in will almost certainly cost most financial planning practices a great deal more than the $11 figure arrived at by Rice Warner consistent with a brief provided by ISN. Indeed, Treasury officials many months ago conceded that opt-in could cost in the order of $100 a head. Thus, one of the central planks of the Government’s FOFA approach is based on data commissioned to form the basis of a polemic, which is at best questionable, and at worst entirely misleading. There were, of course, concessions

2 — Money Management September 8, 2011

While Gillard’s speech did not break any new ground, it did confirm that her administration views financial services almost entirely through the prism of superannuation.

contained in the draft bill with the Financial Planning Association, amongst others, succeeding in locking in Shorten’s undertaking that commissions would be allowed to continue with respect to individually-advised risk products in super, and with flexibility being granted around how planners actually addressed their opt-in obligations. However, if it was ever Shorten’s intention to develop a draft bill capable of garnering bipartisan support, then he stumbled at the first hurdle by trotting out research inextricably linked to the political/commercial agenda

being prosecuted by the ISN. A few days later, the Government’s entire approach to financial services policy was indicated by Prime Minister Julia Gillard when she addressed a Financial Services Council (FSC) breakfast in Sydney. While Gillard’s speech did not break any new ground, it did confirm that her administration views financial services almost entirely through the prism of superannuation. Gillard did not dwell on the broader question of financial advice, industry consolidation or bank dominance. Rather, she exhorted the financial services industry to support the Government’s pursuit of a Minerals Resources Rent Tax on the basis that it would then generate the funds necessary to support the lifting of the superannuation guarantee from 9 to 12 per cent. She will find few people in the financial services industry reluctant to support a lifting in the superannuation guarantee, but many will reflect that viewing financial planning through the prism of superannuation will mostly serve to benefit the Government’s supporters in the industry funds. – Mike Taylor


Climate right for alternatives By Tim Stewart ALTERNATIVE investments tend to be lowly correlated with traditional asset classes such as stocks, bonds and cash – and as such, investors can use them to diversify their portfolios, according to Lonsec’s 2011 Alternatives Sector Review. In addition, the current low growth and rising interest environment is making traditional asset classes look less attractive, said Lonsec. According to data provider BarclayHedge, 2010-11 saw hedge fund assets under management return to pre-global financial crisis levels, with total hedge fund assets estimated to be US$1.77 trillion at 31 March 2011. “Lonsec expects conditions for hedge fund investing to be favourable over the

next 12-18 months … hedge funds in general should do well in an environment where the requisite skill is to pick between the winners and losers, whether that be securities or asset classes,” Lonsec said. Drilling down to the subsections within hedge funds, managed futures and global macro managers had a relatively softer year. Lonsec put the underperformance down to the fact these strategies perform better when the market is clearly trending in one direction, which has not been the case in the past year. Of the 25 funds reviewed by Lonsec, the best performing fund over the year to June was Barclays CORALS Commodities Fund, returning 27 per cent over the year. The fund benefited from rising commodities prices and a rapidly appreciating Australian dollar, said Lonsec.

Lonsec expects conditions for hedge fund investing to be favourable over the next 12-18 months.

But because a large amount of risk is often assumed to achieve such high returns, Lonsec also applied the Sharpe Ratio (a risk-adjusted performance measurement) to the funds under review. Under this criteria, the AQR Delta fund

provided the best return over the past year – with the HFA Diversified Fund and the BlackRock Global Allocation Fund close behind. BlackRock also oversaw the worst performing fund, with the BlackRock Asset Allocation Alpha Fund posting an absolute return of –10.3 per cent over the past year (the fund was also the worst performer after risk adjustment). Lonsec said part of the reason for the poor performance was down to stop loss positions being triggered in a volatile trading environment. The Ashton Paulson Advantage Plus Fund suffered the largest drawdown, at –16.7 per cent, largely due to concerns about its investment in the Sino-Forest Corporation, which is currently facing fraud allegations. Paulson liquidated its holding in Sino-Forest Corporation at a loss.

Rice Warner to justify $11 cost of opt-in Continued from page 1

Treasury presented to its estimate committee a cost of $100 per client,” he said. Report author Richard Weatherhead said the number of advisers and amount of funds under advice outside the top 100 dealer groups was likely less than 3 per cent of the industry. Those groups are usually small operators with simple business processes for whom the additional costs of opt-in are likely to be minimal, he said. Another bone of contention is that the study was commissioned by the ISN. Association of Financial Advisers chief executive Richard Klipin said he was flabbergasted that the minister could acknowledge the Rice Warner research without attributing it to the ISN, while Rantall also suggested the study was designed for

Michael Rice the group that commissioned the research. “This research was specifically commissioned to tease out the lowest possible number without any reflection on the realities of the actual costs involved,” Klipin said. “The ISN/Rice Warner research is laughable in its brevity and its lack of understanding of the realities of running a financial advisory practice,” he said.

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Continued from page 1 advisers and clients clarity and focus, Kerr said. However, this wasn’t the only rebrand the life industry has seen over the past 12 months, with Tower Australia changing its name and logo to TAL after being acquired by Japanese insurer Dai Ichi. TAL had done well by advisers over the past year,

grabbing silver in the overall risk awards, and winning gold in one product category and silver in two. This is also the first year BT Life became eligible for the Risk awards, and the company jumped straight for bronze. For more information on Money Management/Dexx&r Risk Company of the Year awards and the judging criteria, turn to page 15.


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News ANZ announces practice selling facility; targets growth By Chris Kennedy ANZ has announced plans to implement an online merger and acquisition facility where advisers can anonymously advertise that there is a practice for sale, while also targeting significant growth in financial adviser numbers and phone-based advice. “One of the big demands we have currently aside from funding is merger and acquisition help,” ANZ general manager advice and distribution Paul Barrett said at a media briefing yesterday. The online facility will allow planners to log on and advertise to the greater ANZ network – including Millennium 3 and RI Advice – that a practice is for sale. The 1,800odd planners throughout the network will be able to log on and browse the listings, Barrett said. If a planner goes far enough down the path of acquiring another practice, obviously there will be a point where the process can no longer be anonymous, at which point they would have to disclose their identity and sign confidentiality agreements, according to ANZ.

Paul Barrett There is also some thought being given to opening up the facility to the rest of the market, Barrett said. The need to bring buyers and sellers together has never been greater than it is today, and with the average adviser age having gone up since Financial Services Reforms were brought in, there is no shortage of sellers, Barrett said. ANZ Financial Planning is also looking to grow its planner network of around 270 advisers by around 50 per year over the next couple of years, Barrett said.

4 — Money Management September 8, 2011

With OnePath already having made a number of acquisitions in recent years, the group would be focusing on ensuring those acquisitions were successful and focusing on organic growth in the near term, Barrett said, although you “never say never” when it comes to acquisition opportunities. Barrett said the 10,000-strong staff base within the ANZ retail banking network provided an opportunity for some of that planner growth, and said the 50adviser-per-year growth should be realistically achievable just from internal recruitments. Barrett also tipped “significant” growth within the group’s phonebased advice service as more efficient forms of advice delivery became crucial in a post Future of Financial Advice world. The phone-based service has actually been an adviser led initiative, with advisers throughout the network asking for extra support in servicing B and C clients, he said. Barrett said there were no specific targets to grow the phone-based service. “We’re assessing it week to week, we’re meeting demand, and as demand increases we’ll grow that business,” he said.

IOOF integrates multi-manager trusts into IOOF MultiMix By Andrew Tsanadis IOOF Group has announced that it is integrating its United Sector Leaders Funds (United Funds) into a single suite of multi-manager trusts known as IOOF MultiMix. In a move to simplify IOOF’s multi-manager options, the move to a single suite of multimanager trusts will take effect on 30 September 2011. Commenting on the announcement, IOOF general manager distribution Renato Mota said the integration will make the choice easier for advisers and their clients. “There will be minimal impact on advisers and clients because the two multi-manager offerings have aligned asset allocations, underlying managers, investment strategies and objectives,” she said. “Investors who currently hold investments in a closing United Sector Leaders Fund will be transferred to an equivalent MultiMix Trust, which is comparable in terms of risk profile, investment objective

and strategy.” For the eight United Funds that are remaining open as rebranded MultiMix trusts, the responsible entity will change from Australian Executor Trustees Limited to IOOF Investment Management Limited to ensure that a single entity is responsible for the entire multi-manager suite, IOOF stated. IOOF stated that the announcement follows earlier enhancements to the multimanager investment process, which included the appointment of chief investment officer Steve Merlicek, an asset consultant and dedicated portfolio managers for each asset class. In a separate announcement made to the Australian Securities Exchange, IOOF has appointed Kevin White as an independent, non-executive director, effective 4 October. White was most recently WHK Group managing director of accounting business, and remains a director of Insurance Manufacturers of Australia Pty Limited.


FPA to establish ‘mark of trust’ By Angela Welsh

THE Financial Planning Association (FPA) will launch an advertising campaign from 18 September, in an attempt to establish FPA membership as the ‘mark of trust’ with the broader community, and differentiate its members from so-called ‘free riders’. FPA chief executive Mark Rantall said the television, print and online campaign will form part of the FPA’s

mission “to transform financial planning into a respected profession”. This mission drives the association’s current agenda, and Rantall said the FPA has “put this forward during all the negotiations with Government regarding FOFA [the Future of Financial Advice reforms]”. The ad compares the qualifications and experience of financial planners with that of doctors, lawyers, pharmacists and helicopter pilots, with the strap line, “Not all

financial planners are the same. Always look for a member of the Financial Planning Association”. The FPA’s upcoming advertising campaign aims to “make a statement out there in the marketplace around who is the FPA, and what do we stand for”, FPA general manager – marketing, Lindy Jones, told journalists at an FPA Roundtable yesterday. Rantall said the Association had been “instrumental in the FOFA negotiations, even though we absolutely

will not, and do not support opt-in”. Since the Government has consistently refused to abandon the twoyear opt-in requirement, Rantall said the FPA would now focus on “making sure it is sensible, workable, and legal”. The upcoming advertising campaign is also about the importance of refusing to support ‘free riders’ within financial planning, Jones said. Mark Rantall

Coalition scrutiny expected on APRA report By Mike Taylor COALITION senators are expected to be angered by newspaper reports that Australian Prudential Regulation Authority (APRA) deputy chairman, Ross Jones told US diplomats about likely bank consolidation when the regulator has chosen to cite the secrecy provisions of its parent act in answering questions during Senate Estimates. A report in the Financ i a l Re v i ew c i t e s U S diplomatic cables published on the WikiLeaks website which state that Jones gave the US embassy a private assessment of the health o f Au s t ra l i a n b a n k s during the global financial crisis. The cable said Jones noted the Commonwealth Bank had acquired Bankwest and he expected the trend to continue, citing the potential that Suncorp could also be acquired. The revelations come just weeks after APRA declined to answer a series of questions posed by Tasmanian Liberal Senator, David Bushby, about the regulator’s activities around MTAA Super, citing the secrecy provisions of its parent act – something which prompted Bushby to write a column outlining his concerns in Money Management. The Financial Review re p o r t s a i d a n A P R A spokesman had defended the regulator’s deputy chairman, claiming Jones had been speaking hypothetically and with respect to publicly available information. September 8, 2011 Money Management — 5


FOFA legislation delivers sour and sweet By Mike Taylor THE Federal Government has released the first tranche of its Future of Financial Advice legislation, confirming a two-year opt-in backed by fines of up to $250,000 for corporate breaches and the signalling of a ban on asset-based fees with respect to gearing. But the legislation has ceded ground to the industry on commissions on individually advised risk products, the grandfathering of some volume bonuses, and potential limits on the use of the ‘financial planner’ title. Releasing the draft legislation, Assistant Treasurer Bill Shorten also chose to accept controversial modelling produced by actuar-

ial consultancy, Rice Warner, suggesting optin would cost just $11 per client. The first tranche of the draft legislation covers opt-in, best interests duty, and an increase in the Australian Securities and Investments Commission’s powers. The second part of the legislation, to be released some time next month, will contain provisions relating to the ban on conflicted remuneration, a ban on asset-based fees, and the definition of intra-fund advice. The Government has chosen to headline the release of its draft legislation with the best-interests obligations, and the fact it will impose obligations on licensees, while carrying a breach penalty of $250,000 for individuals and $1 million for corporate entities.

