Nick Hakes

The Association of Financial Advisers (AFA) and Asteron Life (Asteron) have announced the 2017 Finalists for the AFA Excellence in Education Award (the Award).

The finalists are:

State Name Practice Title

• NSW: Jonathan Chong, Goodwin Financial Services, Financial Adviser
• NSW: Justin O’Donoghue, Vintage Wealth  Principal
• WA: Bradley Smith, Smith Wealth Partners, Director & Adviser
• QLD: Helen Russo, Encompass Wealth – Financial Life Planning, Financial Planner
• WA: Michael Ward, Maxim Private, Wealth Director

Nick Hakes, General Manager Member Services, Partnerships & Campus AFA, said this year’s finalists are investing heavily in their own academic and technical education but they are also investing in new frontiers of knowledge such as psychology, emotional intelligence and interpersonal skills.

“Through our research, we have discovered that communication and interpersonal skills are the skills that time and again, consumers have indicated they value more highly in advisers than any other quality,” he said. “It is pleasing to see that our finalists for this year are investing in knowledge that they can apply directly to their client conversations to help the client better understand the strategy that is being recommended to them.”

Mr Hakes said the financial advice profession is currently at an inflection point and now has the opportunity to redefine and rethink financial adviser education.

“To date, the industry has favoured an education pathway that is not reflective of what actually happens in an advice practice,” he said. “We now have the opportunity to start a revolution in financial adviser education, to build an education pathway that is reflective of what happens. Along with building academic knowledge and technical expertise, this pathway will help advisers develop the interpersonal skills they need in order to deliver what clients want most. We congratulate all our finalists on being at the forefront of that movement.”

The 2017 Excellence in Education Award Winner will be announced at this year’s AFA National Adviser Conference on the Gold Coast 11–13 October, and will receive a $25,000 education scholarship from Kaplan Professional.

Asteron Life Executive Manager Daniel Waller said, “Congratulations to the five finalists who have shown an outstanding commitment to ongoing education. Further education enables advisers to raise their professional standards and therefore the quality of their advice which in turn has positive impacts on their clients, their peers and the overall profession.”

Finalists of the Award are chosen for their commitment to professional development through continuing education and making a difference within the marketplace and their local community through the practical application of their knowledge and expertise.

Candidates are judged on the quality of their written nomination. Judges then conduct phone interviews with shortlisted candidates. Candidates are also given a weighting across four award criteria, including:

• 50% on formal education
• 30% on practical application of education
• 10% on contribution to one’s industry through education
• 10% on contribution to one’s community through education

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What changing dynamics will impact the US steel sector over the medium to long term?

Having recently returned from the US, Michael Ward, Senior Research Analyst at Nikko AM, shares his thoughts on the US steel sector and what impact its changing dynamics will have over the medium to long term.

Our recent visit to the US focused on its steel sector, which is seen as one of the bigger beneficiaries of a number of proposed initiatives from the Trump administration. The trip was planned to coincide with site visits and management presentations hosted by BlueScope Steel and Sims Metal, two leading Australian steel companies with operations in the US. We also visited a number of industry players right across the steel value chain, from scrap collection, to steel production and steel distribution.

More subdued, but still positive

Before focusing on the US steel industry, we would make the observation that the euphoria surrounding the potential for economic growth appears to have subsided since our last US visit in March. The focus then was very much on the benefits of trade protection, infrastructure investment and tax reform. At that time, the mood was positive, as was the outlook for economic growth. That was in stark contrast to what we sensed on this visit. The mood has shifted and was clearly more subdued than three months prior. This should not be confused with a sense of doom, but the mood had clearly shifted from good to okay. It was well-summarised in one meeting that we attended: “The outlook is fine. It’s better than bad, but worse than good.” Interestingly, the potential benefits to flow from the Trump administration’s policies—rather than being central to our discussions as they were three months ago—were now almost an afterthought.

