Lifespan has contributed $10,000 to the Adviser Regulatory Fund (ARF) set up by the Association of Independently Owned Financial Professionals to defend the property rights of financial advisers. Lifespan will top up this fighting fund with a total of 50% of the individual contributions made by its 180-strong adviser network.

Lifespan founder and executive Chairman John Ardino said the legislation before the senate to abolish grandfathered commissions would increase the cost of receiving financial advice and lower consumer access to advice significantly when the opposite was needed.

“Our industry is at a critical crossroads. The outcome of this challenge in the High Court of Australia will affect the industry for years to come. We believe we should be doing as much as we can to ensure that outcome is a positive one for our clients, ordinary Australians who need access to advice for their wellbeing, as well as the advice industry which is being unfairly treated.

“The government adopted these flawed recommendations from the Hayne royal commission without any objective justification that grandfathered commissions have caused any harm to clients,” he said.

Moreover, Mr Ardino said; “the commission’s recommendation to abolish grandfathered commissions is invalid because the commissioner failed to follow the directive in clause K of the terms of reference requiring consideration to be given to the impact of his recommendations on the economy, the cost and access to advice, competition and other factors.”

Mr Ardino added that grandfathered commissions involve no misconduct, no fees for no service and no breaches of professional standards or community expectations.

“Grandfathered commissions are legitimate income supported by the advice to the Labor government given by the Solicitor General in 2011, which Bill Shorten announced at that time. In effect, he said that these commissions constituted property rights protected by the constitution and that the government could only abolish them by compensating planners on just terms.

“The government and Commissioner Hayne have falsely argued that this 2011 advice no longer applies. Moreover, there is a real risk that adviser property rights may be wiped out unilaterally by fund managers feeling obligated to stop paying grandfathered commissions, potentially in breach of their distribution agreements.

“Advisers may have to litigate against fund managers as well if it can be shown they acted improperly,” Mr Ardino said.

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Matt Walsh

The Lifeplan Investment Bond (formerly Lifeplan NextGen Investments) has been upgraded from “recommended” to “highly recommended” by Zenith Investment Partners in its latest review.

In its report, Zenith said it views the Bond’s investment menu as robust, providing a well diversified suite of investment managers, asset classes and investment styles.

“There are many different applications for the Bond due to its legal and tax structure. In Zenith’s view, this is one of the key strengths of the product.

“We also believe Lifeplan’s management personnel are highly experienced and capable, providing us with a high level of conviction in the product.”

Zenith also commented on the bond’s Wealth Preserver (WP) feature. This feature, unique to the Lifeplan offering, is a nominated beneficiary feature that enables strategies usually only available through a trust structure.  It allows the bond owner to control the timing, distribution and frequency of benefits to nominated beneficiaries after their death, outside the Will structure so it is not affected by any challenges or issues with the Will.

Zenith said that it “sees the WP as an innovative addition to an Investment Bonds already comprehensive structural benefits and view the feature as an impressive intergenerational wealth transfer tool”.

Matt Walsh, general manager of life and super at Australian Unity, said the Zenith rating comes on the back of a solid year for the bond.

“This include upgrades to our digital tools for investors and advisers, improvement to rebates for high net worth investors, an expanded menu, increased team to service advisers and increasing support from the market as evidenced by our continued increase in market share.

“Enhancements to the Lifeplan Investment Bond are part of an ongoing strategy of improving our products and services for advisers and investors,” he said.
Zenith has also given the Lifeplan Education Bond a ‘recommended’ rating in its first review.

It said: “In Zenith’s opinion, the Fund provides a compelling option for those seeking a tax-efficient savings solution for educational requirements.

“Zenith believes that the key attraction is the high level of flexibility around the types of education which are eligible for the specific tax treatment of Scholarship Plans and the non-proscriptive nature of student eligibility. We also believe Lifeplan’s management personnel are highly experienced and capable, providing us with a high level of conviction in the product.”

Mr Walsh said the Lifeplan Education Bond is a hidden gem in the wealth management industry.

“It is a competitive and contemporary product that gives families access to important tax benefits.   It’s also a great way for advisers to demonstrate the value of advice to younger clients, who want help achieving their medium term goals and meeting cost of living challenges.

