Peter Burgess

The SMSF Association has lauded the Federal Government’s decision to fast track the implementation of a legacy pension amnesty.

SMSF Association CEO Peter Burgess says this is an early Christmas gift for over 17,000 SMSF legacy pension accounts that now have five years to commute their pension and take advantage of a flexible pathway to allocate associated reserve amounts.

“These newly registered regulations – Treasury Laws Amendment (Legacy Retirement Product Commutations and Reserves) Regulations 2024 – provide much-needed reform to retirees trapped in non-commutable legacy pensions, including legacy lifetime, life expectancy and market-linked income stream products.

“Considering the age of these superannuants, they now have a genuine opportunity to restructure their retirement savings effectively.”

Burgess says the decision to grant this amnesty is a tribute to the Association’s persistent lobbying on this issue over the past five years.

“These regulations represent a big win for the sector and the Association’s advocacy team, especially the decision to be make it a standalone policy priority and not be linked to other tax policies such as the proposed Division 296 tax.”

He says that while these regulations are a welcomed development, there is a lingering sense that some opportunities to further enhance the regulatory framework surrounding this measure may have been missed.

“In our submission on the draft regulations, we noted it was common practice for legacy pensions to cease rather than be commuted on the death of the primary beneficiary or on the completion of the payment term.

“We encouraged Treasury to consider the inclusion of an additional cap-free pathway to allow a pension reserve to be exited from the system where the pension recipient(s) has died.

“Unfortunately, this was not heeded so it appears an opportunity has been lost to quickly and efficiently eliminate these potentially large reserves.”

He adds that the Association also flagged the potential social security ramifications emanating from the regulatory changes.

“Notwithstanding industry’s recommendations for Treasury to work with the Department of Social Services to ensure these concerns were addressed, at this stage we’re not aware of any social security legislative instruments, or other supporting materials, that serve to alleviate any of these concerns.

“While we understand a legislative instrument to remove the social security ramifications is likely, without further clarification or developments on this front, concerns still linger that social security sensitive members may be negatively impacted by this recent development.”

These regulations, along with all other key legislative changes from 2024 impacting SMSFs, will be a feature of the SMSF Association National Conference 2025 next February. Held at the Melbourne Convention & Exhibition Centre from 19 – 21 February, attendees will hear the latest updates in depth from the experts.

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Peter Burgess

The SMSF Association says the framework outlined in the second tranche of the Government’s Delivering Better Financial Outcomes (DBFO) reform package lays the groundwork for reducing the cost and improving access to advice, but as is often the case, the devil will be in the detail.

The Minister for Financial Services, Stephen Jones, announced the package yesterday, stating it would ensure more Australians would have access to quality and affordable financial advice.

SMSF Association CEO, Peter Burgess, said there can be no argument reforms are needed to reduce the cost of advice and to open up new channels of professional advice to support the 15,500 existing financial advisers servicing the community’s financial advice needs.

“We have consistently argued that these new channels are urgently needed to enable more individuals to access quality advice to improve both their financial and mental well-being.

“Meeting this need has become even more evident when the growing number of baby boomers entering retirement is considered – many of whom cannot currently afford to get advice.”

Burgess said that considering the Government’s focus on creating a new class of adviser to provide safe and simple advice, it remains a mystery to us why the role other professional advisers, such as accountants, could play was still being overlooked.

“It was our contention that the Quality of Advice Review neglected the significant role accountants can play in addressing the growing advice gap, and the Government is perpetuating this oversight.

“By giving accountants a defined advice role, it will further support consumers to access the advice they need when they want it from their choice of trusted adviser.”

He said new educational pathways were needed to not only ensure the sustainability of the financial planning sector, but to ensure the future financial advice needs of all Australians could be met.

“The success of this model will depend on ensuring that the education requirements for the new class of adviser truly provides a pathway to becoming a financial adviser.

“We welcome the opportunity for all AFS licensees to employ the ‘new class’ of adviser and support more individuals on their pathway into a rewarding and fulfilling career.”

