Networth News

Financial Planning

Barry Lambert reveals sale timing strategy There are many factors that practice owners should weigh up in making the decision to sell, according to Barry Lambert, founder and executive chairman of Count Financial. From age and market trends, through to issues such as ill health or a loss of passion for the business, he said in a recent No More Practice blog that owners should take the time to carefully weigh up their motivations for selling. He discussed his motivations for selling Count Financial, and likened the process to when someone retires from the Australian cricket time. “They always say ‘now is the time’ – it just happened,” said Lambert, who is also speaking at No More Practice Live. “You could be prescriptive and analytical about it and try to pick the top of the market, but the right time to sell is when it’s right for you. There is no point dying on the job!"

Advisers need to overcome low consumer trust. Advisers need to overcome low consumer trust and capitalise on a number of opportunities around provision of scaled advice, according to a CoreData survey of more than 1,100 Australian direct investors. It found that trust was a key barrier for 65 per cent of such investors while 57 per cent expressed interest in seeking scaled advice. A further 53 per cent of direct investors interested in scaled advice would prefer to receive it from a financial adviser while 24 per cent would prefer to receive it from their super fund. The number of direct investors has been increasing in recent years, driven by the market environment, a desire for flexibility and control and the explosion of social networking, according to Kristen Turnbull, head of advice, wealth and super at CoreData.

Regulatory

Industry issues caution over FoFA timetable release. The government’s delays in releasing the full regulations and guidance around FoFA could hinder the financial planning industry’s ability to comply with the new laws, according to the Financial Services Council (FSC). “At the heart of the industry’s challenge is the fact that there are many new definitions and obligations that have not yet been written but which we must comply with by 1 July 2013,” said FSC chairman Peter Maher at the recent FSC conference. “Significant systems changes and training are also required to ensure staff can use the new systems and comply with the new regulations. The delay in release of regulations and guidance in some cases until 2013 limits the ability of our industry to comply.”

ASIC cancels Morrison Carr licence. The Australian Securities and Investments Commission recently cancelled both the AFSL and credit licence of national financial planning business Morrison Carr Financial Services, and permanently banned its sole director Dennis Cardakaris from providing financial services and engaging in credit activities. ASIC was concerned Cardakaris was not of good fame and character given evidence he provided false information to its insurer and took steps to avoid client claims. ASIC also noted that Morrison Carr did not have in place adequate compensation arrangements and that Cardakaris has been involved in the contravention of credit legislation. “Licensees must take responsibility for the accuracy and completeness of the information they provide to their insurers, clients and ASIC,” said ASIC commissioner Peter Kell.

Accounting

Call to lift proposed ban on off-market SMSF share transfers. The Government should reconsider the proposed ban on off-market share transfers in a self-managed super fund (SMSF), according to the Institute of Public Accountants CEO Andrew Conway. “The Government’s delay, of at least 12 months, of the proposal to ban off-market share transfers by related parties in an SMSF provides breathing space to come up with an appropriate solution that provides integrity without imposing excessive costs on SMSF,” he said. “The Cooper review determined that there was potential for price arbitrage in valuing off-market transfers between SMSF and related parties. To overcome this it was recommended that related party transactions involving SMSFs be conducted through a ‘market’ where one exists.” While this may appear to be a fair mechanism, Conway said it imposes a number of complications for SMSF when dealing with share transfers.

Government needs to switch tax mix. Tax revenues will have to be expanded in order to meet the future needs of government, in part due to the ageing population, according to Institute of Chartered Accountants Australia tax counsel Paul Stacey. “The current mix of taxes isn’t sufficient to support the delivery of these services. Because of this pressure, the tax mix will need to switch,” he said. The Henry tax review stated the population was projected to increase by 60 per cent (from 2010-11) to 35 million by 2050. Over that same time frame the workforce participation rate is due to decrease to just over 62 per cent. “In today’s society, there are five people of working age to every person aged 65 or over,” he said. “In 2050 that is projected to be just 2.7 people of working age. Fewer people working points to reduced revenue from income taxes. Inevitably, this shortfall will need to be made up from taxes from other sources.”

Investments

Investors take more dynamic investment approach. Market uncertainty has triggered a more dynamic approach in investor portfolios, with 20 per cent employing a purely dynamic asset allocation approach while 53 per cent employ both a strategic asset allocation and dynamic asset allocation approach, according to an AXA Investment Managers survey. “Investors are facing new challenges that are moving them away from purely product-based approaches and are developing an appetite for more dynamic problem solving of their multiple objectives,” said AXA investment managers Australia and New Zealand director Craig Hurt. “By applying a thematic approach at both an asset allocation and equity level, investors have a relatively sensible means of investing according to the ‘knowns’ and preventing investment in the areas where there may potentially be problems.”

Investors seek regular investment income. Institutional investors across Europe and Asia are seeking access to a wider range of regular investment income-generating assets rather than capital appreciation, according to a recent Fidelity Worldwide Investment report. “Low interest rates and bond yields are encouraging a search for yield that forces investors – institutional, wholesale and retail – to look towards assets with more attractive risk-reward characteristics,” the report said. “Together with real estate investment and infrastructure these are the asset classes considered to provide the most favourable trade-off between income and the risk to the underlying principal.”