“There remains a lot of mythology about scholarship fund style products.  Our education bond is a consumer-first product with a compelling tax advantage.

“We’ve democratised access to a very valuable tax benefit which the Federal Government allows for parents and grandparents saving for a child’s education – and what can be more important than that?

“On top of this, we have provided investment choice, flexibility and no penalties. This product is a true myth buster.”

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Matt Walsh

Australian investors must recognise that political risk is currently a significant consideration in wealth creation and management, Matt Walsh, head of Lifeplan, has warned.

“Managing political risk clearly involves the diversification of assets and asset classes but what is not so widely understood is that it should involve the diversification of how investments are held.

“Indeed, while Australian investors may be aware of the term “political risk” they would usually relate it to foreign countries with unstable governments.

“Recent global events should remind us that every country has a degree of political risk, and Australian investors should now appreciate the impact on markets our own uncertain political outlook can have.

“Couple this with ongoing leadership concerns in the UK, the unknown impact of Brexit, and the Trump factor in the US, and political risk is currently a major influence for Australian investors.”

Mr Walsh said that professional money managers, with a well-diversified quality portfolio, would have already taken political risk into account through diversification of assets.

“However, the political risk in the choice of investment vehicles also needs to be considered.

“This is especially true of superannuation – which is where most Australians have a large portion of their wealth.

“We are reminded time and again that politicians cannot stop themselves from tinkering with super – especially the tax aspects that are what make superannuation so attractive as an investment vehicle.

“Investors need to consider other ways of holding assets, not necessarily instead of super, but to complement it and diversify.”

Mr Walsh said that other than investing in one’s own name, or that of a partner, there are four main vehicles that investors can use when holding assets:

• Via family trusts (taxed at marginal rate) or family companies
• Superannuation (taxed at 15 percent; or 0 percent in pension phase)
• Investment bonds (taxed at 30 percent or less with imputation system)
  Companies (at 30 percent tax rate)

“To reduce the impact of political risk on long term savings, investors should ideally spread their wealth across these three types of vehicle.

“Investment bonds are a particularly good vehicle to complement super and diversify as a way to minimise the impact of political risk.

“In recent months, during all the comment on tax and superannuation, any possible changes to investment bonds were not raised. Indeed, there have been only a few material changes to investment bonds in the past 20 years.

“There are also a number of other features to investment bonds which make them an ideal companion to super, including estate planning, intergeneration wealth transfer.”

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Matt Walsh

Following growing interest in investment bonds, Lifeplan has updated its leading investment bond offering, NextGen Investments, with eight new investment options and an additional rebate tier.

Matt Walsh, head of Lifeplan, said the proposed changes to superannuation in May’s federal budget have triggered a surge of interest in the NextGen investment bond.

“Investment bonds are a natural alternative to superannuation, offering a tax-effective, stable investment option.

“Since the Coalition government proposed lifetime caps on superannuation, as well as additional tax imposts, we have seen the market for investment bonds strengthen significantly.

“In response to adviser demand, NextGen Investments now includes more options on the investment menu with 42 options now available.”

The new investment options are:

• Vanguard® Balanced Index Fund
• Vanguard® Growth Index Fund
• PIMCO Australian Bond Fund
• PIMCO Global Bond Fund
• Fidelity Australian Equities Fund
• Vanguard® International Shares Index Fund (Hedged) AUD
• Magellan Global Fund
• Vanguard® Australian Property Securities Index Fund

“NextGen is now very sharply priced across all tiers, and very competitive for the higher net worth investor, with a 0.3 percent per annum rebate cutting in at $500,000” Mr Walsh said.

“Another rebate tier has also been added, offering a 0.60 percent rebate for investment amounts of $10 million or more.”

Enhancements to NextGen Investments are part of an ongoing strategy of improving Lifeplan’s products and services for advisers and investors.

“It follows the upgrade to our adviser website, the launch of a new portal for investors, and the expansion of our adviser support team over the last 12 months,” Mr Walsh said.

“We will continue to keep investing in our offering to ensure we deliver market leading investment bond products and services in Australia.