On opt-in, it states that from 1 July next year advisers will need to provide a renewal notice every two years, as well as an annual fee disclosure statement including the dollar amount of fees. The legislation will also provide scope for clients to clawback fees if they were not seen to appropriately opt in, and provides for penalties of up to $50,000 for individual breaches and $250,000 for corporate breaches. Consistent with an announcement he made at the Financial Services Council conference earlier this month, Shorten confirmed that commissions would remain in place for individually advised risk products with respect to self-managed superannuation funds and Choice products.

Shorten’s ‘vested interest’ undermines FOFA THE Federal Opposition has accused Assistant Treasurer Bill Shorten of jeopardising necessary reform of the financial services industry by sacrificing genuine need to the vested interests of union-backed industry superannuation funds. The opposition spokesman on financial services, Senator Mathias Cormann, said Shorten was continuing to target small businesses and financial services competing with his friends in industry superannuation funds instead of pursuing a balanced policy in the public interest. Commenting on the release last week of the first draft of the Future of Financial Advice

Mathias Cormann (FOFA) legislation, Cormann said a number of key features of the bill would unnecessarily increase costs and red tape for

consumers and business for questionable consumer protection benefit. “Bill Shorten’s approach to FOFA appears conflicted and unbalanced,” he said. Cormann said while the Coalition supported reforms to financial services which increased transparency, competition, and consumer choice such as a statutory best interests duty, it did not support opt-in. “With the best interest duty in place, appropriate transparency of fees charged, and an ongoing capacity for clients of financial advisers to opt out, there is adequate consumer protection without the need to impose additional red tape,” he said.

More fees to pay for ASIC market supervision THE Government is seeking to raise around $18 million a year in new fees from those participating in Australia’s equity markets to help fund the supervisory activities of the Australian Securities and Investments Commission (ASIC). In similar fashion to the manner in which superannuation and financial institutions levied to cover the costs of supervision by ASIC, the Australian Prudential Regulation Authority, and the Australian Taxation Office, the Government has announced a new cost recovery fee structure to be applied to stockbrokers and others utilising the Australian Securities Exchange and incoming Chi-X. The move was announced by Assistant Treasurer and Minister for Financial Services, Bill Shorten, who said the fees were expected to be offset by cost savings for the industry via reduced trading fees and narrower bid-ask spread. “In addition, the economy as a whole will benefit from an innovative and competitive market lowering the cost of capital raising and creating investment opportunities,” he said. Shorten said opening Australia’s financial markets to competition carried the challenge of supervising multiple markets in an environment of high speed and complex trading. “The proposed market supervision fee model

Bill Shorten and cost recovery arrangements represent an important next step in our efforts to support competitive, efficient and innovative equity markets,” he said. Shorten said the proposed market supervision fee model and cost recovery arrangements would replace the current interim cost recovery arrangements from 1 January, next year.

6 — Money Management September 8, 2011

However, he said by 1 July, 2013, the industry would be required to unbundle disclosure so the dollar percentage value of commissions was disclosed for all new and renewed policies – something that would enable customers to see the impact of commissions on their premiums. Shorten said the Government would work with industry and consumer groups to introduce uniform clawback provisions to remove the incentive for some advisers to shop around for the most generous clawback arrangements. He said upfront commissions had the potential to increase churn, while level commissions on replacement policy were an effective way of addressing the issue.

Planning groups dig in against opt-in BOTH the Financial Planning Association (FPA) and the Association of Financial Advisers (AFA) will maintain their rage against the two-year opt-in contained in the Government’s draft Future of Financial Advice (FOFA) legislation, but the FPA believes it has negotiated some worthwhile concessions. The chief executive of the FPA, Mark Rantall, said his organisation welcomed the fact the draft legislation had adopted the detail of a number of issues strongly advocated by the FPA – particularly new clients being the test for the opt-in trigger, a reduction to penalties for future potential breaches for opt-in, and flexibility in the way it was actually applied. However, AFA chief executive Richard Klipin maintained his organisation’s hard-line approach, saying the legislation failed two crucial tests with respect to access and transparency with its acceptance of a two-year opt-in based on the fallacy of figures generated by research commissioned by the Industry Super Network (ISN). “We are flabbergasted that the Government could simply adopt those figures without revealing where they came from and the circumstances under which they were generated,” he said. For their part, the industry superannuation funds – represented by both the Australian Institute of Superannuation Trustees (AIST) and the ISN – welcomed the draft legislation as protecting consumers. ISN chief executive David Whiteley described it as a “moderate package” that would protect Australians’ super savings by imposing a new obligation for financial planners to act in clients’ best interests, and by prohibiting conflicted remuneration including commissions from group insurance and MySuper products. AIST chief executive Fiona Reynolds said the measures contained in the

David Whiteley draft legislation “signalled a new era of affordable and quality advice for super fund members, and would also ensure that the new MySuper products from 1 July 2013 would be commission-free”. “For too long, super fund members have been paying for advice that hasn’t always been in their best interests,” she said. “Importantly, these reforms are not about killing off advice; they are about ensuring that super funds members have access to affordable and quality advice and, doing so, should boost retirement savings,” Reynolds said. MLC & NAB Wealth Group executive Steve Tucker welcomed the Government’s announcement as providing clarification on a number of its FOFA reforms. “We believe these reforms will achieve the Government’s objective of building confidence and trust in financial advice,” he said. “The number of people seeking advice has been stagnant at around 20 to 25 per cent for many years now, and for the future growth of this industry we had to face into the issues that were holding the industry back.”

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News Count practices offered retention bonuses, open architecture By Mike Taylor THE Commonwealth Bank (CBA) will look to staunch any bleeding of financial planners away from Count Financial by offering “appropriate” retention bonuses. Colonial First State (CFS) chief executive Brian Bissaker has confirmed the arrangement to Money Management at the same time as confirming Count planners would continue to be able to access other platforms, including the BT platforms, via the CFS open architecture. He said Count would continue to have its own approved product list, and would maintain its open architecture. However, CBA’s proposed acquisition of

Count based on an offer of $1.40 per share has already drawn criticism from some advisers who have suggested it runs counter to assertions by the company’s executive chairman, Barry Lambert, that it would remain strongly independent. Bissaker said while there might be concerns expressed by some Count advisers, it was not as though CBA and CFS were foreigners to the accountancy-based financial planning dealer group, with the banking group having been a platform provider and corporate banker. Commenting on the acquisition move – announced to the Australian Securities Exchange last week – Bissaker said he believed it would have occurred irrespective of the

FOFA a factor in Count board decision THE Commonwealth Bank’s proposed acquisition of Count Financial will assist the big accountancy-based dealer group better deliver a scaled advice proposition under the Government’s new Future of Financial Advice (FOFA) regime. That is the assessment of Count Financial chief executive, Andrew Gale, who told Money Management that while the proposed FOFA changes may not have been the over-riding factor in the Commonwealth Bank’s decision to mount a bid for Count, they had certainly been a factor for consideration by the Count Board. “FOFA was a catalyst,” he said. “We had been saying for much of the past 15 months that the legislative proposals were likely to

encourage vertical integration in the industr y,” he said. However, Gale said the attraction of the CBA offer was that it recognised the strength of the Count brand and the Count model and would maintain that independence with respect to brand, open-architecture and an approved product list. He said that while the acquisition of Count would deliver many benefits to the CBA, including greater access to the Self Managed Superannuation Fund (SMSF) market, Count practices would also benefit in terms of the ability to deliver scaled advice to clients who might not yet be ready to embrace comprehensive advice.

dynamic created by the Future of Financial Advice (FOFA) changes. “It represented one of the groups we would have liked to acquire, irrespective of FOFA,” he said. Bissaker said the strength of the Count brand and its business model had reinforced the need to allow it to operate as a stand-alone business within the CBA’s Wealth Management division. Also, he said he expected Count founder and executive chairman Barry Lambert would continue to play a significant role as the company’s nonexecutive chairman. The transaction which will see Count acquired by CBA is expected to be completed in early December.

Financial planning accounts for 13 per cent of Countplus revenue By Milana Pokrajac

Andrew Gale Gale said it would also give rise to the ability to offer general insurance.

Brian Bissaker

FINANCIAL planning revenue made up 13 per cent of total group revenue for Countplus in the 2010-11 financial year, according to the company’s full-year results posted on the Australian Securities Exchange (ASX). The Count Financial subsidiary reported a net profit after tax of $8.9 million attributable to shareholders, announcing its plan to reward employee loyalty and performance through equity. Despite posting a net profit after tax of $8.9 million, the company focused on its $13.3 million consolidated net profit after tax, which includes a full year’s performance for 15 member firms acquired on or before 1 July 2010. “The difference between [the two] arises due to the non-controlling interests held in the member firms

until final acquisitions were completed in December 2010,” the group stated. Directors will also grant an annual issue of $1,000 worth of tax-free shares to all full-time employees with 12 months service or more – for the first three years post listing. The initial grant was issued to 333 employees earlier this year, the group said. Countplus is an aggregation of 19 established professional services businesses across Australia, including 17 accounting practices, one financial planning practice and a financial planning dealer group, Total Financial Solutions Australia, while Count Financial has major holdings in the company. The group posted its first full year results on the ASX after it was listed in December 2010.

Countplus float boosts Count bottom line Super better than sovereign wealth - Gillard By Chris Kennedy COUNT Financial has announced a record net profit after tax (NPAT) for the 2011 financial year of $51.56 million – more than double the previous year. That number is more than double the previous result and comes mainly as a result of the listing of Countplus, which resulted in a one-off pre-tax fair value gain on Countplus and its investees of $37.15 million, Count stated. Without the fair-value gain, the normalised NPAT was $25.56 million – a 5.7 per cent increase on the prior year. The company has declared a four cents dividend per share payable in October, taking the total dividend for 2010/11 to 10 cents. Count’s revenue was up by a third to $174 million (including the Countplus contribution), while net fees and retail revenue were down 9 per cent. Asset-based revenue was up 1 per cent, although funds under advice on approved

platforms dropped 1.7 per cent. Total expenses, including employment costs, were down 6 per cent, and earnings before interest and tax were down 4 per cent on the previous year. Count described the year as a “tough and challenging period”, but said key foundations had been laid for future growth, and added the company was well placed in terms of upcoming regulatory changes. The medium term business outlook is positive, with around 85 per cent of wealth management through superannuation and retirement, with a prospective 10 per cent compound annual growth rate over the next 10 years, Count stated. Count listed short term earnings drivers as market performance, margin on funds under advice, and expense management. In the medium term, Count expected organic network expansion and growth of its revenue streams, as well as inorganic growth for corporate development and mergers and acquisitions.

8 — Money Management September 8, 2011

AUSTRALIA’S superannuation regime is strong enough to stand in the place of a sovereign wealth fund, according to the Prime Minister, Julia Gillard. Gillard has told a Financial Services Council breakfast in Sydney she believed superannuation is “already our trillion dollar sovereign wealth fund – but with market benefits”. “That’s because it’s privately managed by thousands of trustees instead of a sovereign wealth fund managed centrally by a Canberra-appointed manager,” she said. “Or alternatively, you could say that Australia has 8 million sovereign wealth funds – the superannuation accounts

Julia Gillard of Australians across the country.” Gillard said these were the very same superannuation accounts the Government wanted to make

massive injections into, but this was something that could not be achieved without the implementation of a Minerals Resource Rent Tax. “We can only get to 12 per cent by 2020 if we use part of the proceeds of the MRRT to mitigate the lost revenue incurred by taxing super at concessional rates,” she said. Elsewhere in her speech, the Prime Minister closely aligned the Government’s Future of Financial Advice legislation to its broader superannuation agenda, and said she expected the bill will be introduced to the Parliament “later this spring”.

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Clearview to launch wealth management platform By Milana Pokrajac CLEARVIEW has announced the launch of its wealth management platform with full wrap capabilities, which will be administered by Colonial First State (CFS) Custom Solutions. ClearView and CFS Custom Solutions have signed a private label agreement, which would see the ClearView branded platform offer its superannuation, pension and other investment products. ClearView managing director Simon Swanson said the new platform is expected to be live by the beginning of 2012. “It is one of our key growth initiatives to transform ClearView from a direct life insurer and retirement focused wealth management company into a fully integrated life insurance and wealth management company able to compete across the broad spectrum of the industry,” Swanson said. The announcement comes weeks after Money Management reported on concerns that dealer groups could be forced to bring platform and product offerings in-house ahead of the proposed Future of Financial Advice changes, which could eliminate mid-tier financial planning firms.

DKN posts $13.95 million loss in net profit after tax By Andrew Tsanadis

Chris Stevens CFS Custom Solutions general manager Chris Stevens said the agreement with ClearView demonstrated the growing demand within the dealer group sector to launch their own products. “With the changes currently occurring in our industry, dealer groups are looking for adoptable platform solutions that position them well for the future,” Stevens added.

