Money Management (July 19, 2012)

www.moneymanagement.com.au

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By Chris Kennedy

A MELBOURNE-BASED financialadviser has hit a hurdle in his purchaseof a large book of clients, with two of thefund managers involved in the purchaserequesting confirmation of cl ientapproval before they will transfer trailingcommissions over to the adviser.

The adviser, who did not wish to benamed, has purchased several trailbooks in the past. He made the mostrecent acquisition shortly before switch-ing licensees – although the new dealergroup is owned by the same institution-al owner as the previous licensee.

He purchased the book for $650,000,and although the majority of clientswere largely invested in a platformwhich has transferred revenue over,some of the money is t ied up inMacquarie Structured Products as wellas Synergy personal choice super andinvestments.

Both Macquarie Funds Group andSynergy have requested assurances thatall clients involved in the book hadapproved the transfer, but the adviser says

that with many of the products in thebook sold as much as 20 years ago, manyof the clients will be uncontactable. Headds that he has purchased the revenuelegitimately and should not be obliged tocontact clients individually.

Macquarie said it would accept signedconfirmation from either the adviser orthe prior dealer group that all clients

approved of the transfer.Macquarie Specialist Investments exec-

utive director Peter van der Westhuyzencould not comment on the specificexample. However, he said in general,client approval would usually be requiredfor a transfer to a new adviser, althoughthere might be exceptions, such as wherea licensee approved the transfer.

“Because there are so many differentarrangements in place in the market, thekey point comes back to that in theabsence of anything specific, we wouldwant the individual client to provide uswith the transfer instruction,” he said.

Macquarie would always try and finda balance between fulfilling its legal obli-gations and making it an efficientadministrative process for all involved,he added.

Synergy cited Privacy Act concerns asthe reason for the assurance that clientshad been contacted, and indicated itwould contact the impacted clientsdirectly. Synergy could not be reachedfor comment by Money Management’sprint deadline.

Gold Seal director Claire Wivell-Plater

said she was unsure of the legal ramifica-tions of the request, and whether the fundmanagers were legally able to refuse totransfer the revenue over to the adviser ifthat adviser had the appropriate releasesfrom the previous licensee.

However, she said it is not a usualarrangement in this type of transaction.“It’s certainly flying in the face of currentindustry practice,” she said.

With hundreds of similar transac-tions still being completed in the indus-try, if client consent was required inorder to reassign trail commissions, itcould have major implications forfuture sales, she added.

The adviser said that if the situationinvolved the major platform with 450 ofthe clients in the book generatingaround $25,000 per month in revenue,then he would be under pressure tomake his bank repayments and meet hisfinancial commitments.

“Surely they can’t retain the commissionswhere I’ve purchased the income streamand I’m not changing the funds or invest-ment options?” he asked. “And if so weshould know that before we buy practices.”

By Andrew Tsanadis

WITH the Australian Securities Exchange (ASX)considering the final look of its new listed man-aged fund service, questions remain over whetherAqua II will attract wholesale fund managers tomake the leap into the retail realm.

If supported, the service could spell the end ofthe expensive and complicated paper-based set-tlement process, which OneVue chief executiveConnie McKeage said could potentially make itworthwhile for wholesale managers to targetretail investors.

“Part of the reason they haven’t bothered withretail is that they would have to invest a lot ofresources in increasing their profile. Another keypart to that is the need for greater distribution,”she said.

Through the automated settlement service,fund managers will have access to those distribu-tion channels – traditionally a point against tryingto market to retail investors, McKeage added.

“It might be worth it for the first time for peoplewho are good performers in the market to con-sider being in the retail market, because all of asudden it’s less expensive to go in, other people

Cautionary tale in trail book sale

Continued on page 3

Aqua IIfloating retail

NEW DEALER GROUP MODEL: Page 12 | DECONSTRUCTING ‘REAL RETURN’ FUNDS: Page 22

Vol.26 No.27 | July 19, 2012 | $6.95 INC GST

AGRIBUSINESS has been a dirty word in the financial serv-ices world ever since 2009, when a number of high-profileprojects collapsed, costing investors millions of dollars.

The size of the sector has deteriorated rapidly since,with retail inflows falling to about $35 million in 2010-11from a $1 billion peak in 2008.

Of the four projects left in 2012, one has been with-drawn and the future of another has a big question markhanging over it.

Financial advisers don’t seem too enthused byagribusiness’ tax effectiveness, with most of the moneycoming from overseas-based institutions.

One of the big frustrations for firms operating agribusi-ness managed investment schemes is the lack of interestAustralian superannuation funds have historically shownin this sector as an asset class.

But there have been suggestions that the industryhas got its business model backwards and needs to setit straight if it wants to see more money flowing through.

Meanwhile, the financial services regulator has workedon ways to improve disclosure in a bid to prevent historyfrom repeating and to ensure investors have a betteridea of what they are getting into.

Although this move was met with a somewhat cynicalresponse – mostly coming from research houses – theindustry generally supported the improved disclosurebenchmarks.

For more on agribusiness, turn to page 14.

Cropped harvest

Peter van der Westhuyzen

AGRIBUSINESS

Saving clients from themselves

Last week’s release of an AustralianCrime Commission (ACC) reportrevealing the degree to whichAustralians had fallen prey to

investment scams should be stronglynoted as underlining what can, and toooften does, happen to self-directedinvestors.

Over much of the past decade, financialplanners have suffered a good deal of collat-eral damage from the collapse of groupssuch as Westpoint and Timbercorp, eventhough there has been widespreadacknowledgement that many of the affect-ed investors were either self-directed orseeking tax breaks on the advice of theiraccountants.

Indeed, it is fair to say that had any oneof the victims of the scams referred to inthe ACC report sought the advice of a finan-cial planner, they would have eitheravoided or minimised the losses they ulti-mately incurred.

Notwithstanding the fact the ACC reportsuggested the most common victims of thefrauds tended to be men aged over 50 whowere highly educated and financially liter-ate, the millions of dollars lost suggeststhese people were nonetheless naïve to therealities of the investment markets.

It is also worth noting that the trusteesof self-managed superannuation fundswere noted as being particularly exposedto such scams.

Nor, it seems, did the traditionalAustralian Securities and InvestmentsCommission admonition that “if an invest-ment seems too good to be true, then itprobably is” appear to have resonated withthe victims of the scams – or at least, notuntil after they had been burned.

What often seems to be overlooked by thecritics of the financial planning industry and

those who would seek to ‘industrialise’ theplanning process is the value of the close,personal relationships often forged betweenplanners and their clients.

Also often overlooked is the education-al element of those relationships and,perhaps most importantly, the develop-ment of trust.

Simply put, it seems highly unlikely thatan investor who had a longstanding andconsultative relationship with a financialplanner would have exposed themselvesto a scam investment if they had sought theadvice of their planner.

Amid all the debate around the Futureof Financial Advice (FOFA) bills and thecontinuing discussion around formulatingthe consequent amendments, there needsto be an acknowledgement that changingremuneration models and imposing bestinterests tests will not protect investorsfrom blatant acts of criminality.

Indeed, if one thing has not beendiscussed enough in the debate aroundFOFA, it is that very often one of the mostvaluable skills a financial planner can bringto a relationship is saving clients fromthemselves.

– Mike TaylorABN 80 132 719 861 ACN 000 146 921

2 — Money Management July 19, 2012 www.moneymanagement.com.au

[email protected]

“There needs to be anacknowledgement thatchanging remunerationmodels and imposing bestinterests tests will notprotect investors fromblatant acts ofcriminality.”

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Average Net DistributionPeriod ending Mar ‘1210,267

By Mike Taylor

ATthe same time as Westpac/BT hasoutlined the structure of its new BTSelect financial planning offering,Count Financial has moved to targetwhat it believes is unrest amongexisting Westpac/BT Securitor advis-ers by offering them the opportuni-ty to switch dealer groups.

However, BT Financial Groupgeneral manager, advice, MarkSpiers has hit back, saying the Countapproach sought to belittle theimportance of planners and whatBT was seeking to achieve in a “dislo-cated and fragmented market”.

The move by Count came as BTSelect managing director andformer DKN chief Phil Butterworthoutlined the strategy behind BTSelect, which involves growing “a

community of like-minded profes-sional practices as part of theaggressive growth of BT FinancialGroup’s multi-branded advicebusiness”.

Butterworth was at pains tostress that BT Select would not bea dealer group, but rather a serviceprovider with a suite of offeringsentailing planners having a choiceof licensing arrangements, as wellas access to a suite of servicesincluding practice managementsolutions.

Butterworth acknowledged that,as part of the BT Select recruitmentprocess, transition paymentswould be made, but he denied thepayments already made to someCount advisers were of the scalepublished in the media.

However, Money Management

obtained a letter from CountFinancial chief executive DavidLane directly targeting Securitoradvisers and pointing out the scaleof “transition payments” paid toformer Count advisers to join bothSecuritor and Magnitude.

The letter refers to “significantsign-on payments in excess of$500,000” and says “we believe thatsuch payments, if they are notaccompanied by similar paymentsto existing advisers, fail to sufficient-ly recognise the loyalty and growthpotential of existing adviser firms”.

The letter then goes on to say, “ifyou feel your contribution to yourlicensee has not been recognised orrewarded, I would urge you toconsider what action you shouldtake”, adding that Lane would “loveto have a chat with you on how

Count can help grow your business”.Asked to comment on the letter,

Lane confirmed its existence andsaid it reflected a number of callsfrom existing Securitor plannersreceived by Count.

“Those planners have seen thereports of the sums paid to Count

and they have indicated they areconcerned they’ve been left out,”he said.

“We believe what has happenedhas created a set of ‘haves’ and‘have nots’ and what we are offer-ing is to treat these planners withequality,” Lane said.

Speaking for BT, Spiers said hewas disappointed by the Countapproach because it sought toplace a focus on BT when the issuewas much broader and involvedmuch larger issues.

“The focus on BT is unwarrant-ed and belittles the critical role ofplanners in making their decisionto move,” he said.

“Focusing on us misses the pointthat planners are making decisionsabout what will work for them inthe future,” Spiers said.

www.moneymanagement.com.au July 19, 2012 Money Management — 3

News

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van Eyk Research Pty Ltd ABN 99 010 664 632, corporate authorised representative of van Eyk Financial Group Pty Ltd ABN 28 149 679 078, AFSL 402146(authorised representative number 408625) (van Eyk) rates investment management capabilities rather than individual products. This rating is valid asat March 2012 (AMP Capital Australian Equity Concentrated Fund) but can change or cease at anytime and should not be relied upon without referringto the meaning of the ratings, as well as the full manager report, available to subscribers at www.iRate.vaneyk.com.au. Past performance informationgiven in this document is given for illustrative purposes only and should not be relied upon as it is not an indication of future performance. van Eyk hasnot directed the publication of AMP Capital Investors’ ratings. These ratings are not intended to influence you and your client’s investment decision in relation to any products managed by AMP Capital Investors and does not take into account your client’s individual financial situation, needs or objectives. We recommend that you and your client do not rely on these ratings in making an investment decision and instead you seek advice from anappropriate investment adviser and read the product disclosure statement before making such a decision.*ANREV Research 2011 – Asia Property / ANREV Fund Manager Survey, October 2011. **Tower Watson, Global Alternative Survey, July 2012. AMP CapitalInvestors Limited (ABN 59 001 777 591, AFSL 232 497) (AMP Capital), is the responsible entity of the AMP Capital Australian Equity Concentrated Fund and the AMP Capital Multi-Asset Fund and the issuer of the units in each Fund. To invest in this Fund, you’ll need to obtain the current Product DisclosureStatement (PDS) from AMP Capital. The PDS contains important information about investing in the Fund and it is important that you read the PDS before making a decision about whether to acquire, or continue to hold or dispose of units in the Fund. This information has been prepared for the purpose ofproviding general information, without taking account of any particular investor’s objectives, financial situation or needs. You should, before makingany investment decisions, consider the appropriateness of this information and seek professional advice, having regard to your objectives, financial situation and needs.

can look after the infra-structure and there’s dis-tribution,” she said.

Recently involved inindustry talks with theASX, Aurora Funds Man-agement director of insti-tutional distribution Alis-tair Davidson said thenew system would workbest as another opportu-nity for the business todistribute its investmentproducts.

Although brokers areall for having the oppor-tunity to sell more prod-ucts, he said fund man-agers will still need tomarket their managedfunds to brokers’ clients.

“The ASX have got agood settlement systemand if it makes it easierfor people to buy things,sure, but you still have topersuade them to buythem,” Davidson said.

From a self-managedsuper fund (SMSF) per-spective, InvestmentTrends senior analystRecep Peker said he sus-pects Aqua II would notnecessarily encourageretail investors – particu-larly SMSF investors –from investing in a man-aged fund.

He said they are “anti-managed fund” becausethey want to avoid payinghigh fees and wantgreater control over theirassets, regardless ofwhether investing ismade more direct or not.

Wealth Insights chiefexecutive Vanessa McMa-

hon said the real winnersfrom Aqua II would besmaller, boutique fundmanagers who don’t usea platform to distributetheir products.

