Wealth Management – Page 29 – Digital Finance Analytics (DFA) Blog

Only One In Four Australians Has a Financial Plan

One in two Australians don’t believe they’re doing enough to reach their wealth goals according to new research from MLC, but a boost in confidence and a financial plan may be the key to helping Aussies get on track. However only 1 in 4 had a financial plan within the last 5 years.

The latest MLC Wealth Sentiment Survey released today for the first time identifies the reasons why Australians believe they may not have done enough to reach their goals, finding that self-doubt ranks second to not earning enough money (50% compared with 32%). These two factors were nominated by respondents as more significant than being scared of risk or even spending more than they earn.

Lara Bourguignon, General Manager, Corporate Super, NAB, says the research captures the strong link between confidence and achieving financial goals.

“We often think that getting where we want to go with our money hinges on how much we earn, but self-doubt appears to be a major factor. If we doubt our abilities with our money, it makes sense that we would struggle to achieve our goals.”

Closely tied to the lagging confidence of Australians is the considerable number who do not have a plan to save and invest. Only one in four respondents reported having a financial plan, which MLC says may be a key reason many lack confidence in dealing with money and investments.

“The research highlights an important connection between planning and confidence in reaching financial goals. With so few people having a financial plan, we perhaps shouldn’t be surprised that Australians doubt themselves and don’t believe they have done enough to reach their wealth goals. Having a financial plan is crucial to feeling empowered and getting where you want to go with your money,” said Ms Bourguignon.

For the first time, the survey has also asked Australians to define “wealth”. On average, 33 per cent reported their definition as income, 29 per cent lifestyle wealth, and 24 per cent net worth. The most important aspects of lifestyle wealth were being debt free, having enough for emergencies, and being able to fund our desired lifestyles.

The MLC Wealth Sentiment Survey also identified that while a majority of Australians report a significant shortfall between their anticipated financial needs at retirement and their expected savings and investments, most do not factor their primary residence in calculating their wealth. If Australians included the family home in their wealth, most would have enough once they left the workforce. Despite this, only 11 per cent reported that they planned to sell the family home to fund their retirement.

MLC Quarter 3 Wealth Sentiment Survey – key findings:

One in two Australians don’t believe they have done enough to reach their wealth goals

The top reasons nominated are insufficient income and self-doubt

Australians on average estimate they will need about $818,000 in savings and investments to retire, but expect to retire with only $557,000 (excludes home equity), an average shortfall of $261,000

Women face a bigger retirement shortfall than men: $297,000 compared with $226,000

If Australians included the equity in their homes, they would have an additional $442,000 in wealth available for retirement

Only 11 per cent of respondents say they will sell their homes to fund retirement

Four in ten respondents said they can achieve their desired lifestyle on less than $100,000 per year

The MLC Quarterly Australian Wealth Sentiment Survey interviews more than 2,000 people each quarter. It aims to assess the investment environment by asking questions related to current financial situation, investment intentions, level of concern related to superannuation and other investments, change in life insurance, and distance to retirement and investment strategy.

REST’s ‘mobile first’ industry-first online super advice platform launched

From Australian FinTech.

REST Industry Super became the first Australian super fund to provide its 1.9 million members with ‘mobile first’ access to personalised financial advice with the launch of the REST Advice Online platform.

REST Advice Online is delivered on Midwinter’s next generation Advice Operating System (AdviceOS) and provides REST members with the ability to receive instant financial advice and make immediate changes to their super account from any mobile device.

The innovative new platform also provides live webchat and over-the-phone support from qualified advice specialists with REST. Importantly the offering is linked to the REST member’s account to enable secure straight-through processing so members can make changes to their super quickly and easily.

The digital advice offering leverages Midwinter’s Digital Advice technology which means that regardless of which method REST members choose to receive advice (phone based, web chat or self-service), it is delivered, recorded and processed from the same integrated advice system.

REST Industry Super CEO Damian Hill said that the new digital advice platform offers user friendly and convenient access to financial advice that is personalised to each member’s unique needs.

“For many Australians, investing can be a daunting task and superannuation, which is an important long-term investment, is no exception. REST Advice Online allows members to make an informed decision about how they’d like to invest their money and grow their retirement savings with confidence.

“Importantly it allows REST members to seek financial advice on their own terms in a way and at a time that best suits them – on their mobile device, via our website or over the phone.”