DKN Financial Group (DKN) has posted a loss of $13.95 million in net profit after tax (NPAT), according to full year results for the 2011 financial year. The announcement made to the Australian Securities Exchange (ASX) stated the company’s underlying profit was down 4 per cent from $7.64 million in the year ending 30 June 2010, to $7.33 million this financial year. DKN is currently the subject of a proposal from IOOF Holdings Limited to acquire all the shares it does not already own in DKN for 80 cents a share. According to the announcement released to the ASX, platform revenue was also down 1.5 per cent, which DKN stated was due to the shift in existing funds under administration (FUA) to lower cost platforms. DKN said positive platform net inflows were down by 40 per cent compared to the same time last year due to lower investor confidence, the uncertainty surrounding regulatory reform, and the loss of one mediumsized wealth management practice from the network. The financial group sustained losses, despite FUA growing from $7.43 billion

Phil Butterworth in 2010 to $8.02 billion in 2011, representing a growth of 8 per cent. Commenting on the results, DKN chief executive officer Phil Butterworth said the market environment was challenging and the company had worked hard to minimise risks. “Over the last four years, we have positioned DKN to effectively weather the storm of market volatility and legislative change,” Butterworth said. “Overall, DKN is in a strong position for continued growth,” he said.

Journos to facilitate tax forum By Tim Stewart THE Government has announced its October Tax Forum will be facilitated by economic commentator and founder of ipac securities Paul Clitheroe, along with Fair fax journalist Michael Pascoe. In a joint announcement with the Treasurer, the

Assistant Treasurer Bill Shorten said Clitheroe and Pascoe would “bring many years of experience in taxation, finance and the media” to their roles as facilitators at the forum. The forum, to be held in Canberra on 4-5 October, will continue the discussion the Government initiated with the Australia’s

Future Tax System Review, which was released last year. The program of the forum includes six major topics: personal tax, transfer payments, business tax, state taxes, environmental and social taxes, and tax system governance.

ASIC announces regulatory guide for good advertising practice THE Australian Securities and Investments Commission (ASIC) has released a consultation paper and draft regulatory guide for the advertising of financial products and advice. As part of the draft regulations, ASIC said advertising played an important role in allowing a consumer to make informed financial decisions. “The objective of our guidance is to help promoters and publishers present advertisements that are accurate, balanced and help consumers make deci10 — Money Management September 8, 2011

sions that are appropriate for them,” said ASIC chairman Greg Medcraft. “While our guidance covers issues of good practice in advertising, it may also help promoters and publishers comply with their legal obligations not to make false or misleading statements or engage in misleading or deceptive conduct.” Comments on the consultation paper and draft regulatory guide are due by 25 October 2011.


Rock and MyState: proposed merger By Andrew Tsanadis THE Rock Building Society Limited (Rock) and MyState Limited (MyState) have announced they intend to merge by way of a scheme of arrangement (scheme) with Rock shareholders. The proposed merger follows the merger of MyState and Tasmanian Perpetual Trustees in 2009, and reflects the ambition of both MyState and Rock to expand operations geographically. Rock is based in Queensland and has a market capitalisation value of around $46.3 million, while MyState, based in Tasmania, has a market capital-

isation of around $236 million, the announcement stated. Commenting on the announcement made to the Australian Securities Exchange, MyState chairman Dr Michael Vertigan said the merger would be the first step in the company’s longer term goal to operate on a national level. “For some time, MyState has recognised that with a customer base of more than 200,000 Tasmanians, if the company is to continue to grow and be competitive, it will need to undertake national expansion of its operations,” Vertigan said. According to MyState, the proposed merger does not

affect the entitlements of current MyState shareholders and they are not required to vote on the proposal. If Rock shareholders approve the merger at a scheme meeting, expected to be held in Rockhampton in November , they will receive 7.75 MySuper shares for every 10 Rock shares, Rock stated. “The proposed merger is the next logical step in Rock’s development, to build a broader and more diverse retail business that provides a regionally-focused alternative to the bigger banks for the communities of regional Queensland,” said Rock chairman Stephen Lonie.

A one off implementation cost of approximately $3.5 million before tax is expected to be incurred over a full three year period.

Volatility impacting super rollovers By Mike Taylor THE Superannuation Complaints Tribunal (SCT) has warned superannuation fund trustees to be careful in handling member transfers during the current period of market volatility to ensure unnecessary losses do not occur. The warning is contained in the Tribunal’s latest quarterly bulletin with the SCT chairperson, Jocelyn Furlan, saying trustees need to be aware “that market instability can and does cause problems for some fund members, whether or not they are approaching retirement”. Furlan cited the example of a fund member rolling a benefit from one fund to another and who, on the day he decides to roll out of his fund, checks his balance online and notes he

has $20,000 in his account. “By the time his request is processed – perhaps a week or two later – his account balance has dropped to $19,000 due to negative investment performance,” the SCT chairperson said. Furlan said the member could then be forgiven for believing he had lost $1,000 and therefore lodging a complaint with the SCT. She said in reality the member may not have actually suffered a loss at the hands of his preexisting fund. “If the member’s new fund’s performance was not as good as that of the fund he is leaving, it may well be that, had his rollover request been processed sooner, he would have lost even more,” Furlan said.

Centro liquidates assets and eyes restructure By Chris Kennedy

Bennelong/Avoca fund gets thumbs up from Zenith By Tim Stewart THE Bennelong Avoca Emerging Leaders Fund, run by former UBS portfolio managers John Campbell and Jeremy Bendeich, has been awarded a ‘recommended’ rating by Zenith Investment Partners. Campbell and Bendeich left the UBS small caps team in March this year to launch Avoca Investment Management in partnership with Bennelong Funds Management. Zenith investment analyst Nicholas Busst said the joint venture between Avoca and Bennelong was “extremely robust”, allowing the portfolio managers to “focus purely on [their] investment duties”. Campell’s 20 years of experience, coupled with Bendeich’s desire to specialise in small caps, had contributed to the Emerging Leaders fund comfortably outperforming the benchmark, Busst said. Campbell, who is also Avoca’s managing director, said he found Zenith’s endorsement “gratifying”. “Zenith were quite good supporters of ours at UBS, so they were pretty quick to do a review on us here,” he said. Campbell said the recent volatility in the stock market had made him revise his opinion that parts of the resources market were expensive. “The resources market from January this year has had a reasonable pullback, and there are pockets there that we think are okay … the coal stocks in particular, we quite like,” Campbell said. He added that the Emerging Leaders fund would have a maximum capacity of $800-850 million.

The conditions of the scheme are set out in full in the scheme implementation deed, which has been released separately to the Australian Securities Exchange.

John Campbell “We’ll be sticking to that quite religiously. In small caps, if you get too much under management you get essentially locked into positions that you can’t do anything about,” Campbell said. Zenith was happy to award the fund a ‘recommended’ rating – despite its relatively short existence – since its managers were “amongst the more experienced in the Australian small capitalisation universe,” Busst added. “While Avoca was only launched in May, Jeremy and I have a strong history of working together. This, coupled with our co-ownership of the business, provides us with the impetus to continually strive for long-term outperformance for our clients,” Campbell said. Campbell and Bendeich are well complemented by the fund’s senior investment analyst Michael Vidler, Busst added.

CENTRO Properties Group has announced liquidation value adjustments of $1.3 billion ahead of a proposed restructure and the maturation of its senior debt. Centro announced a statutory net profit for the 2011 financial year of $2.7 billion, arising largely from those liquidation adjustments, but stressed that profit is not the result of sustainable profit and growth. Centro described the liquidation adjustment as a one-off accounting entry to adjust net assets from negative $1.3 billion to zero. With an adjustment of around negative $400 million for convertible bonds (which rank ahead of ordinary equity) net equity attributable to Centro’s ordinary shareholders is negative $1.7 billion. The group requires a restructure before its senior debt of $2.9 billion matures in December because it will not have sufficient cash to fund interest, overheads and other ongoing expenses, and could not repay its senior debt maturing on that date. Without a restructure, it is likely that external administrators will be appointed, Centro stated. “The restructure is the only feasible option for Centro to emerge from the extensive review of alternatives undertaken,” said Centro chairman Paul Cooper. “Centro cannot trade its way out of the debt situation – even after the moderate recovery in Australian asset values during the past year reflected in the improvement in investment property values, the debt is simply too large and cannot be refinanced when it matures in just under four months time,” he said. The proposed restructure would make available to shareholders 5 cents per security, but if external administrators are appointed shareholders are likely to receive nothing, Centro stated. September 8, 2011 Money Management — 11


Woolworths announces launch of life insurance offering By Andrew Tsanadis WOOLWORTHS Limited (Woolworths) continues its push into the financial services sector with the launch of Woolworths Life Insurance (WLI). Along with Woolworths Pet Insurance, WLI is the first of many financial services set to be introduced, according to the announcement. All Australian residents aged between 18 and 65 are eligible to

apply for WLI, which provides cover from $100,000 to $1.5 million, depending on age and income. Members also have the option to pay their premiums fortnightly, monthly or annually. As part of the announcement, Woolworths will partner with Swiss Re and The Hollard Group (Hollard) to provide, what Woolworths described as, a cost-effective, flexible and easy to understand alternative to many existing options pro-

viding financial protection. Woolworths will be responsible for the overall value proposition of WLI, while Swiss Re will act as the underwriter, and Hollard as the distributor and administrator. Woolworths head of insurance George Hughes said the alliance will provide a solid backing to an effective, low risk model that represents the first step in entering the insurance sector. “We intend to have a long-term

presence in the insurance sector, with the ability to cater for all our customers’ insurance needs,” said Woolworths head of insurance George Hughes. “Our research tells us that many everyday Australians find insurance difficult to understand and access, to the extent that 95 per cent of families do not have adequate levels of life cover.” Hughes’ stated figure came from The Life/NATSEM Underinsurance

Report, released in February 2010. According to Hollard managing director Richard Enthoven, the cover offered by Woolworths represents a substantial opportunity. “Based on our international experience distributing insurance in partnership with large retailers, we are confident the Woolworths Insurance initiative is the single largest untapped insurance opportunity in Australia,” Enthoven said.

Simplicity beats planner engagement, says Canstar By Milana Pokrajac DO-IT-YOURSELF life insurance is becoming increasingly popular with Australians, which is largely attributed to the simplicity of buying so-called ‘off the shelf’ products rather than going through a financial planner, according to Canstar Cannex. Furthermore, insurers are making insurance more accessible by introducing features including auto acceptance with pre-existing medical condition exclusions. “Buying life insurance direct is an alternative to going through a planner or an advisor; as such, it’s an uncomplicated way of putting a life insurance policy into place straight away as the first step towards protecting assets,” the researcher noted. These comments came as Canstar Cannex came out with its annual direct life insurance star ratings, which compared policies from 19 providers. Of those, Allianz, Medibank, and Real Insurance topped the list based on their suite of features covered, reasonable premium costs and ease of eligibility for the majority of consumers. However, Canstar Cannex head of wealth management Stephen Mitchell did warn consumers about the risks of not engaging with a financial planner. “You’ve got to remember that you are not being guided by a licensed financial planner, and so you have to compensate by looking very carefully at the exclusions before you sign up,” Mitchell said. “Direct life insurance is also a good quick-fix for someone who wants to put a policy into place straight away, but plans to review their complete asset protection and investment strategy with a licensed financial planner a bit later on,” he added.

12 — Money Management September 8, 2011

SMSF Weekly SPAA fights on accountant advice By Mike Taylor SELF-MANAGED superannuation fund (SMSF) specialists have welcomed confirmation in the Federal Government’s draft Future of Financial Advice legislation that there will be no ban on commissions applying to individually-advised risk products with respect to choice products and SMSFs. Reacting to the release of the first tranche of the Government’s draft legislation, Self Managed Super Fund Professionals’ Association (SPAA) chief executive, Andrea Slattery, said allowing the use of commissions with respect to individuallyadvised products would remove distortions and would ensure a level playing field for individual insurance policies. However, Slattery was more

Andrea Slattery cautious with respect to the Government’s approach to the role of accountants and SMSFs. “We understand the Government is still considering a restricted or structured advice license for accountants who advise on SMSFs,” she said. “SPAA has been working hard

to ensure the Government understands the importance of a restricted or structured license arrangement, which recognises SMSF accountants may not wish to provide recommendations to clients to purchase specific investment financial products.” “We have also been advising on the minimum competencies required to hold such a license, and we look forward to seeing these final details in the second tranche of the legislation,” she said. Slattery said SPAA had been advocating for the removal of the Australian Securities & Investments Commision class order within RG200, along with advocating for intra-fund advice and scaled advice to have the same level of competency and best interest duty requirements as all other advisors.

