Less supply, more demand for practices. There is a significant imbalance between the supply and demand of financial planning practices, according to Stephen Prendeville, director of Forte Asset Solutions. In a recent blog on No More Practice, he said supply is limited due to principals deferring their retirement because their revenue and business value has dropped, while dealer groups are also extremely protective and are seeking to organise internal transactions or attract external buyers. “Dealer activity has increased substantially with one institution having six personnel in just the Victorian market mandated to go out and buy books of business or recruit new practices and FUM. This hyperactivity is due to the war that has broken out between two dominant players and also the universal need for growth,” he said.
More action needed on financial planning's ‘bad apples’. The financial planning industry needs to take more responsibility for weeding out ‘bad apples’ who give advisers a bad name, according to Association of Superannuation Funds of Australia chief executive Pauline Vamos. Speaking at the recent No More Practice Live Event in Sydney, she acknowledged that most advisers do a good job but said a harder line needed to be taken against the bad apples. “You’ve got many bad apples and people talk about those bad apples and what you really need to do is to have a concerted effort to get rid of them,” she said. “I deal with a lot of adviser groups, they get rid of an adviser and know where the adviser has gone to, yet they haven’t rung the new head of the dealer group and said ‘this guy is a crook’ … You’ve got to really try and get these people out of the industry because you’re never going to get anywhere if you don’t.”
Holistic and scaled advice subject to same rules. The Australian Securities and Investments Commission (ASIC) recently indicated it will apply uniform rules to both holistic and scaled advice. In releasing consultation papers on the Future of Financial Advice (FOFA) regulations, ASIC said all advice is scaled to some extent. “Advice is either less complex or more complex along a continuous spectrum,” said ASIC. However, it noted that it is possible to provide less complex advice in a way that is consistent with the best interests duty and the law generally. ASIC also said its proposed guidance on scaled advice will apply to all industry sectors, including super, financial planners, and banks and insurers.
Conflicts of interest identified in asset consultants. The business models of some asset consultants contain conflicts of interest, according to the Australian Securities and Investments Commission (ASIC). In reviewing the role of asset consultants in the superannuation and managed investments sectors, ASIC commissioner Greg Tanzer said that while there were no apparent significant or systemic issues of concern warranting an immediate regulatory response, conflicts of interest were identified in some asset consultant business models. These conflicts included fee structures based on preferring services and in-house funds as well as other products of related parties of the asset consultant. In some circumstances, asset consultants had to recommend products to multiple clients where capacity to participate in these products might be limited.
Adviser-accountant showdown over FoFA misguided. Suggestions of a turf war between financial planners and accountants as a result of Future of Financial Advice (FoFA) reforms are misguided and inaccurate, according to Alex Malley, CEO of CPA Australia. “Some people in the industry have painted this as future accountants versus financial planners’ showdown,” said Malley, who was one of the headline speakers at the recent No More Practice Live Event in Sydney. “We don’t see that at all. The vast majority of our members do not wish to provide product advice and want to establish professional referral networks to other ‘trusted advisers’”. As accounting clients become more financially literate or if they are in need of a specific product recommendation, he said business relationships formed between accountants and advisers will play an important role in servicing such clients.
ATO warns of exploitative GST arrangements. The Australian Taxation Office (ATO) recently issued a warning about non-commercial arrangements where large input tax credits are claimed on acquisitions of intangible items (such as rights) at grossly inflated values. Such arrangements feature uncommercial vendor finance agreements where payments are contingent on future events, according to the ATO, which noted that payment or the existence of a presently existing obligation to pay GST is required for an input tax credit entitlement under the GST Act. “We are concerned about arrangements which included uncommercial features and which therefore may be ineffective under Australian tax laws. Under this arrangement, the purchaser may not be entitled to input tax credits,” Tax Commissioner Michael D’Ascenzo said.
Gun-shy investors opt for term deposits. Superannuation funds are increasingly offering term deposits for investors who prefer to minimise their exposure to the sharemarket while it remains in such a volatile state, according to CANSTAR research. “In this uncertain market, term deposits have been an increasingly popular option in self-managed super funds but we’re now seeing this option being offered more widely across all superannuation funds,” said CANSTAR research manager Chris Groth. “Parking cash in super is something you may well do while waiting for the market to show signs of recovery. However, a term deposit has an added benerfit as the rate is locked in.” The downside is that investors’ money is locked away for a certain period and unavailable to use for any other investing opportunity that might come up in the meantime, said Groth.
Generations divided on worst financial nightmares. The generations are split when it comes to describing their biggest financial nightmares, where they keep their money, and how their current financial position compares to last year, according to research from superannuation fund Sunsuper. “The two biggest financial nightmares for Gen Ys were not having enough money to support their family (40 per cent) and interestingly, not having enough money to buy the things they want (15 per cent),” said Sunsuper’s general manager, customer experience Teifi Whatley. “Gen Xs, however, were most likely to feel their biggest financial nightmare was not being able to pay the mortgage (16 per cent); whereas Baby Boomers thought not having enough money to retire on (34 per cent) and losing their life savings (21 per cent) was more likely to cause them bad dreams. These results reflect the different life stages of each of the generations, with Baby Boomers in or nearing retirement and Gen Xs generally balancing mortgage repayments with a young family.”