The function, which will be held at the Intercontinental Hotel, Sydney on 30 November, will also feature a panel discussion on Australia’s economic future, hosted by former NSW Liberal Leader Kerry Chikarovski.

The event mirrors a similar event organised by Dr Virtue last year which attracted around a hundred financial services representatives, including finance industry leaders, the heads of financial services associations and financial advisers from every state.

“We expect this year’s event to draw an even bigger crowd, given the present economic climate and the high level of activity going on in the finance and financial services industries,” Dr Virtue said.  “We believe the industry is very keen to hear the Coalition’s vision for the Australian Economy as we move into election mode and are looking forward to hearing Senator Cormann’s view of the world.”

Senator Cormann has been very vocal in his criticism of the Labor Government’s handling of the economy and specific issues such as the mining tax, the budget deficit, elements of the Future of Financial Advice (FOFA) reforms and MySuper.

Bookings for the function, which also includes a unique food and wine experience from a group of South Australian sponsor companies, can be made by clicking here.

The post Mathias Cormann speaks at event appeared first on AdviserVoice.

Starting with FOFA, which after the fanfare of the original ministerial statement two years ago on Anzac Day, ended with barely a whimper. In essence, most of the contentious areas being pushed back into regulations which will no doubt be hotly debated over the next six months.

Given the state of the polls and the Coalition’s stated intention to amend or repeal aspects of both FOFA and Stronger Super, one wonders if this has not been a lost few years. To my mind, the saddest part of this saga was the lack of a credible Regulatory Impact Statement, which was the least the industry deserved. This was coupled with a policy vacuum played out by vested interests in the public media.

For those of us with accounting practices, we are still no nearer getting clarity on the replacement to the’ accountants exemption’ due to expire shortly. Add this to the adverse political decisions on future superannuation contributions and no wonder both clients and their advisers are far from happy.

The reality of being in practice is, of course, that you have to get on with meeting clients’ needs and adjust to the circumstances you find yourself in. The advent of social media and improved online technology is a real plus in being able to communicate with clients more frequently and with greater efficiency.

There is much we can learn from other industries that have embraced new technology to provide improved services to clients, notably in travel and tourism. The challenge, as always, is to make incremental improvements to the business processes while retaining the  close personal relationships with clients that remain the unique competitive advantage of a boutique licensee. As usual it is not the quickest or fastest adviser that will win  in this environment, but the one who can adapt best  to the changing environment that is currently providing both threats and opportunities.

On a more positive note, I have the opportunity to again teach a further twenty students in Financial Planning at Flinders University. This will include a significant number of overseas students sponsored in part by the World Bank, who will then return to difficult home environments.

For all our internal issues, the fact is that Australia remains a leader in global financial planning with a mature and experienced workforce that many other countries would love to emulate. For those of you able to help, I will be looking to place these students in work placements for three weeks in late July.

A great opportunity exists for you to get access to highly skilled labour and make an active contribution to educating the next generation of financial advisers.

The post Challenging circumstances can provide opportunties appeared first on AdviserVoice.

This is the first of two articles on how licensees are coping with the potential impact of the Future of Financial Advice Reforms that have been postponed to 1 July 2013. In this article, three principals of independently owned small-to-medium advice businesses discuss what they’re doing to get FoFA ready. The second article in this series will look at how much larger advice businesses, including a product manufacturer, are getting set for FoFA.

In speaking with the heads of three independently owned financial advice firms about the proposed Future of Financial Advice (FoFA) reforms, one thing is abundantly evident…despite the uncertainty of where FoFA will eventually end up, on the whole, they seem to be just getting on with business.

That’s because there are common aspects of the businesses that are allowing them to cope with FoFA – no in-house products, fee for service and good disclosure systems in place. That said, they all have issues with potential costs associated with an opt-in regime and some see issues getting much needed cost effective advice to clients in areas such as corporate super.

Dr Tony Virtue, of Virtue and Partners Sydney, argues that advice for corporate super and intra-fund advice is where the real problems with FoFA lie.

“There’s not a lot of issue with SMSFs because we bill annually, but corporate super is an area that is still far from settled. How that will work with My Super and intra-fund advice, and whether adviser fees are implicit or explicit and so on? To be frank there is still both uncertainty and different interpretations of the legislation as it stands which is still not through the Reps.”