Life industry consolidates THE Australian life insurance industry has undergone significant change in the past 20 years to be now dominated by the major banking groups, according to a new analysis published by the Australian Prudential Regulation Authority (APRA). The analysis, published in an article last month, pointed out that life insurers that are part of banking groups now account for 55 to 60 per cent of policy-owner assets and premium income. Looking back at the evolution that has occurred over the past two decades, the APRA article said the concept of mutuality had all but been forgotten after the demutualisations in the 1990s.

“State governments have vacated the market completely through privatisations and public listing of their interests in life insurance,” it said. “Today, there are only 18 financial service groups, some with more than one life insurance licence, writing new business in Australia,” the article said. “The local banking industry has evolved into its now prominent position through a combination of organic growth of their own life insurer brands and aggregation of other life insurers, either by direct purchase or through acquisition of smaller banks that had earlier established their own life insurer brands,” it said. The APRA article said this trend had continued with a spate of acquisitions during 2008-10.

Winding-up can be hard to do By Damon Taylor WHETHER it’s due to a payout of all benefits or to the changed circumstances of the trustees, the natural end to a self-managed super fund (SMSF) comes in its wind-up. But it is a process that requires a great deal of care and attention to detail, according to Peter Hogan, Principal of Plaza Financial. “Generally, what people do is aim to wind-up the fund by 30 June,” he said. “And that’s because as soon as you’ve got any assets left in the fund and you roll into the next financial year, then you’ve got another annual return and another set of accounts, and so on. “You really want to get it all tidied up before financial year’s end,” Hogan said. Another issue to be aware of, according to Hogan, lies in how readily realisable the fund’s assets are. “If you’ve got property or something that’s not going to be instantly realisable within a couple of days – so something other than managed funds and shares – then that needs to be taken into account as well,” he said. “It could significantly impact when you’ll be able to wind-up the fund and when you’re going to get the proceeds for those things.” “Even something like property where yes, you might have your contract of sale and it might be dated before 30 June – you may not actually get the proceeds until afterwards,” Hogan said. The final key issue highlighted by Hogan was the question of whether the fund’s trustees were going to sell the assets or whether the members wanted to retain those assets permanently. “So do we do an in-specie transfer of the assets or do we sell them?” asked Hogan. “That’s another question you might want to ask yourself, and in that

Peter Hogan situation, valuations become important as well.” “Most people know that an SMSF is allowed to transfer or sell assets to anyone – even related parties,” he said. “But if it is a related party transaction, and you haven’t got a readily available market value, it’s pretty important that you get an independent valuation.” “You want to make sure that the value you’re transferring it at is one that can be backed to avoid any ATO [Australian Taxation Office] dispute,” Hogan said. But overall, Hogan said SMSF windups were about dotting the i’s and crossing the t’s. “It’s definitely a process that trustees need assistance with, and not one they’re going to be able to do off their own bat,” he said. “And it’s important; when you look at those net numbers that get reported each year and when they say 2,500 funds a month are being set up – in fact, it’s more like 3,000 funds being set up and 600 to 1,000 funds being wound up.” “It’s something that gets done regularly and for all sorts of reasons, but it’s also not as well understood as it should be,” Hogan said.

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35% written for clients who enquired directly



written for clients of accountants


written for clients of boutique owned AFSLs


written for clients of institutionally-owned AFSLs

Source: SMSF Loans

WHAT’S ON IPA Event: Tricks & Traps of International Transactions 16 Sep 2011 Technology Park Function Centre, Bentley, Perth

Finsia Career Services Seminar: Navigating for Success 20 September 2011 Christie Conference Centre, 3 Spring St, Sydney

MFAA Commercial Lending Luncheon 23 September 2011 Waterview Convention Centre Sydney Olympic Park

ASFA National Conference & Super Expo 9-11 October 2011 Brisbane Convention & Exhibition Centre

AFA National Conference 23-25 October 2011 RACV Royal Pines Resort, Gold Coast

Count on reality over sentiment The Commonwealth Bank has moved to acquire Count Financial and, as Mike Taylor reports, pragmatism and the realities of the Future of Financial Advice changes are the driving forces behind the Count board’s decision to recommend acceptance of the bid.


ount Financial executive chairman, Barry Lambert is a pragmatic man. Thus, when certain representatives from the Commonwealth Bank (CBA) approached him some 10 years’ ago to discuss the acquisition of his accountancy-based financial planning group he listened to what they had to say, but ultimately said “no”. From time to time over succeeding years, Lambert received similar approaches and, given the prevailing circumstances, continued to say “no”. His decision this year to refer the matter for full and serious consideration by the board of Count Financial was therefore based on a pragmatic assessment of the circumstances facing the company at the present time – the uncertainties generated by the Federal Government’s Future of Financial Advice (FOFA) changes and the reality that, like most similar financial services companies, Count’s share price has struggled to recover from the worst impacts of the global financial crisis. By any objective assessment the CBA’s offer to acquire Count Financial at $1.40 a share, and the underlying terms it agreed to facilitate the transaction, were generous but in the minds of both Lambert and Count’s chief executive officer, Andrew Gale, the most important element were the undertakings with regard to Count’s continuing independence in terms of structure, open architecture and the maintenance of its own approved product list. However, if anyone had been closely listening to Gale over the past 12 months they would have gleaned from his comments that he has long believed the direction being pursued by the Federal Government via its FOFA changes strongly encouraged vertical integration. While Colonial First State (CFS) chief executive Brian Bissaker told Money Management last week that FOFA had not been a key determinant in the CBA’s decision to acquire Count Financial, the proposed legislative and regulatory changes were certainly front and centre for Lambert and Gale. Bissaker, probably aware of the number of

14 — Money Management September 8, 2011

and Gale believe “CBALambert will deliver Count the scale, resources and all-important referrals necessary to see the business grow and survive in the new FOFA world.

times the bank had approached Count, said the company would have been attractive with or without FOFA, but Gale said there could be no denying that the Government’s changes were a catalyst. “We have been saying for the past 15 months that FOFA will encourage vertical integration and you have to be pragmatic in how you deal with that,” he said. Indeed, both Lambert and Gale are as one in arguing that as big as Count Financial had become, its options in the proposed new legislative landscape were limited and the uncertainties were considerable. In essence Count, which had taken strategic stakes in a number of competitor financial planning groups as well as the mortgage broker, Mortgage Choice, had two options – it could seek to become bigger by pursuing vertical integration or it could accede to the sort of offer delivered by CBA. For the ever-pragmatic Lambert it was a question of which option would generate the greater number of referrals, and there is no question in his mind that far more referrals are likely to flow from the vast bulk of the Commonwealth Bank than would ever flow from Mortgage Choice or aligned but still competitive dealer groups. As well, and unlike their counterparts at dealer group Professional Investment Services, Lambert and a number of the Count board members exhibited no particular enthusiasm for pursuing vertical integration with respect to funds management. In Lambert’s view you could seek to grow

organically and by acquisition at the same time as building products, but such a strategy carried with it both considerable risk and expense with few guarantees of success. He said it was a strategy that Count was pursuing but with an eye to the sort opportunities that might arise from an unsolicited bid, such as that which ultimately came from CBA. While the Count shareholders are yet to vote on the CBA offer, it is already evident that Lambert and Gale feel comfortable dealing with the likes of Bissaker and believe the big banking group would not be prepared to spend $400 million acquiring Count Financial only to ruin the business. Lambert and Gale believe CBA will deliver Count the scale, resources and all-important referrals necessary to see the business grow and survive in the new FOFA world. They see synergies for both businesses, with Gale believing CBA’s bulk will help Count develop a viable model for the competitive delivery of scaled advice along with new products such as a general insurance offering, while the CBA will benefit from the reach Count will provide into the advisory space, especially with respect to Self Managed Superannuation Funds. While there have been plenty of critics of the motivations for the Count board recommending the CBA offer, there will be plenty of dealer group heads reflecting upon a major independent player such as Count moving under the vertically-integrated umbrella of the Commonwealth Bank. They will also be reflecting upon Lambert and Gale’s acknowledgement that for many planning companies the FOFA changes demand scale but limit the options via which that scale is achieved. While some of those accountant/planners working within Count practices may have their reservations about working under a bank umbrella, it is doubtful Count shareholders will find a great deal wrong with an offer which delivers them a considerable premium to the market value of their holdings.

Adviser Choice Risk Awards

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Risk Company of the Year

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Risk Disability Income Product

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Risk Term & TPD Rider Product and Business Overhead Product

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Risk Trauma Product and Research Criteria September 8, 2011 Money Management — 15

Adviser Choice Risk Awards

New brand, old success – OnePath grabs top spot As the risk market becomes more competitive due to the consistently strong demand for insurance products, life companies have truly embraced adviser feedback. The Money Management/Dexx&r Adviser Choice Risk Awards commend the high achievers in the risk space in 2011, Benjamin Levy reports.

Risk Company of the Year Gold: OnePath Silver: TAL Bronze: BT Life THIS year has seen consistent demand for insurance products amid volatile markets, as the Plan for Life data finds the risk market rose a further 10 per cent over the 12 months to March 2011. Of the larger companies, OnePath, Tower (now TAL), AIA and BT recorded highest growth, according to the report. However, the sector has also seen major changes, as two out of the three top companies in the Money Management /Dexx&r Adviser Choice Risk Awards have rebranded during the past year. Nonetheless, they maintained steady performance. This year’s winners demonstrate a continuing trend of embracing online technology, as well as listening to adviser and consumer demands now more than ever. Most have introduced faster claims processing, strengthening their online platforms and applications. Adviser Choice Risk Awards praise those that have stood out in 2011.

Risk Company of the Year: OnePath

OnePath has secured the gold medal for the second year in a row in the Money Management/Dexx&r Adviser Choice Risk Awards. As well as winning the overall Risk Company of the Year category, OnePath also beat other competitors in both the term and total and permanent disability (TPD), and trauma product categories. OnePath’s previous incarnation, ING

Life, secured first place in the same three categories last year. Gerard Kerr, head of product marketing and reinsurance at OnePath, claimed the win was a result of the seamless transition the company had executed from its former incarnation as ING. OnePath wanted to maintain its focus on – and dedication to – advisers and customers throughout the operational changes involved in rebranding the company, Kerr said. “We’ve really managed to seamlessly move from ING into OnePath, so our customers are still happy, the advisers are still happy, and that’s probably the most pleasing aspect of the business – to carry on the momentum we had,” he says. Kerr added OnePath held on to the same staff as part of the rebranding. Part of the company strategy over the last year has been to make incremental improvements to their products and operations, rather than a radical reshaping following their rebranding. Improvements in technology have been one of the core focuses for OnePath over the past year. Advisers have been given online access to track insurance business that is waiting on underwriting requirements before going into effect, and enhancements have been made to their electronic underwriting engine OneCare Express. Those changes have improved transparency and communication between OnePath and advisers, as well as driving higher instant point of sale decisions, Kerr says. Feedback from advisers has helped drive improvements to OnePath’s products and technology, Kerr says. “It’s a great way of testing your proposition in the independent open market – they’ve got a lot of variations in terms of what they demand of a provider,” he says. ANZ’s acquisition of the then ING Australia provided enormous stability when many insurers felt that the market was in an unstable state because of government reforms which are yet to be voted on and implemented, according to Kerr.

Silver: TAL Ltd

Earlier this year, the then Tower was acquired by Japanese insurer Dai Ichi – which was followed by the company’s rebranding to TAL Ltd. This was the second major rebrand for the life industry over the past year, but TAL – a bronze finalist in last year’s awards – demonstrated consistent performance.

16 — Money Management September 8, 2011

Gerard Kerr Chief executive, retail life at TAL, Brett Clark, attributed their strong product development process for the company’s nomination this year. “Our product development is ‘outside in’. It’s very much taking input from the market, from customers and from advisers, and bringing them strong into our product development process,” Clark says. Products need to be delivered in a way that is quicker, more efficient, and with less hassle to attract clients and advisers, he says. “We need to be able to service advisers and customers in the manner they feel most comfortable in, be it web, phone, or traditional mail,” Clark says. The Future of Financial Advice reforms have pushed TAL to offer a range of different remuneration structures for customers to choose from, including commissions and fees. Product manufacturers need to provide the flexibility within their products and operations to cater for both, Clark says. However, it leaves the choice up to the

adviser and the consumer. TAL has flagged a more web-based approach to their services in the future. More and more of the company’s strategy will be dedicated to increasing their online presence, Clark says.