REST’s new Advice Online service is supported by bespoke technology enabling REST members to explore their options for simple advice related issues and receive an emailed statement of advice after being asked a series of questions and prompts about their circumstances.

Managing Director of Midwinter Julian Plummer said there is now a generation of members who don’t necessarily want the first point of advice contact to be a face to face pitch, especially if it is for simple strategies. “Members want to experience the value of advice digitally in a way that is non-threatening and is instantly accessible.

“For REST to be able to provide this digital advice at no additional charge to its members is a leap forward because they are meeting individuals where they typically spend a lot of their time – on their smart phone or device.”

Initially the new service will help members choose an appropriate investment option and will be expanded over time to encompass a range of advice options across more channels. Mr Hill said, “As custodians of Australians retirement savings we have an obligation to ensure our members are as financially prepared for retirement as possible – introducing REST Advice Online ensures we’re able to provide personalised financial advice at no additional charge to every one of our members.”

ASIC takes action against Westpac entities

ASIC says it has commenced civil penalty proceedings in the Federal Court against Westpac subsidiaries Westpac Securities Administration Limited (WSAL) and BT Funds Management Limited (BTFM) for a number of contraventions, including failures of the ‘best interests duty’ introduced under the Future of Financial Advice reforms.

The proceedings follow an ASIC investigation into Westpac’s telephone sales campaigns targeting superannuation fund members. Specifically, ASIC’s case sets out 15 examples of alleged contraventions of the ‘best interests duty’ arising from two telephone campaigns instigated by WSAL and BTFM.

ASIC alleges that during the two telephone campaigns, WSAL and BTFM provided personal financial product advice to customers, specifically recommending that customers roll out of their other superannuation funds into their Westpac-related superannuation accounts. WSAL and BTFM are not permitted to provide personal financial product advice under their Australian financial services licences. Further, ASIC alleges that WSAL and BTFM did not undertake a proper comparison of the superannuation funds as required by law.

The law provides enhanced consumer protections and imposes greater obligations on financial advice licensees when they provide personal advice.

ASIC also alleges that WSAL and BTFM have:

failed to do all things necessary to ensure that the financial services covered by their licences are provided efficiently, honestly and fairly;

failed to comply with the conditions of their licences which only permits those licensees to provide general advice; and

failed to comply with the financial services laws in the Corporations Act.

ASIC and Westpac will continue to cooperate to limit the facts in dispute in the proceedings. The first hearing for the proceedings will be on 2 February 2017 at 9.30am in the Federal Court in Sydney.

These proceedings form part of ASIC’s Wealth Management Project, focusing on the wealth divisions of the major banks, AMP and Macquarie (refer: 15-081MR).

ASIC bans former ANZ Financial Planning adviser from financial services

ASIC says they have banned a former employee of ANZ Financial Planning, from providing financial services for a period of five years.

He was a financial planner with ANZ Financial Planning at Hurstville between 19 January 2006 and 30 July 2014.

He was banned from providing financial services as ASIC found that he engaged in misleading and deceptive conduct by creating false documents and falsely amending documents contained on client files. The conduct included:

writing clients’ names and initials on documents in the places designated for their signatures and initials;

changing the dates recorded on a number of documents; and

creating false investor profile forms for two clients by photocopying forms they had signed in previous years and changing the dates on the copied documents.

Deputy Chairman, Peter Kell said, ‘Financial advisers are important gatekeepers who must act honestly to increase broader public confidence in the financial services industry.

‘This banning should serve as a deterrent to any financial adviser tempted to act dishonestly.’

He has the right to seek a review of ASIC’s decision to the Administrative Appeals Tribunal.

Background

ASIC’s work in the Wealth Management Project covers a number of areas including:

Working with the largest financial advice firms to address the identification and remediation of non-compliant advice; and

Seeking regulatory outcomes, when appropriate, against licensees and advisers.

Update on licence conditions of two CBA financial advice businesses

ASIC has released the findings of a report by KordaMentha Forensic assessing the steps taken by Commonwealth Financial Planning Limited (CFPL) and Financial Wisdom Limited (FWL) to communicate with and compensate customers of 15 former advisers for advice they provided between 2003 and 2012.

This report was required under additional conditions imposed by ASIC, with consent, on the Australian financial services (AFS) licences of CFPL and FWL in August 2014 (refer 14-104MR and 14-192MR).

The report finds that in most instances, the licensees have complied with their licence obligations to consistently apply a remediation program to customers of the 15 advisers.