“With most fund flowscoming from platforms,boutiques are beholdento platforms at themoment,” she said.

“To be able to haveanother distribution chan-nel is surely only going tohelp,” McMahon said.

According to Ian Irvine,head of customer andbusiness development atthe ASX, there is someconsideration from man-agers that they will beput in touch with previ-ously unseen sel f -directed investors.

“Now fund managershave to weigh up in theirmind the efficiencies thatan automated messageservice may provide – itmay deliver them costsavings, but they aredealing with more cus-tomers,” he said.

Aqua II floating retailContinued from page 1

Phil Butterworth

Vanessa McMahon

BT and Count Financial battle it out

New FOFAimplementationgroup for AFABy Mike Taylor

THE Association of FinancialAdvisers (AFA) has signaled it willbe establishing a Future ofFinancial Advice (FOFA) imple-mentation working group aimedat assisting members to accom-modate regulatory changes asthey are finalised by the Aus-tralian Securities and Invest-ments Commission (ASIC).

Establishment of the groupwas confirmed by AFA chiefexecutive Richard Klipin, andhas come amid continuingconcern at the pace with whichASIC is building the regulatoryframework around the FOFAlegislation.

There is particular concernthat the regulator has yet todetail arrangements around thekey issue of the grandfatheringof volume bonuses – somethingwhich will impact the commer-cial models underpinning manyfinancial planning practices.

As well, there is concern thatthe proposed 1 July 2013 imple-mentation date for the provisionof fee disclosure statementsmeans planners will alreadyneed to be compiling the infor-mation for some affected clients.

Klipin said the FOFA imple-mentation working group wouldbe inclusive of licensees andwas intended to ensure anappropriately coordinatedapproach to both understand-ing and meeting the new regu-latory standards.

News

By Bela Moore

AUSTRALIANS will continue to commandhigher salaries than their international coun-terparts – with the finance sector predictedto continue its recovery, according to HayGroup’s Australian Salary Index 2012.

Hays expects Australian salaries to increaseby an average of 4 per cent across all industriesin 2012, as the finance sector regains groundpost-GFC.

Bonus payments were back to pre-GFC

levels for finance, Hays said. Those with specialist knowledge or indus-

try-specific technical skills commanded amuch higher premium, with incentivised payon the rise, the report said.

The link between company performanceand incentives has strengthened, Hays said,with 37.9 per cent of executive and seniormanagement total pay slated as bonuses in2012, up almost 8 per cent.

But fixed annual reward moved 3.9 percent, still 1.5 per cent shy of pre-GFC levels

and 0.3 per cent behind the overall industrialand services market.

“Sectors such as financial services areshowing increasing signs of resilience, withthis sector experiencing a 5.7 per centincrease in Total Annual Reward over thelast 12 months,” said author of the reportand senior Hays consultant Steven Paola.

Insurance however, had a tough time retain-ing talent, as the sector was placed in a pool ofindustries that delivered wages between 3 and10 per cent lower than the national average.

Hays pointed to rising cost-of-living pres-sures, a tightening of the employmentmarket and skills shortages in technical rolesas the causes of global wage discrepancies.

The report said Australia was in a goodposition to retain local talent and attract over-seas workers due to high wages compared toother developed and emerging economies.

But the largest pay increases have been inthe resources sector, which has undone themyth that capital city workers attract higherwages, Hays said.

Finance wages to rise in 2012, says Hays

P R O F E S S I O N A LS M S F

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Richard Klipin


News

By Andrew Tsanadis

FINANCIAL advisers should rethink thebenefits of value-style share funds as activemanagement falls across the Australianlarge-cap share funds sector, according toMorningstar’s latest sector wrap.

While focusing on investment style hasproduced strong results for large cap invest-ing in recent times, the spread betweenstyles narrows over the long-term, Morn-ingstar stated.

“Value-style fund managers adoptvarious processes which deliver varyingoutcomes,” the review stated.

“Investors and advisers therefore needto be mindful of the underlying holdingsto ascertain the likely path of returnsand whether or not a particular strategyfits with an overall portfolio and riskprofile.”

According to Morningstar, there hasbeen a fall in the “activeness” of large-capAustralian share funds over the past 12-15

months, due largely to a number of fundmanagers whose portfolios have become“meaningfully less different than the index”.

Understanding the role of an investmentstrategy in a portfolio is critical, and simplyassembling highly-rated managers canduplicate style exposures and reduce diver-sification, the review stated.

Morningstar added that advisers shouldfavour funds with discounted base fees,high watermarks that cannot be reset, andlonger crystallisation periods.

As part of the sector wrap, Morningstarawarded four strategies a gold rating, 12 asilver rating, and 23 a bronze rating.

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We see it as your clients do; ultimately‚ it’s about losing money.The world of investment is filled with all kinds of mathematical formulas measuring risk. The trouble is that, like in so many areas of finance, an excess of data can distract you from the main game.

At Aberdeen, we hold risk management sacred and we wouldn’t want to diminish its importance, but we like to put things in perspective: do your clients perceive risk as a statistical equation or as the danger of losing money? We suspect it’s the latter, and we couldn’t agree more.

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Some see risk as a function of complex calculations.

FOScomplaintsjump By Chris Kennedy

THE Financial OmbudsmanService (FOS) received 9,590complaints in the first quarterof this year – almost one thirdmore than the first quarter oflast year, according to FOSstatistics.

There has been a steadilyincreasing trend since the firstquarter of 2011 when 7,415complaints were received,despite a slight dip in thefourth quarter.

Half the complaints relatedto credit (4,810) and almostone third to general insurance(2,814). Complaints relating topayment systems, deposittaking, investments and lifeinsurance together made upless than 20 per cent ofcomplaints for the quarter.

A significant number ofdisputes were closed over thesame period, although itlagged behind the number ofnew disputes.

The 8,734 disputes closed inthe first quarter of 2012 wereup 5 per cent on the previousquarter and up 20 per cent onthe January-March 2011quarter.

Three quarters of resolutionsresulted from an agreementbetween the financial servicesprovider (FSP) and the appli-cant, and the remaining quarterwere resolved by FOS’ decision.Almost half of these (11 per centof total resolutions) weredeemed to be outside the FOS’terms of reference.

Of the remainder, 6 percent of resolutions werediscontinuations (where thecomplainant discontinuesthe dispute or fails to respondto communications). Five percent of total resolutions were byFOS decision in favour of theFSP, and just 3 per cent of reso-lutions were by FOS’ decisionin favour of the applicant.

‘Activeness’ dips across large-cap sector


News

Vow drives wealth managementoffering forward By Andrew Tsanadis

MORTGAGE aggregator VowFinancial has continued thegrowth of its wealth managementoffering with a new joint venturein Melbourne.

With two financial planning prac-tices in Sydney and another in Perth,Vow chief executive Tim Brown saidthe firm was also in negotiations toadd a branch in Brisbane.

He said wealth management hadbeen a significant revenue-maker forthe business over the past 12 months,

with most clients looking for incomeand life protection solutions.

“We’re also finding commercialfinance is in growing demandbecause banks are squeezing theirclients on rates at the moment andpushing up the margin on theircommercial products,” he said.

Vow has set up a specialistcommittee of commercial mortgagebrokers to help its residentialbrokers close business deals in situ-ations where they wouldn’t normal-ly have that level of experience andknowledge, Brown said.

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Record global ETP inflows in first halfTHE first half of 2012 has seen the strongest inflowsinto exchange-traded products (ETPs) in a first half inhistory, according to BlackRock.

ETPs attracted net new assets of more than $100billion during the first half of 2012, increasing assets inglobal ETPs to $1.68 trillion, according to BlackRock’sETP Landscape Industry Highlights.

The $105 billion increase was a 16 per cent rise on the$90.6 billion seen in the first half of 2011, BlackRock stated.

There was particularly strong demand for exposureto income-producing assets, with the largest portion of

inflows seen in fixed income products. The $42 billionflowing into fixed income ETPs was more than doublethe $19.6 billion in the first half of 2011 and includ-ed $15.5 billion into investment-grade corporatebond ETPs.

Fixed income was followed by developed marketsequities ($40.5 billion). Almost three quarters of thoseflows were into North American equities, with Euro-pean equities seeing a slight net outflow.

Emerging markets equities accounted for $15 billionof net inflows and commodities $5 billion.

Remodel fees now: ElixirBy Chris Kennedy

FINANCIAL advisers have been urged to remodel their fee struc-tures now to allow them to have their new pricing models up andrunning by the time Future of Financial Advice (FOFA) legislationtakes place on 1 July 2013.

Elixir Consulting has released the second edition of its AdviserPricing Models Research Report, and managing director of ElixirSue Viskovic said over half the advisers in the 433 financialadvice businesses surveyed estimated it took them over sixmonths to create their pricing model.

Ninety-five per cent estimated it took them a year or more toimplement it, meaning that for advisers who are still refiningtheir model or are yet to create it, “our message would be tostart increasing their focus as a matter of urgency”, she said.

More advisers are charging fees now compared to when thefirst edition of the research was released in 2009, while manyare just now refining or determining their pricing models,Viskovic said.

The research found that advisers who undertook a robustprocess charge 27-30 per cent more than those who did notapply a robust process to their fee model – suggesting thatadvisers who did not put adequate time into their chargingmodel may be undercharging for their services.

“It is of concern to note that if advisers don’t price effec-tively, they may charge too little for their advice – which willhave disastrous long-term consequences on their businesssustainability. It’s important to invest the time to do it prop-erly,” she said.

“We would counsel against a business simply copyinganother’s pricing model and implementing it. However, shar-ing ideas, experiences and understanding different fee struc-tures has proven to be very helpful to many advisers,”Viskovic said.

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News

Market volatility and media coverage influencing super switchingBy Mike Taylor

THE investment volatility currently being expe-rienced across the globe is unprecedentedand is likely to continue, according to newanalysis released by the Association of Super-annuation Funds of Australia (ASFA).

What is more, the superannuation bodyhas warned that the heightened volatilitywhen combined with media coverage cangive rise to switching by superannuation fundmembers.

In a discussion paper examining theneed for further academic research intothe superannuation sector, ASFA says thevolatility of investment markets followingthe global financial crisis has made manypeople question whether the asset alloca-tion strategies of many superannuationfunds are appropriate, particularly for baby

boomers approaching retirement.“One of the things we do need to appre-

ciate is that the level of investment volatil-ity we are experiencing at the moment isunprecedented,” it said, citing a report byProfessor Amin Rajan – ‘Market Volatility:Friend or Foe?’ (a global survey of 289asset managers, pension plans, pensionconsultants and fund distributors, manag-ing total assets under management of$25.2 trillion) – which predicts that volatil-ity will continue, with 78 per cent ofrespondents to the survey anticipating pro-longed turbulence.

“According to the report, the last four yearshave been the most volatile in the history ofequity markets, with price fluctuations of 4per cent or more in intra-day sessions occur-ring six times more than they did on averagein the previous 40 years. Extreme spikes in

market volatility and asset class correlationshave been common,” the ASFA analysis said.

It said some causes of the global volatilitywere known, with the de-leveraging of the“mother of all debt bubbles in the West”being the primary cause.

However, it said other factors contribut-ing to volatility included high frequencytrading (HFT), which caused the 2010 mar-kets’ ‘flash crash’.

The ASFA analysis pointed out that by2010, HFT accounted for over 70 per cent ofequity trades in the US.

It also pointed to the role of the media,saying the focus on investment volatility hadthe potential to unnerve investors.

“ASFA’s anecdotal feedback is that whilethe number of switches made by superannu-ation fund members at times of heightenedmarket volatility is low in absolute numbers, itis significant in terms of the size of individualaccount balances,” it said.

“The challenge for superannuationfunds is to manage volatility risk, both inabsolute terms through asset allocationand by communicating to members at thesame time as they are receiving messagesfrom a variety of sources that focus onthe downsides of investments,” the ASFAanalysis said.

New boutique manager open for businessBy Milana Pokrajac

TWO former Hunter Hall global equity portfolio managers haveformed a new boutique funds management business, MorphicAsset Management.

Morphic is a global equities manager founded by Jack Lowen-stein and Chad Slater, formerly of Hunter Hall, who will be itsjoint chief investment officers and part-owners.

With Perpetual Trust Services as its responsible entity, theboutique has also come out with its first product, Morphic GlobalOpportunities Fund (MGOF).

MGOF will be targeted at both wholesale and retail investorsand will invest in global equities, the firm has announced.

Morphic will be majority owned by the founders and staff, with

the other large shareholder being a private equity fund estab-lished by Innova Portfolio Management and available on thee-Clipse UMA platform.

Innova and the e-Clipse UMA Platform are majority owned bya financial planning dealer group Fortnum Financial Group.

The two founders have been joined by research manager TimCheung and risk manager Geoff Wood.

“Despite market chaos, equities are one of the few ways toprotect wealth, and so if you combine research with flexiblehedging strategies, then global equities are going to representthe wisest diversification of capital risk in current times,” MrLowenstein said.

Minimum investment in MGOF is $10,000, with minimumadditional investments of $5000.