He added that many consumers needed point in time advice, often driven by life events, so modernising the best interest duty provided certainty to the sector that they could meet this need by providing advice on a single topic or limited scope of advice.

Burgess said the professionalism that now characterised the advice sector was a credit to its practitioners, providing the foundation for the sector to now expand so that it could meet the advice needs of a growing number of Australians in an affordable way.

“The Association looks forward to working with the Government to ensure the right balance between opening up advice to more Australians is achieved without surrendering important consumer protections.”

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Peter Burgess

The self managed super fund (SMSF) sector has notched up a significant milestone following the release of the Australian Taxation Office’s (ATO) September 2024 quarter SMSF statistics which show total SMSFs assets have surpassed $1 trillion for the first time.

SMSF Association CEO Peter Burgess hailed the ATO’s quarterly statistics as a landmark achievement for the sector, noting that while the figures are estimates, they underscore the confidence Australians place in SMSFs. As at 30 September 2024, Australians have entrusted approximately $1.02 trillion of their retirement savings to SMSFs – a powerful testament to the value of “choice” and the benefits of SMSFs.

“SMSFs can provide the ultimate level of control and flexibility which in-turn empowers and encourages greater level of engagement.”

“This extra flexibility and control can manifest itself in many ways including investment flexibility, estate planning flexibility and the ability to structure the fund in a way which best suits the needs of fund members.”

“It’s always been the Association’s mantra that SMSFs are not for everyone. But for those individuals who want to take direct control of their retirement savings, whether in the accumulation or decumulation phase of superannuation, they have proved a very effective vehicle.

Burgess said the sector had thrived despite a long-running campaign that asserted SMSFs were costly, complicated, and delivered lower investment returns compared with their APRA-regulated counterparts.

“These were criticisms that the sector – and the Association – took extremely seriously, so it was gratifying when research commissioned by the SMSF Association showed that an SMSF with net assets of $200,000 can be competitive in terms of costs and investment returns compared with APRA funds.”

Burgess said the Association was proud of the sector’s remarkable evolution, noting the concept of small, member-controlled superannuation funds emerged in 1985 under the term ‘excluded funds’ before SMSFs were introduced in 1999 alongside a more comprehensive regulatory framework.

“Over nearly four decades we have seen the emergence of a dedicated cohort of advisers who have played a critical role in guiding SMSF members through their own unique superannuation journey. The fact that every inquiry into superannuation has given our sector a clean bill of health is testimony to the professionalism they bring when advising their clients.”

This significant milestone will be celebrated at the SMSF Association’s 2025 National Conference, being held at the Melbourne Convention and Exhibition Centre from February 19 -21, where the theme, ‘Collaboration: Unleashing Collective Potential,’ will highlight the importance of working together to explore and shape what the future holds for the sector.

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Ian Dunbar

Global professional services firm Aon has collaborated with Global software provider SuiteBox, to roll out its digital workspace technology to its Australian adviser network, to streamline their advice process and provide improved client experience.

“Aon has had a client first philosophy for some time now, leveraging technology such as SuiteBox’s video conferencing platform is the next logical step in improving the client experience. It also, increases the effectiveness and efficiencies for our adviser’s practices.” Said Jayson Walker, Aon’s General Manager of Financial Advice.

“A key innovation from SuiteBox was the integration of the digital signatures into the video conference itself. To have an adviser be able to digitally present a Statement of Advice and capture the Authority to Proceed in the same session is the kind of easy and simple process consumers have come to expect.” He added.

Aon has over 200 advisers across its network who will have access to SuiteBox’s video, collaboration, and digital signature tools.

Ian Dunbar, CEO of SuiteBox, commented: ‘Aon’s undertook a comprehensive review of functionality, risk and suitability, and I am very proud that SuiteBox has been selected by Aon to deliver a comprehensive digital workspace to their advisers and clients’.

“From our inception, SuiteBox has always understood the importance of the ability to not only meet, but also collaborate on documents and transact business all in the one digital solution. This combination puts SuiteBox at the leading edge of digital workflows for professional services. The adoption of SuiteBox within Aon is true endorsement of this strategy”.

