Networth News

Welcome to the Networth News update for Thursday the 29th of September.

From next week, Networth News will be coming to you in a new weekly roundup format. Bringing you the biggest stories from the sources that matter, Networth News will consolidate the best financial services industry news of the week and deliver this to you every Friday.

Second tranche of FoFA legislation released

Australia's financial services sector will face a crackdown on conflicted remuneration models under the Government's Future of Financial Advice (FoFA) reforms. Investor Daily reports that the second tranche of the FoFA draft legislation, which was released yesterday, focused almost entirely on remuneration changes, with the government looking to ban asset-based fees on geared funds, volume-based shelf-space fees and conflicted remuneration. The draft bill also provides a carve-out from the ban on conflicted remuneration for arrangements where employees of an ADI (authorised deposit-taking institution) advise on and sell basic banking products.

Takeovers lead to shrinking pool for funds

Fund managers are concerned about a shrinking pool of large liquid stocks for institutional investors following the proposed takeover of Foster’s and ConnectEast. smh.com.au reports that the continued dominance of the big banks and resource companies on the Australian Stock Exchange pose a diversity problem for institutional investors. Fund managers are also concerned about the static initial public offer (IPO) market, which has led to a reduction in supply of new industrial stocks.

Planners need to communicate value

Financial planners need to establish better ways of communicating their value to potential clients, according to Equity Trustees. Financial Standard reports that the direct link between the service and cost of financial planners will become more visible under the Future of Financial Advice (FoFA) reforms. As such, advisers should focus on educating clients about the value that can be added in areas such as estate planning, wealth protection and creation as well as avoiding unnecessary taxes, said Philip Galagher, head of wealth management at Equity Trustees.

Super funds prepare for standards overhaul

Superannuation funds will be required to improve reporting standards around investment decisions, conflicts of interest and hiring external asset managers, according to the Australian Prudential Regulation Authority (APRA). The Financial Review reports that, under reforms to the superannuation system, APRA will have greater powers to set prudential standards for super funds. In a discussion paper released yesterday, APRA indicated that super funds would be required to consider the impact of tax and investment fees on member returns in addition to putting legally binding arrangements in place for outsourced service providers.