CEDA Super Report, A Curate’s Egg

A CEDA report released today is calling for an overhaul of retirement policy, including options such as pre-tax mortgage repayments and superannuation being available for owner-occupied home purchases, to be considered. We think, like the curate’s egg, it is good in parts!

Whilst we agree that a root and branch review of retirement income provisions should be undertaken (superannuation, SMSF, and government pensions holistically), we do not agree with the option of allowing savers to access superannuation for house purchase, nor a tax offset against mortgage interest payments. Both of these extend the ability of people to pay more for property, and will simply lift prices further above their long term norms. It also reinforces the view that property is about savings, not somewhere to live, as we discussed recently. We need a focus on the supply side of property, to meet demand, and reduce the price to income disparity. Extending yet more ability to purchase simply moves the problem on another generation and make ever larger mortgages worse, creating yet more risk in the banking sector. At some point the music has to stop.

“Two key trends, our ageing population and decreasing housing affordability, mean Australia’s retirement system structure needs a significant rethink,” CEDA Chief Executive Professor the Hon. Stephen Martin said when releasing The super challenge of retirement income policy.

“Talk about our ageing population and the impact on retirement policy has been part of national debate for many years but the impact of sustained housing affordability issues is only just beginning to be recognised as a significant issue for retirement policy.

“However, if it is not addressed the long term consequences could be significant with an increasing number of people living in poverty in retirement and unsustainable fiscal pressure on the Federal Budget.

“We already know from CEDA’s report Addressing entrenched disadvantage in Australia, released in April this year, that between 1 and 1.5 million Australians live in poverty and the elderly, particularly those who do not own their home, are an at-risk group. In fact, the overall poverty rate of older people in Australia is three times the OECD average, and one of the highest.

“Without a significant policy overhaul, that number is likely to significantly rise over the next 40 years.

“There has been a lot of talk and tweaking of retirement policy aimed at reducing the burden on government, but what Australia needs is a robust discussion on all the options to ensure long term Australians can retire comfortably.

“We strongly agree with the sentiments at last week’s National Reform Summit that tinkering at the edges is no longer an option and that discussion needs to broaden on this important issue.

“The system needs to be reviewed in its entirety. Ensuring retirement policies are not too onerous on the Federal Budget should be an outcome, but the focus must be on ensuring a sustainable system that delivers an adequate living standard for retirees.”

Professor Martin said the other priority must be a national conversation to confirm the objectives of the system, which would go a long way to alleviating confusion among the public, industry and government.

“Our retirement system should ensure Australians can retire with dignity and an adequate living standard, while providing a social safety net for those cannot afford to save enough for retirement,” he said.

Professor Martin said CEDA’s position is that there are a number of options that could help radically reshape retirement policy in Australia to improve its effectiveness in the long term and they need to all be put on the table and reviewed for their merits given the current environment.

“Obviously taxation arrangements need review because currently concessions are benefiting the rich and are being used as tax mitigation measures rather than to encourage retirement savings. However, the other area that needs review is the treatment of the family home,” he said.

“One option would be make the family home part of the assets test for the Age Pension and change superannuation payments to an after income tax payment, with all other super tax concessions removed.

“Alternatively, mortgage payments on the family home could be allowed to be made pre-tax.

“Implementing one of these options would allow for two important components of retirement savings – superannuation and the family home – to be treated the same.”

In addition Professor Martin said to further recognise the role of housing in alleviating poverty in retirement, first home buyers could be allowed to access superannuation funds to purchase owner-occupied housing.

“How policy impacts women should also be part of any review with women currently the most disadvantaged by the current system,” he said.

“We recognise that each of these policy recommendations come with their own issues, for example making mortgage repayments pre-tax could contribute to pushing house prices up. However, with the right combination of policy levers and checks and balances they are genuine options that should be explored given the trends we are now facing.”

The CEDA research report The super challenge of retirement income policy can be downloaded here.

Leveraged Property in SMSF Has Government Support

In a speech on Friday the Assistant Treasurer Josh Frydenberg “Speeches The Future of Super – Address to The Tax Institutegave support to SMSFs and  leveraged property investments within them. 

