Register For Our Mailing List

Register to receive our free weekly newsletter including editorials.

Home / 267

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

 

  •   17 August 2018
  •      
  •   

 

Leave a Comment:

banner

Most viewed in recent weeks

Retirement income expectations hit new highs

Younger Australians think they’ll need $100k a year in retirement - nearly double what current retirees spend. Expectations are rising fast, but are they realistic or just another case of lifestyle inflation?

Four best-ever charts for every adviser and investor

In any year since 1875, if you'd invested in the ASX, turned away and come back eight years later, your average return would be 120% with no negative periods. It's just one of the must-have stats that all investors should know.

Why super returns may be heading lower

Five mega trends point to risks of a more inflation prone and lower growth environment. This, along with rich market valuations, should constrain medium term superannuation returns to around 5% per annum.

Preparing for aged care

Whether for yourself or a family member, it’s never too early to start thinking about aged care. This looks at the best ways to plan ahead, as well as the changes coming to aged care from November 1 this year.

Our experts on Jim Chalmers' super tax backdown

Labor has caved to pressure on key parts of the Division 296 tax, though also added some important nuances. Here are six experts’ views on the changes and what they mean for you.        

Why I dislike dividend stocks

If you need income then buying dividend stocks makes perfect sense. But if you don’t then it makes little sense because it’s likely to limit building real wealth. Here’s what you should do instead.

Latest Updates

Investment strategies

LICs vs ETFs – which perform best?

With investor sentiment shifting and ETFs surging ahead, we pit Australia’s biggest LICs against their ETF rivals to see which delivers better returns over the short and long term. The results are revealing.

Retirement

The growing debt burden of retiring Australians

More Australians are retiring with larger mortgages and less super. This paper explores how unlocking housing wealth can help ease the nation’s growing retirement cashflow crunch.

The ASX is full of broken blue chips

Investing in the ASX 20 or 200 requires vigilance. Blue chips aren’t immune to failure, and the old belief that you can simply hold them forever is outdated. 

Shares

Buying Guzman y Gomez, and not just for the burritos

Adding high-quality compounders at attractive valuations is difficult in an efficient market. However, during the volatile FY25 reporting season, an opportunity arose to increase a position in Mexican fast-food chain GYG.

Investment strategies

Factor investing and how to use ETFs to your advantage

Factor-based ETFs are bridging the gap between active and passive investing, giving investors low-cost access to proven drivers of long-term returns such as quality, value, momentum and dividend yield. 

Strategy

Engineers vs lawyers: the US-China divide that will shape this century

In Breakneck, Dan Wang contrasts China’s “engineering state” with America’s “lawyerly society,” showing how these mindsets drive innovation, dysfunction, and reshape global power amid rising rivalry. 

Retirement

18 rules for ageing well

The rules to age successfully include, 'the unexamined life lasts longer', 'change no more than one-eighth of your life at a time', 'nobody is thinking about you', and 'pursue virtue but don’t sweat it'.

Sponsors

Alliances

© 2025 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. To the extent any content is general advice, it has been prepared for clients of Morningstar Australasia Pty Ltd (ABN: 95 090 665 544, AFSL: 240892), without reference to your financial objectives, situation or needs. For more information refer to our Financial Services Guide. 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.