Networth News

Welcome to the Networth News update for Tuesday the 13th of September.

Financial planners brace for commission ban

Financial planners at major banks will stop charging clients annual commissions only if they sign up for investment packages that cost roughly the same. The Financial Review reports that these annual commissions, which are a traditional source of revenue for financial planners, will be banned on all new sales from 1 July 2012 under the Government's Future of Financial Advice (FoFA) reforms. Financial planners are concerned about plans to ban trailing commissions as well, however, the ban will not extend to insurance policies (with the possible exception of life insurance policies inside superannuation), mortgages and some banking products.

Investors buoyed by bank guarantee

The Government's bank guarantee is attracting investors looking for safer options given recent volatility in the financial markets. Money Management reports that there was an increase of money flowing into bank accounts with a contraction in the cash trust business in the June quarter. Research from Plan for Life found that gross inflows for the year to June fell by 26.1 per cent on the previous 12 months to $155.6 billion. Retail managed funds also declined 1.5 per cent during the June quarter to $510.7 billion, however, they were up 2.5 per cent over the 12 months to June this year.

Individual risk insurance steadies

New business in the individual lump-sum risk insurance market has slowed to more moderate levels in recent times, according to recent research. Investor Daily reports that new individual lump-sum risk business firmed 3.5 per cent to $1.03 billion in the year to June, down from 2009 when growth peaked at 21.5 per cent. According to DEXX&R research, new business in the group risk category fell nearly 16 per cent to $530 million in the year to 30 June, however, this measure is usually volatile as it coincides with large premium payments by group policyholders, which are mainly industry funds.

Clients want transparency and value

Retail clients don't care too much about what remuneration model their financial planner employs, but are more interested in transparency and value, according to AMP financial planning. Money Management reports that a fee-based approach to servicing clients generally delivers better transparency. AMP financial planning head Steve Helmich said this was particularly important in attracting new clients and that transparency was the future of financial planning. Helmich also noted that the banning of commissions under the Government's Future of Financial Advice (FoFA) reforms would not remove conflict of interest from the financial planning industry altogether.