SMSFs are a great feature of the Australian superannuation system – they promote engagement and competition in the market. Currently SMSFs account for around one third of all superannuation funds under management. As of March this year, there were over 550,000 SMSFs with over one million members. This is up five per cent from the previous year.

There are several ways in which the ATO is trying to help trustees satisfy their obligations.

Borrowing

An issue of particular relevance to SMSFs is the recommendation in the Financial System Inquiry on leverage.

David Murray’s report has recommended a complete ban on limited recourse borrowing arrangements in the superannuation sector.

I am sure this issue is something a number of you have a keen interest in.

It would obviously be inappropriate for me to pre-empt what the Government proposes to do on this issue, as it forms part of the broader Government response to Murray. However, I do want to emphasise that we have been considering the issue carefully. We want to make sure the approach we adopt is proportionate to the risks identified.

We have all heard unhappy stories of property spruikers providing inappropriate advice to people, encouraging them to start up SMSFs in order to gear up and buy a flash new apartment off-the-plan. Then the property price plummets or the rent dries up, and the member is left either wiping out their super balances by liquidating other assets, and possibly losing the family home they’ve offered up as a personal guarantee. There may also be liquidity issues when funds move into pension phase.

Where this happens, it is clearly troubling. But these stories are very much the exception, not the rule.

The available statistics on limited recourse borrowing arrangements, while not perfect, tell us that limited recourse borrowing arrangements remain a very small proportion of SMSF assets, and are more often invested in commercial property than in residential high-rises.

Forty two per cent of limited recourse borrowing arrangements – or around $3.5 billion – were invested in residential property in mid-2013. To put this in context, that means that only 0.07 per cent of Australian residential property – perhaps 6,500 dwellings – were held by an SMSF through a limited recourse borrowing arrangement in 2013.

Leverage always carries risks. Lenders recognise this in their loan to valuation requirements.

And while we do not intend to ignore these risks, we need to make sure that our response is proportionate to the problem the FSI identified.

Assisting Self Managed Super Funds

The Government recognises that the majority of SMSF trustees try to do the right thing with regards to their compliance with the superannuation laws. The ATO, together with the SMSF industry and professional associations, are looking to assist trustees comply with their obligations by providing them with timely access to information that is relevant for them, at a time when it is most suitable for them. This includes:

• on-line education packages for SMSF trustees created in partnership with professional associations;
• short on-line SMSF trustee videos;
• SMSF Assist, which allows users to type specific SMSF questions online or into an app, and receive information relating to that topic when they need it;
• a subscription SMSF News service that includes case studies, legislative information and common question and answers.

Professionals are also supported in providing services to their clients. SMSF auditors have been provided with an express resolution service called ‘professional to professional’ and free software to help them complete audits and work through scenarios and case studies.

The methods that are in place ensure that we have enough support mechanisms available to help not only the large funds, but SMSFs as well.

SMSF of $200,000 or less not cost effective – ASIC

ASIC has released two information sheets to improve the quality of advice provided by advisers on self-managed superannuation funds (SMSFs). The information sheets deal with the cost-effectiveness of an SMSF, making clear ASIC’s view that an SMSF with a starting balance of $200,000 or below is unlikely to be in the client’s best interests and that advice to establish one below that threshold is more likely to be scrutinised by ASIC. They are also intended to assist advisers comply with their conduct and disclosure obligations under the Corporations Act and outline what ASIC looks at when undertaking surveillance in this area. They specify the types of risks and costs that an adviser should  consider, discuss and then disclose to clients when providing advice on establishing or switching to, an SMSF.

ASIC Deputy Chairman Peter Kell said, ‘Setting up an SMSF is a significant financial step for consumers and many factors can impact their decision. It is therefore important that consumers receive good quality advice that will assist them in making informed decisions about their retirement savings.

‘ASIC wants to ensure that only those investors for whom an SMSF is suitable are advised to establish an SMSF and that our expectations around the standards of advice are clear.