Bronze: BT Life

BT Life’s decision to launch stand-alone insurance products for independent financial planners was the extra push it needed to win third place in the awards this year. While BT always had strong value in its wrap master trust platform, it limited its access for advisers and consumers, says BT national life insurance product manager, Scott Moffitt. The flexibility in BT’s stand-alone insurance products allows advisers to offer clients the best product for them, regardless of where it is bought from and how it is paid. That unique flexibility complements the wrap platform and works within the self-managed super fund market, Moffitt says. MM

Committed to support. As an independent life insurance specialist, we are focused on building long-term, rewarding relationships with ¿nancial adYisers. :e want to help \ou grow \our business and ¿nd wa\s to make it easy for you to do business with us, so you can focus on what makes your business work – your clients. Speak to the AIA Australia team today about how we can support your business on 1800 033 490.

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Adviser Choice Risk Awards

OneCare notches up fourth product win

Risk Term & TPD rider product Gold: OnePath Silver: TAL Bronze: AXA I N C R E M E N TA L i m p r ov e ments to their OnceCare life c ov e r p r o d u c t h a s h e l p e d OnePath hold onto the first place in the term and total and permanent disablement (TPD) rider product category for the fourth year in a row. Age changes in the own occupation definition towards the end of last year

allow TPD damages to be assessed until age 70 – beyond the standard retirement benchmark age of 65. Making life insurance cover affordable for as many people as possible was a core element of their offering, according to OnePath head of product marketing and reinsurance Gerard Kerr. O n e Pa t h h a s i m p l e m e n t e d a discount package across all their products, rewarding customers who are prepared to place more life insurance with the company. “With life cover, our product suite actually all works together very well because we allow the packaging to apply right across all our products. They all interconnect with each other, as opposed to standing out in isolation,” Kerr said. OnePath also allows beneficiaries to receive their life insurance package as a lump sum or as monthly instalments, with a reduced premium cost for the instalment option. Clients can also increase their level of cover by up to $200,000 for each life event – like the birth of a child – without supplying medical evidence. Building on already strong products will ensure OnePath stays at the front of the market, Kerr says. “We have carried on the continuity theme in many ways – we certainly pushed the boundaries with our TPD offer,” he says.

With life cover, our “product suite actually all works together very well because we allow the packaging to apply right across all our products. They all connect with each other as opposed to standing out in isolation.

– Gerald Kerr

John Ashton Chief executive, retail life at TAL, Brett Clark, attributed their strong product development to coming second in this category this year. “The product development process is dynamic at [TAL], and we take inputs from all of our key stakeholders, from advisers and customers,” Clark says. The company aims for at least two upgrades per year to ensure TAL’s Ac c e l e ra t e d Pro t e c t i o n p r o d u c t remains competitive in the market. “[TAL] is one of the few organisations

that is a life insurance specialist; that is all we think about, and it gets all of our attention. That’s important when the market is looking for specialisation and excellence,” Clarke says. AXA’s re-engineering of their claims a n d i n - f o rc e p o l i c y s e r v i c e s h a s pushed their product to the top of the industr y, according to AXA senior product manager for individual life insurance John Ashton. MM – Benjamin Levy

Putting customers first makes AIA winners

Risk Business Overhead Product Gold: AIA Australia Silver: BT Life Bronze: AMP

A CUSTOMER-first philosophy during product development has contributed to AIA Australia’s win in the Business Overhead Product category of Money Management’s 2011 Adviser Choice Risk Awards. AIA’s Priority Protection Business Expenses insurance took out gold, over BT Life and AMP, which snapped up the silver and bronze awards respectively. What differentiates the firm’s risk products from its competitors is the customer feedback it incorporates into the product development stage, according to AIA head of product management, Tim Tez. AIA not only considers comments from advisers who support the product, he said, but also gauges the opinions of those who have constructive criticism. AIA’s Priority Protection Business Expenses plan aims to ensure that fixed business

18 — Money Management September 8, 2011

expenses – such as rent and utility bills – can be paid when business owners can no longer run their business. Designed for self-employed individuals, employed fulltime, the benefits aim to make sure the fixed expenses of their business or practice will still be paid, even if they cannot work due to injury or sickness. The benefit covers business expenses, minus any amounts reimbursed from elsewhere. Coming in a close second was BT Life’s Business Overheads. BT’s national insurance product manager, Scott Moffitt, said the wide scope of the firm’s business overheads product was among the reasons for the accolade. “ We l a u n c h e d t o t h e market in February with a broader product, new technology, effective underwriting, on-boarding technology as far as the claims processing part [goes]”, he said. Moffitt said BT aims to s i m p l i f y t h e i n t e ra c t i o n

We launched to the market in February with a broader product, new technology, effective underwriting, on-boarding technology as far as the claims processing goes. – Scott Moffitt

between its income protection and business overhead product range. AMP’s Business Overheads insurance claimed bronze in the awards. The company had formally acquired AXA earlier this year, which it said would help AMP not only expand its financial planning network, but its insurance offering, too. AMP’s director of wealth protection products, Michael Paff, attributed the bronze to the balance struck between

a f f o rd a b l e p r i c i n g a n d covered events. In the months where the business has lower expenses, the insured party can accrue any unpaid monthly benefit to the next month, AMP states in its product disclosure statement (PDS). This means AMP is “able to offer month to month payment to reflect the peaks and troughs of a claimant’s business expenses”, Paff said. MM – Angela Welsh

Adviser Choice Risk Awards

TAL takes first place with disability product award

Risk Disability Income Product Gold: TAL Silver: OnePath Bronze: AIA

TAL has followed up its second place finish in the overall field, with a win in the disability income category of the 2011 Money Management /Dexx&r Adviser Choice Risk Awards. The Accelerated Protection Income Protection Premier offering allows TAL to differentiate around its benefits, according to TAL retail life chief executive Brett Clark. “The income protection benefits are living benefits and they’re definitionbased,” said Clark. “Those parts of our offer are important, and we spend a lot of time thinking about them.” Clark added that there had been a general move away from total and permanent disablement, because the complexity of a lump-sum payment places a lot of responsibility into the member’s hands. “There has been a trend in recent years for [superannuation] trustees to look more for income protection and income replacement benefits to sustain a member over a longer period in the event of any disablement, and I think that’s a good strategy,” Clark said. OnePath took out second place in the disability income section with its OneCare Income Secure Standard product.

Brett Clark A key feature of OnePath’s income protection offering was that it was “slowly but surely” catering for certain occupations so they could be covered up to age 70, according to OnePath head of product marketing and reinsurance, Gerard Kerr. “ We see more and more people looking to take out income protection. It’s one of these contracts that applies to every single person, because every person wants to protect their income,

whether you’re married, single, old or middle-aged,” Kerr said. Kerr added that OnePath had received a lot of positive feedback from advisers about its default special fiduciar y benefit. “So when fractures or breakages happen, that’s automatically paid out. It’s inbuilt into the contract, so you don’t have to worry about adding it in as an option,” he said. AIA Australia rounded out the categor y with its Pr ior ity Protection – Income Protection PLUS plan. AIA head of product management Tim Tez said his company took a ‘customer first’ approach to its product development process, and even considered the feedback of people who didn’t support AIA’s products. Tez added that AIA includes specified injuries within its PLUS contract. He said AIA could potentially cover people for up to $60,000 a month. “We also have features like an income protection lump sum … that converts income payments, if people so choose, into a lump sum benefit that’s paid to them tax-free,” Tez said. MM – Tim Stewart September 8, 2011 Money Management — 19

Adviser Choice Risk Awards

Trauma helps OnePath to healthy win

Risk Trauma Product Gold: OnePath Silver: TAL Bronze: CommInsure

O N E PAT H h a s re p e a t e d i t s success from last year by taking out the top honours in the trauma category in the 2011 Money Management /Dexx&r Adviser Choice Risk Awards. The win came as OnePath added outof-hospital cardiac arrest to its Trauma Premier product and changed its cancer definitions, according to OnePath head of product marketing and reinsurance, Gerard Kerr. “Some of the changes are just recognising that the speed at which medical knowledge is increasing is still at a fast rate, so we need to make sure that the definitions continue to capture those changes,” Kerr said. He added that learning from clients was central to improving OnePath’s offering. “We constantly talk to the clients, and they tell us what happens in the real world. They’re sharing some of the e x p e r i e n c e s t h a t t h e y ’v e s e e n i n a trauma claim,” Kerr said. TAL grabbed the silver in the trauma category with its Accelerated Protection Critical Illness Premier product. “Critical illness is a benefit that has been more successful globally that in

Tim Browne Australia,” said TAL retail life chief executive, Brett Clark. “There’s more work to do around raising consumer awareness about what is available here, and how it can help protect individuals and their families,” he said. Clark added that when it came down to differentiation, culture was the key factor

– and TAL was one of the few organisations that was a life insurance specialist. “It’s all we think about, and it gets all of our attention. That’s important when the market is looking for specialisation and excellence,” Clark said. CommInsure won the bronze award with its Total Care Trauma Plus offering, which CommInsure general manager for retail, Tim Browne, put down to a business model that was focused on customer service. “Our Fast Track Claims for short-term duration claims is a good example – instead of paying a client monthly in arrears, we will seek to advance the monthly payments,” Browne said. But what really makes CommInsure stand out from the crowd is its position as the only insurer in the Australian market to include trauma reinstatement as a built-in benefit. “Following an initial full trauma claim, all clients are given the opportunity to reinstate their valuable trauma cover. Should a second unrelated illness strike, the full benefit may be payable again,” Browne said. MM – Tim Stewart

The adviser knows best: the judging process THE Money Management /Dexx&r Adviser Choice Risk Awards, now in their eighth year, are based on an assessment of each product’s benefits, features, definitions and premiums. A panel of experienced risk insurance advisers who have built practices specialising in the provision of life risk insurance advice were contacted and invited to complete a survey providing their feedback on: • The relative importance of the features included in term, trauma, total and permanent disability, disability income, and business overheads insurance products; • The relative importance of the definitions for core and supplementary conditions; and • The weighting they believe should be applied between features and benefits, definitions, and price (premiums) in each product category. The adviser responses were then converted into a weighting for each item (deter mined by the average of the weightings nominated by the advisers) and combined with weighted score from the previous year. These scores were summed to give a total weighted score for each feature, benefit and definition. These weightings were then applied to the Dexx&r Risk Ranking system to calculate a final weighted score for each product. Examples of items encompassed as features include the availability of the product as personal superannuation business, the range of premium options available (eg, stepped, level and blended); entry and expiry ages. Examples of items included as benefits include personal and business guaranteed insurability, terminal illness benefits, premium waiver options, and occupationally acquired HIV benefits. Examples of items included for definition scoring include own and ETE TPD definitions, total and partial disability definitions, and all included core (eg, cancers, heart conditions and stroke) and ancillary diseases (eg,

dementia, motor neurone disease, osteoporosis) in trauma products. Price score premiums were calculated for a wide range of sums insured for all lump sum risk products and monthly benefits for disability income and business expenses insurance. Separate premium calculations were conducted for males and females, smokers and non-smokers, over a range of ages from 21 to 60, at five-yearly intervals. The relative cost for

20 — Money Management September 8, 2011

e a c h p r o d u c t w a s w e i g h t e d by a g e, g e n d e r, smoker/non-smoker status, occupation, and sums insured. The total weighted score for features, definitions and price per product was then calculated out of a maximum of 100. The winning products in each product category are determined by calculating the total score of the highest scoring product for each company in each category – term, TPD, trauma, disability income and business expenses. The leading risk company was determined by adding the total score for the highest scoring product for each company in each product category. The scores within each product category are also weighted to reflect the relative size of new premium in each category. For example, business expenses category score accounts for 10 per cent of each company’s total score. All product information is based on data collected by Dexx&r and published in the Dexx&r online risk research and print versions of term life analysis and disability analysis. Premium calculations are based on those generated by the Dexx&r Risk Developer Software. Details of the features, definitions and price comparison criteria, and standardised scores are published in Dexx&r’s Risk Ranking Report. In 2011, the adviser feedback resulted in a small reduction in weighting applied to price. This reduction biases the results of products with a higher definition, features, and benefit scores. Virtually all risk products have benefited from incremental improvements in benefits and definitions over the past 12 months. The results this year reflect the higher benefit scores where they have been associated with no change in premiums, or in the case of term insurance, lower premiums. MM – Mark Kachor

