Networth News

Welcome to the Networth News update for Monday the 5th of September.

Labor MPs warn independents over FoFA

Labor MPs have warned independent MPs that they should vote in favour of the Government's Future of Financial Advice (FoFA) reforms otherwise the financial planning industry will be left in limbo. The Financial Review reports that Labor MP Bernie Ripoll argued that most of the industry has already moved to FoFA and said financial planners would go backwards unless the reforms were passed. Labor is struggling to gain support for its controversial opt-in policy and independent MPs such as Bob Katter have warned they would not support this element of FoFA.

Future cashflow key for lenders in mergers

Demonstrating reliable future cashflow is the most important element for financial planning practices looking to merge with or acquire other businesses, according to Kenyon Partners. Money Management reports that lenders are increasingly keen to understand the risks associated with an acquisition, with a focus on free cashflow after financing costs. Alan Kenyon, managing director of Kenyon Partners, also said that lenders are interested in how potential acquisitions will be funded, the liability of purchasers and what businesses will look like post-merger. These factors were not readily understood throughout the financial planning industry, Kenyon added.

FoFA leaves lingering uncertainties

There is still lingering uncertainty about the impact the Future of Financial Advice (FoFA) reforms will have on the financial planning industry despite the government releasing the first tranche of draft FoFA legislation, according to the Association of Financial Advisers (AFA). Investor Daily reports that some observers in the financial planning community believe it is questionable as to whether or not FoFA will deliver on the government's intentions. The AFA said there was still no independent research, evidence or impact statements around this and argued that the draft FoFA legislation had also failed the rigor and transparency test.

A-REIT, cash and equities safe investment havens

Australian real estate investment trusts (A-REITs), cash products and equities are the safest investment choices for advisers, according to Ibbotson Associates. The Financial Standard reports that A-REITs are one of the best sectors to invest in at present, according to Daniel Needham, managing director for asset allocation specialist firm Ibbotson Associates, part of Morningstar. He said grade-A prime commercial property sector is very attractive, while other safe investments include equities, which are slightly cheaper than normal as a result of recent market volatility, as well as cash, which does not have the same duration risk of volatility that bonds do.