10 steps to building practice value in the new financial year. There are 10 ‘must do’ activities that any adviser should also undertake to help drive business value in the new financial year, according to Rod Bertino, principal of Business Health. In a recent No More Practice blog, he said the first step should be to set aside time to objectively review your cost structure. “When you combine the standard rise in general expenses with the costs to deliver FoFA it’s a pretty fair bet that your cost base has gone up. So, set aside time to consider the implications of this increase to your current fee structure,” he said. Bertino also recommended revising client offer and business models around C and D clients, seeking feedback from good clients and leveraging compliance audit results for positive marketing.
Financial advisers shifting to flat fees. Financial advisers are using a hybrid of flat and asset-based fees first – but gradually shifting to a full flat fee model, according to a recent Elixir Consulting report. The report also found that clients appreciate the shift towards a fee-for-service model, with 86 per cent of advisers finding that their offer was accepted by more than 90 per cent of the clients they presented it to. “This focus on fees has caused a dramatic rise in the importance of adviser fee models. Whilst there are many advisers who are making the transition to fee charging, and would have done so irrespective of the proposed changes, there remain many advisers who are either accelerating their business evolution or starting to address the issue who would not be making the change had they not been compelled to,” said the Adviser Pricing Models Research Report.
Caution over dividend access share arrangements. The ATO will be examining dividend access share arrangements which seek to place the profits of private companies in the hands of shareholders or their associates in a substantially tax free form. “The ATO is concerned that these arrangements are set up with the dominant purpose of avoiding tax,” said Tax Commissioner Michael D’Ascenzo. “While some arrangements may be claimed to be done for commercial and other non-tax purposes, we will be closely examining whether the way these arrangements have been set up would show a tax avoidance purpose.” The ATO said individuals or entities that promote and/or facilitate these types of arrangements may risk contravening the promoter penalty laws.
ASIC acts on SMSF companies. ASIC has obtained interim court orders against the operators of two Queensland-based self-managed superannuation advice companies. The orders prevent them from carrying on some of their activities following ASIC concerns that they misled investors about their investments. ASIC’s investigation has so far found Royale Capital and ActiveSuper raised $4.75 million from more than 200 investors. ASIC is concerned that Royale and Active were offering their self-managed superannuation fund (SMSF) clients shares in companies based in the US and the British Virgin Islands, when the appropriate disclosure documents had not first been lodged with ASIC.
Holding the gate open on positive regulatory reform. Fostering trust and confidence in the rigour of financial markets and its players is crucial towards ensuring opportunities are grasped and turned into positives, according to Lee White, CEO of the Institute of Chartered Accountants in Australia. The global financial crisis uncovered severe weaknesses in the international framework of regulation and Australia moved to ensure its regulation architecture remained viable, he said. “Regulators tend to close the gate once the horse has bolted. In Australia our regulatory settings have positioned us well to cope with financial crises and we’ve demonstrated we are quite good with the gate,” said White.
My Adviser launches accountants licensing package. Dealer group My Adviser has announced the launch of a specialist authority to enable accountants to provide advice on SMSFs under Future of Financial Advice (FoFA) reform changes. “The accountants licensing package we have developed will go beyond existing legislative exemption,” said Philippa Sheehan, managing director of My Adviser. The package is available for a flat fee with the option of a weekly payment for professional indemnity insurance and ongoing support and education. “Better informed investors are increasingly seeking out services that are free of ‘product manufacturer’ influence, and our accountant licensing package will help accountants provide that unfettered advice,” said Sheehan.
Super switchers influenced by market volatility and media. Unprecedented financial market volatility and negative media coverage are two major reasons why people switch superannuation funds, according to a recent report by the Association of Superannuation Funds of Australia (ASFA). “While the number of switches made by superannuation fund members at times of heightened market volatility is low in absolute numbers, it is significant in terms of the size of individual account balances,” the report found. “The challenge for superannuation funds is to manage volatility risk, both in absolute terms through asset allocation and by communicating to members at the same time as they are receiving messages from a variety of sources that focus on the downsides of investments.”
Alternative assets under management near $5 trillion. Assets managed by the top 100 alternative investment managers globally now exceed $3 trillion, according to Towers Watson research. It found that real estate managers have the largest share of assets (35 per cent and $1.1 trillion) followed by private equity managers (22 per cent and $696 billion), hedge funds (21 per cent and $643 billion), private equity fund of funds (PEFoF) (9 per cent and $288 billion), fund of hedge funds (FoHF) (6 per cent and $187 billion), infrastructure (4 per cent and $119 billion) and commodities (3 per cent and $101 billion). “The ongoing global economic crisis has driven all types of institutional investors towards having more diversified investment portfolios, with investment managers offering significant alternatives capabilities being the clear beneficiaries,” said Mark Brugner, head of research at Towers Watson Investment, Asia.