Virtue and Partners provides advice on a range of financial services but primarily in the areas of risk, retail superannuation (using wraps and SMSFs), a non-super investment service along with a mortgage brokerage. Dr Virtue believes that larger portfolio clients are already paying for services on a FoFA type basis but that it’s the smaller portfolio clients where it’s going to be difficult.

“For the larger clients there is no change where there is an invoiced fee. We already send them an invoice and they pay it. I think the real issue is in the ‘mid-market’ – the twenty to fifty thousand type small accounts where we need to get some scale. That’s the area which we’re finding difficult in how to reorganise ourselves in a way that is still relevant to the public.”

Melbourne-based Hewison Private Wealth CEO John Hewison is a little more at ease about what FoFA could mean for his firm. With several hundred million dollars under management via direct investment portfolios, Hewison is very comfortable where the firm sits for an eventual FoFA implementation:

“Really it doesn’t worry us at all. We’re fee-based and we’re transparent. The clients know what they pay because we already issue them with an invoice and for us to send have to send them an annual statement [opt-in] – well, it’s annoying but it’s not a big deal.”

Similarly Orange-based Roan Financial Group head Peter Roan is also ready for FoFA.

“We’ve always adopted the approach that you have to be providing service for clients and a value proposition, and your client needs to be able to connect with you on that and vice versa. So for us, regardless of whichever way FoFA ends up, it’s always going to revolve around a value proposition; the client knowing what they’re paying for – what they’re paying and where it [the payment] is coming from, and did it represent true value for what the work being carried out?”

All three principals are agreed that if an opt-in requirement were to be put back into the Bill, it would add costs to their operations. Tony Virtue argues:

“A lot will depend on if there is any retrospective annual fee disclosure. If ASIC will accept fee disclosure via the quarterly statements that clients receive on a wrap account, for example, then that won’t have an impact, but if we have to write separately to clients historically on my letterhead as opposed to the wrap account, then really that’s just pure duplication for duplication sake. The point is there is no need for there to be a separate piece of paper to what is currently being provided [for fee disclosure].”

Looking more broadly at financial advice businesses, John Hewison claims:

“The real issue is when not if FoFA will actually go through. The big question is how on earth can a product manufacturer comply with fiduciary duty?”

We’ll look at that issue in the next FoFA article.

There are key aspects of these businesses which can well serve licensees looking to set their businesses for an eventual FoFA regime. Each of the businesses has:

• dedicated client service systems already in place
• fee for service charged in a way that ensures clients know how much they’re paying and what for
• strong ongoing relationships with their clients.

Regardless of FoFA, these attributes are already serving these businesses well.

The post Businesses get FoFA ready appeared first on AdviserVoice.

Dr Virtue built the business – which was once a member firm of Associated Planners, the group that in 2004 sold to Challenger for a substantial $100 million – from the ground up.

“Virtue and Partners is now a boutique financial planning business,” Dr Virtue says. “We hold our own AFSL and have a total of four planners and four administration staff.  It’s a source of constant joy to me that my daughter works with us two days a week while studying at university and her mother also makes a substantial contribution.  I believe family businesses are still the cornerstone of financial planning.”

Over the course of his 21 years in the industry, Dr Virtue has invested heavily in education. He is a CFP, a mortgage broker, holds a Bachelor of Business (Financial Planning), a Masters of Applied Finance and is a Doctor of Business Administration. He is a member of all six financial services industry associations, has published a book on microfinance, has spoken at conferences around the world and is an Adjunct Professor and Lecturer in Financial Planning at Flinders University.

His story is almost by definition a rags to recognition one.

“My grandfather was a rag and bone man in East London – think Steptoe and Son.  My father left school at 14 and fought in the Second World War at 16.”

In search of a different life, Dr Virtue and his solitary suitcase migrated from the UK to Australia on the points test in 1987.

“I decided almost immediately to start out as a life insurance adviser,” he says.  “I had no clients, no staff, only a car for an office, and two milk crates as props. But step by step and day-by-day, things got a little bit better.”

He still sees claims from those days and he still counts delivering claims that impact on the lives of his clients as one of the highlights of the job. But as time went on and he gained more qualifications, he began providing more comprehensive advice.  “As best I can be, I am a holistic adviser,” he says.

Today, Virtue and Partners looks after 3,000 clients from all walks of life.