‘SMSFs are a key priority for ASIC and we will continue to target inappropriate advice about SMSFs in our surveillance work,’ Mr Kell said.

To that end, the information sheets provide ‘compliance tips’ which  indicate the factors that ASIC is likely to look at more closely as part of our surveillance activities.

The information sheets are Information Sheet 205 Advice on self-managed superannuation funds: Disclosure of risks (INFO 205) and Information Sheet 206 Advice on self-managed superannuation funds: Disclosure of costs (INFO 206).

INFO 205 and INFO 206 follow a consultation paper released in 2013 (13-243MR) on proposals to impose specific disclosure obligations on advisers giving advice on SMSFs.

Omniwealth pays penalty for potentially misleading advertising

Omniwealth Services Pty Ltd has complied with an ASIC infringement notice, paying a  $10,200 penalty after including potentially misleading claims on its website.

Omniwealth’s website included a page on the advantages of investing in property within a self-managed super fund (SMSF). This page compared the performance of a geared property investment within a self-managed super fund to an ungeared equity investment within a self-managed super fund.

The webpage was also promoted through the social media profile of Omniwealth’s CEO with a statement that investing in property in a self-managed super fund has taxation, leverage and diversification advantages and included a link to the Omniwealth webpage’s related article.

ASIC was concerned that the webpage did not give a balanced message about the returns, benefits and risks of investing in property in a self-managed super fund, and in particular that the uncertainty of forecasts was not made clear.

ASIC Deputy Chair Peter Kell said: ‘Making appropriate investment decisions is one of the most important responsibilities of SMSF trustees. ASIC is determined that SMSF trustees get accurate information and are not misled by advertising, including on websites and through social media.’

As the use of social media for promoting financial products and advice services increases, it is important that financial consumers are not misled or misinformed. ASIC encourages financial services providers using social media to regularly review their content and consider ASIC’s guidance on promoting financial products and advice services in Regulatory Guide 234 Advertising financial products and advice services including credit: Good practice guidance. (RG 234)

Omniwealth has removed the statements from its website and related social media profiles and has fully cooperated in responding to ASIC’s concerns.

Background

The payment of an infringement notice is not an admission of a contravention of the ASIC Act consumer protection provisions. ASIC can issue an infringement notice where it has reasonable grounds to believe a person has contravened certain consumer protection laws.

In 2012, in response to the growth in SMSFs ASIC established an SMSF Taskforce. The advertising to SMSF trustees or potential trustees through social media has been a recent specific focus of the Taskforce.

Publically available information may be read, and acted on, by a wide range of consumers with a variety of personal circumstances. ASIC encourages all SMSF trustees to look at the information available on the MoneySmart website and provided by the Australian Tax Office. Content that recommends a strategy, which requires a particular set of personal circumstances for it to be relevant, may be better suited to a personal advice situation.

Living longer means it’s time Australians embraced annuities

From The Conversation.

Few people are likely to be interested in buying an expensive financial product which offers little return, particularly when that return is based on their life expectancy. But annuities, which provide a series of regular payments until the death of the annuitant in return for a lump sum investment, deserve closer attention.

Despite the benefits of annuitisation, there is considerable evidence of annuity aversion among individuals. This has led to what economists call the “annuity puzzle”. It’s like this: let’s agree there are some benefits, we won’t buy it anyway.

Retirees don’t always succeed in ensuring their retirement income lasts the distance. Image sourced from Shutterstock.com

The good…

Life annuities provide longevity insurance, which is another way of saying they guarantee the annuitant an income until death. Managing longevity risk is an integral part of any retirement system. The recent Financial System Inquiry (FSI) regards longevity protection as a “major weakness” of Australia’s retirement income system.

The most popular retirement product, Account-Based Pensions (ABPs), provides flexibility and liquidity but leaves individuals with longevity, inflation and investment risks. The FSI recommends that superannuation trustees pre-select a comprehensive income product for retirement (CIPR) that has minimum features determined by the government. This product will help members receive a regular income and manage longevity risk. This is the main job of annuities.