Over 800 companies globally use SuiteBox’s digital workspace. The company is experiencing a rapid expansion given the growing popularity of video conferencing in business and the engagement it offers with clients.

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Lambros Lambrou

Aon Underwriting Managers (AUM), Aon’s managing general agency, has signed an exclusive distribution agreement with wholesale underwriting management company, Freeman McMurrick (FMM).

The agreement positions FMM as the sole distributor of AUM solutions throughout the region and will bring market-leading products to clients and brokers across Australia and New Zealand.

As part of the implementation strategy, Aon will establish Aon Underwriting Managers in Australia as a managing general agency (MGA) for risk solutions in the region.

AUM currently underwrites over USD$1 billion in premiums globally. This agreement will position AUM as unique regional leader, providing Australian and New Zealand brokers with access to exclusive products and services, supported by world class carriers through the FMM brand.

Lambros Lambrou, Aon Risk Solutions Australia Chief Executive Officer, said the new offering will benefit from greater data and analytical insights, combined with strategic carrier relationships.

“This agreement strengthens Aon’s existing local and global capabilities to give brokers and their clients a range of services and innovative solutions that go beyond traditional offerings in the retail marketplace,” Mr Lambrou said.

“This enhanced offering is a significant addition to the market and aligns with Aon’s global strategy around underwriting management.

“We have witnessed the successful implementation of MGA strategies in the US and UK. This agreement enables us to replicate a proven model in the local market,” Mr Lambrou said.

Freeman McMurrick is a trusted leader in wholesale underwriting management and will become the channel for the distribution of existing FMM products and new AUM offerings in Australia and New Zealand.

Development and refinement of new product solutions is currently underway and FMM will keep its broker partners, clients, the industry and other interested parties updated on the progress.

Aon has appointed Alison Smith as AUM Director to lead this initiative.

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With extensive international experience working for some of the world’s major insurers, Ms Walther, who is Australian, has held senior leadership roles working in the Americas, Europe and Australia for Allianz and Zurich, most recently as Head of Corporate Market Management – Americas, for Allianz Global Corporate & Specialty.

“Giselle has a proven track record at every level in driving top and bottom line results, as well as the development and execution of strategic initiatives and plans. Her focus on innovation to drive results and her ability to draw widely on her international experience across a wide range of roles will prove invaluable to Aon and our clients in Australia.

“Giselle’s appointment demonstrates Aon’s overriding commitment to investing in our business to support our clients and generate growth,” said Lambros Lambrou, Aon Risk Solutions Australia Chief Executive Officer. “We are extremely fortunate to welcome Giselle home to Australia in this role. She will bring extensive knowledge and know-how to the Growth Strategies division.”

In addition to driving Aon Risk Solutions’ intensifying growth agenda in Australia, Ms Walther will assist with the oversight of Sales Excellence, Client Facing Marketing and Business Growth Innovation.

“Aon is an organisation I have worked with extensively across multiple regions for many years and I am very excited to become part of the ARS Australia team. I am confident that together we will achieve our growth ambitions and Aon will continue to be the market leader in the industry,” said Ms Walther.

Ms Walther starts with ARS in Australia on 1 January 2015.

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Lambros Lambrou

Growth in capacity and increasing interest from international markets mean the recent run of reducing premiums in Australia may well continue, raising the question of whether insurers are prepared to meet the challenge and diversify by developing new products.

This is one of the key insights revealed by Lambros Lambrou, CEO of Aon Risk Solutions Australia, following the release of Aon’s Australian Insurance Market Update for Q1, 2014.

Mr Lambrou said that the data, gleaned from the Aon Global Risk Insight Platform (GRIP), the world’s largest proprietary database of insurance placement data, enables better analysis and more profound insights to support the insurance industry in shaping its future.

He also pointed out that insurance markets in general are becoming increasingly attractive investment opportunities for alternative capital, such as pension funds, which are actively seeking greater returns and further diversity for their investors.

“For buyers, this adds to an already competitive environment,” Lambrou said. “So for the insurance market, the big question becomes: when will it genuinely start using profits derived from the relatively benign claims environment to develop innovative products for traditionally uninsurable risks, rather than simply banking the difference?”

