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Cuffelinks Newsletter Edition 267

  •   17 August 2018

There's no doubt the Royal Commission has decided that super fund trustees are "hopelessly conflicted" when they are also executives of the entity running the fund. The Commission's Senior Counsel Assisting, Michael Hodge, has asked the same question on member best interests a hundred different ways.

To NAB's Nicole Smith: "Do you agree that if a member is not paying a commission, the member is in a better position than if the member is paying a commission?" To ANZ's Victoria Weekes: "Would it be possible for the board to approve the successor fund transfer [to IOOF] without being satisfied ... the members' best interests would be served?" To Colonial First State's Linda Elkins: "How was it in the interests of the members of the fund to grandfather commissions when going from superannuation to pension?"  

Ms Elkins was Executive General Manager of Colonial First State and a Director of the trustee company at the same time, and she was meeting Treasury officials on grandfathering commissions. She replied to Hodge: "In hindsight, I would agree that it's not and we, you know, shouldn't have been lobbying for that."

At least she didn't circumlocute like other witnesses. Such an intractable conflict may lead to a banning of the commissions retained from pre-FOFA and a requirement for independent trustees. Many advisers and super funds simply will not switch clients to better products while they retain commissions on old, lower quality funds. As Michael Hodge said of the sale of ANZ's wealth assets: "The view seems to be that if commissions are not grandfathered then the adviser network will not support the super fund or the sale."

It has also been fascinating how often the excuse 'super is a scale business' is used to justify actions, from maintaining commissions to keep funds viable, to paying $2 million to support an online newspaper, to corporate entertaining and football sponsorship.

This week, Bernard Kellerman describes the conflicts of interest in the $1 billion sale of OnePath to IOOF, and Carden Calder and Gigi Shaw look at how executives have responded to the Royal Commission with complexity and opacity and they suggest ways out of the darkness.

Commissioner Kenneth Hayne has much more to examine on superannuation after almost two weeks focussing mainly on trustee duties, and he's likely to ask for an extension in September. We will provide a summary of Round 5 in next week's edition.

The franking credits arguments continue 

Olivia Long reports on data showing 25% of SMSF assets have lost their tax-free status, with a double whammy impact if SMSFs also lose their franking credit refunds. In response to ongoing reader questions, Vinay Kolhatkar has collected all our articles (with 579 comments!) on the Labor proposal, plus he shares another 'sample letter' lobbying to change the policy.

Results of our HILDA Survey

About 2,200 readers filled in our Survey and Leisa Bell shows the results. Yes, you're smarter.

Elsewhere in this packed edition ...

Amid this focus on the Royal Commission and markets troubled by trade wars, Brexit and Turkey, the S&P/ASX200 Index was not only at a 10-year high yesterday, but its VIX volatility index was back below 10. It's unlikely to stay this way for the rest of 2018. 


Rising equity markets with low volatility - it doesn't get much better in the major asset classes. Robin Bowerman introduces an excellent Interactive Index Chart where readers can check different asset classes in their goal planning, while Robert Miller gives some great tips on watching directors and management buying their own company shares.

We have started a content-sharing arrangement with leading retirement website, YourLifeChoices, which has 250,000 subscribers, and first up, Olga Galacho looks at healthcare costs in retirement.

This week's White Paper from Accurium explains the new Transition-to-Retirement Income Streams rules, worth understanding for people over 50 and under 65. Plus the latest ETF Reportfrom BetaShares shows ongoing strong inflows, especially into international options.

Graham Hand, Managing Editor


Edition 267 | 17 Aug 2018 | Editorial | Newsletter



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