One important feature of annuities is the return of capital (ROC). Investors are guaranteed up to 100% return of capital in the first 15 years of annuity purchase. If the investor dies in this period and does not have a joint owner or nominated person to receive payments when they die, a lump sum payment is made to her estate.

The Bad…

The idea of losing liquidity by locking up capital in annuities does not make the product very appealing. Also, the lower rate of return compared to investing directly in financial markets or alternative financial products is a reason why Australians shun annuities.

Annuitising is also seen as an irreversible choice in most cases and therefore investors are careful when to commit to it. This decision is delayed further when individuals have bequest or capital preservation needs, making full annuitisation an unlikely choice for most retirees. Today’s annuity with ROC to some extent caters for some of these concerns, but some of these drawbacks continue to loom large in the minds of investors.

An alternative

Let’s consider deferred annuities instead. A deferred annuity is a financial security for which the annuitant makes a premium payment to the insurer. In return, the insurer agrees to make regular income payments to the insured for a period of time. However, unlike regular annuities, the first payment is deferred until an agreed future date, i.e. the deferred annuity does not make any payments until after the deferred period is passed.

They are cheaper compared to regular annuities, yet provide the necessary longevity insurance. Deferred Life Annuities (DLAs) continue payments until the death of the annuitant. DLAs have been acknowledged in 14 submissions to the Financial System Inquiry and received widespread support from industry bodies and associations encouraging its uptake. Legislative barriers, however, prevent the development of such a product in Australia.

The major risk to the annuitant purchasing deferred annuities is that she may not survive the deferred period, forfeiting her annuity premium. The Return on Capital concept could be employed to help overcome this. There is also a degree of counter-party risk involved since the life company might become insolvent before retirees’ income payouts begin.

What if we didn’t need life insurance companies to provide this longevity insurance? Could the big superannuation funds provide the income retirees need? They certainly could, by taking some lessons from the deferred annuities concept to build a Group Self-Deferred Annuity (GSDA). A certain percentage or amount of retiree’s wealth (depending on size of balance at retirement) goes to the superannuation fund’s “deferred investment pool” at retirement. This serves as premium for the deferred annuity. The retiree still holds liquidity and controls remaining wealth and has opportunity for higher consumption even before the annuity payments begin. Remaining wealth may be subject to account based pension regulations ensuring minimum drawdowns.

According to such a structure, the annuity begins to pay out at age 80 or 85 years and the retiree’s income level will be a function of the premium invested, investment performance and mortality assumptions. With this approach, superannuation funds would be able to provide the much needed longevity insurance without resorting to complex products outside of superannuation. The “deferred investment pool” would undoubtedly require meticulous management as it would serve retirees beyond the deferred age.

If the retiree died before reaching the income payment stage, a discounted amount of her premium may be returned to her estate. The upside to surviving the deferral period is that the retiree may receive high mortality credits; additional return above the risk-free rate of return on the annuity income. Mortality credits stem from the redistribution of pooled wealth among surviving participants from retirees who die in the payment period.

While we seek to have a comprehensive income product in retirement, there are several starting points. A Group Self-Deferred Annuity is one option.

Author: Research Fellow, Griffith Centre for Personal Finance and Superannuation (GCPFS) at Griffith University

Australian Hedge Funds Snapshot

ASIC today published their report into the Australian Hedge Funds Industry. It draws from aggregated industry data and a survey to September 2014. Hedge funds comprise about 4% of managed funds in Australia, $95bn compared with $2,407bn. Superannuation funds accounted for approximately three-quarters of this total with nearly $1,789 billion in assets. The average Hedge Fund return last year was 4.2% (though with significant variations).ASIC-Hedge-6There were 473 funds in operation and there are a large number of small funds.

ASIC-Hedge-1Nearly 80% of the operating single-manager hedge funds and funds of hedge funds were domiciled in Australia. In terms of assets under management, just over 81% of single-manager hedge funds and 99% of funds of hedge funds were domiciled in Australia.