According to Mr Lambrou, future success for the insurance market lies in its ability to innovate by anticipating and meeting client needs in an ever changing risk landscape.

Mr Lambrou cited network security and privacy insurance policies as a recent example of product innovation: “Five years ago organisations were completely exposed to cyber risk. The insurance market just did not cater to this very real and constantly evolving risk. Now the market offers specialist cyber risk insurance policies to adequately mitigate risk; opening itself up to an entirely new segment of the market that was up until recently uninsurable.”

Mr Lambrou went on to outline some of the highlights from the latest update.

“The good news is that at a macro level, and despite some commentary to the contrary, commercial markets are in good shape and continue to return healthy profits, largely off the back of a year with fewer natural catastrophes and attritional losses,” he explained.

According to Aon, at the micro level, there are some marked variations in the profitability and outlook for different sectors. For example, despite intense competition and surplus capacity keeping premiums flat across the board in general liability, those with bushfire and offshore energy exposures are a marked exception. Rates in these areas have hardened in the last year, and this is expected to continue.

Mr Lambrou said that Workers’ Compensation was another line to buck an otherwise favourable claims trend.

“Both the volume and the value of Workers Compensation claims are on the increase,” he explained. “This means that clients with poor loss histories will inevitably be asked to take on more risk themselves.”

In the Directors’ & Officers’ Liability (D&O) space, supplementary traditional and non-traditional capital has created an oversupply, pushing premiums down, a trend expected to continue throughout 2014. On the other hand, the total amount of compensation claimed is on the rise. Of particular concern is the growing tendency for legal costs to outweigh settlement amounts.

Mr Lambrou commented that up-coming court cases in respect of whether directors can access their D&O insurance to fund legal costs will have potentially serious ramifications for Australian companies.

“Courts want the insured to have access to a legal defence, but whether or not this comes at the expense of those entitled to compensation from the policy remains to be seen. We may see a rise in the purchase of separate ‘legal expense only’ policies to complement traditional D&O policies depending on the way the decision goes,” he said.

While the majority of market commentary is focused on the large corporate space, this sector is becoming increasingly difficult to penetrate. As a result, there is a strong trend of insurers entering the small and medium enterprises (SME) market, particularly in the professional indemnity space.

“They believe that the fluid SME market provides more opportunities, and as a result, between 40 and 50 insurers are currently actively looking to provide professional indemnity cover to SMEs,” he said. “The one exception to this trend is financial planners, where poor loss histories across the board have resulted in rate increases.”

Mr Lambrou concluded by saying that Aon has been sharing deep data insights from the report with key clients in a series of boardroom briefings held in major capital cities around Australia prior to its more general release. The aim of the briefings is not just to share Aon’s insights, but for clients to contribute to the conversation by raising their questions and concerns.

“The response from clients has been overwhelmingly positive,” he said.

“Our clients are clearly keen to get the edge on their competitors by building their businesses on the back of hard data. We are really pleased to be able to share evidence and insights from GRIP to offer them the opportunity to do just that.”

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Lambros Lambrou

Regulatory and legislative change has assumed the prime position as the leading risk for Australian and New Zealand businesses in 2013/2014, followed by concern regarding deteriorating local economic conditions and the impact of people risk.

These are the major findings of Aon’s (NYSE:AON) 12^th annual Australasian Risk Survey, which provides a snapshot of the risk management practices of 380 businesses operating in 15 key industry sectors, including 23 of the ASX top 100 Australian companies.

Top 10 Risks to Australian and New Zealand Businesses:

1. Regulatory & legislative change
2. Local economic conditions
3. People risk
4. Increasing competition
5. Brand & image
6. Global economic conditions (new in 2014)
7. Human resources
8. Weather and natural disasters
9. Failure to innovate
10. Business interruption and supply chain risk

Speaking about this year’s survey, Mr Lambros Lambrou, CEO of Aon Risk Solutions Australia, said that the elevation to number one of regulatory and legislative change, up from third place last year, was a reflection of the growing burden and pace of change and the costs and effort companies must undergo to address it.