OpinionEquities A flip-side to a downside Paul Taylor points to several positives that have been overlooked amidst the nervousness surrounding the equity market volatility.


t’s a bit of an understatement that equity markets are nervous at the moment. Investors are nervous, sceptical, cautious and scared – and for very good reasons: there has been a lot of negative macro-economic news lately. However, there are also several positives that have been overshadowed. For example, even if the global economy slows, some Australian companies will still be in a comparatively good position. Some macro-economic conditions could change over the next year and potentially have a different impact on the market. Concern around Chinese economic growth, for example, is one that could change through the year. The worse conditions are for global economic growth, the higher the likelihood Chinese authorities will stop tightening monetary conditions and seek to resume growth. At the moment, the Chinese authorities are trying to bring growth down to more sustainable levels by increasing interest rates and tightening lending standards. Should global economic growth get worse, the Chinese authorities are more likely to reverse this policy stance as they did moving from 2007 into 2008 and 2009. This would see the government in Beijing try to boost growth, which would maintain if not increase Chinese demand for Australian commodities, which would in turn buoy our resources and associated stocks. This highlights how while macroeconomic concerns continue to overshadow the market and impact sentiment, it’s key to talk to companies to see how they are actually being impacted by these factors. Some are being impacted much less than others. The Australian market remains attractively valued at well below long-term average levels. The earnings and dividend yield of the market also indicates attractive valuation levels. Over the past year, the macro-economic concerns have dominated bottom-up fundamentals and company valuations. At individual company levels, you are now able to buy great quality Australian companies with strong balance sheets and good long-term growth prospects for very attractive long-term valuations. I believe the bottom up fundamentals and attractive market valuations will win out over the long-term, but it’s always difficult to pick the exact timing. With these macro concerns now very well priced into the market, and some

You are now able to buy “great quality Australian companies with strong balance sheets and good long-term growth prospects for very attractive longterm valuations.

improvement likely over the next 12 months combined with very attractive valuation levels means that the likelihood of getting better returns from the Australian market over the next year is much improved.

Two-speed opportunities

Australia’s two-speed economy is creating divisions within the sharemarket. Some sectors – such as those reliant on consumers – were depressed, as households remained concerned about further increases to interest rates. At the moment, we have overweight positions in the industrial, healthcare and energy sectors. Within the mining sector, we still see opportunities to invest in the larger diversified miners over the smaller miners. The miners – big and small – are trading on similar multiples, which is unusual. One reason is when commodity prices are

rising, the market generally gets excited about small-cap miners and bids them up. The fact that all miners are trading on similar valuations presents a fantastic opportunity to invest in the big miners at good prices, as that’s where the long-term value is. The larger miners tend to own the best quality assets, such as the low cost, long life mines. They also have strong operational and management teams – and they are currently trading on the most attractive valuations. Australia’s banks are also attractively priced, but are facing some headwinds in slowing lending growth and higher interest rates. Investors also have to take into account what the high Australian dollar means for each company, and this could well be a feature during the reporting season. While the strength of the Australian economy relative to other parts of the

world, health of commodity markets, and yield on the Australian dollar probably mean the Australian dollar will continue its strength against other major currencies, exchange rates – especially in the short term – are notoriously difficult to predict. Some of the macro-economic concerns, like sovereign debt issues and US economic growth, are likely to remain with us through at least this financial year. But with the Australian market very attractively priced and with good quality companies with strong balance sheets and solid longterm growth opportunities combined with potential improvement in some macroeconomic issues, the probability of achieving good returns in the Australian market for the next 12 months is much improved. Paul Taylor is the head of Australian equities at Fidelity and portfolio manager of the Fidelity Australian Equities Fund. September 8, 2011 Money Management — 21

Observer Mainstream or a golden bubble? Recent market events have put an emphasis on the value of gold, leaving investors curious to know whether investing in this commodity would be a good decision. Dominic McCormick argues the gold bull market would eventually end as a bubble.


hen I last wrote about gold in early April, the editor of this magazine suggested that enough had been said about the topic and it should be the last piece on gold for the year. However, given the rise in the gold price of almost $US500 since then to a recent peak of $US1,917 and the growing importance and interesting dynamics of gold related exposures in a fragile economic and investment environment, the case to revisit the topic is strong. Indeed, the time-worn arguments that gold should be treated as just another commodity, to be included in portfolios only as a small part of a broader commodities basket, has been ruthlessly thrown out by recent events. Gold has surged in recent months, as most other commodities have fallen sharply in a world increasingly worried by slowing growth – asserting its unique monetary/currency characteristics and role as a store of value against fickle paper currencies. Of course, it has not been all one-way and volatility has recently increased – after breaching $US1,900 gold fell almost $200 in just a couple of days. Further, while gold mining stocks held up well in the sharemarket weakness of recent months, they have dramatically underperformed the spectacular progress of the metal itself through 2011 to date. This divergence between gold and gold mining equities has been one of the big challenges for many gold investors in 2011. However, as we discuss below, gold shares may well be the best investment avenue for those seeking to maintain gold exposure but cautious about the pace of bullion’s recent rise. For most investors contemplating gold, the big issues today are: Is gold a bubble? If so, when will it burst? Is it too late to get exposure? How should one go about this? I have always believed that the gold bull market, which has lasted more than a decade so far, would eventually end as a bubble. Further, I do believe we are seeing some indicators that gold may be entering the final, more speculative phase of its bull market. Such indicators include the recent near vertical rise, subsequent increased volatility, increasing retail interest, the promotion of a

Used properly in a portfolio, gold is not some all out, concentrated “Armageddon” bet, but rather just part of a portfolio diversification story.

range of new ways to access gold and widely quoted, extremely high price predictions from so called “experts”. Recently a local TV show presented a ‘go for gold’ segment with an expert predicting a gold price of $5,000 in five years. The front page of the business section of a major newspaper on the same day interviewed a high profile company director who bought $1 million of gold in late 2007. Of course, no one knows how long this last phase of the gold bull market may last. It could well extend for years and the price gains from current levels could still be dramatic, although volatility is likely to be significantly higher than experienced so far. Unlike many, I make no attempt to predict the price of gold at its ultimate peak. Indeed, the more precise a commentator’s forecast, the more I ignore their views. Gold’s rise is about the falling confidence in paper currencies and the financial system. If you can tell me when developed country governments (especially the US) are going to get their fiscal houses in order, when interest rates are going to offer a real return in those countries, and when currency debasement and inflation is not seen as desirable economic policy, then maybe you can develop some (vague) idea when the gold bull market boom will end. A key driver for the gold price is, therefore, its ability to gradually ‘recruit’ new buyers who are losing faith in paper

22 — Money Management September 8, 2011

currencies and other investments generally. While retail investors are now being encouraged to buy gold directly, and have a greater array of vehicles to do so, relatively few mainstream investors have done so for any meaningful part of their portfolio. Institutions have been even more sceptical, although there are some signs that this is changing. Interestingly, it is central banks – particularly in the rapidly growing emerging economies – that have become active buyers in the last year, after many years of net sales by ‘old world’ central bankers. This widespread scepticism suggests that this last phase could go on for some time. These sceptics have plenty of high profile support, claiming that gold is a bubble about to burst. Of course, most of these have had little or no exposure to gold throughout the course of the bull market. Take Warren Buffett: as a very successful investor, his views on most issues should be heeded, but on gold he has been consistently wrong – particularly regarding gold’s role in a portfolio. Buffett has regularly trashed gold, comparing its non-income earning and passive characteristics to other favoured assets such as global companies or farmland. Yet it is interesting that Buffet’s Berkshire Hathaway continues to hold tens of billions in US dollar cash – earning close to nothing in nominal terms, losing at least 2-3 per cent per annum in real terms after inflation, and watching the foreign purchasing power of those US dollars depleting. Which is the true dud asset here? One of Buffet’s challenges in recent years – partly due to his enormous success – is he has become perceived as, and is under pressure to play the role of, saviour and cheerleader for the US financial system and its economy. (Note his recent equity injection into Bank of America.) In that role, he has no choice but to be negative about gold. Ultimately though, gold is not an either/or story. Investors don’t need to decide to have cash or gold, great companies or gold, farmland or gold. You can have some or all of them. Well diversified portfolios do. Used properly in a portfolio, gold is not some all out, concentrated “Armageddon” bet, but rather just part

of a portfolio diversification story. Of course, those calling for gold to collapse will be right one day, and as noted above, we are beginning to see some warning signs that the gold bull market is becoming more vulnerable. In Select’s own diversified portfolios we have actually sold a meaningful proportion of our gold bullion exchange traded fund (ETF) exposure into the recent strength. However, we certainly have not given up on gold exposure across our portfolios, and have in fact used the proceeds of these sales to increase our holdings in gold mining stocks. In our view, a sensible gold exposure has always consisted of a mix of gold and gold mining stocks (and has generally been skewed to the latter). Looking forward from here, however, we believe the risk reward clearly favours gold mining stocks. They have dramatically lagged the gold price this year, are pricing in gold retracements half to two thirds of current levels, and on a range of valuation measures such as price to net present value are as cheap as they have been in the past two decades. After all, gold mining stocks represent real gold exposure – it’s just that the gold is largely still in the ground. They do

come with a range of additional challenges and risks – political, cost, technical, and management (etc). However, even after all this, their attractive valuations suggest they may well be a lower risk way to gain exposure to gold than gold bullion at the current time. What explains this recent poor performance and cheap valuations of gold stocks in a massive gold bull market? There are certainly some company and industry specific issues – rising costs, depleting reserves at some big miners, and some questionable management decisions (eg, Barrick’s recent takeover of copper producer Equinox). However, the main reason seems to be the self-reinforcing effect of the preference of investors for direct gold related exposures, such as the Gold ETFs. At one point in August, the main US listed Gold ETF became the largest ETF in the world (worth over $US75 billion). As this interest in direct gold exposures helps support the gold price it attracts more investor interest. Meanwhile, in comparison, gold shares have languished as investors seek to avoid ‘equity risk’, which further justifies investors’ decisions to seek direct exposure. Another factor may be the distorted

way the investment community analyses and presents gold mining stocks as investments. In many cases, analysts don’t seem to fully recognise the reality of the gold bull market and are seemingly using inputs from a different era. For example, in a report on gold stocks issued in July this year, Citigroup used a long-term gold forecast of $US950. In August, this was revised upwards to $US1,050. The gold price was around $US1,500 at the time of the initial report and around $US1,800 at the revision. It begs the question: why don’t the analysts simply use the current spot price or the forward price curve as inputs into their models and then also provide an upside and downside case around that? The standard broking practice of starting with the spot price but using gradually lower prices over the next few years and then a significantly lower long-term gold price – with little, if any, sensible justification for such prices – makes their analysis of the fair value for the shares largely meaningless. Of course, good investors can use their own numbers and markets ultimately see through such analysis to where real value lies. Some gold mining companies are also seeking to generate more investor interest through better

capital management and higher dividends. In the case of US gold miner Newmont, these dividends have even been explicitly linked to the gold price. As dividends rise due to current high profit margins, gold mining stocks have a key differentiator from the Gold ETFs. Lack of income has always been the big criticism of gold as an investment. Many will argue that gold stocks are more volatile and don’t have the same low correlation and portfolio diversification benefits of gold itself, but such an assessment is backward looking and perhaps out of date. It is interesting to note that in the recent sharp movements up and down in August, the gold stock indices were generally less volatile than the gold price itself. Arguably, the valuation gap suggests that gold mining stocks could handle some significant weakness in the gold price without similar falls in stock prices. In any case, the days of low volatility for gold itself are likely over. While the final phase of the gold bull market can keep going for some time, it is likely to be an increasingly wild ride for both bullion and gold shares. The role of gold in a portfolio has been dramatically vindicated in recent

months. However, its ongoing bull market is a worrying sign for the global economy, and a clear demonstration of the lack of faith in the world’s politicians and policy bureaucrats. The world faces some major problems, with no easy fixes and some readjustments in the global monetary system necessary. Despite the heady rise of late, some diversification into gold continues to make sense. In the current challenging environment, investors should be comforted that there is still an attractive, discounted way to get exposure to gold via gold stocks. If, as I expect, the next phase of this bull market includes a dramatic chase for quality (and non-quality) gold mining stocks, achieving sensible gold exposure from an investment perspective is going to become much harder in the future. Ironically, that will be a time when it has become increasingly mainstream and widely accepted to include some gold bullion and gold equity exposures in portfolios. When such sentiment and complacency start to rule, it will be the truly dangerous time to own gold exposure. That time is getting closer. Dominic McCormick is the chief investment officer at Select Asset Management. September 8, 2011 Money Management — 23


Protecting more than income Income protection insurance doesn’t just protect income, it protects clients’ lifestyles. However, there is a greater need to regard superannuation protection as a must, rather than an option within this cover, writes Col Fullagar.


he average percentage of after tax income spent servicing debt in Australia is 45 per cent, according to a Genworth International Mor tgage Trends repor t released this year. In its Economic Roundup, the Australian Treasury found that the ratio of household debt to annual household income was around 160 per cent, and household saving (ie, the part of current after-tax income that was not directly used) was around 2 per cent in 2008. For those reliant on their ability to work in order to derive an income, sickness or injury will very quickly have a devastating impact on them and their family. Income protection insurance is often touted as an essential component of the risk insurance portfolio of clients because “it will protect your income”. While the sentiment is definitely correct, the wording might benefit from a slight adjustment. There are two things that can be done

with income; it can be spent and it can be saved. That which is spent will dictate the current lifestyle of the client and their family, and that which is saved will dictate their future lifestyle. Thus, the adjusted wording of the above statement might be that income protection insurance is not protecting income – it is protecting the current and future lifestyle of the client and their family. The distinction is important. When it comes to current lifestyle, it seems that on average people spend about 90 per cent of their income maintaining it – that is, 100 per cent of income less 9 per cent compulsory superannuation and 2 per cent average savings, as per above. If, however, those same people can only protect a maximum of 75 per cent of that income under income protection insurance, the problem becomes apparent – current lifestyle may be reasonably maintained, but the ability to save is likely to quickly cease.

