Succession planning number one issue for advisers. Succession planning is issue “numero uno” for advisers in non-bank channels, according to Paul Barrett, General Manager, Advice and Distribution, ANZ. Speaking at No More Practice Live recently, Barrett said that funding sources are key to solving the issue of succession planning. “At ANZ we have a funding source, which is the basic ingredient of helping to solve problems around succession planning. If you don’t have a solution to succession planning today you’re not necessarily in trouble, but if you don’t have a solution in place in a year or two you probably will be,” said Barrett, who added that there were three key considerations for any potential acquirer in buying practices.
Financial advisers trump counterparts in client relationship stakes. Financial advisers are better at building trust and establishing close professional relationships with clients than banks and credit card providers, according to recent research from the Financial Services Institute of Australasia (Finsia). “Those financial service providers able to develop professional relationships with customers over a period of time have a distinct advantage over others in positively influencing their perceptions of fairness,” said Monash University’s Steve Worthington, who helped conduct the research for Finsia. Interestingly, banks suffered significant decreases in perceptions of fairness as customer relationships lengthened, while credit card providers fared worse than financial advisers and banks in a number of respects.
AMP results highlight high FoFA costs. AMP’s 2012 half-year results are an indication of the significant cost of increases in financial services red tape, according to Shadow Minister for Financial Services and Superannuation Mathias Cormann. The cost of system changes alone for AMP to implement FOFA and a number of other regulatory changes is estimated at $60 million to $75 million, he said. AMP also revealed that it had a team of 50 people working to implement FOFA and other regulatory changes imposed by Labor over the past year. “Across the whole financial services industry conservative estimates are that FOFA will cost about $700 million to implement with $375 million in additional compliance costs every year,” said Senator Cormann.
ASIC slaps ban on Lion Advantage. ASIC has cancelled the Australian financial services (AFS) licence of Lion Advantage and banned its chief executive David Hickie from providing financial services for two years. ASIC found that Lion Advantage had breached a number of the financial, reporting and other obligations, including having adequate professional indemnity (PI) insurance in place and lodging audited financial reports on time for Lion Advantage and the schemes it operated. “Licensees who fail to maintain adequate PI insurance expose retail clients to the risk that they go uncompensated in circumstances where a licensee has insufficient funds to meet client claims,” said ASIC commissioner Greg Tanzer.
Caution for accountants engaged in financial planning. Accountants heavily engaged in financial planning risk contravening new standards being proposed by the Accounting Professional and Ethical Standards Board (APESB), which recently released the second exposure draft of its APES 230 Financial Planning Services standard. The proposed APES 230 will supersede the existing APS 12 Statement of Financial Advisory Service Standards (APS 12), and will apply to all members of Australia’s three major professional accounting bodies who provide financial planning advice as defined in the exposure draft. Accountants who are members of these bodies will be prohibited from receiving commissions from third parties and from setting their fees on the basis of conflicted remuneration methods such as a percentage of clients’ assets.
Call for not-for-profit sector reforms. Not-for-profit sector reforms should not proceed through parliament without amendments being sufficiently consulted upon, according to the Institute of Chartered Accountants Australia. The Economics Committee has presented a report to the House of Representatives based on the exposure draft of the Australian Charities and Not-for-Profits Commission (ACNC) bills, and recommended the bills be passed. While the broad scope of the reforms – including the establishing of a national regulator – is strongly supported, issues such as duplication of reporting, the reporting framework and governance requirements, have not been fully explored or understood by the sector, according to the Institute’s head of reporting, Kerry Hicks.
Investors turn to secured credit investments. Some institutional investors are allocating up to 50 per cent of their portfolio to secured credit due to the positive performance of this asset class, according to Threadneedle Investments. “For investors looking for robust capital preservation – while avoiding exposure to long duration risk - secured credit investments can provide significant upside,” said Threadneedle Investments’ Steven Fleming. “In the current economic climate, investors searching for income need to look further than traditional fixed income asset classes. Those seeking capital preservation may want to consider the new breed of secured credit investments – which can offer attractive risk adjusted return potential.”
Advisers need to address generational gap. Advisers need to tailor their advice to clients at a generational level, according to a report from Macquarie Bank and the SMSF Professionals’ Association of Australia Limited (SPAA). It found that investors across the generations recognise the value of advice when managing their SMSFs, but advisers should tailor their approach according to life stage to have the greatest impact, according to Macquarie Banking and financial services group analytics research manager, Gary Lembit. “Through better understanding their clients’ state of mind, advisers can adapt their advice models and learn to communicate in a way that better meets their needs, while articulating the value they can add,” he said.