The most-read articles of 2015 reflect the issues that Professional Planner’s readers responded to most, and considered most interesting, over the course of a long and tumultuous year.

The hot-button topics inevitably included regulatory change – particularly the review of retail life insurance undertaken by a working group led by the high-profile actuary John Trowbridge – and the impact of technology on financial planning businesses and the relationships between financial planners and clients.

But there was also an appetite for articles that examined the strategies behind successful businesses, and on investment topics including the Professional Planner|Zenith Fund Awards.

We examined advice both great and poor; delved into the issues of vertical integration and conflicts of interest; continued to promote the ideals of higher professional, ethical and education standards; and sought out advisers and advice practices that demonstrate by example how the goal of professionalism can be achieved without it being at the expense of robust and profitable businesses.

We tackled the issues through a mix of news reporting, comment, analysis and technical insights. We treated issues seriously when they needed to be treated that way, but tackled other issues tongue-in-cheek when they merited it. Looking back over the most-read stories leads us to think that Spiro Paule, chief executive officer of Findex Wealth Accountants Group, might be thinking about using another carmaker in his analogy for his company’s structure and strategy. It’s not clear that describing Findex as “the Volkswagen of financial services” necessarily conveys quite the same impression it once did.

In 2015 we published more than 500 articles online. We also produced six events – the Conexus Financial Superannuation Awards, the Conexus Financial Post Retirement Conference, the Professional Planner Dealer Group Summit, the Professional Planner Best Practice Forum, the Professional Planner|Zenith Fund Awards, and the Professional Planner Dealer Group Research Forum – and published 11 editions of Professional Planner in print.

It has been – as it has been for all our readers – a demanding year, and 2016 is showing no signs of being any less so. But for now we’re taking a break, and would like to take this opportunity to wish all of our readers a very Merry Christmas and a safe and happy New Year.

We will be back on deck in early January.

2015: The year in words

The most-read stories on www.professionalplanner.com.au in 2015

June 10: Yellow Brick Road offers itself as financial planning guru to the 80 per cent disengaged

PEARSON_Grant_YBR_600x300Yellow Brick Road launches a new online modelling tool it claims will turn the financial planning process on its head, handing “power and control” directly to consumers.

The firm says it is hiring what it calls “money coaches” – individuals who are not necessarily qualified financial planners – to help guide consumers through the initial stages of the new process of modelling financial outcomes.

Grant Pearson, head of wealth management and chief risk officer for YBR, says “a coach has different skills to a typical planner”.

Pearson says YBR’s aim is to address upfront the three main reasons consumers say they do not use the services of a financial planner: they are not wealthy enough to warrant using the services; they do not trust financial planners; and they can’t afford to pay for financial advice.

Pearson says the YBR process is aimed at addressing the 80 per cent of potential financial planning consumers who do not currently consume planning services.

April 20: AFA’s withdrawal of support for Trowbridge is a disappointing reversal

DistanceThe chief executive of the Association of Financial Advisers (AFA) Brad Fox seeks to put further distance between the association and John Trowbridge’s recommendations around life insurance advice remuneration.

In a lengthy 750-word statement, Fox repeats claims voiced previously by both himself and fellow Life Insurance and Advice Working Group (LIAWG) committee member John de Zwart, managing director of Centrepoint Alliance. De Zwart had claimed that the mandate of the working group changed in the week prior to the release of the final report.

Fox says AFA “believed in the LIAWG Terms of Reference, which were to find a unified solution that the whole industry could support”.

“It is a great disappointment that this was not achieved, and that the terms of reference were not delivered,” he says.

These claims had been vigorously refuted by Trowbridge earlier in the month, in an open letter published in The Australian Financial Review.

May 25: Are you ready for this? Opt-in starts on July 1 and ASIC won’t be treading softly

150525 - DE-GORI_Dante_600x300The “facilitative approach” taken by the Australian Securities and Investments Commission (ASIC) towards Future of Financial Advice (FoFA) compliance ends on June 30 and financial planners are warned to be ready to comply fully with the new laws – particularly the controversial opt-in provisions.

ASIC’s softly-softly approach to compliance was extended to June 30 after amendments that were expected to be made to the FoFA laws in late 2014 were defeated in the senate.

“What it means is the best interests duty wasn’t changed; fee disclosure statements are now required for all clients, not just new clients; and opt in is back in play,” the Financial Planning Association’s general manager of policy and conduct, Dante De Gori, tells the FPA national roadshow in Adelaide.

“ASIC … provided a facilitative approach for licensees and advisers until June 30 this year. You’ve got until June 30 this year before ASIC then start effectively regulating fully the FoFA amendments.

“One of those areas in particular that I think we all believed was not going to happen, which was opt in, obviously is in.

“I know that this is something that many of you have not turned your attention to, or were hoping it was going to go away.

“The opt-in process is only applicable for new clients – clients that you only provided, and only ever provided, a statement of advice for from July 1, 2013.