24 — Money Management September 8, 2011

In the short-term, this may not be too big a problem, but over time the funding gap grows exponentially.

Case study

Jeff is aged 45 and earns $200,000 a year. He contributes 10 per cent of his yearly income into superannuation. Jeff starts to suffer from depression which over time becomes increasingly debilitating. Finally, he is forced to stop work, and he remains off work for the best part of the next two years. The benefits he receives from his income protection insurance are a lifesaver, and enable Jeff and his family to keep up their mortgage payments and a reasonable standard of living. Unfortunately, however, he is unable to maintain his superannuation contributions over the two years he is not working. Assuming inflation is at a steady 5 per cent per annum, when Jeff retires at age 65, the two year suspension of contributions

will have grown to an overall funding gap of around $105,000 – ie, $20,000 x 2 x 0.05 compounded over 20 years. Of course, the longer Jeff is unable to work the greater the problem, and in fact, if Jeff remained disabled through to age 65, his income protection benefits would cease and he would likely be left destitute. The only possibly good news for Jeff might be that he would have seen this coming for many years, and thus would have had time to discuss legal options in regards to the appropriateness of the financial advice he had originally received. An ironic value of advice might well be that the client has someone who can be held accountable – and the client may be able to afford to hold them accountable. The issues associated with a superannuation funding gap are not only created by the duration of disability. Consider the plights of Jack and Jill. Jack is aged 35 and is unable to work for five years due to an illness. He has no

income protection insurance, so in order to survive, he has to cash in all his assets including his superannuation. The good news is, however, that he has 25 years from age 40 to 65 to recover financially. Jill is aged 55 and is unable to work for five years due to an illness. She is in the same position as Jack, in that she is forced to cash in all her assets, including her superannuation. The really bad news for Jill, is that she only has five years (from age 60 to 65) to recover financially, which makes it just that much more difficult for her. The point is that the older the client, potentially, the more important it is to protect future lifestyle – because the ability to rebuild it grows increasingly difficult. A primary role of insurers is to provide products that enable advisers to, in turn, provide reasonable advice. Around 15 years ago, it was the realisation of the problem surrounding the maintenance of superannuation savings while on a disability claim that led insurers to introduce an optional benefit to income protection insurance that is commonly referred to as the superannuation protection option.

The original concept and design was simple: • Up to 75 per cent of earnings could be protected under the basic policy and • Up to an additional 10 per cent of earnings could be protected under the superannuation protection option. Thus, up to 85 per cent of earnings could be protected in total. If disability occurred, the 75 per cent would be paid to the client, and the 10 per cent would be paid into their superannuation as a substitute for their own “suspended” contributions. Because the amount in excess of 75 per cent (ie, the additional 10 per cent) was not going directly into the hands of the client, the theory was that it would not impact to any material extent on the client’s motivation to return to work. In essence, the problem of maintaining some level of superannuation savings was reasonably solved. This innovative optional benefit received general support, and was introduced by most of the mainstream insurers. As time went on, however, the clarity and simplicity of this optional benefit has been blurred such that today the choice facing advisers is somewhat more complex. Returning to Jeff’s situation, set out below is how he would have fared had he been offered, and taken up, the original superannuation protection option. The maximum protection package for Jeff would have been:

Superannuation cover of $20,000 x 1/12 = $1,670 a month Total = $12,920 a month Replacement percentage = 77.5 per cent, which represents an additional $420 a month over the standard 75 per cent cover

Basic cover of $200,000 x 0.75/12 = $12,500 a month Superannuation cover of $200,000 x 0.1/12 = $1,670 a month Total = $14,170 a month Replacement percentage = 85 per cent

The reason for the difference in attitude between insurers appears to be tied to the belief by some that failing to reduce earnings by the amount covered under the superannuation option creates an adverse double dipping situation – ie, the insured can insure 75 per cent of earnings (including superannuation) under their basic cover, and then a further percentage of the same amount as the superannuation option. In reality, however, the basic cover still only represents 75 per cent of what the insured previously used to support their lifestyle. If the insured’s earnings are further reduced by deducting superannuation contributions, the replacement percentage under the basic cover becomes 67.5 per cent in Jeff ’s example – ie, ($200,000 - $20,000) x 0.75/12 as a proportion of $200,000/12. Irrespective of the different approaches taken in arriving at an insured benefit amount, the approach in regards to other aspects of the superannuation contribu-

In the current risk insurance market, there are several ways in which the superannuation protection option is now structured. (i) Original basis Only one insurer was identified as using the original basis of implementation. With that insurer, the client can insure up to 75 per cent of basic income protection insurance cover, plus up to 10 per cent of superannuation cover, for a total maximum replacement ratio of 85 per cent. Another insurer did something similar; however, the maximum superannuation cover was 5 per cent of earnings for a total replacement ratio of 80 per cent. (ii) Contributions deducted from earnings Several insurers covered up to 100 per cent of the contr ibutions made to superannuation in the previous 12 months, including salary sacrifice and employer contributions; however, this amount was then deducted from total earnings in order to arrive at a benefit amount under the basic income protection insurance policy. Thus, in Jeff ’s situation, his benefit amount would be: Basic cover of ($200,000 - $20,000) x 0.75/12 = $11,250 a month

(iii) Contributions not deducted from earnings One insurer allowed up to an additional 12 per cent of the basic benefit amount to be insured as superannuation contributions. The basic benefit amount was based on the client’s full earnings, without the deduction of superannuation contributions. Therefore, in Jeff’s situation the benefit amount would be: Basic cover of $200,000 x 0.75/12 = $12,500 a month Superannuation protection cover of $12,500 x 0.12 = $1,500 a month Total = $14,000 a month Replacement percentage = 84 per cent Another insurer had a variation of the above, whereby the basic cover could be increased by up to 25 per cent of superannuation contributions. Basic cover of $200,000 x 0.75/12 = $12, 500 a month Superannuation cover of $20,000 x 0.25/12 = $416 a month Total = $12,916 a month. Replacement percentage = 77.5 per cent

tions option appears reasonably consistent.

Benefit Payment

The majority of insurers indicated they would pay the superannuation benefit amount direct to the designated superannuation fund, rather than paying it to the claimant.


Various insurers were asked about their understanding of the tax position in regards to the option. The view generally held was (and, of course this is a general view which should be checked for each particular client): • Premiums for this optional benefit would be tax deductible; • If the policy is owned by the employer, then the benefit payments to the designated superannuation fund would be considered employer/concessional contributions that will count towards the superannuation guarantee obligations; • If the policy is owned by the insured, then the benefit payments to the designated superannuation fund would be considered non-concessional contributions, and be taxed as normal income to the insured. The insured may claim the contribution as a tax deduction if it can be demonstrated that they are “substantially self-employed” (Section 290 ITAA 1997). Irrespective of the philosophies behind the different bases of cover, the issues facing the adviser include: • What priority is the client placing on having maximum coverage? • How to balance the situation of an insurer with a higher cover percentage against another insurer with a lower premium rate; • How to balance the situation of an insurer that has an appropriate contribution option against another insurer that is more appropriate in its basic cover; and • Identifying which contribution option structure will best suit a particular client’s need. Income protection insurance is not just about protecting income – it’s about protecting lifestyle. For clients who want maximum cover, and who seek protection of their future lifestyle by way of ensuring the ability to make ongoing superannuation contributions, the various superannuation protection benefits available are not an option – they are a must. Col Fullagar is the national manager for risk insurance at RI Advice Group.

Graph: The Superannuation Gap

The Gap Level of Superannuation Contribution

Period of Disability

Time Period

Source: RI Advice September 8, 2011 Money Management — 25

Toolbox Understanding the legislative mix The 2011 financial year brought many changes to the financial services industry, and many are yet to come. John Perri has provided a snapshot of the activity coming out of the Federal Parliament from a technical financial planning perspective.


50 per cent tax discount for interest income — consultation paper

ith global sharemarkets volatility dominating discussions on superannuation and retirement, it can be easy to lose sight of the activity coming out of Federal Parliament from a technical financial planning perspective. Given the new financial year is well under way, now is a good time to highlight some of the key developments passed by the Federal Government.

The Government proposes to allow individuals a 50 per cent tax discount for interest income, including interest received from deposits in banks, building societies, and credit unions, as well as from bonds, debentures, and nonsuperannuation annuities – whether it is received directly or indirectly, such as via trusts and managed funds. The discount will apply on up to $500 of interest in the 2012-13 income year (ie, a $250 discount) and $1,000 in subsequent years (ie, a $500 discount).

Reduction in minimum pension requirements

There is a 25 per cent reduction in standard minimum annual superannuation pension income requirements for 201112 – an extension of the 50 per cent reduction enjoyed by some in recent years. The Government has also indicated no reduction will apply from 2012-13 onwards.

Excess concessional contributions — ATO discretion

Legislation has been passed allowing the Australian Taxation Office (ATO) to make a formal determination to disregard or reallocate contributions for the purposes of excess contributions tax (ECT ) without first issuing an ECT assessment. This will permit a person to request the ATO to use its discretionary power at an earlier time. However, the ATO will only be able to make a determination after it is satisfied all contributions that are to be potentially disregarded or reallocated for that year have been made. Importantly, there is no change to the criteria used in determining whether a favourable determination should be made.

Deductibility of TPD premiums by superannuation funds

From 1 July 2011, super fund trustees are only allowed to claim a tax deduction for the cost of total and permanent disability (TPD) insurance premiums, to the extent that the definition of TPD in the insurance policy is aligned with the definition of “disability superannuation benefit” used for income tax purposes. While this represents a shift from recent practices, the Government has m ov e d t o m a k e t h i s p ro c e s s m o re streamlined by allowing the percentage of TPD insurance premiums a superannuation fund is allowed to claim as a tax deduction – which would be specified in tax regulations. According to draft regulations, a deduction for TPD insurance premiums will broadly be available as follows:

Commencement and cessation of an income stream — draft ATO ruling

Table 1 Policy type TPD — Any occupation

Deductible portion of premium (proposed) 100%

TPD — Own occupation


TPD — Own occupation bundled with death (life) cover


Concessional contribution cap for individuals aged 50+ — consultation paper

The Government has released a consult a t i o n p a p e r i n re l a t i o n t o i t s announcement that from 1 July 2012 individuals aged 50 and over, with total s u p e ra n n u a t i o n b a l a n c e s b e l ow $500,000, will be allowed to make up to $50,000 per year in concessional superannuation contributions. The paper presents a broad overview of how the concessional contributions caps for individuals aged 50 and over will operate – although, it should be noted that these are preliminary views only. A key parameter of the paper is in the design of the account balance of less than $500,000 – including whether or not to include those who have commenced drawing down their superannuation. Industry submissions on this paper have now closed. At the time of writing, final details had not been released.

