Register For Our Mailing List

Register to receive our free weekly newsletter including editorials.

Home / 293

Cuffelinks Newsletter Edition 293

  •   15 February 2019
  •      
  •   

The implications of the Royal Commission are spreading well beyond the initial focus on prosecutions, mortgage broking and the two big NAB resignations. In financial advice, planners with large books of trail commissions have also been hit. How many clients realised if they generated a trail commission of $1,000 a year, it was also worth $3,000 on the value of the adviser's business?

A broker of grandfathered trail commissions, Radar Results, this week advised clients that books of clients that had sold for 3X trail in 2013 to 2017 will probably fall in value to about 1X after Kenneth Hayne's recommendation (likely trail end date 1 January 2021). This is akin to the decline in the value of taxi plates as Uber moved in. Radar said trails were previously attractive because Fee Disclosure Statements were not required and opt-in rules did not apply. Some advisers borrowed to buy these books expecting income for life. Many advice businesses do not have trails, and it was ill-informed of any adviser to expect they would last forever. There is a disincentive for an adviser to move a grandfathered client to a better product. Hayne said:

"The interests of client, intermediary and provider of a product or service are not only different, they are opposed. An intermediary who seeks to ‘stand in more than one canoe’ cannot. Duty (to client) and (self) interest pull in opposite directions." 

The Royal Commission suggests disruptive changes in the way some products are distributed. Roy Morgan research on channel usage shows managed investments are heavily dependent on intermediaries (funds are sold not bought) and how much superannuation relies on employers.  


    
This week, we have a survey to gauge your reaction to the Royal Commission. It's seven short questions which will take a few minutes of your time, with results published next week.

I went to university with Ken Henry, and while Kenneth Hayne was critical of many people and companies during the hearings, I examine why Henry became the Commission's biggest scalp. I recorded a podcast with Damien Klassen and Tim Fuller on consequences of the Commission.

Labor's franking policy has become a massive political issue, yet the imputation system is poorly understood. In our simple explanation, we distill it to this: to avoid taxing company profits twice, tax must be paid at either the company or individual level, but not both. If it were paid only at a company level, high income earners would benefit from the 30% tax rate. So our system taxes company profits at an individual level. Any tax already paid by the company is refunded. 

More on investing and markets ...

Rachel Folder draws on insights from Howard Marks for guidance on handling market volatility, while James Bloom says the recent rise in US bond rates makes the case for owning equities for yield much less compelling. Jacob Mitchell warns about populism trends around the world. 

Kristen Le Mesurier identifies 10 trends in ESG investing that go beyond the 'feel good' to direct implications for investments, and Patrick Potts shows which companies are likely to benefit from the opportunities presented by 5G

This week's White Paper from UBS Asset Management is a comprehensive review of China following a recent visit. We also feature the latest Exchange Traded Funds (ETF) updates from BetaShares and Vanguard in this increasingly important part of the listed market.

With so much going on, we're experiencing record numbers of visits to our website, and feel free to discuss anything relevant to our audience in Have Your Say

Graham Hand, Managing Editor

 

For a PDF version of this week’s newsletter articles, click here.

 


 

Leave a Comment:

banner

Most viewed in recent weeks

Simple maths says the AI investment boom ends badly

This AI cycle feels less like a revolution and more like a rerun. Just like fibre in 2000, shale in 2014, and cannabis in 2019, the technology or product is real but the capital cycle will be brutal. Investors beware.

Why we should follow Canada and cut migration

An explosion in low-skilled migration to Australia has depressed wages, killed productivity, and cut rental vacancy rates to near decades-lows. It’s time both sides of politics addressed the issue.

Are LICs licked?

LICs are continuing to struggle with large discounts and frustrated investors are wondering whether it’s worth holding onto them. This explains why the next 6-12 months will be make or break for many LICs.

Australian house price speculators: What were you thinking?

Australian housing’s 50-year boom was driven by falling rates and rising borrowing power — not rent or yield. With those drivers exhausted, future returns must reconcile with economic fundamentals. Are we ready?

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?

Welcome to Firstlinks Edition 627 with weekend update

This week, I got the news that my mother has dementia. It came shortly after my father received the same diagnosis. This is a meditation on getting old and my regrets in not getting my parents’ affairs in order sooner.

  • 4 September 2025

Latest Updates

Shares

Why the ASX may be more expensive than the US market

On every valuation metric, the US appears significantly more expensive than Australia. However, American companies are also much more profitable than ours, which means the ASX may be more overvalued than most think.

Economy

No one holds the government to account on spending

Government spending is out of control and there's little sign that Labor will curb it. We need enforceable rules on spending and an empowered budget office to ensure governments act responsibly with taxpayers money.

Retirement

Why a traditional retirement may be pushed back 25 years

The idea of stopping work during your sixties is a man-made concept from another age. In a world where many jobs are knowledge based and can be done from anywhere, it may no longer make much sense at all.

Shares

The quiet winners of AI competition

The tech giants are in a money-throwing contest to secure AI supremacy and may fall short of high investor expectations. The companies supplying this arms race could offer a more attractive way to play AI adoption.

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.

Infrastructure

Renewable energy investment: gloom or boom?

ESG investing has fallen out of favour with many investors, and Trump's anti-green policies haven't helped. Yet, renewables investment is still surging, which could prove a boon for infrastructure companies.

Investing

The enduring wisdom of John Bogle in five quotes

From buying the whole market to controlling emotions, John Bogle’s legendary advice reminds investors that patience, discipline, and low costs are the keys to investment success in any market environment.

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.