Retail investorsre-evaluatehedge fundsBy Andrew Tsanadis

AS the market continually fails to meet thehighs of pre-2008, fed-up retail investors areincreasingly looking to equity hedge funds forhigher returns, according to Australian FundMonitors chief executive Chris Gosselin.

Although hedge funds are more widelyavailable in the wholesale market, retailinvestors are often willing to bear the complex-ity and higher fees associated with anabsolute return fund in search of a more pos-itive return outcome, he said.

“There’s a lot of focus on fees, but youshould be looking at net return, and if thenet returns aren’t good enough you should bequestioning the performance of the fundmanager or the sector you’re invested in,”Gosselin said.

At the moment, more defensive, marketneutral strategies are performing better thansome of the more index-concentrated fundsthat might only have 10 or 20 positions andhave large exposures to individual sectors,according to Gosselin.

“There’s certainly a move to say thereneeds to be some flexible asset allocationwithin equities,” he said.

“The problem is there’s a huge blanketview that says ‘avoid equities, go to cash’ justbecause of risk. I think that’s logical but notsensible,” Gosselin said.

A financial adviser’s concern about the riskof hedge funds should be mitigated by takinginto account the type of sector or fund man-ager they’re invested with rather than turningtheir back on them altogether, he said.

SPAA wants super pension stream clarifiedBy Bela Moore

THE SMSF Professionals’ Association ofAustralia (SPAA) has called on the AustralianTaxation Office (ATO) to clarify when a super-annuation income stream begins and ends.

Although a response was expected lastmonth and numerous submissions made onthe issue, the ATO has yet to come clean,according to SPAA.

SPAA is requesting clarification on whatconstitutes the provision of a pension in a fundand the tax implications it carries.

“It has the potential to impact significantlyon members’ benefits. Certainly there is thepotential for significant additional income taxto be paid if the trustees get it wrong,” SPAA

director for educational and professional stan-dards Graeme Colley said.

He said the link between tax law and SISlegislation had always been tenuous and a lagin finalising the draft ruling had exacerbatedthe issue.

Colley said if the ruling was backdated to1 July 2007, it could be very costly for thosewho had misinterpreted the law.

“Larger public offer funds that are in this boatmay end up with a larger tax bill to pay. Theymay need to amend their systems and reducethe balances of members to pay the additionaltax. This may impact unfairly on members whoare new to the fund or those who have been inpension phase for a shorter period than thebackdating requires,” he said. Graeme Colley

ASIC bans unlicensed Sydney ‘adviser’By Tim Stewart

A SYDNEY man described by the Aus-tralian Securities and Investments Com-mission (ASIC) as a “financial adviser”has been permanently banned from pro-viding financial services.

An investigation by the regulator foundthat Ropati Broederlow (of Punchbowl, NSW)advised clients to deposit funds into a trustaccount run by RN Property Pty Ltd – ofwhich he was the sole director.

Broederlow solicited deposits of morethan $150,000 from over 20 clientsbetween August 2010 and July 2011,telling his clients the funds would be usedto purchase a house.

When clients called for the return oftheir money, “both RN Property and MrBroederlow failed to use the funds ontheir clients’ behalf or refund the investedmoney,” ASIC stated.

Broederlow was also the sole director ofYourefund Pty Ltd, which has had its credit

cancelled by ASIC because the regulatorbelieves Broederlow “is not a fit and properperson to engage in credit activities”.

ASIC Commissioner Peter Kell said thelicensing system “provides importantrights and protects people and theirmoney”.

“Anyone giving investment advice orselling financial products without holdinga licence may be breaking the law, andASIC will continue to pursue these offend-ers,” he said.

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For a better value platform and the chance to win one of fi ve $1000 cash prizes, visit www.asgard.com.au/win or call 1300 881 716 to speak to a BDM.

Asgard Capital Management Limited ABN 92 009 279 592 AFSL 240695 is the issuer of Asgard Infinity eWRAP. A Product Disclosure Statement can be obtained by calling 1800 731 812, or visitingwww.asgard.com.au/infinity. You should consider the appropriateness of this product, having regard to your client’s objectives, financial situation and needs. *Based on a balance of $120,000. Source:Chant West Pty Limited. Chant West’s Financial Services Guide is available at www.chantwest.com.au. Fees exclude the standard commission paid to financial advisers. Fee comparison includes theflagship products of the top ten retail providers by superannuation FUA at 31 March 2012. Total fees include administration and investment fees based on each fund’s multi-manager option with a 61-80%allocation to growth assets. Where no such option exists, the default option has been used. Investment fees include the most recent performance fees disclosed. Fees are gross of income tax of 15% andexclude transaction fees. Asgard Infinity Core fees include the Core administration fee of 0.30% pa and investment fees net of rebates of 0.50% pa. This data may change into the future and this may alterthe outcome. ^As reported in Investment Trends Platform Competitive Analysis and Benchmarking Report December 2011 and Wealth Insights Service Level Report 2012. Chant West’s data is based oninformation provided by third parties that is believed accurate at March 2012. Asgard is not in any way responsible for such data. For further information on this comparison visit www.asgard.com.au/infinity.Full terms and conditions apply. See www.asgard.com.au/win for details. BTF4658-MM-HPC-1207

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News

My Adviser launchesaccountants’ package By Milana Pokrajac

DEALER group My Adviser has announced thelaunch of a specialist package for accountants, whichit claims will go beyond the proposed legislation.

Under the proposed removal of the accountants’exemption, accountants will have to obtain a limitedAustralian Financial Services Licence if they wish tocontinue to provide advice around self-managedsuperannuation funds (SMSFs) and superannuation.

“[The package] offers professional indemnity (PI)insurance to accountants and will also allow themto provide some strategic advice to clients on SMSFs,including on basic deposit products and cashmanagement accounts,” said Philippa Sheehan,managing director of My Adviser.

The new offering will include a flat-fee pricingmodel and the option of a weekly payment for PIinsurance, in addition to ongoing support andeducation for accountants.

With the Institute of Chartered Accountants esti-mating that up to 10,000 accountants will be lookingto take advantage of the current legislative changesto move into the sphere of SMSF advice, Sheehansaid there was a significant opportunity for account-ants to license themselves sooner rather than later.

“We feel very strongly that accountants shouldbe able to get the correct licensing easily. We haveno links with any bank or insurance company, andwe see this as a competitive advantage as institu-tional aggregation continues in the industry,”Sheehan added.

Treasury Group adds boutique fund managerBy Andrew Tsanadis

TREASURY Group (TRG) has entered into a partnership agree-ment with Singapore-based equity manager Octis AssetManagement.

As part of the agreement, TRG has acquired a 20 per centequity stake worth $224,000 in Octis, with an option to increasethat by a further 10 per cent if new funds-flow goals are met.

The initial stake was funded from working capital and thestrike price of the option will be dependent upon the “prevail-ing net asset backing at the time the options are exercised”,TRG stated.

TRG chief executive Andrew McGill said the company hadbeen interested in diversifying into alternatives and wouldbe looking to grow the Octis business both in Australia andoverseas.

The latest addition to TRG follows an announcement in May,when the group acquired a 30 per cent equity stake in Melbourne-based boutique manager Evergreen Capital Partners.

“We have been very impressed by TRG’s performance inpartnering boutique fund managers and are very confidentof the synergies created with our partnership,” said Octis chiefexecutive Jerome Feracci.

Octis currently has $50 million in funds management.


ATO managing 1.4 million debt casesBy Mike Taylor

THE Australian Taxation Office (ATO) hasacknowledged the degree of debt it is man-aging exceeds $14 billion.

The Commissioner for Taxation, MichaelD’Ascenzo, has told a recent conference theATO is managing around 1.4 million debtcases with a total value in excess of $14 bil-lion dollars.

As well, he said that every quarter the taxoffice was managing thousands of overdueactivity statement payments.

Explaining the ATO’s use of analytics toassist in managing the debt problem, D’As-cenzo said some cases resolved themselveswhile others required further action by theagency.

“A suite of debt models predicts a tax-payer’s propensity to repay a debt, and theircapacity to pay,” he said. “Using income taxreturn data, we are able to risk score overone million companies across all industries,all corporation types (public, private) and allsizes, as measured either by assets ornumber of employees.”

D’Ascenzo said the combined scoresenabled the ATO to determine the necessarysupport or compliance strategy required.

“Those who are predicted to finalise theirdebt on their own – people with a predictedhigh propensity to pay – do not need to bebothered by us unless they are in need ofassistance,” he said. “On the other hand, wetry to engage early with taxpayers who have alow propensity and a high capacity to pay.” Michael D’Ascenzo


News

Sophisticated fraudsterstargeting savvy investors

By Bela Moore

ACTIVE managers had it tough in thefirst half of 2012 as issues in theperiphery of Europe continued towreak havoc on fixed interest markets,according to Standard and Poor’s(S&P) half-yearly fixed interest peergroup review.

S&P analyst David Erdonmez saidperformance had not recovered since2010, when all managers targetingthe UBS Composite Bond Index hadachieved above-benchmark returns.

S&P downgraded a number ofglobal fixed interest funds at the end of2011, blaming their poor performanceon market volatility, short duration andoverweight credit calls.

Duration continued to dictate S&P’s

core offerings in 2012, along withmanagers’ ability to predict futurepaths of interest rates. Credit-basedofferings had been susceptible towidening spreads in a risk-off environ-ment, the report said.

Bentham Asset Management andPIMCO were the only global fixed inter-est funds to receive five-star ratings,which they also managed to holdthroughout 2011.

S&P awarded Tyndall InvestmentManagement, PIMCO, Colonial FirstState Global Asset Management andAMP Capital Investors five-star ratingsfor their Australian fixed interest offer-ings, while OnePath’s Wholesale Diver-sified High Yield Trust and WholesaleDiversified Fixed Interest Trustremained on hold.

The only notable team change,according to S&P, was the addition offormer INGIM staff members RachelO’Connor and credit analyst Thomas Wuto the UBS Asset Management team.

David Erdonmez

Perpetual looks to offload Lenders Mortgage ServicesBy Chris Kennedy

PERPETUAL has reached a condi-tional agreement to sell its Per-petual Lenders Mortgage Ser-vices (PLMS) to First MortgageServices (FMS) affiliate FAF Inter-national Property Services (Aus-tralia), according to a statementto the Australian SecuritiesExchange (ASX).

Perpetual described theannouncement as a “first majorupdate on the implementation of

its Transformation 2015 strat-egy”, which was announced on25 June 2012. The strategy aimsto “significantly simplify the com-pany’s corporate structure, refo-cus its operational activities andcapture new opportunities forgrowth,” Perpetual stated.

“The sale allows us to refocusour corporate trust business oncorporate fiduciary services,” saidPerpetual chief executive andmanaging director Geoff Lloyd.

Although PLMS is “competi-

tively well positioned” it fits betterwithin a company that can addscale and technological innova-tion, Lloyd said.

“A sale also gives us the bestopportunity to maximise PLMS’value for our shareholders,” headded.

Perpetual did not disclose theterms of the sale or the condi-tions that would need to be metfor the sale to proceed, but saidthe transition was not expectedto be material to Perpetual’s net

profit after tax.FMS is a subsidiary of US-

based First American FinancialCorporation. PLMS has around280 full-time staff (as at 31 May2012). Completion of the saleis expected to occur before 30September 2012, according tothe ASX statement.

The operations team withinthe PLMS business is expectedto remain in place followingcompletion of the acquisition,according to FMS.

ClearView snaps up six practices in JulyBy Tim Stewart

CLEARView Wealth has recruited six new financial prac-tices in July, bringing the total number of advisers in thedealer group to 78.

The number of advisers operating under the ClearViewlicence has increased by 21 since 31 December 2011,according to a statement by the company.

The six practices recruited in July are the LeveringtonFinancial Group, Peter Howard Insurances, MBA Finan-cial Group, The Insurance and Superannuation Centre,The Financial Clinic (Victoria) and Centre of Wisdom.

The life insurance side of the business has also grown, withlife insurance new business premiums up $5.2 million forthe 12 months ended 30 June 2012, according to ClearView.

In addition, the group’s recently launched life adviceproduct LifeSolutions has been added to the ApprovedProduct Lists of 14 dealer groups since 2 April 2012, saidthe statement.

ClearView managing director Simon Swanson said the“positive acceptance” of the LifeSolutions suite of prod-ucts, along with strong life insurance premium growth,“reflects the early success of our strategy in the retail lifeadvice segment”.

Geoff Lloyd

AUSTRALIANS have lost $113 million to sophisticatedinvestment fraud since January 2007, and the victimshave predominantly been financially literate and highlyeducated men.

The Australian Crime Commission report into ‘Seri-ous and Organised Investment Fraud in Australia’ waspublished jointly with the Australian Institute of Criminol-ogy, and is based on the efforts of the multi-agencyTask Force Galilee.

Task Force Galilee is comprised of 19 agencies, and isfocused on combating serious and organised investmentfraud aimed at Australians.

The frauds use sophisticated techniques to solicitinvestment in non-existent or essentially worthless secu-rities, according to the report.

The most common victims of the frauds tend to bemen aged over 50 who are highly educated and finan-cially literate. Victims also tend to be small businessowners, self-funded retirees and individuals who aresocially isolated.

