Networth News

Welcome to the Networth News update for Friday the 23rd of September.

Legal concerns over FoFA’s best interest duty

The current definition of the best interest duty in the Future of Financial Advice (FoFA) reforms is unclear and leaves advisers open to potential legal liabilities, according to Minter Ellison Lawyers. Professional Planner reports that under the duty, taking an objective approach to clients’ financial situations and understanding their needs must be the paramount consideration when providing advice. Minter Ellison’s financial services regulatory expert and partner, Richard Batten, said the challenge in the definition lies in drafting principle-based legislation for an undefined overriding duty.

Directors winners in super reforms

Directors are the big winners with the Government deciding not to introduce a separate office of "trustee director" under Stronger Super proposals, according to TurksLegal. On the downside however, trustees will be faced with extensive costs complying with the increased regulation in the MySuper and SuperStream proposals. Paul Cleary, TurksLegal partner and head of superannuation and managed investments, also said the standard of care, skill and diligence required of trustees and directors of corporate trustees will be raised to that of a “prudent person of business”. The Stronger Super legislation will be introduced in several parts over the coming months and in the first half of 2012.

Low returns here to stay

Lower returns and high market volatility means that investors should rethink their market strategies, according to AMP. Investor Daily reports that investors should instead look for assets that offer-long term income or clear growth advantages such as Asian shares, resource stocks, or investments that are likely to benefit from an aging population. AMP’s chief economist, Shane Oliver, said some emerging key trends include constrained growth in advanced countries, as well as rising growth rates in Asia.

PI insurance for advisers needs re-evaluation

Product regulation and safety guidelines that professional indemnity (PI) underwriters use to assess a financial planner’s risk are in need of reassessment, according to the Financial Planning Association. Money Management reports that instead of looking at risk in assessing PI insurance for planners, underwriters are taking a formula of revenue and approved product list approach and charging premiums that reflect that. Deputy chief of the Financial Planning Association, Deen Sanders, said that underwriters should put more attention on which licensees are the better businesses to insure rather than taking a broad-brush approach with PI insurance for advisers.