John Brogden

It’s official: New South Wales is now the fastest growing state in Australia. This is due to a booming growth in financial services which accounts for 11.5 per cent of the NSW Gross State Product (GSP).

The same applies in Victoria where financial services accounts for 10.4 per cent of GSP. These statistics have been revealed in a new report on the state of the financial services industry in Australia commissioned by the Financial Services Council and UBS Global Asset Management – State of the Industry: Financial Services and SMSFs in Australia.

John Brogden, CEO of the Financial Services Council said: “Financial services is now Australia’s largest industry accounting for nine per cent of GDP − more than mining and manufacturing.”

“While growth in other industries is slowing down, financial services is continuing to grow,” Mr Brogden said.

“Our report shows that financial services is making a significant contribution to the Australian economy. It pays more corporate tax than any other sector, employs more than 400,000 people –most are well-remunerated and well-education − and contributes $130 billion to the economy each year.”

“Yet financial services it is still to be recognised as an industry in its own right,” he said.

The FSC-UBS report also shows that the way that Australians manage their superannuation is having an ongoing impact on the growth of Australia’s emerging services economy. From a relatively small population of 23 million, Australia has the fourth largest pool of superannuation in the world.

“With the right policy settings, Australia has an enormous capacity to increase financial services exports,” Mr Brogden said.

According to the FSC-UBS report, exports of financial services increased by 43 per cent in 2012-13 − from $2 billion to $2.9 billion.

Bryce Doherty, Head of UBS Global Asset Management in Australia said: “Australia has a real expertise in financial services, particularly in funds management and superannuation that is highly regarded around the world.”

“There is a huge opportunity for us to both export our investment expertise offshore as well as enable access for Australians to international investment opportunities. We are very supportive of the work done by the FSC to develop the Asia Region Funds Passport to facilitate mutual recognition between Australia and other economies.”

The pilot program is expected to be up-and-running by 2016.

Key findings:

Financial Services

• largest sector of the Australian economy
• contributes over $130 billion to GDP each year
• NSW is the fastest growing state: Financial Services = 11.15 % of GSP
• pays the most corporate tax − $20 billion per annum
• employs more than 400,000
• jobs are highly skilled, and highly remunerated
• includes $1.85 trillion in superannuation = 116 % of GDP
• exports grew 43 % in 2012-13 − $2 billion to $2.9 billion

SMSFs

• $550 billion = 1/3 of Australia’s superannuation pool
• $320 billion in 2009; $550 billion today = 30% growth
• 60% of SMSF owners have plans or have started planning for retirement
• 59% have an SMSF for control and choice
• a typical SMSF has 35% invested in deposits/cash
• 15% may add international shares to their investment portfolios

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Six ING IM individuals will become employees of UBS Global Asset Management. These are Joel Fleming (Australian equities small companies), David Scott and Patrick Barrett (property securities), Michael Fanning (structured beta and indexing), and, Rachel O’Connor and Thomas Wu (Australian fixed income). These hires are effective April 1, 2012, following completion of the integration of ING IM on March 30, 2012.
 
The previously announced UBS-branded Australian equities boutique offers three capabilities; large-cap, small-cap, and property securities. The additional hires within the Australian equities boutique include Joel Fleming and David Haddad (small-cap), David Scott and Patrick Barrett (property securities), and Steve Coffey (large-cap).
 
UBS has also advised that Simon Shields (head of equities) and Shane Fitzgerald (financials and gaming analyst) will be forming a separate, independently branded boutique on the new UBS platform. They will launch a distinct, total return strategy with a global opportunity set.
 
We note that Jakov Males has been directly responsible for the UBS flagship Australian Share Fund since October 2011 (and was previously back-up portfolio manager). Mr. Males was head of Australian equities at Allianz Global Investors prior to joining UBS Global AM in April 2007. He is an experienced investor, and is well regarded by S&P. In addition, Mr. Fitzgerald’s sector responsibilities have been assumed by Steve Coffey, who recently joined UBS Global AM from QBE. Mr. Coffey will also have back-up portfolio management responsibilities within the large-cap team, alongside head of research Marissa Rossi.

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