“Technological ‘grooming’ of the potential investor com-bined with personal contact over weeks, even months, isused to convince victims of the legitimacy of the invest-ment,” according to the report.

Most of the frauds base their operations overseas,although recent investigations have identified operationsbased in Australia, said the report.

The average amount transferred by victims of thesetypes of frauds is $18,174, with a range between $9 and$1,293,390, according to the report.

“Investors are also encouraged not to become com-placent. Due diligence is required even if an investor hasa financial adviser because they may also be unaware ofthe fraud,” said the report.

Rough trot for active fixed interest managers


By Milana Pokrajac

OUTSOURCING business process-es for self-managed superannua-tion funds (SMSFs) is growing inpopularity, but cutting costs is notthe biggest motivator.

According to a survey conductedby Sundaram Business Services,which offers SMSF administrationservices itself, freeing up time and

solving staffing issues are other majorreasons why accountants and otherbusinesses consider outsourcingSMSF back-office functions.

But labour arbitrage is not the onlymotivator, with most of Sundaram’sclients retaining staff numbers,according to head of Asia PacificHarish Rao.

“The motivation is usually beingable to have a more flexible back

office processing arrangement, onethat is scalable to fluctuating businessdemands and offers faster turn-around times,” Rao said.

“Attracting staff for the repetitiveback-office functions can be prob-lematic for firms, since professionalaccountants generally want to spendmore time on client development andhigher value-added work,” Raoadded.

SMSF trustees becoming more strategicBy Damon Taylor

SELF-managed superannuation fund(SMSF) trustees are becoming morestrategic within their portfolios toensure recent downturns are notadversely affecting their retirementgoals, according to Capital CFDs.

SMSFs have been allowed accessto contracts for difference (or CFDs)since 2007, and according to AshleyJessen, head sales trader at CapitalCFDs, this change has given trusteesa cost-effective and efficient tool forhedging, as opposed to traditionalmethods such as options.

“If a SMSF holds 2,500 ANZshares, then traditionally you wouldneed to understand options, timedecay and strike prices in order toget insurance or protection over yourANZ shares,” he said. “Whereas, trad-ing the much simpler CFD over ANZallows you to trade short 2,500 ANZshare CFDs without having to worryabout strike prices, time decay andtime expiry.

“This is essential during marketdownturns, such as recently whenANZ fell just over 12.5 per cent in 13days,” Jessen said.

Instead of being exposed to a 12.5per cent drop in ANZ, Jessen saidthat an SMSF investor positioned viasuch an “insurance policy” couldhave positioned themselves to limitthat downside for minimal outlay.

“This explains the growth of CFD

trading by SMSF trustees to ‘short’their own portfolios to protect thevalue of the core portfolio in case of amarket slide,” he said.

Yet for Jessen, the equally impor-tant point to consider is that mostCFD providers recommend that SMSFtrustees use CFDs as an efficientinsurance policy, or hedge, only. Theydo not, for instance, recommend trad-ing for speculation.

“Experienced investors who under-stand leverage and who are lookingto use CFDs for risk protection arewell advised to consider this tech-nique further,” Jessen said. “Euro-zone announcements that spookinvestors and drive markets down areall too common nowadays, soinvestors need to consider all thetools available to limit their downsideand protect their profits.”

Macquarieenhances termdeposits for SMSFsBy Mike Taylor

MACQUARIE Adviser Services has enhanced itsproduct offering for self-managed superannu-ation funds (SMSFs), introducing an upgradeto the functionality of its term deposits.

The company announced the upgraded func-tionality reflected recent research by InvestmentTrends confirming a third of SMSFs intendinvesting in term deposits in the next 12 months– up from 27 per cent in 2011.

The company said the enhancements wereaimed at driving efficiencies for financialplanners through the introduction of anonline maturities capability and data-feedimprovements.

It said the updates would help streamlinethe administration required in managing theterm deposit component of clients’ invest-ment portfolios.

Commenting on the product upgrades,Macquarie Adviser Services head of cashproduct Peter Forrest said they were intended todeliver simple yet effective enhancements toMacquarie’s broad range of cash managementsolutions, especially for SMSFs.

“Managing term deposit maturities can be alaborious process for both advisers and theirclients, with the traditional process requiringsignificant paperwork in a limited timeframe,”he said. “By introducing an online capabilityand enabling clients to allow their adviser tomanage instructions on their behalf, we havereduced the time burden on both parties,simplifying the whole maturities process.”

SMSF Weekly

Outsourcing SMSF admin grows in popularity

1. Past performance is not a reliable indicator of future performance. The BlackRock Australian Equity Opportunities Fund (Fund) invests in the BlackRock Equitised Long Short Fund (Inception Date 18 December 2001. Open to wholesale clients only). Issued by BlackRock Investment Management (Australia) Limited ABN 13 006 165 975, AFS Licence Number 230523 (BlackRock). This document contains general information only, is subject to change and does not take into account an individual’s objectives, fi nancial situation or needs and consideration should be given to talking to a fi nancial or other professional adviser before making an investment decision. BlackRock believes that the information in this document is correct at the time of publication however no warranty of accuracy or reliability is given. Investing involves risk including loss of principal. No guarantee as to the capital value of investments nor future returns is made by BlackRock or any company in the BlackRock group. A Product Disclosure Statement (PDS) for the Fund is available from BlackRock. You should consider the PDS in deciding whether to acquire, or to continue to hold, the product. Please visit our website www.blackrock.com/au to obtain a copy of the PDS. © 2012 BlackRock, Inc. All Rights reserved. BLACKROCK, BLACKROCK SOLUTIONS, iSHARES, LIFEPATH, SO WHAT DO I DO WITH MY MONEY, INVESTING FOR A NEW WORLD, and BUILT FOR THESE TIMES are registered and unregistered trademarks of BlackRock, Inc. or its subsidiaries in the United States and elsewhere. All other trademarks are those of their respective owners. OMHKO0274_2I_MM4

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WHEN most planners andinvestors hear the ter m

‘managed investment scheme’and its accompanying acronym, ‘MIS’,their thoughts inevitably drift towardstax-effective agribusiness schemes –many of which have failed spectacular-ly in recent years.

But an MIS is really just any pooledinvestment with a unit trust structureand a responsible entity, according toZenith senior investment analystDugald Higgins.

“When people hear ‘MIS’ all they thinkabout is things like Great Southern andTimbercorp. It’s been a big bugbear ofmine for almost a decade,” Higgins says.

So how does a typical agribusinessMIS differ from, say, a property trust?For starters, they tend to be tax-effec-tive, says Higgins. That is, they requirea product ruling from the AustralianTaxation Office (ATO) every year inorder to allow investors to claim a taxdeduction on their investment.

But it’s not only agribusiness schemesthat have sought product rulings fromthe ATO. Film schemes, certain types ofbonds and some structured productshave also been granted product rulingsin the past, says Higgins.

However, the bulk of product rulingsare for agribusiness projects, Higginsadmits. In 2006, the ATO issued 165such rulings; by the time the 2011-2012financial year rol led around, thatnumber had fallen to 24.

The second way agr ibusinessschemes differ from typical MISs is thatthey tend to not operate under a unittrust structure – investors have contrac-tual rights instead, says Higgins.

There are a number of agreementsbetween the investor, the responsibleentity and the investment manager inplace instead of a direct unit trust struc-ture, Higgins says. The reason behindthe agreements is to remove the ability

of the investor (typically referred to as a‘grower’) to come in and harvest theircrops themselves, Higgins adds.

Finally, not all agribusiness schemesare tax-effective, says Higgins. He pointsto two Rural Funds Management prod-ucts, StockBank and RiverBank, asexamples of non-tax-effective agribusi-ness products.

The state of playAt its height in 2008, the retail agribusi-ness sector reportedly saw annualinflows above the $1 billion mark above.

It is difficult to estimate the currentinflows into the retail market, but oneindustr y insider put the market at $35 million for the 2010-11 financial year– with 2011-12 on track for around $15 million.

While there were around 80-90 newschemes being offered at the height ofthe tax-effective agribusiness boom,there were only four retail offers in 2012:the TFS Sandalwood Project 2012,AACL’s Grain Co-production Project, theWA Bluegum Project 2012, and LowellCapital’s Premium African Mahogany2012 Project.

Of those four projects, the AACLproject is not going ahead due to lackof retail funding (money is currentlybeing returned to investors, according

to the company) and the future of thisyear’s Premium African Mahoganyproject also appears to be in doubt.

The dramatic fall-off in the sectorbegan in 2009 when a number of high-profile schemes collapsed – and thepoor investor sentiment following theglobal financial crisis has also played arole.

“ The tax-effect ive schemes arelabouring in an environment wheresuch schemes are a dirty word for muchof the investment community – bothfinancial planners and investors alike,”says Higgins.

While the (albeit, relatively small)inflows into the remaining tax-effectiveschemes suggest that there are someadvisers continuing to recommendagribusiness to their clients, there arenot many dealer groups around that willadmit to including such a scheme ontheir Approved Product List (APL).

All of the dealer groups contacted byMoney Management denied having anyagribusiness products – tax-effective ornot – on their APLs.

One dealer group that was badlyburnt by the high-profile collapses isProfessional Investment Services (PIS).Former PIS managing director GrahameEvans told Money Management in Maylast year that agribusiness would haveto be “well diversified” with “substan-tial funds under management” andinstitutional ownership to complementretail investors before the dealer groupreconsidered the sector.

Who’s left?The companies that survived the spateof agr ibusiness col lapses are nowrelying primarily on wholesale invest-ment rather than the retail MIS sector.

TFS Sandalwood grows Indiansandalwood (Santalum album) onbehalf of its investors in the Kununurra,a tropical region of Western Australia.

According to the TFS website, Indiansandalwood is “renowned for its fragrantand medicinal properties” and has “a widerange of uses in the global fragrance,incense, worship and carving industries”.

Strong demand for the product hasled to the deforestation of Santalumalbum in India, Indonesia and Timor –leading TFS to believe that the scarcityof the product will result in a relativelyhigh selling price.

But considering the company has yetto conduct a commercial harvest of itsproduct, how can it be certain that whatit eventually produces will be identicalto wild Indian sandalwood growingoverseas?


Agribusiness

Inflows into the retail agribusinesssector deteriorated rapidly since the2008 peak.Of the remaining four projects in 2012,one has been withdrawn and another isin doubt.The sector is frustrated by the lack ofinterest institutional investors havehistorically shown in agribusiness.Additional disclosure benchmarks havebeen welcomed by the industry.

Key points

The retail agribusiness sector is a shadow of its former self, with plannersstaying away in droves. Tim Stewart takes a look at a sector with aserious image problem.

Croppedharvest

TFS Sandalwood chief f inancialoff icer Quentin Megson says thecompany has conducted tests withEuropean fragrance houses and Indianbuyers using sample harvests of treesgrown in the Kununurra.

“It’s right in the middle of the speci-fications for Indian sandalwood oil.We’d be very surprised if that’s not thecase across the board,” he says.

“Our unknown is more: ‘What will bethe yield?’ Our yield estimates havea l w a y s b e e n o f f t h e b a c k o f o u rforester’s formulations and so forth.But there’s no real information there tog e t i n f o r m a t i o n o n , b e i n g t h epioneers,” Megson says.

The first commercial harvesting of theproduct is likely to begin in some formin 2013, he adds.

“Our first plantings were in 1999. Thefirst PDS [Product Disclosure State-ment] was for 15 years in the ground.Technically, the first harvest of theproject would be in 2014, but…we’reinvestigating doing some or all of ourfirst harvest next year,” Megson says.

The retail 2012 TFS project ended upraising $9.3 million in 2011-12 – up 30per cent from last year.

But the amount was eclipsed by thewholesale investment into the project,which came primarily from overseas,says Megson.

To provide some context, the totalfunds raised last year will be used toplant 1,500 hectares of Indian sandal-wood – and only 88 hectares of that willcome from the retail MIS offering,according to Megson.

“In an ideal world we’d love retail/MISto be higher…but we’ll never be relianton it like we were back in 2008 andbefore. Our first wholesale investorcame in 2009-10,” says Megson.

But “notwithstanding what’s gone on”in the sector in recent years, Megsonreckons TFS Sandalwood is a case studyfor “what MIS can do as a positive”.

“We’re the pioneers and world leadersin a very valuable plantation that prob-

ably wouldn’t have gotten off the groundwithout MIS,” says Megson.

Going against the grainOne of the biggest surviving agribusinessschemes, AACL, has withdrawn its 2012Grain Co-production Project following alacklustre retail MIS take-up.

AACL executive manager for capitalraising, Rob Melville, said his companyacts as an inter mediar y betweeninvestors and farmers to grow grain.

“The investors own the grain, andthey contract the farmers to grow it forthem. There’s a profit-sharing mecha-


Continued on page 16

Agribusiness


Agribusiness

nism to incentivise the farmers to dothe best job they can,” says Melville.

All of the grain grown by the farmersis then pooled in each project, and theinvestors get the proportionate sharedepending on how many units theyown, he says.

“This year’s capital raising due to themarket circumstance didn’t warranttaking on the project over five seasons,”says Melville.