“While the current political uncertainty may alter the final form of super changes, there is clear support from both sides of politics to constrain tax benefits of super, so attractive viable alternatives such as investment bonds will continue to see growing interest,” Mr Walsh said.

Lifeplan is a specialist business of Australian Unity Investments.

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Matt Walsh

Lifeplan has entrenched its digital presence in the market with the launch of an online investor portal enabling investors to monitor and transact online. The development and launch of the Investor Portal follows the successful launch of the Adviser Portal in November 2014.

The launch follows Lifeplan’s extensive consultation with advisers and investors, in order to design an online portal around their specific needs.

“The Lifeplan investor portal has been developed in response to adviser and investor demand for the ability to self-service online,” said Matt Walsh, head of Lifeplan.

“The secure online portal provides a user optimised digital experience with functionality designed around what advisers and investors have said they want.

“It has been built with a responsive design and will allow investors to easily view policy information and change contact details via their mobile or desktop.”
As with all of Lifeplan and Australian Unity’s digital tools, Mr Walsh said the portal has been built with a ‘mobile first’ design philosophy.

“Increasingly Australians are conducting their financial affairs over their mobile phones, and it is paramount that any online initiative adopt this ‘mobile first’ design philosophy.

“With the increasing proliferation of technology – even among older investors – today’s tech savvy generation of investors is looking for a convenient and secure digital experience when purchasing new products and maintaining online accounts.

“The new Lifeplan portal provides this with easy and secure access to account balances, transaction history, tax portion statements, useful forms, and answers to frequently asked questions.”

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Matt Walsh

In previous surveys, an investor’s age was positively correlated to the three drivers of advocacy: performance, trust and reliability, and technical ability of their financial adviser – i.e. the older the investor, the more likely they were to be satisfied with their adviser. However, over the past two surveys, the youngest cohort of investors has displayed rapid increase in their perceptions regarding their advisers.

This group now sits second to the over-60s age group in terms of their perceptions for all three drivers of advocacy. As in previous surveys, older investors have significantly higher levels of perceptions regarding their advisers, although this survey saw their perceptions regarding their adviser’s technical abilities decrease.

Higher wealth levels have also been correlated with more positive perceptions across the three drivers of advocacy in previous surveys; however this survey shows that investors with the highest net wealth record a decrease in perceptions for Technical Abilities and Trust and Reliability.

Investors with lower net wealth seem to show an increase in their perceptions across the three drivers and investors with less than $50,000 seem to be most positive regarding their advisers.

“This survey sees a very strong increase in the levels of advocacy by the lowest net worth and younger investors. This result may indicate that financial advisers are doing a good job of taking care of entry level investors,” said Mr Matt Walsh, head of Lifeplan.

Market factors may also explain the high levels of advocacy among investors in this survey. Notably, the equity market index ASX 200 showed gains for much of the period since the last survey. During this time investors have seen high returns on their equity and real estate investments although the lower interest rates have impacted the fixed income markets severely.

“In light of favourable capital market conditions for equities and property over the past six months, investors with a bias towards risk have benefited and this may help explain an increase in the perception regarding performance,” Mr Walsh said.

“On the other hand, as yields decrease term deposits and other annuities are impacted negatively.  Perhaps as a result of this, perceptions of investors in the 60-plus age group showed a drop in their advocacy of their advisers.

“As global equity markets rise and yields decrease, advisers need to be cautious about future changes in the capital markets. If the domestic economy slows down, advisers will need to be careful regarding how portfolios may need to be adjusted. If the equity market, real estate and fixed income securities start providing low or negative returns, investors will become more critical of their advisers.

“In particular, it is concerning that investors in the 45-60 age-group seem most dissatisfied with their adviser, as this is the group we believe most advisers are concentrating on as a way of growing their business.  Our view is that more needs to be done to keep them happy,” Mr Walsh said.

Although young investors and those with less than $50,000 showed the biggest satisfaction increase, across the board this survey showed an increase in the satisfaction all investors have with their financial advisers. All three drivers of advocacy are now at their highest levels since the index commenced.

The index increased to 75.12 and has achieved the highest level of satisfaction since its inception. Year on year, the April 2015 survey saw an increase of 0.8 percent over the April 2014 index levels.

