Register For Our Mailing List

Register to receive our free weekly newsletter including editorials.

Home / 331

Welcome to Firstlinks Edition 331

  •   6 November 2019
  • 3
  •      
  •   

Sludge. Well done ASIC for calling out the meaningless warnings, disclosures and disclaimers in financial presentations and offer documents. ASIC even says they are often harmful to client outcomes. Consider the dreaded disclaimers at the start of every talk. They interrupt well-crafted and strong introductions, and they are usually the butt of jokes by presenters, along the lines of "You've all read that, right? Good, now I'll get on with what really matters."

Nobody reads them. Hundreds of words appear on the screen for a few seconds. I'm waiting for the day when someone shouts out, "I'd like to read that, please. What are you saying? Perhaps it's like the T&Cs for Facebook where I give away my rights." In Product Disclosure Statements, endless and useless warnings can overwhelm the valuable content.

The ASIC survey found that mandated disclosures and warnings are often ineffective, and may contribute to consumer harm. Deputy Chair, Karen Chester, said:

"It's time to 'call time' on disclosure as the default consumer protection. It's not the 'silver bullet' once thought, nor should it be relied upon as one. Disclosure can and has backfired in unexpected and harmful ways ... the over reliance on disclosure in some ways proved an enabler of poor conduct and poor consumer outcomes revealed by the Financial Services Royal Commission."

Here is a random example taken from a fund manager presentation with the identity removed. It's more about protecting the company than warning the consumer. As ASIC says, in practice, we ignore, overlook or misunderstand warnings.

Our first article follows a similar theme of misunderstanding an audience. At least 75% of Firstlinks' readers are over 55, and it is generally a well-off and engaged group. Rose Herceg reports research on how marketers and brands ignore the over 50s audience (and while few people look forward to ageing, a recent Ipsos study says Australians consider 'old' starts at about 66). The over 50 segment is active and enthusiastic and our readers are finding new ways to plan for their so-called 'retirement' every week. We need another word.

While bond funds have been available in the unlisted space for decades, there is a new range of listed options bringing fixed interest to a broader group of investors. We explain the choices.

Mercer has ranked Australia's retirement system third in the world but at a B grade, and David Knox describes the changes needed to create an A grade system.

I recently met with a financial adviser for the first time in many years, and I can attest to the merit of the input. Daniel Reyes weighs in with four reasons to engage an adviser.

We tend to look to the US as the engine for global growth, but George Toubia shows how the future will be increasingly Asian. Continuing this theme, the White Paper this week is Fidelity's confirmation that the region will shine. It's a perfect reminder in the week when Prime Minister Scott Morrison signed a trade agreement with 15 Asian-Pacific countries.

The market's rejection of WeWork is the highest-profile IPO failure this year, a welcome reminder to investment banks that they need to deliver better quality. The $12 billion total raised on the ASX this year is a quarter of the average for the last five years. Damien Klassen reveals some of the tricks sellers may use to inflate the value of their offers.

Last week's survey on including the home in the pension assets test drew a strong response, and Leisa Bell compiles the results and selects from the vast range of comments received. While the Firstlinks' audience is not a random sample of the Australian electorate, could this be a policy measure with far more support than the Government believes, done the right way?

 

Graham Hand, Managing Editor

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

 

3 Comments
Ramani
November 10, 2019

A comment on ASIC's new-found enthusiasm about disclosures that confound rather than clarify.
About time, from the agency that till some time ago treated disclosure as the panacea, the whole panacea and nothing but the panacea. This ignored the truism that unless it makes sense to the intended audience all disclosure is in Swahili translated into Sanskrit. No doubt the system is being gamed through incomprehensible and irrelevant drivel loaded onto illiterate and inertia-bound targets of witting ignorance.
Not clear how this will be addressed: would opaque disclosures be treated as non-disclosures and prosecuted by the Hayne-convertee 'Litigate first, Negotiate later' regulators?
As we go about cleaning this mess up, there is another elephant room that we have been impervious to: the pervasive disclaimer of every professional adviser to the world at large 'This may not be suitable to you, seek professional advice'. What do they think we are doing when we engage them: social intercourse?
ASIC, ACCC and the other authorities must require every professional adviser to specify which professional advice they have in mind when they say so, and more critically, explicitly accept liability for their own expertise instead of the usual 'we disclaim...'
Sludge it is - and there is more to be mined before we change into consumer-facing from the current consumer defacing.
Shangri La!

Warren Bird
November 07, 2019

Further to my comment on the "Retire retirement' article, I note Graham's quick summary here.

It's interesting about people thinking that 'old' is 66.

When I was in hospital for a month just before I turned 60 and had some time on my hands to discover new things, I became a fan of Ed Sheeran. One of his great songs, "Thinking Out Loud" includes a line "darling I'll be loving you until we're 70". So it seems that young people like Ed think that 70 = old.