“We have some very wealthy clients but we also look after Centrelink clients. We help out at a soup kitchen. We do it because we want to make a difference. We want to help all Australians, irrespective of their financial circumstances.”

It is his concern for these clients that is prompting him to speak out against some elements of the Future of Financial Advice (FOFA) reforms.

“My concern is that the introduction of FOFA will disadvantage the already disadvantaged,” he says.

“The cost that things like opt-in and annual fee disclosure will add to financial planning businesses means advisers won’t be able to service people who really need help.  I’d hate to see financial planning become an elitist service just for the very rich.”

He believes the Government is destroying the financial advice industry in order to serve sectional interests, namely industry funds.

“The consequences of ideologically-driven legislation appear to have been poorly thought-through,” he says.

“One of the most serious consequences is that while the Government undermines the investment community at every opportunity, consumers will not be inclined to invest. Equally serious is the overall loss of confidence in the sector, due to the uncertainty over FOFA and the projected loss of many thousands of adviser and support jobs. I know of senior advisers, who have a wealth of knowledge and experience in the industry and much to offer consumers, who are selling up and retiring early in disgust.”

Late last year Dr Virtue organised a Liberal Party fundraiser to support the work being done by the Opposition to oppose elements of the FOFA reforms that threaten the advice industry. A hundred financial services representatives, including advisers from every state, industry leaders and the heads of all six industry associations attended.

“The reforms in relation to financial advice are too heavy-handed and prescriptive,” he says. “The Government has taken out a sledgehammer to smash an ant. Most advisers work hard for their money and take their responsibilities very seriously.”

Dr Virtue argued that problems like Storm Financial and Trio were as much about regulatory failure as anything else and it is time to consider the bigger picture. “The Government needs to look through the immediate electoral cycle at the real long term needs of Australians,” he says.

Dr Virtue says it is also time for the industry to show genuine, collaborative senior leadership. “We have been profoundly misled in this process and we need to stand up for ourselves and get a bit of respect,” he says. “The first very obvious thing we need to do is call to delay FOFA until a full regulatory impact statement is completed.”

However, despite the considerable challenges facing the industry today, Dr Virtue says he wouldn’t be in any other profession. “For me, helping people is a passion that never goes away,” he says.

The post Virtue celebrates 21st anniversary…& calls for pragmatic approach to FoFA appeared first on AdviserVoice.

The event was organised by veteran financial adviser, Dr Tony Virtue of Virtue & Partners, who said that the profound impact of the proposed FOFA reforms on the millions of people around the country that the industry currently serves, spurred him into political action.

“We can’t be a protected species as an industry but some of FOFA has been beyond the pale,”  Dr Virtue said. “Two or three years ago, I would not have attended a function like this. This is what FOFA does. It forces you to get up and do something.”

The event united the heads of all adviser associations – including the AFA, the AIOFP, the BFPPG, the FPA and SPAA – at the one table. Dr Virtue, who is a member of all six, said the presence of the association heads reveals that although each association has a different view of the world, they have more in common than they have differences.

“I’m very proud of the contribution each and every association has made,” he said. “It’s a bit like going to a party. You have a different perspective, based on where you are in the industry. If you have a big risk insurance business, you see the world very differently from if you’re advising on self-managed funds. If you are running a large corporate super block of business, again you see things differently. But we have much more in common than what makes us different.”

Dr Virtue said one of his concerns in relation to FOFA is that, if made law, advisers will not be able to provide services to members of corporate super funds. He cited a case in which the family of one of his clients, a young woman who had chosen to keep her group life insurance policy in force despite leaving the company, received a $420,000 death benefit following her accidental death on holiday in Thailand.

“She had kept the policy in force for $3 a week. That’s what a group plan can do. Had she been in an industry fund, and had left that place of employment, after six months her insurance would have been cancelled out and there would have been nothing. For those of you who are interested, I think I made 20 to 30 cents a week on that policy.”

Advisers raised the question of FOFA’s ban on risk commissions within super with Senator Cormann who said that while the Minister for Financial Services and Superannuation, Bill Shorten had backed away from a blanket ban on risk commissions, some questions remain around group insurance.

“The principle should be that if you access advice, whether you structure your insurance inside or outside super should not make any difference in terms of how you pay for that advice,” he said.

Advisers also asked Senator Cormann whether the Coalition, if it were in power, would reverse the severe tax penalties recently imposed on people who have inadvertently exceeded their concessional caps.

