Networth News

Welcome to the Networth News update for Wednesday the 31st of August.

Banks looking to buy financial planning practices

Commonwealth Bank's proposed acquisition of Count Financial is the start of a trend, with major banks looking to acquire financial planning businesses while prices in the sector remain suppressed, according to Forte Asset Solutions. Investor Daily reports that banks are looking to boost adviser ranks, buy dealer groups and boost funds under advice as financial planning sector prices remain low as a result of the GFC. Financial planning practices were selling for 3.8 to four times recurring revenue before the GFC, however, Forte Asset Solutions principal Steve Prendeville said this multiple has fallen to about 3.3 times since. Commonwealth Bank's offer is a multiple of nearly 15 times earnings.

The Federal Opposition has claimed that Assistant Treasurer Bill Shorten has given in to the vested interests of union-backed industry superannuation funds with the draft Future of Financial Advice (FoFA) legislation. The opposition spokesman on financial services, Senator Mathias Cormann, said that the Labor government is putting sensible reforms of the financial advice industry at risk as a result. Minister Shorten is targeting small businesses and financial services that compete with industry super funds instead of pursuing a balanced policy in the public interest, Senator Cormann said. A number of key features of the proposed FoFA legislation released will unnecessarily increase costs and red tape for consumers and businesses for questionable consumer protection benefit, he added.

ASIC cracks down on financial advertising

The Australian Securities and Investments Commission (ASIC) is cracking down on misleading and deceptive advertising by financial services firms. ASIC released a consultation paper and draft regulatory guide containing best practice guidance for the advertising of financial products and financial advice. In releasing the guide, ASIC also warned promoters and publishers of such advertising against making false or misleading statements or engaging in misleading or deceptive conduct. "The objective of our guidance is to help promoters and publishers present advertisements that are accurate, balanced and help consumers make decisions that are appropriate for them," said Chairman of ASIC, Greg Medcraft.

Clients more willing to switch to DIY super

The self-managed super fund (SMSF) sector grew with 33,100 new funds and 66,000 more members in the 2010-11 financial year, according to the Australian Taxation Office. The Financial Review reports that there was a total of 456,000 SMSF funds by the end of the last financial year, with a total of around 868,000 members with a total asset base of $418.5 billion. The SMSF sector is entering a more mature phase with more death benefits paid out of funds than in past years, according to industry experts.