The 2012 project was not viable becauseAACL’s fee income is very small, and theexpenses to run the project are very highsince the company needs to monitor thefarmers’ performance, he says.

This year’s project was also hamperedbecause the ATO’s closing date for thescheme was 10 June, Melville adds.

“I’m getting calls every day frominvestors and planners about whetherwe have the project open and whetherinvestors can invest,” said Melville,speaking at the end of June.

A lot of potential investors contactAACL “late in the day” after going to theirplanners with an urgent issue, he adds.

“People sometimes don’t becomeaware of their tax position until there isa review done in May/June of their taxposition,” says Melville.

He says that AACL as a business needsto review the manner in which it raisesinvestor capital in the future.

Like TFS Sandalwood, the majority ofthe investment into AACL comes fromthe wholesale market.

“I’ve been spending a fair amount ofmy time over the last 12-18 months orso travelling and exploring wholesaleopportunities around the world,” saysMelville.

The take-up by Australian institution-al investors has been particularly frus-trating, he adds.

“It’s extremely disappointing, becausethere has been little to no interest [by

Australian institutional investors] tohave any exposure to agriculture gener-ally,” says Melville.

Australian Agribusiness Group (AAG)founder and managing director, MarcusElgin, says he’s been “knocking on thedoor” of Australian superannuationfunds for eight years.

“Our firm is investing money for ourclients by buying real farms, improvingtheir performance, and running them –either on an active or a passive basis,”says Elgin.

While AAG is not a tax-effect ivescheme, it has been heavily involved inthe sector and conducted research onit in the past.

“This year we did a very small amountof research [on MIS schemes] and wehave an agenda item for our next boardmeeting as to whether or not we do anyat all next year,” says Elgin.

One of the big frustrations for peoplel ike Elgin is the lack of interestAustralian superannuation funds havehistorically shown in agribusiness as anasset class.

Australian institutional investors tendto view farmland as the “alternative ofalternatives, way out there with stampcollecting and art”, says Elgin.

This sor t of att i tude is in starkcontrast with overseas institutionalinvestors, who tend to view farmland aseither part of a property portfolio or“one of the first things they think aboutin the alternative [portfolio]”, accord-ing to Elgin.

“Timberland and farmland are thetwo things [overseas investors] think ofas the first of alternatives. Before theystart thinking about venture capital andother private equity type plays,” saysElgin.

“I always like to say to the Australianfunds: ‘So eating’s the alternative towhat? Not eating?’ If you don’t eat, you

Continued from page 15


Dugald Higgins

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Agribusiness

die – that’s a fairly strong motivatingfactor,” Elgin says.

You’re doing it wrongRural Funds Management (RFM)founder and managing director DavidBryant reckons the problem with theagribusiness industry is that it’s got itsbusiness model backwards.

“Typically, when a fund manager says‘we’re going to start an agriculturalinvestment fund’ they raise somecapital, buy some farms and hire someguys with big hats and then star trunning the farms,” says Bryant.

“If you really look at what your invest-ment is, you’ve actually bought a prop-erty investment that has a businessoperated on it. Now, would you go andbuy an office tower and then establishand operate businesses yourself in thatoffice tower?” he asks.

Frank Lowy wouldn’t attempt to run aChinese restaurant in one of his shop-ping centres himself, says Bryant – he’drent the space out to a Chinese person.

He’s equally scathing when it comesto the tax-effective MIS space. RFM onlyever went to market with one tax-effec-t ive product, in 2006, which grewalmonds, he says.

“We only did one tax-effective scheme,and when we did it we discovered what atawdry industry it was,” he says.

“The buying of business extended tolunches that went all day and into thenight. That aspect of it we found a bitrepulsive,” says Bryant.

“By 2006 the industr y was ver ycompetitive, such that the large tax-effective operators effectively boughtbusiness – they bought market share.They did that by offering high commis-sions and very favourable loan terms topotential investors. In fact, the loanterms were such in some cases that Iwould have thought they were non-commercial.

“These big tax-effective MIS busi-nesses were using shareholders’ fundsto buy market share so they could reportever-increasing MIS sales,” says Bryant.

The way Bryant tells it, these types ofbusinesses are even dodgier than yourtypical Ponzi scheme.

“Ponzi schemes work on the basisthat you use the investment income thatyou earn on investments to pay highrates of return to initial investors.

“But these MIS companies never evengot any investment income, so theywere using shareholders’ capital to payhigh rates of return. It was like a sub-standard Ponzi scheme,” he laughs.

“Almost everything about them isbad. There are thousands of Australianswho have personal loans with BendigoBank and the CBA, for example, thatthey’re struggling to pay off – yet theinvestment they originally made hasbeen vapourised,” says Bryant.

Even if planners wanted to recommendtheir agribusiness schemes to their clients,they face a pretty major stumbling block:after the string of high-profile collapses,barely any insurers are willing to provideprofessional indemnity cover for agribusi-ness schemes, says Bryant.

“There wouldn’t be a dealer group in

Australia that has professional indemni-ty insurance to cover them for [agribusi-ness schemes],” says Bryant.

Dugald Higgins says Zenith has heardanecdotal evidence from some planninggroups that insurers have taken a “hardline” on agribusiness MISs.

“We have heard that while there isthat blanket ban approach, somegroups who approach the insurers indi-vidually have been able to get them torescind that, but it’s very much on acase-by-case basis,” says Higgins.

But agribusiness hasn’t been the onlyasset class to get the stern treatment,with insurers taking a tough line onanything illiquid, Higgins adds.

Increasing disclosureThe Australian Securities and Invest-ments Commission (ASIC) updated itsregulatory guidance on agribusinessMISs in January, introducing five newdisclosure benchmarks that will applyto the schemes effective 1 August 2012.According to ASIC’s senior executiveleader for investment managers andsuperannuation, Ged Fitzpatrick:

“Responsible entities of agribusinessschemes must ensure people betterunderstand what they are getting intobefore they invest. ASIC’s priority isensur ing investors and f inancialconsumers are confident and informedbefore investing in these schemes.”

But Higgins is sceptical that theimproved disclosure wil l end upprotecting investors in the future.

“We’ve seen a consistent theme where[MIS] managers come out and say ‘wethink we’re financially solvent’. And then[investors] look at that and say ‘that’sgreat!’,” says Higgins.

“The problem is that a lot of the time,managers bullshit,” he says.

He points to the fifth disclosure bench-mark of ASIC’s Consultation Paper 133,

which requires that managers demon-strate that they are solvent and have suffi-cient funds to continue.

Before the original guidelines becamemandatory, the MIS scheme RewardsGroup voluntarily complied with thebenchmark by effectively saying ‘wethink we’re fine’, according to Higgins.

“Weeks later they were insolvent. Youcan definitely see instances of peoplewho looked at that prospectus and said‘oh well, they say they’re fine, so I’mgoing to believe them’. It’s just not thatsimple,” says Higgins.

“Just because you give someone aheap more information doesn’t neces-sarily make things better,” says Higgins.

While Higgins is all for improveddisclosure for investors, he worries thatretail investors will have trouble readingbetween the lines and end up mistak-ing information for safety.

“You go into a standard Australian equi-ties fund, and if one day the managementgets up and walks out and you decide‘that’s it, I don’t agree with this anymore’,you just put in a sell order on it and threedays later you’re gone. With these things,if you’ve got a 25-year Radiata pinescheme like Willmott, well you’re strappedin there for the ride,” says Higgins.

“Everyone’s got a hard enough timeseeing the future 10 minutes down theroad let alone over a 25 year period,”says Higgins. MM


David Bryant

Pros• Agribusiness as an alternative asset class has a low

correlation to mainstream assets like equities,property, fixed income and cash.

• Thematic drivers like global population growth, changingdietary patterns and rising affluence make grains,oilseeds, dairy and protein (meat) look attractive.

• There can be tax benefits for investors with the rightcharacteristics, but investment in an agribusiness MISmust not be considered purely for tax reasons.

• It must be considered as a way of bringing effectivediversification to an investment portfolio first, and as atax planning measure a distant second.

Agribusiness: weighing it up

Cons• All investments are only as good as their structure. You can’t make poor

assets better through structuring, but you can make good assets useless if thestructure isn’t right.

• Most forms of agribusiness operations involve long-dated, relatively illiquidassets like forestry and, as such, many funds can either have low liquidity withvery shallow secondary markets or nil liquidity.

• Agricultural investments are characterised by a wide variety of risks associatedwith climatic and environmental influences, manager risks to operations andrisks posed by natural disasters.

• Use of high levels of borrowing by the fund manager and the investor (if usingpersonal gearing) significantly increases dangers.

• High level of counterparty risk with the responsible entity and the investmentmanager. We would suggest that these risks are generally higher inagribusiness tax-effective schemes than for other asset classes.

Zenith analyst Dugald Higgins lists the pros and cons for investors considering an exposure to the agribusiness sector.

An uncomfortable truth is thatpeople, especially those in parlia-mentary democracies likeAustralia, do not want to think

about their prosperity being dependent onthe (hopefully wise) decisions made byleaders of the Communist Party of China(CPC). We say that we are reliant on tradewith China, or that China's continuedeconomic growth is crucial to the worldeconomy.

But we do not go as far as to say that ourwell-being hinges on the skills and foresightof a group of men who make decisionssecretly and who are not accountable toanyone really, except possibly each other.And, to add insult to injury, these men, atleast publicly, claim to uphold the princi-ples of Marxism and Mao Zedong.

An equally awkward truth is how little weknow about the men who will take the helmin China. The views of the leaders at thepinnacle of power and the processes bywhich they reach their positions remainobscure. We still do not even know the exactdates of the next CPC Party Congress thatwill conclude with the new leadershipwalking onto the podium to the applause ofsome 2,200 Party delegates. Presumably thismeeting will be held in late October orNovember.

What we do know, barring the unlikelyevent of an horrific crisis, is that China's topleader will be Mr Xi Jinping and his right-hand man will be Dr Li Keqiang. Xi will beappointed head of the CPC and head of theall-powerful Politburo Standing Committeelater this year, and he will become Presidentof the People's Republic of China (PRC) inMarch 2013 at the annual meeting of theNational People's Congress, China's parlia-ment. Li will presumably become thesecond-ranked member on the Standing

Committee and become Premier of the PRCin 2013. Xi, who turns 60 next year, studiedchemical engineering as an undergraduate.

Li Keqiang, who has a doctorate ineconomics, turns 57 next year. Both Xi andLi have been specifically groomed for thetop leadership positions for the past fiveyears. As CCP Standing Committee Partymembers and in the roles of Vice-President(Xi) and Vice-Premier (Li), they both haveconsiderable experience.

But who in addition to Xi and Li will beon the Politburo Standing Committee isnot known with any degree of certainty.We do not even know for sure that will it bea nine-member committee as is the caseat present, or if membership will bereduced to seven, in order to make deci-sion-making more effective (or becausethe present nine members cannot agreewho should be the eighth and ninthmembers, as is also plausible).

However, because of term limits and agelimits, we know that besides the existingmembers Xi and Hu, nearly all of theremaining Standing Committee memberswill be new.

Xi as a person is certainly different fromHu Jintao, China's current top leader, who isknown for his cardboard-like stiff publicpersona. People who have spent time withXi tell me he is 'comfortable in his own skin'.He communicates easily with people and,together with his famous singer wife, theywill be an entirely different 'first couple' thanChina has ever had before.

Does a new group of leaders mean thatthere is chance for policy change?It could. Party Congresses have previouslymarked, broadly speaking, the start of a newdirection in Chinese economic policies.Twenty years ago, following the 1992 Party

Congress, Jiang Zemin (President and PartyGeneral Secretary) and in particular, ZhuRongji (Premier), pushed forward a wave ofliberalisation that led to China's entry intothe World Trade Organization in 2001.

Jiang Zemin was known for his pro-business stance, and paved the way forprivate ownership of property, businessand wealth to finally (in 2004) be protect-ed by the Constitution. Ten years ago, afterthe 2002 Party Congress, the new leadersHu Jintao and Wen Jiabao made 'inclusivegrowth' a policy goal. This led to a reduc-tion in the number of levies imposed onrural residents, an expansion of socialwelfare programs, and more support forstate-owned enterprises.

It is possible that Xi and Li will be morecommitted to free-market principles. Manyinterest groups in China, some of which arevital for the Communist Party to be able towield power, advocate that the new leaders

muster the political will to rein in the domi-nant state sector and push harder togenuinely foster innovation.

The problems in China's current econom-ic model are widely understood among topofficials in China. Moreover, various policysolutions have been identified and thor-oughly researched. China must reduce thedominance of state enterprises, lower barri-ers of entry to the private sector, free upmarkets for land, labour and capital, andstrengthen the fiscal system.

These were the recommendations madeby a report (China 2030) issued jointly inFebruary this year by the World Bank andChina's Development Research Center, aninfluential institution under the StateCouncil. Li Keqiang was closely involved inthe work of this report and is said to supportthese recommendations.

Xi Jinping, in turn, is known to haveendorsed policies that supported the privatesector in his two previous posts as head oftwo provinces with rapid economic growth,Fujian and Zhejiang.