However, in some instances, the licensees failed to meet the time-frames specified in the additional licence conditions. In those instances, the licensees failed, within the required time-frames, to communicate with customers or provide them and their independent advisers with relevant information to help them to assess their advice or compensation. The licensees subsequently rectified these deficiencies by providing the information to the clients and advisers. ASIC does not propose taking any further action.

The report also provides an update on compensation outcomes arising from the additional licence conditions. To date, the additional licence conditions have resulted in a further $4.96 million being offered to 185 customers of the 15 advisers. This is in addition to the $26.97 million paid to 707 customers of the same 15 advisers under a previous compensation program. For further information about that compensation program, see KordaMentha Forensic’s Comparison Report, published in April 2015 (refer 15-083MR).

KordaMentha Forensic’s next report regarding the licensees’ current review of advice given in 2012 and earlier by 17 further potentially high-risk advisers, including any further compensation outcomes, will be published by ASIC in 2017.

Mercer acquires Pillar Administration

From InvestorDaily.

Pillar Administration, a Wollongong-based company with over $100 billion in funds under administration, has been acquired by Mercer.

Balance-Pic

The NSW government announced it would be putting Pillar up for sale in December 2015 as part of its ‘asset recycling’ program.

Link Group was initially a frontrunner to acquire the business, but its hopes were dented when the ACCC raised objections to the acquisition in October 2016.

In a statement Mercer said the acquisition would make it the largest provider of outsourced superannuation administration services in Australia.

Mercer’s managing director Ben Walsh said: “We will add further value to our clients and to members through the investments we are making in our business and through strategic partnerships, alliances and acquisitions such as this one.”

“Specifically, we know many super funds are seeking a proactive and sustainable business partner who can provide superior administration and related services, reduce costs and help funds get closer to members.

“For this reason we have invested heavily in our people capability, process innovation and technologies to ensure we are ready for these opportunities. This deal provides Mercer with the capability and scale to enhance our clients’ relationships with their members,” Mr Walsh said.

ANZ wealth sale ‘not about capital’

From Investor Daily.

ANZ’s decision to exit product manufacturing is purely strategic and unrelated to the need to raise regulatory capital, says chief executive Shayne Elliott.

Speaking at a Reuters event in Sydney yesterday, ANZ chief executive Shayne Elliott said product manufacturing is “not the model for [ANZ]”.

The comment comes after the bank announced plans to conduct a strategic review of its wealth business, with a sale one possible option.

Mr Elliott was keen to stress that a sale of the entire business, valued at approximately $4.5 billion, was only one option ANZ is considering.

“We haven’t said we’re going to sell. What we’ve said is we’re going to look for ways to release capital from [the business],” he said.

“Ideally we want to partner with somebody who can help go to market. It may include a sale.”

Mr Elliott said ANZ is already “having conversations with people and we’re open to ideas”.

InvestorDaily sister publication IFA reported yesterday that IOOF has confirmed an interest in purchasing ANZ’s wealth business.

An IOOF spokesperson said ANZ’s manufacturing business “presents very attractively and is a strong strategic fit with existing IOOF businesses”, adding IOOF would be “very interested in participating in the sale process”.

But Mr Elliott said any “partnership” would not be about ANZ generating capital.

“We’re not putting a ‘For Sale’ sign on the [wealth business] and saying the highest bidder wins,” he said.

“That is not what we’re doing. In order to do the best job for our customers, we need to partner with somebody who can help us, and has the financial/intellectual wherewithal to keep up with customer demands and to innovate.”

The partner would also need to be “aggressively positioning product in the marketplace”, Mr Elliott said – noting ANZ is “not the person to do that”.

“We want to partner with somebody – and it’s possible that that person may want to buy what we’ve got,” he said.

ASIC launches new digital toolkit to help Australians navigate financial advice

A new online toolkit developed by ASIC’s MoneySmart will enable Australians to better understand and navigate the financial advice process.

ASIC’s MoneySmart Financial Advice Toolkit is available on ASIC’s MoneySmart website.

ASIC’s MoneySmart Financial Advice Toolkit is a free educational tool that breaks down the complexity around the financial advice process. It will assist consumers with their research and help them evaluate the financial advice they receive.

ASIC’s MoneySmart Financial Advice Toolkit provides an overview of the financial advice process and gives impartial guidance on:

Identifying financial goals and advice needs;

Tips on choosing an adviser;

Preparing to meet a financial adviser;

Understanding your Statement of Advice; and

Reviewing your financial situation.

