Networth News

Welcome to the Networth News update for Monday the 19th of September.

Best interest guidelines need clarification

There is no guarantee that financial advisers will be protected from legal claims brought on by disgruntled clients under the current best interest guidelines, according to TurksLegal. Money Management reports that the guidelines as they currently stand in the Future of Financial Advice (FoFA) draft legislation are based on minimum requirements, and as such cannot be relied upon as a complete defence against legal action. TurksLegal senior associate Darryl Pereira said that if the legislation was changed so that advisers who comply with the guidelines are presumed to have acted in the client's best interests, the onus would then rest on disgruntled clients to prove that this was not the case.

Insolvencies on the rise

Accounting firms are competing for talent following a record rise in insolvency figures. The Financial Review reports that external administration figures sat at 1027 for the month of June - a record high for one month, while insolvency appointments for the year to June came in at 14,566. There had been an increase in insolvencies largely in the SME market, and as such, accounting firms were looking to boost numbers to handle an increase in related work.

Inactive clients weigh on financial planner books

The number of inactive clients that financial planners have can outweigh active clients by up to five times, according financial planning consultancy Radar Results. Financial Standard reports that a survey of 71 financial planning practices currently up for sale found that while the size of the average client base was 544, the number of inactive clients was reported to be up to five times that number. Radar Results said that over the past few years, many financial planning practices have been selling off their inactive clients in a bid to concentrate on higher-revenue clients.

A-REITs worth a look in: UBS

Australian real estate investment trusts (A-REITs) are currently trading at a discount to their long-term average, according to UBS. The Financial Review reports that while A-REITs are currently considered cheap in absolute terms, they look expensive compared to domestic equities which are currently trading at 1.1 times their current price earnings ratio. UBS predicted that REITs will continue to perform well in the coming year, and since the GFC, the sector has lowered its gearing levels from 40 per cent to 28 per cent.