The current vice premier, Wang Qishan, isanother strong candidate who is relativelyfamiliar to economists and policymakersabroad. He is known to be an effective tech-nocrat and troubleshooter. His present port-folio includes finance and trade and he isconsidered to be a supporter of pro-marketpolicies and is supposedly close to centralbank governor Zhou Xiaochuan.

In sum, there is reason for modest opti-mism that China's new leaders will embarkin a new direction to transform growth sothat it is more driven by the markets – ie,consumers and the private sector.

Linda Jakobson is East Asia programdirector at the Lowy Institute forInternational Policy.

China


Everyone would like to know more about China’s impending new leaders – not just the Chinesebut people across the globe. So what can we expect? Linda Jakobson writes.

“There is reason formodest optimism thatChina's new leaders willembark in a new directionto transform growth so thatit is more driven by themarkets.”

Lifting the bamboo curtain

National Consumer Credit Legis-lation has been upon us forsome time, and by nowAustralian Credit Licence (ACL)

holders and representatives should be wellversed in their key compliance and respon-sible lending obligations.

However, as is the case with any newreforms, the credit legislation has beenevolving since its inception and is set tocontinue to do so in 2013.

Recent changes to the credit legislationhave been well documented, so much ofwhat follows will not be all that new tomany readers. However, in practice we areseeing that some of the finer details of thesechanges have slipped through the cracks.

So, here’s what you might have missed.

Credit disclosure documentsAs we all know, the commencement of therequirement to provide credit disclosuredocuments for credit assistance providers(being the credit guide, quote for provid-ing credit assistance credit contract orlease disclosure proposal document andpreliminary assessment), was postponedthree times to its eventual start date of2 October, 2011.

Regulations released during the secondhalf of 2011set out further requirementsas to the form and content of the creditdisclosure documents. Some importantchanges are:

• The credit guide of a credit assistanceprovider must now state if a commissionis payable by the licensee to third partiesfor the introduction of credit business, andinclude a statement that the consumermay, on request, obtain a reasonable esti-mate of such commission and how it isworked out.

What you may have missed: if the licens-ee pays commissions to third parties, thecredit guide must also include informationabout the classes of persons to whom suchcommissions are payable. Simply stating‘third parties’ will not suffice.

• Credit disclosure documents can becombined where appropriate, providedthat the content requirements of eachdisclosure document are still being met.Given the timing requirements for provi-sion of these documents, this predomi-nantly saw credit guides and quotes beingcombined, and credit or lease disclosureproposal documents and preliminaryassessments being combined.

Previously, the Australian Securities andInvestments Commission (ASIC) had saidthat dual credit and financial serviceslicensees could combine their disclosuredocuments where appropriate. This,together with the Regulations, saw manydual licensees combining their FinancialServices Guide (FSG) with their CreditGuide/Quote, and their Statement ofAdvice (SoA) with their credit proposaldocuments/preliminary assessment.

What you may have missed: if you are adual credit and financial services licenseecombining disclosure documents, ensurethat the different terminology of theregimes is not being confused. Wecommonly see terms such as ‘credit advice’and ‘credit product’ being used incombined documents for what should be‘credit assistance’ and ‘credit contract’.

• Credit disclosure documents can beprovided to consumers electronically. Morespecifically, the regulations set out that thecredit disclosure documents can either besent to a consumer by electronic commu-nication, or made available to theconsumer on the licensee’s informationsystem (ie, website). This saw manylicensees move to providing the credit

disclosure documents solely by email.What you may have missed: credit disclo-

sure documents can only be provided to aconsumer electronically if the consumerconsents. Before the consumer canconsent, they must be told that:

– Paper documents may no longer begiven;– Electronic communications must beregularly checked; and– Consent may be withdrawn at anytime.

Have you properly obtained theconsumer’s consent?

• The requirement for licensees to displaytheir ACL number on required documentscommenced on 1 April 2012. The requireddocuments are not just the credit disclo-sure documents, but also advertisementsthat relate to the provision of regulatedcredit (see below for more on advertising).

What you may have missed: ASIC clari-fied that when the licensee’s ACL numberis to be displayed, it must be displayed as‘Australian Credit Licence number 12345’,not ‘ACL 12345’. However, if a licencenumber is referred to in a document morethan once, it will be sufficient for the fulldescription of the licence to be used once,


Credit law

What you mighthave missedKathryn Wardrobe outlines some of the finer details of the newcredit legislation which might have slipped through the cracks.

and the abbreviated form to then be usedin the remainder of that document.

• The extent of information about feesand charges required in the quote forproviding credit assistance, and the mannerin which such information is to be includ-ed, was expanded. The Act already statesthat the quote must include the maximumamount of fees and charges payable by theconsumer to the licensee and what theamount relates to, including:

– The licensee’s fees for providing creditassistance;– Charges that will be incurred by thelicensee for matters associated withproviding credit assistance; and– Fees and charges that will be payableby the licensee to another person.

The Regulations add that these fees andcharges must be described as follows:

– Identify the fee or charge as payableto the licensee for the licensee’s servic-es, or for payment to another personon the consumer’s behalf; and– Include a clear explanation of thetype of fee or charge; and– If the fee or charge is not a fixedamount – explain the method used for

working out the amount of the fee orcharge; and– State how frequently the fee or chargeis to be paid; and– Describe the circumstances when thefee or charge will or will not be payable.

Further, the maximum amount of each feeor each charge, if known, must be expressedin dollars or, if unknown, in one of the alterna-tive ways set out in the regulations.

What you may have missed: any of theabove! Use this list as a checklist to ensurethat your quote is compliant. Also, the regu-lations state that the document mustinclude a statement that clearly identifiesthe amounts as a quote.

• The regulations clarify that a quote isnot required if the licensee does not imposefees or charges on consumers for creditassistance and the licensee’s credit guideincludes a statement to that effect.

What you may have missed: the legisla-tion does not require credit representativesto provide a separate quote to that of thelicensee. However, credit representativesare required to provide their own creditguide and the licensee’s credit guide.

Advertising credit products andservicesIn June 2012, ASIC released its Consulta-tion Paper CP 178 Advertising credit prod-ucts and services (CP178). In February2012, ASIC released Regulatory Guide 234Advertising Financial Products and AdviceServices (RG234). CP178 proposes toupdate RG234 to give additional guidanceon specific issues relating to advertising ofcredit contracts and credit services.

CP178 proposes the following addition-al guidance which will be relevant for creditassistance providers:

• Restricting the use of certain terminol-ogy: CP178 states that terms such as ‘inde-pendent’, ‘impartial’ and ‘unbiased’ maycreate a misleading impression about therelationship between a credit serviceprovider and third party. Although the useof these terms is not prohibited by thecredit legislation, care should be taken inusing these terms where a credit serviceprovider receives a commission, or has aconflict of interest.

What you may have missed: theConsumer Credit and Corporations Legis-lation Amendment (Enhancements) Bill2011 includes a ban on credit assistanceproviders using these terms.

• Nature and scope of credit assistance:RG234 states that advertisements shouldnot create an unrealistic expectation aboutwhat the service can achieve. CP178proposes to extend this general principleto credit assistance specifically by statingthat credit assistance providers’ advertise-ments should be clear about the scope ofthe service that will be provided to theconsumer.

What you may have missed: CP178 statesthat a credit assistance provider should notpromote that they are a ‘broker’ if they areonly affiliated with one lender.

The consultation period ends on 6August 2012, and an updated RG234 isexpected to be released in October 2012.

What you may have missed: ASIC’scurrent RG234 is for promoters of financial

products and financial advice services. Thereference to financial products in RG234means financial products as defined in theAustralian Securities and InvestmentsCommission Act (ASIC Act). A financialproduct under the ASIC Act is defined asincluding a credit facility, being the provi-sion of credit which is not limited toconsumer credit. Therefore, even if you onlyprovide or arrange commercial or invest-ment credit, you should be following theexisting guidance in RG234.

Training requirementsIn December 2011, ASIC issued an updatedRegulatory Guide RG 206: Competence andTraining (RG206) which detailed ASIC’srevised policy on training requirements forrepresentatives who provide credit assis-tance in relation to a loan secured by realproperty. Prior to December 2011, this wasreferred to as mortgage broking assistance.

The updated RG 206 changed this to‘home loan credit assistance’ and distin-guishes between:

• Independent home loan credit assis-tance: home loan credit assistance wherethe licensee is not the credit provider; and

• Other home loan credit assistance:home loan credit assistance in relation tocredit products provided by the licensee.

The requirements for those whoprovide independent home loan creditassistance remain unchanged (Cert IVFinance/Mortgage Broking) in additionto 20 hours of continuing professionaldevelopment (CPD).

For those who provide other home loancredit assistance, there is now no minimumtraining requirement. Instead, the licenseemust be satisfied that the representative:

• Is able to deal with consumers appro-priately;

• Has adequate understanding of the

range of home loan products and theircharacteristics; and

• Understands the economic environ-ment impacting home loans.

What you may have missed: ASIC’supdated RG206 also extended ASIC’s viewof what can be counted as CPD. ASIC statesthat: ‘Generally, we do not regard privatestudy as adequate for the purposes ofmeeting the CPD requirements unless itinvolves audio or visual material specifi-cally designed for this purpose’.

2013: Future developmentsThe Consumer Credit and CorporationsLegislation Amendment (Enhancements)Bill 2011 was passed by the House of Repre-sentatives in June 2012.

The bill makes some significant changesto the National Consumer Credit Protec-tion Act. The following are relevant to credit

assistance providers:• First, the bill defines reverse mortgages

and introduces additional responsiblelending requirements for credit assistanceproviders who provide credit assistance inrelation to a reverse mortgage creditcontract. These include showing to theconsumer projections as to the value of theland which is the subject of the reversemortgage credit contract, and giving theconsumer a reverse mortgage informationstatement.

• Second, the bill introduces the conceptof a small-amount credit contract. Accord-ing to the bill, a small-amount creditcontract is not provided by an authoriseddeposit-taking institution (ADI), is not acontinuing credit contract, is for two yearsor less and for an amount of $2000 or less.Credit assistance providers:

– Must not provide credit assistance inrelation to a small-amount credit contract,or enter into a small-amount creditcontract, if the licensee knows, or shouldknow, that the consumer is a debtor underanother small-amount credit contract; and

– Must not provide assistance to increasethe limit of a small-amount credit contract.

• The bill also introduces remedies forunfairness and dishonest conduct bycredit assistance providers. This is intend-ed to make credit assistance providers, asopposed to the credit provider, moreaccountable. The bill does not defineunfair and dishonest conduct, butprovides a list of circumstances to beconsidered, including whether theconsumer was at a special disadvantageand whether the credit assistanceprovider’s conduct with the consumerinvolved a technique that manipulatedthe consumer, and should not in goodconscience have been used. The moresuch circumstances are present in a

particular situation, the more likely theconduct is to be unfair and dishonest.

• Finally, the bill restricts the use of thefollowing terms by credit assistanceproviders:

– Independent;– Impartial;– Unbiased; or– A term of similar import.

The restriction does not apply if thecredit assistance provider does not receiveany commissions, gifts or benefits andoperates free from conflicts of interest.

What you may have missed: thecommencement dates for key provisions ofthe bill have been postponed to 1 March 2013.

Kathryn Wardrobe is a lawyer at HolleyNethercote Commercial and FinancialServices Lawyers.


“The bill introduces remedies for unfairness anddishonest conduct by credit assistance providers.”

STANDARD & POOR’S Both strategies, multi-asset or multi-sector,have generally the same underlying assets.It is largely the degree of asset allocationdynamism which is different, and can resultin portfolio asset allocations and perform-ance that are significantly different, partic-ularly over the shorter term.

In markets where risk premia are normal-ly distributed (equities, outperformingbonds, and outperforming cash), there maynot be a significant difference in the assetallocation or the return of these two typesof funds. However, in a market where riskassets are rallying strongly, the traditionalstrategy will be rebalancing out of growthassets and into income assets to maintainthe prescribed strategic asset allocation(SAA). The multi-asset real return fund hasno such requirement, but may be rebalanc-ing in reference to the achievement of thereturn target. The same drivers apply in afalling market.

The investment timeframe for real andabsolute return funds is longer than oneyear. Typically, the timeframe is three yearsor more, depending on the return target –that is, they can have periods of negativereturn across shorter timeframes. The signif-icance of the difference is more likely to bemanifest in shorter periods where returndifferentials between the two strategiescould result from significantly different assetallocations, particularly where market condi-tions are volatile. Real return funds are alsonot without their risks – for example, in caseswhere the manager fails to add valuethrough their asset allocation calls, or poten-tial relative underperformance in strongmarket conditions.

A real return fund aims to achieve a target-ed return with a lower level of absolutereturn volatility than a traditional multi-

sector fund. Assuming that the real returnfund’s manager can add value through activeasset allocation calls, the portfolio construc-tion options will be dependent on the indi-vidual’s investment belief and need.

Selecting a real return fund means adopt-ing the fund’s investment philosophy, invest-ment policy, and consequently, portfolioconstruction methodology. In a core-satel-lite application, it becomes problematic toblend single asset-class funds with a realreturn product as the overall portfolioconstruction is then being co-managed bythe real return manager and the adviser. Butusing a real return fund as a stand-aloneinvestment creates manager risk in relationto manager skill and the business in general.

