Register For Our Mailing List

Register to receive our free weekly newsletter including editorials.

Home / 253

Cuffelinks Newsletter Edition 253

  •   11 May 2018
  •      
  •   

Buried in the fine print in Budget 2018 was $10.6 million for ASIC and $2.7 million for APRA to assist in their Royal Commission work. Notably, $4.7 million goes to ASIC in 2019-2020, but the Commission's final report is due in February 2019. The extra work will continue for years.

When I started working in wealth management as a consultant in 2001, I had previously spent two decades in banking. I thought funds management and financial advice would be a breeze compared with the complexity of bank balance sheets, capital adequacy and liquidity rules, lending and deposit policies and systems handling millions of payments a day.

In fact, the structure of wealth management is a complex and intriguing web. There are so many gatekeepers, with dealer groups, asset consultants, rating agencies, fund managers, regulators, industry associations, media groups, platforms and financial advisers, each with a power base and clients. The Royal Commission is only unraveling parts of it.

Which is why the calls for 'clean brooms' from outside wealth management to sweep through the industry are misplaced. Every time I see a person from another industry appointed to a board position in wealth management, I wonder what they know about the value chain and who pays the piper. The AMP head of advice told the Royal Commission he had not "turned his mind" to commission structures. How could the former Chair of AMP, previously a middle-level executive at investment bank ABN Amro, have understood thoroughly what was happening in the advice payment structure?

The regulator is watching incentives

It's a good time for public superannuation funds to follow the letter of the law, especially those who have just paid a fine. Last year, ASIC issued Report 529 on how super funds should deal with their members, including this instruction (page 30):

"In our view, the offering of gifts to influence a financial decision is not conducive to enhancing consumer trust and confidence in the superannuation industry ... ASIC has previously warned trustees about this issue and may take stronger regulatory action in future, including issuing stop orders. Law reform may be needed to ensure that account consolidation is appropriately managed."

 


This week's articles and Budget Special

Bernard Salt was correct that money saved by forgoing smashed avocado breakfasts and the like could eventually become a home deposit, and we look at how a low income earner can boost superannuation by 70% over time with some expenditure discipline.

Nobody waves a red flag in the middle of the street the day before markets peak, but Ashley Owen says US equities are at danger levels which in the past have delivered losses. The markets have been driven by US tech stocks, but Kim Catechis argues Asian tech companies are no longer catching up but leading the tech revolution.

On investing, Michael Roach uses factors to improve portfolio construction, while Adrian Harrington shows how technology is improving property management.

For SMSF trustees, Monica Rule explains segregated and unsegregated assets, and Mark Ellem describes when an investment property can be transferred into an SMSF.

In addition to the Cuffelinks articles published on Tuesday night during Scott Morrison's Budget Speech, the White Paper section is a Budget Special with commentary and videos from five sponsors, including Accurium, AMP Capital, nabtrade, SuperConcepts and Perpetual. The latest LIC Monthly Review from IIR is also attached below.

Graham Hand, Managing Editor

 

Edition 253 | 11 May 2018 | Editorial | Newsletter


 


 

Leave a Comment:

     
banner

Most viewed in recent weeks

House prices surge but falls are common and coming

We tend to forget that house prices often fall. Direct lending controls are more effective than rate rises because macroprudential limits affect the volume of money for housing leaving business rates untouched.

Survey responses on pension eligibility for wealthy homeowners

The survey drew a fantastic 2,000 responses with over 1,000 comments and polar opposite views on what is good policy. Do most people believe the home should be in the age pension asset test, and what do they say?

100 Aussies: five charts on who earns, pays and owns

Any policy decision needs to recognise who is affected by a change. It pays to check the data on who pays taxes, who owns assets and who earns the income to ensure an equitable and efficient outcome.

Three good comments from the pension asset test article

With articles on the pensions assets test read about 40,000 times, 3,500 survey responses and thousands of comments, there was a lot of great reader participation. A few comments added extra insights.

The sorry saga of housing affordability and ownership

It is hard to think of any area of widespread public concern where the same policies have been pursued for so long, in the face of such incontrovertible evidence that they have failed to achieve their objectives.

Two strong themes and companies that will benefit

There are reasons to believe inflation will stay under control, and although we may see a slowing in the global economy, two companies should benefit from the themes of 'Stable Compounders' and 'Structural Winners'.

Latest Updates

Strategy

$1 billion and counting: how consultants maximise fees

Despite cutbacks in public service staff, we are spending over a billion dollars a year with five consulting firms. There is little public scrutiny on the value for money. How do consultants decide what to charge?

Investment strategies

Two strong themes and companies that will benefit

There are reasons to believe inflation will stay under control, and although we may see a slowing in the global economy, two companies should benefit from the themes of 'Stable Compounders' and 'Structural Winners'.

Financial planning

Reducing the $5,300 upfront cost of financial advice

Many financial advisers have left the industry because it costs more to produce advice than is charged as an up-front fee. Advisers are valued by those who use them while the unadvised don’t see the need to pay.

Strategy

Many people misunderstand what life expectancy means

Life expectancy numbers are often interpreted as the likely maximum age of a person but that is incorrect. Here are three reasons why the odds are in favor of people outliving life expectancy estimates.

Investment strategies

Slowing global trade not the threat investors fear

Investors ask whether global supply chains were stretched too far and too complex, and following COVID, is globalisation dead? New research suggests the impact on investment returns will not be as great as feared.

Investment strategies

Wealth doesn’t equal wisdom for 'sophisticated' investors

'Sophisticated' investors can be offered securities without the usual disclosure requirements given to everyday investors, but far more people now qualify than was ever intended. Many are far from sophisticated.

Investment strategies

Is the golden era for active fund managers ending?

Most active fund managers are the beneficiaries of a confluence of favourable events. As future strong returns look challenging, passive is rising and new investors do their own thing, a golden age may be closing.

Sponsors

Alliances

© 2021 Morningstar, Inc. All rights reserved.

Disclaimer
The data, research and opinions provided here are for information purposes; are not an offer to buy or sell a security; and are not warranted to be correct, complete or accurate. Morningstar, its affiliates, and third-party content providers are not responsible for any investment decisions, damages or losses resulting from, or related to, the data and analyses or their use. Any general advice or ‘regulated financial advice’ under New Zealand law has been prepared by Morningstar Australasia Pty Ltd (ABN: 95 090 665 544, AFSL: 240892) and/or Morningstar Research Ltd, subsidiaries of Morningstar, Inc, without reference to your objectives, financial situation or needs. For more information refer to our Financial Services Guide (AU) and Financial Advice Provider Disclosure Statement (NZ). You should consider the advice in light of these matters and if applicable, the relevant Product Disclosure Statement before making any decision to invest. Past performance does not necessarily indicate a financial product’s future performance. To obtain advice tailored to your situation, contact a professional financial adviser. Articles are current as at date of publication.
This website contains information and opinions provided by third parties. Inclusion of this information does not necessarily represent Morningstar’s positions, strategies or opinions and should not be considered an endorsement by Morningstar.

Website Development by Master Publisher.