Low income earners government superannuation contribution — consultation paper

The Government has released a consultation paper regarding the proposed introduction of a low income earners government superannuation contribution. Under this measure, the Government proposes to provide a superannuation

26 — Money Management September 8, 2011

payment of up to $500 annually for eligible low income earners directly into the individual’s account. This payment will be separate, and in addition to the existing Government cocontribution. The paper suggests the amount payable under this measure will be calculated by applying a 15 per cent rate to concessional contributions made by, or for, eligible individuals on, or after, 1 July 2012 – up to a maximum annual payment of $500 (not indexed). To be eligible, an individual must have an adjusted taxable income of up to $37,000 (not indexed). Industry submissions on this paper have now closed.

Refunding excess concessional contributions — consultation paper

A consultation paper has been released i n re l a t i o n t o t h e G ov e r n m e n t’s announcement to introduce a ‘once only’ option for eligible individuals to have their excess concessional contributions refunded. Once refunded, these contributions would then be assessed at the individual’s marginal tax rate, rather than incurring excess contributions tax. Importantly, refunded concessional contributions will not be included in any non-concessional cap calculations. The closing date for submissions has passed.

The ATO has issued a draft taxation ruling (TR 2011/D3), which considers when a superannuation income stream commences and when it ceases. These concepts are relevant to determining the taxation consequences for both the superannuation fund and the member in receipt of the income stream payments. The contents of this draft ruling come as little surprise. They are views that have been the subject of discussions with the ATO since 2004. Additionally, they are likely to be views that are primarily relevant to advice provided to the self-managed superannuation fund (SMSF) sector. This ruling is still in draft format – as such, the final version may vary following industry consultation.

More may yet come

In addition to the changes above, there is a raft of other measures still in the pipeline, including a gradual increase of SG contributions to 12 per cent. One catalyst for further technical developments is likely to be from the St ro n g e r Su p e r Pe a k Co n s u l t a t i v e Group (SSPCG). The SSPCG was tasked with providing the Government with broad and high level advice on the design and implementation of the Stronger Super (Cooper) reforms. Separate working groups were formed to consider more technical input on key components of the reforms such as SuperStream, MySuper, SMSF measures, and broader consumer, governance and regulatory issues. The SSPCG has handed its report to the Government, which contains their recommended reforms to Australia’s superannuation industry. The industry now awaits the Government’s response to this report, expected to be released mid to late September. John Perri is technical services manager at AMP.


Please send your appointments to:

THE Australian Securities Exchange (ASX) has employed Elmer Funke Kupper as its new managing director and chief executive officer, who is expected to commence his new role in October. Funke Kupper would receive an annual salary of $1.7 million, which would be subject to his performance, and the performance of the group. His appointment was announced by ASX Chairman, David Gonski, who welcomed Funke Kupper to the company. “Elmer has enormous experience as chief executive officer of a major Australian listed company, and extensive involvement in the financial services industry, as well as in industries that are highly regulated with important and diverse stakeholders,” Gonski said. Funke Kupper’s appointment comes after Robert Elstone left his role as ASX chief after 11 years.

CHALLENGER Limited has appointed Aaron Minney to the newly created position of head of retirement income research. Minney will report directly to Challenger’s chairman, retirement income, Jeremy Cooper, and the new role will extend the company’s research and analysis capabilities specific to that sector.

Co m m e n t i n g on the appointment, Cooper said, “We are delighted to appoint an experienced investment strategist to help strengthen and grow the existing retirement income team. Aaron’s appointment supports our leadership ambitions in the retirement i n c o m e m a rk e t , w h i c h i s becoming increasingly important as the first wave of baby boomers star t moving into retirement this year.” Minney joins the firm from Colonial First State Global Asset Management, where he was head of investment research and development. He has previously held portfolio management roles as head of Australian fixed interest at Macquarie Funds Management and as a senior portfolio strategist at Insurance Australia Group. Minney will be responsible for generating additional research in the areas of decumulation, portfolio construction, investment strategy, retirement risk mitigation, new product solutions and policy support.

IOOF has appointed Kevin White as an independent, nonexecutive director, effective from 4 October. White, whose original calling was engineering, has spent the majority of his career in the

Move of the week AUSTRALIAN Financial Services Group (AFS) has announced the appointment of Meaghan Unsworth to the newly created role of head of strategic development. Unsworth was previously the national dealer group’s regional manager for NSW and ACT, a position she held since joining the organisation in 2009. Prior to this, she was general manager Australia for KBC Asset Management, and director - head of adviser business development at Fidelity International. AFS Group chief executive and managing director Peter Daly announced the move saying, “Meaghan’s appointment reflects the evolution of our business and reinforces the dealer group’s commitment to being a dominant player in the financial services industry”. Daly said Unsworth would work closely with the group’s executive team and senior advisers to “research, develop and implement strategy” that would “pre-position the dealer group for the future, and underpin the AFS Group’s business growth and direction in the new FOFA environment”.

finance industry, most recently as managing director of accounting business WHK Group for the past 15 years. He has merchant banking and corporate finance experience, as well as an understanding of the financial planning industry. He will remain a director on the board of the Royal Automobile Club of Victoria (RACV) and a number of its associated companies, including Insurance Manufacturers Australia. IOOF shareholders will be asked to consider White’s appointment at the upcoming


Location: Melbourne Company: Helm Recruitment Description: An independent planning firm is offering a new opportunity for a financial adviser. The role involves promoting a full service offering to high net worth (HNW) clients, including financial advice, retirement planning, client administration, stockbroking, lending and life insurance. To be suitable for this role, you will have a successful track record as a private wealth advisor, together with experience in providing tailored financial advice to HNW clients. A strong network and relevant financial services qualifications, such as DFP/CFP will be assumed. For more information and to apply, please visit or contact Brendon Jukes at Helm Recruitment, (03) 9018 8001.


Location: Melbourne Company: FS Recruitment Solutions Description: A financial planning business is seeking an experienced paraplanner with the CFP accreditation to progress into advising. If

annual general meeting on 23 November.

ALLIANCEBERNSTEIN has announced the appointment of Anthony Moran to the Bernstein Australian Value team as a research analyst covering construction, building materials and infrastructure. Moran was previously a senior investment analyst with Macquarie Group, where he covered infrastructure equities. Before joining Macquarie, he worked as a strategy analyst with Port Jackson Partners, a

Meaghan Unsworth boutique management consulting firm, and as an institutional research sales executive at Deutsche Bank. Moran’s appointment is a demonstration of Bernstein’s “commitment to the Australian market”, to the firm’s Australia Value clients, and to the value it sees in Australian equities, Roy Masten, AllianceBernstein cochief information officer and director of research – Australian value equities said in a statement. “The team has more dedicated resources now than at any stage since the launch of our first portfolio in 2003,” he said.

For more information on these jobs and to apply, please go to

accepted for the role, you will provide advice to clients and help grow the company’s client base. You will work closely with three risk advisers who will refer complex financial planning advice issues to you. Benefits of this position include ongoing training and education, an established client base, increased earning potential and opportunities for progression. For more information and to apply, please visit or contact Kiera Brown at FS Recruitment Solutions – 0409 598 111,


Location: Perth Company: ANZ Description: ANZ Financial Planning is seeking planners to fill a number of positions in Perth. Reporting to a practice manager, you will assist clients to plan for their financial goals by providing financial planning strategies, access to a diversified product range and ongoing services. You will also identify and analyse business opportunities, network and build internal and external relationships to promote services.

In return, you will receive management support and attractive financial rewards. You must have an extensive knowledge of the financial planning industry and be progressing towards your CFP qualification. For more information and to apply, please visit


Location: Melbourne Company: FS Recruitment Solutions Description: This high net worth financial planning business is now seeking an experienced senior paraplanner. An increase in business activity will see you helping the business owner in managing his client base. You will be responsible for the construction of comprehensive statements of advice, ranging from wealth accumulation strategies to self-managed superannuation funds, direct equities and managed funds. As the technical expert, you will assist in the creation of new templates and the management of any template changes due to new legislation. To find out more and to apply, please visit, or contact

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Location: Perth Company: Terrington Consulting Description: A leading bank is now seeking a relationship manager to build the high net worth client segment within a strategic location. The role will require effective portfolio management to ensure continued development and growth of a diverse range of personal account relationships. This is an opportunity to work for a dynamic lender offering a range of financial services, including personal and commercial finance, private banking, financial planning, trade finance, treasury and financial markets, cash management and global banking. The successful applicant must have a strong background in lending as well as proven sales and service results. To find out more about this opportunity, please visit September 8, 2011 Money Management — 27



Down for the count OUTSIDER must confess to being somewhat taken aback by the news that Count Financial might ultimately find itself operating under the golf-sized Commonwealth Bank umbrella – something which might see Count executive chairman, Barry Lambert, once again dealing with erstwhile Count chief executive and now Colonial First State financial planning head, Marianne Perkovic. Outsider recalls that Perkovic announced her departure from Count shortly after she and Lambert had embarked on a kayak marathon up the Hawkesbury River, suggesting that executive bonding can sometimes be taken to extremes. However, Outsider is assured that the Count board’s decision to recommend that shareholders accept the unsolicited

CBA bid has vastly more to do with the premium contained in the $1.40 per share offer than any desire to resume paddling duties.

Outsider is also delighted that, notwithstanding the busy schedule attached to dealing with the CBA bid, “The Great Lamberto” intends defendi n g h i s t i t l e i n t h e a n n u a l Mo n e y Management Dealer Group Golf Open to be held at Sydney’s Roseville Golf Club on 19 October. The question is, of course, which other dealer group heads will find time in coping with Future of Financial Advice challenges to hit a ball for charity? Outsider recalls that Professional Investment Services last year fielded a highly competitive team ably led by Grahame Evans, as did Matrix and AMP. Proceeds from the charity golf day will go to the eMerge Foundation. Entries and enquiries to

Breakfast debriefing OUTSIDER has rubbed shoulders with a number of Australian prime ministers – Whitlam (fleetingly, and post-Prime Ministership), Fraser, Hawke, Keating and Howard. He admits, though, that geography and other factors have precluded him from meeting either Kevin Rudd or Julia Gillard. Even though the Financial Services Council invited Outsider to attend a breakfast event with the Prime Minister in late August, he could not drag himself away from Money Management central long enough to grace the presence of Australia’s first female PM. Outsider’s inability to attend, saw Money Management’s most eligible bachelor (Chris Kennedy) vigorously raising his hand for the

gig, giving your venerable correspondent reason to wonder whether Kennedy harboured hopes beyond simply gathering a story for the morning news bulletin. It is now history that the Prime Minister delivered a reasonably bland dissertation to those of the financial services glitterati who got up early to attend the FSC breakfast, and while it is true that Kennedy returned to the office sans story, he did not return completely empty-handed. As the attached image reveals, the days when bachelor Kennedy returned from industry breakfasts with a pocket full of crumpet have changed. Outsider thinks he has clearly developed other tastes.

Wager a kiwifruit WITH the Rugby Union World Cup just around the corner, Outsider notes that ANZ planning guru Paul Barrett has not been slow to indicate his willingness to take bets from any Australians willing to punt against his beloved All Blacks. Barrett, unlike Money Management’s Mike Taylor, may have been a resident in Australia for some years, but he has held firm to his New Zealand roots and supports the All Blacks with almost as much zeal as Australia’s major political parties support off-

shore processing of refugees. Taylor has been a resident in Australia for much longer than Barrett, and freely admits that he has not supported the All Blacks since 1979 except, of course, when they are playing South Africa or England, but then again, he supports any team playing South Africa or England. The rugby test season has already seen money change hands between Taylor and Barrett as a result of a wager taken during the Financial Services Council annual

conference on the Gold Coast, and the World Cup appears likely to be the venue for further monetary exchanges. Ou t s i d e r i s t h e re f o re wondering whether some of the financial services industry’s other well-known Kiwis will be fielding bets from their Australian colleagues – TAL’s Jim Minto comes to mind, along with Brillient’s Graham Rich. Outsider is prepared to hold the bets if the World Cup throws up an Australia versus New Zealand final.

28 — Money Management September 8, 2011

Out of context

“If institutions were too big to fail a few years ago, now they’re even too bigger to fail.” van Eyk head of research John O'Brien turns to creative grammar to express the extent of consolidation seen in

global financial sectors since the GFC.

“There’s no modeling and there’s no evidence” AFA chief executive, Richard Klipin explains why his organisation remains opposed to the two-year opt-in.

“It was a matter of what was better for our network” Count Financial executive chairman, Barry Lambert explaining the attraction of the Commonwealth Bank’s bid for Count.

Money Management (September 8, 2011)  
Money Management (September 8, 2011)  

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