Similarly, adding a real return strategy canhave implications for a traditional SAA invest-ment philosophy as the asset allocation at themargin is governed by the real return managerand potentially impedes the effectiveness ofthe asset-class rebalancing policy.

Ultimately, the appropriate use of a realreturn product/strategy, or any other for thatmatter, is the role it plays in meeting clientneeds. The proposition of real return andobjectives-based portfolio constructionclearly has application for pre- and post-retirement clients less able to recover capitallosses due to the effect of drawdowns(pension payments) and inability to replen-ish capital.S&P Fund Services has advised that theirbusiness activity will cease as at 1 October2012, but meanwhile, it is ‘business asusual’ and PortfolioConstruction Forumis satisfied with the integrity of the analystopinion provided.

VAN EYK RESEARCHAs the question implies, modern diversi-fied funds are also, or should be, real

return funds, in essence. Many still have aCPI-plus objective. It is also true, however,that a combination of static asset alloca-tion and overemphasis on peer groupcomparisons has meant that the focus onprospective real returns has fallen by thewayside. Do the recent crop of real returnfunds really take investors back to thefuture as standalone investment solu-tions? Or should they be seen as comple-ments to the incumbent, relatively staticmodern diversified funds – perhaps as partof the alternatives allocation?

To be seen as a useful alternative invest-ment, they would have to be providing some-thing different to the existing portfolio interms of downside protection, correlation orreturn drivers. Analysis of performance overthe past two years suggests that, on the faceof it, this has not been the case – at least,recently. There are two prominent real returntype funds that have performed in a marked-ly similar manner to certain peer groups overthe past two years. While we shouldn’t overlyfocus on peer group comparisons, bench-marks are still worthwhile to see whether aparticular fund is performing differently toits peers (as opposed to making sure that allproducts conform to peer group norms).

A cursory glance at the underlying invest-ments within most of these funds suggeststhat while they are investing in similar assets,they are doing so in quite different propor-tions. And that is where most of the differ-ence lies. Nominally, the asset allocationlooks very different, but the risk factors areagain similar (especially in the risk on/risk offenvironment). In most cases, they are prob-ably more efficient in risk/return terms,although the real difference is in the abilityto change weights freely over time based onvaluations and expected returns. Theseproducts performed relatively well during

the global financial crisis (GFC) because theyhave typically been much more active and,importantly, forward-looking in terms ofasset allocation. Anyone taking an objectiveview of expected returns just prior to theGFC should have adopted a similar posi-tioning. It is debatable whether less activeproducts using a more static asset alloca-tion always offer value for money, but theirvery homogeneity does offer some advan-tages in terms of ease of communication –we know what to expect from a so-calledbalanced fund. Furthermore, like a stoppedwatch, a static asset allocation will be rightevery so often. More equity-centric strate-gies are probably much more ‘right’ (for the


ResearchReview

Same, samebut differentResearch Review is compiled by PortfolioConstruction Forum inassociation with Money Management, to help practitioners assess therobustness and disclosure of each fund research house compared withone another, and given the transparency they expect of those they rate.This month, PortfolioConstruction Forum asked the research houses: Are multi-asset class “real return” funds significantly different to themulti-sector funds of old? What is the appropriate use of real returnfunds in a portfolio?

next five years) than they were five years ago. In summary, van Eyk doesn’t think these

products make a particularly good alterna-tive complement to traditional portfolios,but they do set a good example in terms ofsetting asset allocations based on forward-looking metrics without all the peer groupbaggage. Whether they are good productsfor individuals depends on the extent towhich the client wants to outsource assetallocation policy (and take on a bit moremanager risk).

ZENITHThe new generation of multi-asset class, realreturn funds are different from the well-

established, diversified funds of old in anumber of ways.

They have much broader asset allocationranges allowing the manager much greaterflexibility in what asset classes and invest-ments the fund invests in in order to achieveits real return objective. They generally havea greater ability to allocate to alternative assetclasses or investment strategies such asequity long/short, infrastructure, commodi-ties (soft and hard), CTA (commodity tradingadvisor) and global macro.

There is also a much greater focus onrisk and current and forecast volatility ofasset classes, given the more definedinvestment objectives of these funds over

specific timeframes. As such, managersattempt to manage the ongoing volatilityof the fund to assist in achieving thatdefined return and timeframe objectivemore so than is the case with older stylediversified funds.

The need for large and potentiallyfrequent asset allocation changes in the realreturn fund investment process tends tolend itself better to single manager fundsrather than multi-manager funds where theability to change asset allocation quickly viaphysical changes in external managersunderlying mandates is not possible.

However, it can be challenging to deter-mine an appropriate allocation to real return

funds within a portfolio.The wide asset allocation ranges of

these funds can make the management ofa client’s overall portfolio asset allocationdifficult as the real return fund can changeasset allocation dramatically if themanager deems the environment dictatessuch moves. A relatively small allocation toa real return fund (say 10%) can have quitea large impact on a client’s overall assetallocation, outside the control of theiradviser.

In theory, the new multi-asset class realreturn funds could be used as the totalsolution for a client seeking a specificreturn. But they are unlikely to be used inthis way by advisers as it threatens theirrole, and in addition, the majority of thesefunds are currently single manager funds,so using one exclusively as a portfolio solu-tion would introduce single manager risk.

Alternatively, these funds can be used asa core holding within a portfolio to under-pin the portfolio’s return, complementedwith some smaller exposures to satellitefunds. However, this approach dilutes thecertainty of the real return target of thefund. Another option is to use a real returnfund as part of the alternative allocationwithin a portfolio to provide an absolutereturn component to the portfolio.

LONSECMulti-Asset Class Real Return (MARR) stylefunds seek to overcome some of the issuesencountered by traditional diversified fundspost the GFC.

MARR funds invest across a broad spec-trum of investment opportunities, includinglarge and small cap equities, fixed income,REITs, direct mortgages, private equity,commodities, distressed debt, inflation-linked bonds, hedge funds, global high yield,etc. These funds generally seek to add valuethrough flexible asset allocation and do notconform to a traditional SAA framework.Instead, asset composition changes over timeto meet the fund’s objective. This includes theability to ‘go anywhere’ – a fund may becompletely divested from a particular assetclass in periods of severe market stress. It alsoallows for more opportunistic investing innew asset classes as opportunities arise.

Importantly, these funds recognise thatinvestors in the accumulation phase areinterested in growing their wealth in realterms. Investors typically have little inter-est in benchmark relative performance asa benchmark delivering negative returnsis not considered a good outcome. MARRfunds aim to limit the extent and severityof drawdowns and deliver a real rate ofreturn above cash or inflation, regardless ofwhat benchmarks or peers are doing. As aresult, these funds exhibit a strong focuson capital protection and minimisingvolatility and tail risk.

MARR funds should not to be confusedwith hedge funds. While they are lessconstrained than traditional diversifiedfunds, they are not unconstrained in thetruest sense. These funds generally don’t usegearing and won’t employ shorting at theasset class level.

However, MARR funds rely heavily on theasset allocation skill of the manager. These




ResearchReviewfunds introduce a far greater degree of busi-ness risk, as there will be periods of timewhen the funds may significantly under-perform more traditional diversified funds,which can be uncomfortable for managersif investors start to redeem. Liquiditymanagement also becomes more impor-tant, with the flexible investment approachrequiring the ability to sell out of assets ina timely manner if required.

Conventional portfolio constructionapproaches are challenging for this typeof strategy. There are two primary waysto use MARR funds when constructingportfolios.

Firstly, they can be used as a diversifiedcore to which satellites can be added,depending on whether an investor is in theaccumulation phase (growth satellites) orretirement phase (income satellites). Thisapproach suits investors who are believ-ers in the flexible asset allocationapproach.

Secondly, they can be used in an alterna-tives allocation – while these funds are notactually classified as alternative assets,planning software and complianceregimes within some dealer groups do nocater for such flexible approaches, withmost retail dealer groups preferring an SAAapproach. For such groups, an alternativesallocation may be the most appropriate.

MERCERUnconstrained multi-asset class fundsoffer exposure to traditional and/or alter-native asset classes, with absolute returnperformance targets and often with a moredynamic approach to varying exposuresto asset classes. The development of suchfunds has evolved from problems that havebeen associated with more traditionalmulti-sector funds which often sufferedfrom too much exposure to a particularasset class at the wrong time. They havealso evolved from the historical shortcom-ings many investors experienced withhedge funds during the GFC in terms ofliquidity, fees and performance. The multi-sector funds are often known and market-ed as new age balanced funds.

There is no standard multi-asset classfund. Typically, these funds combine bothalpha and beta as sources of return,although beta returns are expected to forma large part of return contributions (unlikethe case for, say, hedge funds). The assetallocation can be reasonably static, or canbe altered tactically by the manager. Assetallocation decisions can be implementedvia direct investments (stocks or bonds ormanaged investments) or derivativecontracts. And, managers can use in-houseor external investments to achieve theirtarget exposures to asset classes.

These funds can be used to reduceequity risk by allocating some of aninvestor’s equity exposure to multi-sectorfunds. This maintains equity risk butreduces volatility. They can also provideaccess to alternative assets where themulti-sector fund has a material exposureto alternatives. They can provide moredynamic asset allocation where theinvestor prefers such an approach but isn’table to easily implement it.

These funds can fit into a number ofalready established asset classes, beingequities, multi-sector or alternatives.However, it is important to be aware of theways in which the returns of unconstrainedmulti-asset class funds and other assetclasses can be correlated.

We believe that multi-asset class fundscan play a part in some investors’ portfo-lios and that they address some of the mainweaknesses which traditional balancedfunds suffer. We expect them to be usedincreasingly by investors and would expectthat over time, the number and variety ofofferings will increase.

MORNINGSTARObjective-based investing differs fromtraditional SAA approaches to investing,primarily because objective-basedapproaches have as their principal focusselection of the most appropriate assetclass or mix of assets to meet a particularobjective, usually a target return over infla-tion. Risk, return, and correlation charac-teristics are secondary considerations.Objective-based approaches aim to allo-cate assets more flexibly than traditionalapproaches, generally have a shorter time-frame, and generally do not have a set SAAfrom which to deviate.

Recent market volatility and poorreturns from growth assets have playedinto the hands of this new type of strategy.Additionally, returns from the majority ofmulti-sector fund managers are generallyclustered in a narrow range, meaning thatthere is little obvious differentiationbetween traditional approaches onperformance alone. In a SAA-directedapproach – the main alternative – themulti-sector fund investor is exposed tothe direction of the underlying markets inwhich the fund is invested. In objective-based investing, the more significant factoris the fund manager’s skill at positioningthe portfolio effectively, given prevailingmarket conditions.

This kind of flexibility provides bothopportunities and risks. The investor isessentially relying on the fund manager’sjudgements, as the portfolio is likely to beconcentrated heavily in certain areas.However, it has proved exceptionally diffi-cult for the average fund manager to addexcess value over relevant measurementsover the medium to long-term using thismethod. A recent study by our US colleaguesof more than 100 objective-based funds’performance from October 2007 to Decem-ber 2011 showed that not only did theaverage strategy fail to produce better

returns than a passive 60/40 stock/bondsplit, but also it exposed investors to greatervolatility, reducing risk-adjusted returns.

Astute investors can add value over time– although not necessarily all of the time– by tactically varying asset allocations.However, given objective based strategies’market timing risk, we believe that theyshould only be used as supporting playersin investment portfolios, rather than ascore holdings. For example, the SchroderBalanced Fund – the manager’s more tradi-tional multi-sector offering – had a 10%allocation to the Schroder Real Returnstrategy as at July 2012. An investor’s under-lying asset mix could change quite signif-icantly and rapidly if they had a heavy allo-cation to such strategies in their portfolio,potentially creating a mismatch betweenthe most appropriate asset allocation fortheir particular circumstances and theactual underlying exposures. AlthoughSAA-based multi-sector strategies havehad a tough time of late, they remain viableoptions if executed efficiently and cost-effectively, while their objective-basedcounterparts should play only a minor rolein portfolios.

In association with


Toolbox

In the financial year 2008-09, indi-vidual taxpayers in Australiaclaimed just over $2 billion worthof deductions for gifts made to

charities (charities and deductible gifts,Australian Taxation Office (ATO) report2010). Though the global financial crisisand the recent turmoils of the worldeconomy may have taken some sting outof charitable giving, Australians remaincommitted to improving the wellbeingof humanity and the community.

This presents a tremendous opportu-nity for the planning industry, in partic-ular risk advisers, who often come face-to-face with clients that would like toleave behind a legacy for a charitablecause.

Let’s consider this opportunitythrough a case study

Case studyDavid is aged 51 and has two teenagechildren. His wife of 15 years, Elizabeth,was diagnosed with breast cancer sometime ago and passed away recently.Consequently, breast cancer is a causecloser to David’s heart, and on a recentvisit to his financial planner Davidexpressed his desire to be able to helpthe Jane McGrath Foundation. David hasindicated that his longer term goal is toleave a legacy of $500,000 to providesome funding for research and preven-tion of breast cancer. However, ideallyhe would like not to dip into his chil-dren’s inheritance. David is currently onthe top marginal tax rate.