“Clients you’ve provided a statement of advice for prior to July 1, 2013 – they are not an opt-in client.”

April 17: All eyes turn to Westpac as ANZ’s ‘epic fail on advice’ pushes consumers closer to voting with their feet

Voting-with-feetThe Australian Securities and Investments Commission (ASIC) declares it has found “multiple instances” of clients of vertically integrated advice businesses being charged fees where no services had been provided; and ANZ announces it will reimburse as many as 8500 clients of its Prime Access advice business who have been charged for services the bank didn’t actually provide.

The Prime Access fee-for-advice model was established in 2006 in response to a survey of 4000 ANZ customers who said they found commissions “confusing”. At the time, ANZ promised:

  • Priority access to a qualified and experienced ANZ financial planner
  • Proactive advice and ongoing reviews of their financial plan
  • Education on economic and regulatory issues that may affect their investments
  • A range of discounts on other ANZ banking and insurance products.

ANZ promoted Prime Access as a “fee-for-advice” model, rather than a “fee-for-service” model; a subtle distinction, perhaps, but one that now looks prescient, given that no service was actually provided. ANZ said then that its customers “will be able to work with their financial planner to select the level of service that is most appropriate for them” – a level that evidently didn’t actually include the option of “nil”.

Consumer group CHOICE describes ANZ’s predicament as an “epic fail on advice”.

June 30: A new kid on the block takes the planning software fight to Xplan, Coin

New home-grown financial planning software provider Adviser Intelligence claims it can help planners become up to four times more efficient – just as the Australian Securities and Investments Commission begins policing compliance with the controversial opt-in provisions.

It launches the first of its three major modules, starting with the Future of Financial Advice (FoFA) module. This is followed by separate insurance and investment components.

“The game plan has always been to create efficiencies within planning practices … with the administration and all the compliance reforms coming in, the administration gap is widening, there’s a lot more that advisers have to do,” says Jacqui Henderson, director of Adviser Intelligence.

The FoFA module automates a number of processes that are currently done manually, including automating fee disclosure requirements.

“It enables you to develop service packages, add in all your fees and then produce statements for clients … it automates the whole fee disclosure, it’s going to solve a lot of problems for the industry,” Henderson says.

The initial roll-out includes the customer relationship management (CRM) package and client portals. This forms the basis of the hub-and-spoke design, with CRM at the core and other tools added around this.

March 26: Trowbridge hands down final report on reform of life insurance

150326 - Trowbridge report coverThe author of the Trowbridge report into life insurance practices and remuneration says his proposed package of reforms will shift insurers’ focus from competing to win advisers and licensees to more effectively competing for the business of individual clients.

John Trowbridge makes a total of 11 recommendations – six on policy; four on implementation; and a recommendation that the entire package be reviewed in 2020.

“These changes are transformative as they are designed to stimulate insurers to compete for customers instead of for licensees and advisers,” Trowbridge says, in a statement.

“They will remove misaligned incentives for new and replacement policies and align the interests of insurers, licensees and advisers.”

Trowbridge says that it is critical that remuneration of advisers and licensees by insurers be restructured.

“This suite of recommendations is designed to achieve improved alignment of interests, including the removal of conflicts over remuneration and advice, along with productivity gains in the life insurance and advice sectors,” he says.

The report also recommends changes to licensee remuneration, specifically that licensees be prohibited from receiving benefits from insurers that might influence recommended product choices or the advice given by the licensees’ advisers.

Trowbridge hands down his report at the FSC Life Insurance Conference in Sydney.

April 27: The ‘Volkswagen of financial services’ revs up as Findex drives efficiency gains from acquisitions

PAULE_Spiro_Findex_CROPPEDIt was the former French president Charles de Gaulle who is reported to have asked: “How can anyone govern a country that has 246 different kinds of cheese?”

Governing any entity – a nation or a corporation – that is so disparate and diverse is a challenging proposition, and it’s the kind of situation that faces Spiro Paule, chief executive officer of the Findex Wealth Accountants Group as he integrates the acquisition of the listed accounting firm Crowe Horwath.

“They’ve got something like 540 applications that they are supporting across the network,” Paule says.

“They might be 10 versions of MYOB and 12 versions of Xero. Clients migrate data in from their accounting packages and their software packages, so we have to keep all of those going to accommodate all of them. This is creating incredible inefficiency through the business, because there’s nothing standard.”

But that inefficiency also gives a hint of the potential that Findex sees in the struggling accounting group.

“The Findex group is used to significant profitability, of above 40 per cent EBIT [earnings before interest and tax],” Paule says.

“Crowe Howarth is certainly well below 10 per cent, so if I can get from there to us – and we’re actually nearly at 50…

“That’s what you can bank. [EBIT] is what you can bank at the end of the day and pay your tax and move on. There’s no one I know does more than 50 per cent. The average is about 20, and if I can get [Crowe Horwath] to 20, I’ve tripled our investment. So we’ll see.”