“Regulatory and legislative change has been moving up consistently through the top ten risks over the past few years,” Mr Lambrou said. “Legislative change adds cost pressure to a company’s bottom line in many ways, both directly where it results in more restrictive working conditions and potential additional fines and penalties and indirectly, for example in compliance costs.”

In this environment, Mr Lambrou said it was more critical than ever for organisations to positively manage change, remain flexible and attuned to the evolving landscape: in particular, he added, to the implications of change both for the day-to-day running of businesses and the bigger governance and Board-level picture.

“Having the systems in place to support effective risk management is increasingly a determinant of a business’ ability to succeed in fast-moving and challenging times,” said Mr Lambrou. “And not all such systems are created equal.”

Ranked second, for the second consecutive year, is concern about local economic conditions. Australian business sentiment continues to languish, fuelled in part by predictions of a slowdown in economic growth over the next decade. And it’s not just the local economy that has companies worried. Concern about global economic conditions came in at number six, further highlighting that local business clearly see the global marketplace as having a more significant impact on their business success.

Mr Lambrou said that the strong Australian dollar, challenging trading conditions and the high cost of employment in this country have all combined to force the withdrawal of a number of high-profile major manufacturers from Australia.

The fastest mover in the top ten this year, people risk, moved up eight positions, from outside the top ten, to third place in the Aon survey.

“There are a number of reasons for companies’ increased concern about people risk,” Mr Lambrou explained. “The cost of Workers’ Compensation insurance is increasing and has led to a greater focus on injury prevention and early intervention. Harmonisation of work health and safety laws across most states and territories has also increased awareness of the issue. The need to manage these increasing costs is a clear business imperative. Companies that positively manage their people risk issues by taking specialist advice can significantly reduce costs.”

Other big movers this year were business and supply chain risk, which fell six places to number ten on the back of significantly fewer natural disasters than in previous years. Brand and image concerns fell to their lowest level in the 12 year history of the Survey, ranking at number five in 2014. Mr Lambrou said that this fall was more likely the result of intensified competing risk concerns, than a gauge as to the decreasing relevance to organisations of their brand and image.

The overall view on insurance pricing among respondents was positive. Most said they expected the cost of premiums to remain stable or decrease slightly, based in part on surplus capacity and strong insurer competition.

Mr Lambrou said that it was of real note that the top ten business risks included a number of external concerns that are largely uninsurable. These include local and global economic concerns, and increasing competition at number four. At the same time, the median total cost of insurable risk fell marginally.

“Companies are under pressure to reduce costs and that includes their insurance spend. As a result they are looking for evidence of the bottom line benefits of an effective risk management strategy. Many are looking at alternative, non-traditional risk transfer solutions, such as captives, weather derivatives, catastrophe bonds and insurance linked securities, just to name a few.”

Mr Lambrou concluded by citing recent research conducted by Aon and the Wharton School at the University of Pennsylvania.

“There is a clear and direct correlation between risk management performance and favourable financial results when analysing return on shareholder equity. Developing innovative and robust risk management strategies therefore makes extremely good business sense.” 

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Lambros Lambrou

Aon Risk Solutions has integrated its existing financial businesses – including Aon M&A Solutions, Environmental Services Group, Trade Credit and Surety, and Financial Services Group – into an expanded segment, Financial Specialties.

This will deliver Aon clients the convenience and benefit of a single point of access to the company’s comprehensive, integrated technical and subject matter expertise.

Lambros Lambrou, CEO of ARS Australia, said: “The depth and range of solutions offered by the enhanced segment is a key differentiator for Aon Risk Solutions. The decision to bring these specialist teams together means we can leverage strength to maximise the value we provide clients, delivering growth and improving the scale of our technical and subject matter capability across key market segments.”

Jennifer Richards, the current Client Director of Aon M&A Solutions, will head up the division as Managing Director of Financial Specialties, reporting to Mr Lambrou. Ms Richards has been with ARS since July 2011, leading the AMAS team to significant growth and a number of key achievements.