This happens to be just over 10 years less than the average life expectancy in Britain these days. So it would seem that young folk like Ed Sheeran think that you are old about a decade before your expected end.

My thoughts turned to another song, from my younger days, about being old. Ringo Starr once wondered in song, 'will you still need me, will you still feed me, when I'm .... " You all know the number. 64.

Interesting, but back in the 1960's life expectancy (at least in the UK) was 72. Ringo and the Beatles thought you were old when you had just under a decade of life expectancy left. So not much has changed! Young people's perceptions have, at least, kept up with the actuarial statistics!

At the rate life expectancy is increasing, however, I guess it won't be too long before the next Ed Sheeran sings about still being in love when we're 90 or a 100.
Still, as long as the songs are as good as this one, what does it matter! Click on the link, hit play and enjoy one of the great love songs of the 21st century.
https://www.youtube.com/watch?v=lp-EO5I60KA&sns=fb&fbclid=IwAR2RjXKwWKcBl-9NPnaZ_O8oT0dQ6dJjt-YNphjV2ECEKwbmZ-m1Caw3Ajg

AS
November 07, 2019

Thanks Graham. Interesting read again.

I read with interest a quote from Australian Institute of Superannuation Trustees chief executive Eva Scheerlinck on the topic of PDS disclosure for super funds.

"It is the role of regulation and legislation to ensure that members are getting fair value for money, rather than relying on members' ability to compare funds through disclosure."

I just can’t see how the role of regulation and legislation (assuming she means the regulation and legislation around PDS disclosure) is to ensure that members are getting fair value for money. I would have thought this is the role of competition. It is interesting to read the differing views on this.

 

Leave a Comment:

     
banner

Most viewed in recent weeks

Is it better to rent or own a home under the age pension?

With 62% of Australians aged 65 and over relying at least partially on the age pension, are they better off owning their home or renting? There is an extra pension asset allowance for those not owning a home.

Too many retirees miss out on this valuable super fund benefit

With 700 Australians retiring every day, retirement income solutions are more important than ever. Why do millions of retirees eligible for a more tax-efficient pension account hold money in accumulation?

Is the fossil fuel narrative simply too convenient?

A fund manager argues it is immoral to deny poor countries access to relatively cheap energy from fossil fuels. Wealthy countries must recognise the transition is a multi-decade challenge and continue to invest.

Reece Birtles on selecting stocks for income in retirement

Equity investing comes with volatility that makes many retirees uncomfortable. A focus on income which is less volatile than share prices, and quality companies delivering robust earnings, offers more reassurance.

Welcome to Firstlinks Election Edition 458

At around 10.30pm on Saturday night, Scott Morrison called Anthony Albanese to concede defeat in the 2022 election. As voting continued the next day, it became likely that Labor would reach the magic number of 76 seats to form a majority government.   

  • 19 May 2022

Comparing generations and the nine dimensions of our well-being

Using the nine dimensions of well-being used by the OECD, and dividing Australians into Baby Boomers, Generation Xers or Millennials, it is surprisingly easy to identify the winners and losers for most dimensions.

Latest Updates

SMSF strategies

30 years on, five charts show SMSF progress

On 1 July 1992, the Superannuation Guarantee created mandatory 3% contributions into super for employees. SMSFs were an after-thought but they are now the second-largest segment. How have they changed?

Investment strategies

Anton in 2006 v 2022, it's deja vu (all over again)

What was bothering markets in 2006? Try the end of cheap money, bond yields rising, high energy prices and record high commodity prices feeding inflation. Who says these are 'unprecedented' times? It's 2006 v 2022.

Taxation

Tips and traps: a final check for your tax return this year

The end of the 2022 financial year is fast approaching and there are choices available to ensure you pay the right amount of tax. Watch for some pandemic-related changes worth understanding.

Financial planning

Is it better to rent or own a home under the age pension?

With 62% of Australians aged 65 and over relying at least partially on the age pension, are they better off owning their home or renting? There is an extra pension asset allowance for those not owning a home.

Infrastructure

Listed infrastructure: finding a port in a storm of rising prices

Given the current environment it’s easy to wonder if there are any safe ports in the investment storm. Investments in infrastructure assets show their worth in such times.

Financial planning

Power of attorney: six things you need to know

Whether you are appointing an attorney or have been appointed as an attorney, the full extent of this legal framework should be understood as more people will need to act in this capacity in future.

Interest rates

Rising interest rates and the impact on banks

One of the major questions confronting investors is the portfolio weighting towards Australian banks in an environment of rising rates. Do the recent price falls represent value or are too many bad debts coming?

Sponsors

Alliances

© 2022 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.