The largest increase amongst the three drivers of advocacy was for the perception of Performance that increased by almost 1.24 percent over the last survey six months ago, while the other drivers – the perception of Trust and Reliability increased by 0.81 percent while the perception of Technical Abilities of the advisers increased by 0.17 percent over the last six months.

“It is clear that generations Y and generations X will increasingly account for a larger part of a financial adviser’s client base. These survey results underline the importance of ensuring advisers meet the needs of all their clients, and not just the about-to-retire and newly-retired baby boomer generation.

“Gen X and Gen Y will eventually be the recipients of huge levels of intergenerational wealth transfer, so ensuring advisers provide these investors with good advice now, will stand them in good stead when these younger clients have even larger amounts to invest.

“The increased satisfaction levels of younger investors, and of those with smaller amounts to invest, would suggest that this is the case,” Mr Walsh concluded.

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Matt Walsh

The latest Consumer Price Index (CPI) figures show that education costs continue to outstrip inflation, maintaining the trend that has persisted for the past decade.

Parents’ concerns about the increasing cost of their children’s education are justified, warns Matt Walsh, head of Lifeplan.

For the 12 months ended September 2013, education costs rose by 5.7 per cent compared to the 2.2 per cent rise in the CPI.

“The increasing cost of education is outstripping rises in the CPI by a rate of more than two to one*,” Mr Walsh says.

“The cost of education has been steadily increasing for some time and there is no reason to expect this to change anytime soon.”

This is particularly relevant for parents seeking private schooling for their children.

“Parents should still consider starting to save in advance for their children’s education, even if it’s just a small amount each week, as this can add up to quite a lot over time,” Mr Walsh said.

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The latest Lifeplan ICFS Financial Advice Satisfaction Index* has shown clients of financial advisers have become significantly less happy with the technical ability of their adviser over the past six months.
 
The latest in a series of surveys of financial advisers’ clients, undertaken in April, sought feedback about the performance; trust and reliability; and technical ability of their financial adviser.
 
Since the previous survey in October 2012, perceptions of financial advisers’ technical ability have dropped by 4 per cent, while the other two drivers – performance, and trust and reliability ­– have both improved, up 11.6 per cent and 5 per cent respectively.  The strong perceptions of performance helped pull the overall Index up by 3.1 per cent. 
 
Matt Walsh, head of Lifeplan, said one of the most likely reasons for the drop in perceived technical ability is the ongoing regulatory change affecting the financial planning sector, and overall loss of confidence in, and confusion about, the changes being made.
 
“Clients have been exposed to the significant changes taking place in financial planning, such as the impact of FOFA requirements including fee-for-service, which can easily be misinterpreted as critical of financial planners.
 
“There are two probable causes.  Firstly, clients could well be thinking ‘there must be an issue if the government is creating regulation to fix it’.
 
“Secondly, the effort of responding to the changes has distracted advisers from the very thing they’d prefer to be doing – working with their clients and giving quality advice.”
 
Mr Walsh said many clients could still be unfairly blaming their adviser because they have missed out on recent market gains or waited too long.
 
“The movements in the Lifeplan Index over time indicate client communication is a critical aspect of the relationship.
 
“There needs to be more individual contact to give advisers the opportunity to explain how they are dealing with the many issues around, and show they have the skills and knowledge to manage them.
 
“Education and information programs for clients will also enhance relationships and show the adviser has the technical knowledge required, and also helps reinforce the image of trust,” Mr Walsh said.
 
He pointed out that those who have had an adviser for only a short time are more likely to have a positive perception of their adviser’s technical ability than those who have had an adviser for a significant period of time.
 
“This is probably because advisers have spent more time with new clients than those they have had for some time.
 
“The perception of technical ability among those who have only had an adviser for two years or less has improved since the last survey, and it is those who have had an adviser for 10 years or more who have displayed a decline in their perception of their advisers’ technical ability.
 
“It would make sense for advisers to consider ways to remove themselves from the ongoing noise and distraction around legislation and market movements, and ensure they are maintaining a healthy range of advice strategies that are not dependent on market performance or superannuation alone, with a focus on communicating this to clients,” Mr Walsh said.

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