Yesterday's News

Financial Planning

5 steps to networking that works. Financial advisers and accountants should get back to the basics in order to make the most of networking in tough economic times, according to Geoff Pritchard, CEO of Australian Private Wealth. “Go back to the fundamentals,” he said in a recent No More Practice blog. “It is our individual networks that play an undervalued part in the outcomes that we’re looking for and like anything else they need to be attended to, to ensure that we’re getting the most from them.” Pritchard, who outlined a 5-step approach to effective networking, also said the best value from your networking comes when you are a presenter, organiser or take a leadership position within the group or organisation. “Typically the more you put into the organisation, the greater your ability to connect, bond and interact with the very people that will be bringing you opportunities down the track,” he said.

Mortgage choice gets in on financial planning. Mortgage Choice recently entered the financial planning space with the launch of Mortgage Choice Financial Planning, which will operate as a separate franchised business to the existing mortgage broking business. “We anticipate having 60 financial planners operating across Australia in three years’ time, keeping in mind that our stringent recruitment standards require our planners to hold a Diploma of Financial Services (Financial Planning) and have solid financial advice experience,” said general manager for Mortgage Choice Financial Planning, Tania Milnes. “We have recruited a team of industry experts and partnered with specialist investment research house, van Eyk, together with its leading practice management consultancy division, The Encore Group, to build a best in class dealer group.”

Regulatory

Government cautions against overregulation of MySuper. The Association of Superannuation Funds of Australia (ASFA) recently cautioned against overregulation of MySuper in a submission to the Parliamentary Joint Committee on Corporations and Financial Services review of the Government’s Stronger Super legislation. ASFA said considerable concern has been expressed by its members about the definition of “accrued default amount”, which includes amounts where the member has given the trustee a direction as to where to invest their account balance and some, or possibly all, of their account balance has been invested in the “default” investment option. “We query why – in circumstances where a direction as to the investment option has been given – an amount is to be treated as an accrued default amount. This amounts to the government interfering with, and effectively overriding, valid financial decisions made by the member,” ASFA said.

ASIC slaps ban on Sydney mortgage broker. ASIC recently banned Sydney-based mortgage broker Athol Halvorsen from engaging in credit activities and providing financial services for six years after it was found that he had engaged in conduct that was false and misleading. An ASIC investigation found that from 2005 to 2008, while working for Sydney Mortgage Market, Halvorsen acted as a broker for people seeking loans to invest in a financial scheme. It was found that he submitted nine loan applications to either Perpetual or to St.George Bank which contained information that was false and misleading about the income and employment of the borrowers. In another instance, Halvorsen told St.George Bank that the borrowers had not yet retired when, in fact, they had retired, even though Halvorsen had been made aware of this fact by the borrowers.

Accounting

How to establish formal referral agreements. There are a number of critical elements that planners and accountants need to consider in formalising a referral arrangement, according to Nick Hilton, national manager, MLC Accountant Solutions. In a recent No More Practice blog, he said that if both parties can arrive at the key terms of an agreement before engaging a lawyer, this can save a lot of time as well as legal costs. “In developing a formal agreement, key terms that should be covered off relate to revenue sharing arrangements, key performance measures for both parties, restraint provisions and communication procedures,” said Hilton, who also noted that one particularly important term in any formal arrangement is how it will be unwound if necessary. “Often the basis of referral agreements are struck over a beer between two parties, but the hard questions – such as how do you unwind an agreement – need to be asked when everything is all good, either at the outset or during the trial period,” he said.

Rethink on corporate tax needed. The benefits of lowering the corporate tax rate will not be fully realised if funding options for such a reduction has to come from within the business tax system, according to the Institute of Public Accountants (IPA) in a submission to the Business Tax Working Group (BTWG). The BTWG terms of reference stipulate that in order to pursue the economic benefits associated with a reduction in the company tax rate, savings should be identified from within the business tax system in order to progress reforms in a cost neutral way. The terms of reference also expressly restrict the working group from considering changes to the goods and services tax. “This simply does not work; it is a zero sum game approach whereas a more holistic approach to tax reform is required,” said IPA chief executive officer, Andrew Conway. “Current funding options represent a real double whammy for non-corporate taxpayers; and represent yet another burden on small business.”

Investments

Self-managed super funds flows increase. Australians contributed $24 billion into self-managed super funds (SMSFs) in the 2010-11 financial year, according to the Financial Services Council’s Bond Report on SMSFs. This represented a total increase of $3 billion, or 15 per cent, in contributions from the previous year. Of the $24 billion, discretionary contributions represented by far the largest growth rate with a $3.2 billion (19.8 per cent) increase to $24 billion between 2009-10 and 2010-11, while employer contributions grew by $0.3 billion (4.9 per cent) to $6.8 billion during the same period. “The rebound in growth in discretionary contributions into self-managed super funds in 2010-11 was triggered by the improvement in the economic growth and investor confidence following the financial crisis,” said John Brogden, CEO of the Financial Services Council. “It is critical that investment appetite for discretionary super is retained across all segments of the superannuation industry.”

Fund managers predict turnaround in share market. Investment managers in Australia expect a sustainable turnaround in the local share market by the end of 2013, according to Russell Investments’ Investment Manager Outlook. The survey of around 40 Australian fund managers found that 77 per cent believe a turnaround will likely occur by the end of 2013. “The results from both the Australian and US IMOs show that while managers are more confident of a turnaround on fundamental or valuation grounds, the potential for further political and policy shocks in Europe and the US is keeping investor sentiment quite fragile near term,” said Russell director of client investment strategies Scott Fletcher. “We remain firmly of the belief that the path to superior long-term outcomes for investors will be via dynamically managed portfolios that are well diversified across (and within) multiple assets and strategies, to take advantage of market opportunities as they present themselves.”