Consumers can use the toolkit to create a customised ‘to do’ list which they can modify to suit their personal financial needs. The toolkit also includes links to ASIC’s Financial Advisers Register where consumers can check a financial adviser’s credentials – their licence, authorisations, experience and qualifications, and whether they have ever been banned or disqualified from providing financial services.

‘Australians face major financial decisions throughout their lifetime, many of which can be complex and confusing. Yet only about one in five Australians obtain financial advice. ASIC recognises the value that quality advice can deliver and wants to see this increase,’ said Mr Peter Kell, ASIC Deputy Chairman.

‘ASIC’s new toolkit is a practical resource to help Australians assess the quality of the advice they receive and make better financial decisions.’

The resource is a new digital tool that complements and supports ASIC’s regulatory and enforcement work in the financial advice sector and is designed to improve demand-side capability at critical financial moments.

Background

ASIC is the Australian Government agency responsible for financial literacy, consistent with its strategic priority to promote consumer confidence and trust in the financial system. Financial literacy is about having the knowledge, skills, attitudes and behaviours to make good financial decisions.

ASIC leads and coordinates the National Financial Literacy Strategy, which sets out a national framework for financial literacy work in Australia. The Strategy highlights the importance of providing people with tailored resources and tools, and of responding to the financial issues facing vulnerable sectors of the community. People experiencing high financial stress and crisis are identified as one of a number of priority audiences in the National Strategy.

ASIC’s MoneySmart website provides impartial and trusted financial guidance and tools to support informed financial decision-making for all Australians.

We’re Richer, but More In Debt – Report

Credit Suisse has released the seventh edition of their global annual wealth report. Switzerland retains first place, (down USD 27,000 to USD 562,000), and leads over second-placed Australia (USD 376,000, down USD 5,000).

Australians are significantly more in debt now – since 2000, average wealth increased only two-and-a-half times whilst household debt quadrupled. In 2016, Australian debt per adult increased to $US98,004, up from $US97,189 the year before. Debt as a percentage of gross wealth increased to 20.7 per cent, up from 20.3 per cent. The RBA has finally acknowledge high household debt could be a problem.

Using median wealth- which is a measure that gives a better picture of inequality – Australia ($US162,815) also ranked second behind Switzerland ($US244,002) and much better than the USA ($US44,977).

Net worth, or “wealth” , is defined as the value of financial assets plus real assets (principally housing) owned by households, minus their debts. This corresponds to the balance sheet that a household might draw up, listing the items which are owned, and their net value if sold. Private pension fund assets are included, but not entitlements to state pensions. Human capital is excluded altogether, along with assets and debts owned by the state (which cannot easily be assigned to individuals).

The United States (USD 345,000, up USD 3,000), and Norway (down USD 13,000 to USD 312,000) are still in third and fourth place respectively, but New Zealand (USD 299,000, up USD 34,000) has jumped up into fifth, leapfrogging the United Kingdom, where the most significant drops in wealth per adult was experienced (down USD 33,000 to USD 289,000). Canada (USD 270,000, up USD 2,000) drops to ninth place, while Denmark (USD 260,000, up USD 5,000) retains tenth position.

The banks says Australias overall position is “still resilient” and our level of wealth inequality as “relatively low”. They are suggesting wealth could grow by 34 per cent over the next five years.

HSBC opens private bank in Australia

From InvestorDaily.

HSBC has announced plans to open an Australian office offering private banking services to high net-worth individuals and family offices.

The opening of the new office is part of a move to expand the bank’s presence in the Asia-Pacific region, said HSBC Australia chief executive Tony Cripps.

“Australia is a priority growth market for HSBC, and having a private bank office here will complement and enhance our existing retail, commercial and investment banking businesses,” he said.

“We anticipate significant growth from being able to offer a comprehensive private banking experience to both new and existing customers.”

Families and individuals with more than $10 million in investible assets will have access to a number of HSBC’s services, the bank said, including discretionary investment management, equities and fixed income products, derivatives and more traditional banking services.

HSBC Australia head of private banking Hayden Matthews will lead the private banking business in Australia, and will work closely with the Singapore and Hong Kong offices, the bank said.

“HSBC has achieved strong growth in Australia over the past five years, and private banking is a natural step to continue building our business and meeting our customers’ needs,” Mr Cripps said.