Shifting back to the US steel sector, the volume outlook appears to reflect a balancing act between auto demand and energy demand. Auto demand has declined over the first five months of the year, which is somewhat of a surprise in the face of cheap financing, low gas prices and relatively strong employment figures. With auto demand comprising around 30% of the US steel market, this is going to prove somewhat of a demand headwind. The offset is a potentially stronger energy sector; however, this makes up less than 10% of demand, so it is only likely to provide a minimal offset. Combined with continued construction sector growth (around 40% of demand), this should mitigate any auto weakness. Discussion of a buyers strike, however, suggests that talk is translating through to reality.

Pricing is also coming under pressure on the back of the weaker volume outlook and has moved back to below USD 600/t for hot rolled coil. This is, in part, a function of expected seasonal weakness as we move into the Northern Hemisphere summer, but also a function of the underlying weaker market. While there have been some announcements of sheet price increases in recent weeks, the feedback on those appears relatively mixed at this point. Feedback from the distributor channel would suggest that the likelihood of a price increase succeeding in the short term is unlikely.

A period of transition

One potential short-term positive for pricing is the Section 232 review of the Trade Expansion Act, which has recently been conducted by the Secretary of Commerce around steel imports and their threat to national security.

If this review finds evidence of a threat to national security, the President has the power to unilaterally decide on how to reduce the threat from imports, whether through bans, quotas or tariffs. The sense was that the timing of an announcement was imminent, in part reflecting the desire of the Trump administration to notch up a high-profile political win. The steel market appears to be waiting for such an announcement to take its next lead on pricing.

Moving beyond short-term issues, there are a number of longer-term issues which the steel industry is going to have to grapple with over the medium term. Firstly, the continued transition away from blast furnaces to more flexible electric arc furnaces (EAF) appears likely to continue. We could not help but think that the potential to expand EAF capacity remains strong, with the blast furnace producers ultimately the ones most likely to be squeezed out, as they have been over the last few decades.

Secondly, the industry value chain appears to show no real signs of altering its behaviour. In our view, the industry is fragmented and oversupplied, with little real pricing power. Thirdly, trade protection appears critical for the continued health of the sector. Without it, the industry’s profitability profile could be significantly altered. This does not appear to be a risk in the short to medium term, given the continued global push away from free trade. The dark side to higher prices is potentially higher imports of finished goods. In the end, it could be argued that the measures may end up costing more jobs across the US economy than they save in the steel sector.

What this means for investors

Focusing specifically on BlueScope Steel, we continue to feel comfortable with our assumptions that trade protection should increase the US pricing premium over Asian steel, and improve US steel manufacturer spreads over raw materials. It is worth keeping in mind that this is an assumption based on policy that can be reversed as quickly as it was implemented.

The consequences of such a move would be somewhat dire, given the longer-term challenges faced by the industry. The good news for BlueScope Steel is that such a move appears unlikely in the short to medium-term.

By Michael Ward, Senior Research Analyst, Australian Equities, Nikko Asset Management

Important Information: This material is issued by Nikko AM Limited ABN 99 003 376 252, AFSL 237563 (Nikko AM Australia). The information contained in this material is of a general nature only and does not constitute personal advice, nor does it constitute an offer of any financial product. It is for the use of researchers, licensed financial advisers and their authorised representatives, and does not take into account the objectives, financial situation or needs of any individual. The information in this material has been prepared from what is considered to be reliable information, but the accuracy and integrity of the information is not guaranteed. Figures, charts, opinions and other data, including statistics, in this material are current as at the date of publication, unless stated otherwise. The graphs, figures, etc., contained in this material include either past or backdated data, and make no promise of future investment returns, etc. Past performance is not an indicator of future performance. Any economic or market forecasts are not guaranteed. Any references to particular securities or sectors are for illustrative purposes only and are as at the date of publication of this material. This is not a recommendation in relation to any named securities or sectors and no warranty or guarantee is provided.

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