Prior to joining Aon, she was Senior Vice President within AIG’s Mergers & Acquisitions and Financial Institutions group. Prior to AIG, Jennifer was a corporate/M&A lawyer at Sidley Austin in New York.

Ms Richards will be responsible for creating and implementing the Financial Specialties strategy.

“I am confident that Jennifer’s experience and strong leadership skills will ensure even greater success for our expanded segment and its clients. It’s particularly pleasing to be able to assign leadership of this important segment from within our own Aon ranks. It’s a real endorsement of the unmatched capability of our people and our leadership position in the market,” said Mr Lambrou.

Liz Botha and Stephen Trickey will continue to lead Trade Credit and Surety, and Financial Services Group respectively, reporting to Ms Richards.

The creation of the enhanced segment will see a team of more than 30 members from across Aon M&A Solutions, Environmental Services Group, Trade Credit and Surety, and Financial Services Group come together as Financial Specialties, effective immediately.

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Capital inflows affecting insurance markets: Aon

“An influx of capital from non-traditional sources is contributing to increased market capacity, lower premiums, and effectively enhancing competition in the global insurance industry.”

Commenting on insurance markets in 2013, Jason Disborough, Managing Director, Global, for Aon Risk Solutions, global provider of risk management, insurance and reinsurance brokerage, said that the market conditions that increased competition between insurers and lowered premiums across the board this year was likely to continue into 2014.

Mr Disborough said that increased capital flows into the industry from non-traditional sources has resulted in a convergence of traditional and non-traditional capital, translating into excess capacity which insurers have been unable to absorb through organic growth.

“Funds are flowing into the insurance sector from major pension and hedge funds as well as family trusts in a way we haven’t seen in the past,” he explained. “In the current low interest rate environment, these investors are seeking alternative sources of return. In addition, they have been willing to accept lower rates of return than have been usual in the industry. Because their investment has the potential to dwarf traditional sources of capital, it has the ability to fundamentally change market dynamics.”

Softening market conditions and increasing capacity have seen premiums fall almost across the board, with downward pressure on rates being experienced even in some of the poorer performing product classes.

Mr Disborough said that while this was great news for insured’s, it continues to present real challenges for insurers.

“Many are no longer able to rely on growth from their existing book of business, and need to look at new ways of maintaining profitability,” he explained.

James Baum, Managing Director of Broking & Chief Broking Officer, Pacific for Aon, also had some comments on the industry response to these changing financial dynamics, pointing out that when market conditions are challenging, it behoves insurers to innovate in order to maintain growth. And, he said, there are some key areas calling out for innovation in Australia.

“Australia is lagging behind the rest of the world in a number of areas. Network security and cyber risk, for example, have been seen as ‘emerging’ risks for far too long. The fact of the matter is that these risks are here now, and require a better and more coherent response from Australian insurers.”

Mr Baum went on to comment on the link between the themes emerging from Aon’s 2012/13 Australasian Risk Survey and the identifiable trends in insurance markets in 2013.

“Insurance exists to mitigate risk but at the same time, it is clearly not possible to insure against all risks,” he said. “We saw this very much reflected in the Aon risk survey. The number one risks identified by Australasian corporates, namely ‘brand and image’, and the ‘market environment’, are not risks that insurers can comprehensively address in the short to medium term.”

On the other hand, business interruption and human resources, which were ranked three and five respectively, are areas where insurance can offer real protection, and where insured’s and insurers alike need to concentrate their risk mitigation efforts.

“Workers Compensation, for example, is the single biggest insurance expense faced by businesses, so it’s no surprise that it ranked as the fifth highest risk concern. It really needs to be monitored and managed well on an ongoing basis.”

Mr Disborough concluded by looking forward to 2014, saying that he did not expect general economic conditions to pick up significantly, at least in the short term, and that alternative capital flowing into insurance markets would continue to keep competition alive and well.

“All in all, insurers and reinsurers alike are facing challenging times ahead, not just because of the ongoing impacts of natural catastrophes, but also due to less favourable operating conditions. On the other hand, their customer’s Total Cost of Insurable Risk will continue to benefit,” he said.

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