Clearly, life insurance is a solution forDavid. It will allow him to create an assetof $500,000 by paying only a fraction ofthe cost in premiums. In l ine withDavid’s wishes, the proceeds of the lifepolicy may then be gifted to the JaneMcGrath Foundation upon his death.More importantly, buying a life policywill mean that David will not have to dipinto his children’s inheritance to fundhis charitable aspirations. The real chal-lenge, however, from a planningperspective, will be to structure theadvice in a way that will provide David,his estate, and the Jane McGrath Foun-dation the best possible f inancialoutcome.

Tax issues to considerPremiums for a life policy (death only)are generally not tax deductible, unlessheld inside superannuation. With thesame token, the proceeds are not assess-able income for income tax purposes.There are, however, circumstancesunder which a life policy may be subjectto capital gains tax (CGT). CGT exemp-

tions for life policies are contained inthe Income Tax Assessment Act 1997(ITAA) s 118-300. It specifies that capitalgain or loss from a life policy is ignoredif the proceeds are paid to one or moreof the following recipients:

• The original beneficial owner of thepolicy;

• An entity that acquired the interestin the policy for no consideration; or

• The trustee of a complying superan-

nuation fund.In other words, it is possible to bene-

ficially assign a life policy (death only)to a person other than the life insured,including those persons who are notrelatives of the life insured, without anyCGT consequence to the beneficiaryupon receipt of the insurance proceeds.This can provide significant strategicadvantage from a tax perspective, whichwe will explore bit later in the article.

Gifts of $2 or more made to certaininstitutions, bodies or classes of themare tax deductible. These institutions arereferred to as ‘deductible gift recipients’or DGRs. DGRs are those institutionsthat have either been endorsed by theAustralian Taxation Office (ATO) or thosethat are specified in the tax law.

ITAA Div 30, s 30-1 to 30-320 specifies,

Live and let givePaul-Surinder Singh explains how the planning industry – in particular, risk advisers – can benefitfrom philanthropic investors.



Appointments


Please send your appointments to: [email protected]

Opportunities For more information on these jobs and to apply,please go to www.moneymanagement.com.au/jobs

MORTGAGE BROKERLocation: AdelaideCompany: Terrington ConsultingDescription: A leading finance broking firm isseeking a mortgage broker or bankingprofessional with mortgage financing experience.

In this role, you will conduct interviews withprospective customers, manage bankrelationships and liaise with internalstakeholders, specifically financial planners.

A holistic suite of banking products andservices will be available to the successfulcandidate to ensure a competitive productoffering.

It is essential that the incumbent haveextensive experience in mortgage broking orresidential/business lending within the bankingindustry.

For more information and to apply, visitwww.moneymanagement.com.au/jobs, orcontact George at Terrington Consulting– 0499 118 147,

www.terringtonconsulting.com.au

RELATIONSHIP MANAGERLocation: Western AustraliaCompany: Terrington ConsultingDescription: An Australian-owned bank withplans to expand its business across regionalAustralia is seeking a senior relationshipmanager to join its Geraldton team.

The role is well suited to an agribusiness orcommercial banker who is capable of building anetwork of referrals.

In addition, you may be required to managean assistant and encourage and drive the flowof business propositions from existing retailnetworks.

On a day-to-day basis, the relationshipmanager will be responsible for providingtailored solutions to existing and prospectiveagribusiness customers.

For more information and to apply, visitwww.moneymanagement.com.au/jobs, orcontact Emily at Terrington Consulting – 0499 771 742,www.terringtonconsulting.com.au

COMPLIANCE AND TECHNICALMANAGER Location: SydneyCompany: Patron Financial AdviceDescription: A financial services company isseeking a compliance and technical specialist tojoin its Sydney team.

Joining two other senior recruits, thesuccessful candidate will work closely with thegeneral manager to manage the AFSL andadvice compliance and risk mitigation.

You will also be required to review variousinvestment offerings, manage the APL andmodel portfolio and coordinate the investment

review committee.It is essential that you have had a successful

track record with a life company, fund manageror AFSL in a compliance manager, adviser, riskor audit office capacity. Advanced DFS is alsoan essential requirement.

Knowledge of financial planning software,research houses and a broad knowledge offund and investment products will be a distinctadvantage.

To find out more and to apply, visitwww.moneymanagement.com.au/jobs

CLIENT RELATIONSHIP MANAGERLocation: Melbourne or SydneyCompany: Unified Healthcare GroupDescription: A leading health informationsolutions provider is looking for a clientrelationship manager to grow existingrelationships with key accounts.

Your responsibilities will include developingand implementing account plans for keystrategic accounts, providing seniorstakeholders with resolutions to issues andcomplaints, growing revenue in line with a setbudget, and managing the business reportpipeline and ensuring data is accurately enteredinto the CRM system.

You will report to the executive managerbusiness development and work closely with theexecutive managers of operations and finance.

To be considered, you will need at least fiveyears experience in client relationshipmanagement, experience in product and serviceline development, client relationshipdevelopment and experience with complexsales solutions.

To find out more and to apply, visitwww.moneymanagement.com.au/jobs, orcontact Amanda at UHG – [email protected]

BUSINESS BANKERLocation: PerthCompany: Terrington ConsultingDescription: A financial institution is seeking anexperienced business banker to develop newbusiness and service existing clients within theSME segment.

The successful candidate will drive salesgrowth through their strong referral network aswell as internal stakeholder relationships.

It is highly desirable that you have had astrong track record in business lending and agood understanding of business financials.Complex residential lending or relevant businessdevelopment experience will also be lookedupon highly.

To find out more and to apply, visitwww.moneymanagement.com.au/jobs, orcontact Emily at Terrington Consulting – 0499 771 742,www.terringtonconsulting.com.au

FORMER acting Multiportmanaging director Libby Roy hasbeen named director corporatesuperannuation at AMP Finan-cial Services.

She will be responsible fordriving the company’s corporatesuperannuation strategy acrosssales, distribution, marketing,product, pricing and investments,reporting to AMP FinancialServices managing director CraigMeller.

Prior to her tenure at Multiport,Roy served as general manager offinancial planning at ipac, incharge of the firm’s 150 financialadvisers.

Altogether, she has over 17years’ experience across anumber of industries in Australia

and the United States, includinggeneral manager of AmericanExpress Travel across the Asia-Pacific.

Bevan Towning will step into therole of chief executive - platformfor Mirvac Group.

He will be a part of the execu-tive leadership team and reportdirectly to managing directorNicholas Collishaw.

Collishaw said the executivechange will allow the group tobuild on its success in capitalpartnering and grow its coreactivities in investment anddevelopment.

Before joining the group,Towning held a number of leader-

ship and senior managementpositions in real estate fundsmanagement and asset manage-ment with Grocon InvestmentManagement, Challenger Finan-cial Services and Colonial FirstState Property.

He also served as head of prop-erty at Lend Lease Corporation,with responsibility for GeneralProperty Trust Real Estate assets.

Lifeplan Funds Management hasappointed Rachel Elfverson asbusiness development managerfor Queensland.

With over 20 years’ experiencein the banking and financial serv-ices industry, she most recentlyworked at BT Financial Group as

a practice development manager.She has also previously been

involved in business develop-ment and compliance roles atAsgard, Sealcorp and Lend LeaseGroup.

Matt Walsh, head of Lifeplan,said Elfverson would help identi-fy and implement strategic solu-tions to allow its advisers to addvalue to their clients.

Bentham Asset Management hasmade two new hires to its invest-ment team as the firm seeks tomeet a growing demand from retailinvestors for credit investments.

Daniel Saldanha has beenappointed a senior credit analystand associate director and will be

responsible for the analysis ofsyndicated loans and special situ-ation corporate debt.

Prior to joining Bentham, hewas an investment analyst withMarathon Asset Managementwith a focus on Europeandistressed and high yield creditopportunities.

Calvin Niu will step into therole of portfolio analyst and asso-ciate, maintaining portfolio risksystems and providing quantita-tive risk support to the portfoliomanagement team.

He was previously a credit riskanalyst at QBE Insurance GroupAustralia working within thecorporate partner division todesign financial modeling forcorporate portfolio risk.

Move of the weekWEALTH management firm Infocus Money Management hasannounced the appointment of Giulio Russo as head of businessdevelopment.

He has over 20 years of experience in banking and financial serv-ices, most recently serving as strategy manager for BT Financial.

Before that, he was head of business development for wrap andsuperannuation products with Macquarie Adviser Services.

Infocus managing director Darren Steinhardt said Russo’sprofessional skills will be essential as the group meets key objec-tives in its planner network and alliance partners over the comingyears.

This includes further expanding the group’s national presenceinto New South Wales, Steinhardt said.

Daniel Saldanha

Libby Roy

Giulio Russo

““RECENTLY, Outsider was luckyenough to hear the exploits ofone of his younger colleagueswho competed in a 10km ToughMan event complete withmuddy perils to separate themen from the mice.

His young colleague explainedhow he heroically ascended 16-foot-high walls and crawled forseveral metres, face- and belly-first, through muddy trencheswhile barbed wire glistenedinches above his head.

To the amusement ofOutsider, the "tough bloke"came out the other side of theordeal a little worst for wear, andended up missing a couple ofdays work thanks to a nasty ropeburn on the back of his leg.

Outsider could never quiteunderstand the mentality thatdrives young men to prove theirmanhood by competing in suchbarbaric games.

At least financial profession-als have the decency to entercharity bike rides to scratch theircompetitive itch (albeit in not-so-decent lycra attire).

Now, Rugby Union – there is atrue gentleman's game.

Although back when Outsiderwas still very much in the thickof the game, he recalls having toexplain to industry folk aroundtown why he happened to besporting two black eyes.

Perhaps the (hobbling) youngjourno is more like Outsider thanhe first thought.

Outsider


“I’ve always wondered andreflected upon why women livelonger than men, but perhapsthere will be wiser heads in thisroom that will be able to shedsome light on that.”

Assistant Treasurer and MinisterAssisting for Deregulation, the Hon.David Bradbury, asks for womanlyinsights from a delegation of Asian

Pension funds - 99 per cent male.

“I know a lot of people arelooking at us and going, poorbastards. Oh, that we should besuch poor bastards for the nextthree years!”

Bentham Asset Management’smanaging director Richard Quin has

fingers crossed for further returnsafter the company’s success during the

credit crunch.

“We want to try and be a littlebit upbeat today.”

ASFA President Pauline Vamosturns her Stronger Super frown

upside-down at an ASFA conference inSydney, even if just for the day.

Out ofcontext

Outsider goesundercover

Top guns: How the West was transitioned

Tough luck, son of Outsider

WHILE recently attending CitiTransaction Service’s ExecutivePension Summit, Outsider hadthe pleasure of meeting AssistantTreasurer and Minister Assistingfor Deregulation, the Hon. DavidBradbury.

Well, perhaps it was less of ameeting than an attempt byOutsider to shadow the ministerand glean any private-type infor-mation the Hon. may have beenunwilling to proffer to delegates,but nevertheless – a pleasure.

After lauding the Gillard

government’s progress on super-annuation and the like, the Hon.Mr Bradbury took some happysnaps and wouldn’t you know it,Outsider found himself in thesame elevator.

His minder began talkingabout how great the speech hadbeen, didn’t Mr Bradbury think?

But alas, Outsider, unable tohide his girth and his well-wornreporter’s cap, must have beenspotted, and Bradbury remainedtight-lipped until he was releasedfrom the elevator.

OUTSIDER has always been a Gary Cooper fan,and so he likens current relations between BTFinancial Group and Colonial First State/CountFinancial as being something akin to that greatmovie classic High Noon.

Indeed, he likes to imagine BT Select's PhilButterworth and Count's David Lane as gun-slingers facing off in the main street ofHadleyville, New Mexico, while Securitor andCount planners sing the plaintive words of Donot forsake me oh my darling.

Of course, Outsider is not sure which of But-terworth and Lane is the marshal and which isthe recently released inmate, Frank Miller, seek-ing revenge. He senses a number of financialplanners will be making suggestions aboutappropriate casting.

Given Butterworth is domiciled in Melbournewhile Lane lives in Sydney, Outsider has alwaysworried about how he could conspire to have

the two protagonists face-off in the main street– but that dilemma was solved when your ven-erable correspondent visited the Westpacfortress in Sydney's Kent Street.

Sitting chatting to Butterworth, Outsidernoticed that he was gazing down on the Com-monwealth Bank's new digs near Cockle Bay,and he figured any duel could be held on neu-tral ground – the boardwalk fronting the eateriesalong King Street Wharf.

Unlike the movie, Outsider knows that neitherman will emerge the winner because of thenumber of financial planning businesses thathave already run away with the gold shipment.

It is also worth remembering that althoughFrank Miller is killed in High Noon, the marshalwas also wounded, notwithstanding the fact hewas comforted by Grace Kelly who ultimatelyended up in Monaco. Maybe life really will imi-tate art.

A L I G H T - H E A R T E D L O O K A T T H E O T H E R S I D E O F M A K I N G M O N E Y

Money Management (July 19, 2012)

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