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Cuffelinks Newsletter Edition 265

  •   3 August 2018

Next week, as the Royal Commission turns to superannuation, it will join a conga line of regulators and commissions uncovering the industry's secrets. We had the APRA Prudential Inquiry into the Commonwealth Bank, the Productivity Commission Review of Superannuation, and ASIC Chair James Shipton said he plans to target financial advice with more consumer testing, shadow shopping and on-site visits. At the FSC Conference, he added:

"There needs to be a wholesale review of conflicts of interest in firms, sectors and markets to identify, manage and if appropriate, remove every single conflict of interest. There does not appear to be a single example of a strategic plan that articulates the principles of engagement with regulatory agencies."  

Productivity Commission Deputy Chair, Karen Chester, said she was shocked by the poor quality of data and comparing fund performance "nearly killed three team members". 

It feels like a 'now or never' moment for the wealth industry. On one side, there are more public resources than ever digging into the value chain. On the other side, billions of dollars of payments are entrenched in the system. My best guess is the latter will win. As Karen Chester told the FSC, "When things are overlapped and murky, accountability goes out the window."

This week, Kevin Bungard explains why the PC Report has gaps in its analysis of SMSFs, and the ATO issues warnings to SMSF trustees and a series of checklists for good fund management.

Meanwhile, the real stuff of investing ...

Roger Montgomery sees little merit in the Nine takeover of Fairfax, bringing two struggling industries together. My daily breakfast routine of coffee and toast while reading printed copies of The Herald and The AFR looks doomed in the medium term, and the reduced diversity of ownership of media means more people must support independent voices and the ABC. 

One of Australia's leading economists, Don Stammer, shows why the Aussie dollar has held up reasonably well, Ashley Owen takes a swipe at large companies wasting capital and Kurt Winrich gives three vital characteristics of great companies. Erik Weisman says industries are increasingly becoming winner-takes-all.

Elsewhere, Jeff Gebler reveals the vast difference between what people say they want when questioned by financial advisers, and what they actually do in their real lives.

This week's White Paper from Vanguard is a study of indexing and active management, and researches the most common criticisms of indexing. Well worth a read, as well as updated reports in Additional Features below.

We are changing the way we publish articles on the Cuffelinks website. New content will be added regularly during the week, not only at the time of the newsletter. It's worth checking more frequently for new articles on asset allocation and understanding of markets. Articles often have new comments added, such as the high quality franking credits debate here and here.    

Graham Hand, Managing Editor


Edition 265 | 3 Aug 2018 | Editorial|Newsletter



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