Findex operates six brands in the financial planning space, from Centric Wealth at the high-net-worth end of the spectrum, to Movo, the company’s version of an online advice service.

While Paule describes the task of aggregating so many separate businesses under the Findex umbrella as being like “turning milkbars into supermarkets”, he likens Findex’s multi-brand wealth management strategy to that of carmaker Volkswagen.

“We run six brands. We call ourselves the Volkswagen of financial services,” he says.

October 9: Professional Planner and Zenith Investment Partners reveal the fund managers of the year

Fund-Awards-1Professional Planner and Zenith Investment Partners reveal the winners of the 2015 Fund Awards. At an awards event at Ivy Ballroom in Sydney, attended by more than 300 of the retail fund management industry’s leading participants, Magellan Asset Management is named as Fund Manager of the Year.

The award is accepted by Magellan’s general manager of distribution Frank Casarotti and presented by Zenith Investment Partners managing partner and co-founder David Smythe.

Award winners are also announced in 16 other categories (see table), including Distributor of the Year, which this year is taken out by Fidante Partners.

The managing director of Zenith, David Wright, says being named Fund Manager of the year “denotes, as you know from our methodology and philosophy, excellence in the management of multiple asset classes and/or capabilities”. “That’s pretty difficult to achieve in this day and age, where across individual categories it is so competitive,” Wright says.

“It is just recognition for the ability to do that in more than one asset class.”

Wright says competition in funds management is increasing and “it’s got to the stage where unless you are competitive, you’re just not going to survive”.

“There’s more that can be said about the polarisation of the industry into large and boutique and it’s pretty difficult to be in the middle,” he says.

“But as a general comment it’s definitely becoming more competitive in the majority of asset classes.”

May 4: There’s a hole in my bucket, dear adviser, dear adviser

Bucket-with-holesPaul Resnik and Peter Worcester examine a common investment solution used by advisers, sometimes referred to as the “bucket strategy”.

They say conversations between advisers and their clients are typically constructed to develop a list of financial goals which are in turn placed within time frames: short term (in the next few years); medium term (in the following half dozen years or so); long term (ten-years plus); and estate planning (what goes to family and philanthropy).

They say many advisers they’ve spoken with view the different stages – short, medium, and long-term – as three, or in some cases four different buckets, filled with different investment approaches with different tolerances to risk attached to each bucket.

For each stage, however, they say there’s likely to be at least different capacities for loss. In the case of education funding for instance, in the absence of alternative sourced monies, the investor may have little flexibility in taking on the uncertainty that typically follows increased equity risk exposure. Capacity is clearly the issue that changes with context, not risk tolerance.

Resnik and Worcester say evidence and experience tell them that risk tolerance is the one consistent factor in each risk bucket.

Of course, they add, the practical challenge is in managing the various portfolios if monies are actually put aside to match the goals as the assets in the bucket deplete. At any time, one “stage” may become over full because the asset mix has outperformed expectations or a bucket may be rapidly emptying because something unexpected like a surprise tax liability occurs.

January 19: Steve Tucker’s advice firm takes first steps as Koda recruits two financial planners

Baby-stepsKoda capital, the financial planning business headed by former MLC chief executive officer Steve Tucker and former JBWere chief executive officer Paul Heath, appoints its first financial planners, with Sean Abbott and Peter Dunn joining the firm.

Before joining Koda, Abbott established Aqua Private Wealth, in Neutral Bay on Sydney’s lower north shore, and previously worked with Woodbury Financial Services. Both Aqua and Woodbury were licensed through MLC.

Dunn is a former head of institutional equity sales for Citi, and has previously worked with accounting firm HLB Mann Judd in Sydney and Singapore.

Abbott and Dunn are the first financial planners to join Koda and to become equity partners in a firm that its founders believe can eventually reach about the same size as a mid-tier accounting or legal firm.

The business was set up in late 2014 to capitalise on advances in technology that enable planning businesses to operate on lower fixed costs, and to create business structures more akin to professional partnerships than to traditional financial planning practices.

The contenders

February 2: AMP’s plan to clear out Genesys hits a snag as practice principals consider equity options

April 15: Government is cautious on Trowbridge report, cagey on PJC inquiry

February 13: Could no-commission life insurance kill off financial planning practices?

April 29: Executives of vertically integrated and conflicted advice businesses in corporate watchdog’s sights

June 8: Financial planning licensee of the year honours split as CoreData research reveals winners

August 13: Whether it’s a friend or foe of financial planners, robo advice is coming

April 24: ‘Paedophile priests’ comparison sums up depth of frustration with financial planning

May 20: In at the deep end: Barrett jumps into the financial planning profit pool

August 27: Cashflow service could become a nursery for Gen Y financial planning clients

February 16: Macquarie culls a quarter of its financial planners during ASIC enforcement

Honourable mentions:

February: SMSFA National Conference

November: FPA Professionals Congress

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