Although Senator Cormann said that “people who make inadvertent errors in relation to excess contributions should be able to rectify those errors” and “there might be fees with processing it, but not the sorts of penalties they are currently exposed to”,  he also said the Coalition was currently looking at the issue and could not make any comment about what they might do retrospectively.

In a response to a call from advisers to have adviser fees made tax deductible, Senator Cormann said that it was a Budget issue.

“Right now the Budget is in a very bad state… I understand that financial advisers around Australia have the aspiration of having their fees made tax deductible. It’s something that will be in the mix of the whole issue, once the Budget is in surplus.”

Senator Cormann echoed adviser concerns around trusteeships, reporting standards and corporate governance of industry funds.

“The Cooper Review made some very sensible recommendations on how corporate governance and transparency could be improved,” he said.

“The Government has been very unenthusiastic about this. We think there are some pretty basic things that should happen very quickly… We do have to have better arrangements around broader competition, around management of perceived conflicts of interest in terms of directors who want to sit on multiple boards…  There should be better management of conflicts in relation to Labor Party transactions and there should be increased transparency around investment performance; there should be a more level playing field around a couple of requirements for all superannuation funds operating in Australia.

“These are some issues we are likely to pursue in the context of MySuper legislation that is coming out. We are going to be moving amendments along those lines to all these sorts of issues.”

In response to a question on what the advice community could do, if it were to combine its resources, in order to have its views loudly heard by the Australian public, Senator Cormann advocated continued strong lobbying of Members of Parliament in marginal seats.

“Make sure they understand that there’s a groundswell of opposition to the bad parts of FOFA,” he said.

“… continue to focus on the Independents because that is your best bet… if you want to make it more difficult for the government to pursue bad policy, which is going to hurt your business as well as your clients, to the extent that you can, generalise the groundswell of opposition to what the Government’s doing, in particular within marginal seats…”

However, Senator Cormann warned that recent events mean the dynamic of Parliament has changed, making it more difficult to oppose FOFA.

“… we should continue to focus between now and whenever the legislation is tabled in the House of Representatives …. on all the Independents [however] We need two now rather than one to stop bad legislation from getting up and we need three rather than two in order to get amendments passed.”

Senator Cormann also used the lunch to formally call on the Minister for Financial Services and Superannuation to delay the implementation of FOFA legislation.

The post Financial services industry rallies to fight FoFA appeared first on AdviserVoice.

A helpful document from Treasury accompanying the draft legislation called an Explanatory Memorandum goes through the strategic intent of the Government in formulating policy, the various options open to it and the impact of these actions which can be viewed on their website. It is insightful in revealing in stark detail the prediction of a loss of jobs of around half of the financial planning community over the next few years while seeking to increase access of advice to a wider number of Australians at the same time. Treasury’s concluding remarks were that there was an inadequate amount of research to support the Government’s preferred option and recommending further consultation.

As a practicing self licensed adviser this leaves me with a number of confusing anomalies to work through as the various carve outs are negotiated behind closed doors. In investments I can charge a brokerage on a  direct share or ETF but not on a Index Managed Fund which achieves a similar function.

I can charge a fee of $1000 for advice but not brokerage of $50 for the same outcome. I can receive commission on a individual risk insurance policy but not on a group plan which may be a better more cost effective outcome for a client. I can charge a % based fee on a geared share fund but only a flat fee on a geared portfolio. I can receive a  profit share on group business as do the Industry funds as long as it’s not called brokerage. Finally of course there is no certainty that this will actually be the final legislative result or survive the inevitable legal challenge.

Of immediate concern is of course the welfare of clients in the current volatile market which coupled with yet more insurance claims keeps me busy. It is hard for clients over 50 to plan future super contributions from next financial year as there is no certainty on the amounts that can be contributed and any lifetime limit to this amount so caution and flexibility are the current watchwords. With so much uncertainly a clear heady and a steady hand is as important as ever.

Finally my prediction for FOFA is that it will be referred to a Parliamentary Enquiry where the real issues of long term retirement income streams can be thought through. Currently the wrong clients are taking the wrong level of risks at the wrong time of their lives in a game of Russian Roulette.

We need to earnestly dovetail retirement income streams with centerlink benefits to reduce the equity risk being taken by retirees. With good judgement and commonsense it should be possible for all Australians to have access to advice at a reasonable price without favouring one lobby group over another.

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