ASIC-Hedge-2Since 2012, assets under management for funds of hedge funds have remained relatively flat at around $12 billion. This does not mirror the global sector where assets under management for funds of hedge funds have fallen by approximately 17% to US$457 billion over the same period

ASIC-2014-4The majority of the Australian hedge funds sector comprises small-sized funds, with just over half (54%) of the sector holding assets under management of less than $50 million

ASIC-2014-5The most common strategy employed by managers for operating single-manager hedge funds and funds of hedge funds was equity long/short (53.8%), with multi-strategy in second place (10.6%) and fixed income in third place (9.5%).

ASIC-2014-6In the 12 months to 30 September 2014, the average annual net return for single-manager hedge funds and funds of hedge funds was 4.2%. This was down from the previous year when funds on average achieved a return of 14.4%. The third quarter of 2014 was the worst performing quarter for the year for the global hedge funds sector, posting returns of –0.4% for the year. Concerns over Greece leaving the Eurozone during this period caused equity markets to fall, which may have affected hedge fund investments. The year to 30 September 2014 saw returns for hedge funds globally fall to 3.3%, which highlighted the weakness in the sector in 2014 in comparison to the previous year when an average of 7.8% was posted for the same period.

ASIC-Hedge-7Turning to the survey, Retail direct investors accounted for 17% of the investors by net asset value in the surveyed hedge funds. This is a 7.3% increase from the 9.7% reported in ASIC’s 2012 hedge funds survey.

ASIC-Hedge-8The vast majority of funds’ reported turnover was in interest rate derivatives and fixed income derivatives. Interest rate derivatives were the most highly traded individual asset class at $510.5 billion, reflecting their importance in managing interest rate exposure.

ASIC-Hedge-9

 

BT pays $20,400 penalty for misleading statements

According to ASIC, BT Funds Management Ltd (BT) has paid $20,400 in penalties after ASIC issued two infringement notices for misleading statements contained in the online advertising of BT Super.

The misleading statements were contained in two separate online advertising campaigns. Each infringement notice imposed a penalty of $10,200.

The first infringement notice was issued for the statement “BT Super Has Outperformed Industry Super Funds Over the Last 5 Years*” published on search results pages generated via www.google.com.au from 26 June 2014 to 18 September 2014.

ASIC was concerned that BT misled consumers by representing that superannuation products issued by BT had generated greater returns than those generated by all industry super funds during the stated period. In reality, BT’s superannuation products had not generated greater returns during the stated period.

The second infringement notice was issued for the inclusion of the words “Industry Super Australia” in the headlines of BT advertisements published on search result pages generated via www.google.com.au from 29 October 2014 to 17 November 2014.

ASIC was concerned that BT misled consumers into believing that BT had an affiliation with Industry Super Australia (ISA), an organisation which manages collective projects on behalf of fifteen industry super funds. BT has never had an affiliation with ISA.

ASIC Deputy Chairman Peter Kell said, ‘The advertising of financial products and services must be clear, accurate and  balanced and should be presented in a way that avoids potentially misleading or deceiving consumers.

‘ASIC has provided guidance to help promoters comply with their legal obligations when advertising financial products and services. We continue to actively monitor advertising in this area and will take appropriate action where we consider consumers may be misinformed,’ Mr Kell said.

The payment of an infringement notice is not an admission of a contravention of the ASIC Act consumer protection provisions. ASIC can issue an infringement notice where it has reasonable grounds to believe a person has contravened certain consumer protection  laws.

Why Pensioners are Cruising Their Way Around Budget Changes – The Conversation

As reported in The Conversation: Age pensioners have always gone on cruises. But since the budget, we have seen stories emerge of age pensioners changing their behaviour in response to the proposed rebalancing of the age pension asset tests.

Sydney housewife Noelene has bought a holiday cruise to Alaska. Seemingly contradicting sensible living strategies for many older people, financial advisers are now proposing part-pensioners upsize and buy a more expensive house.

It’s surprising behaviour, especially in light of new research from CePAR using government data that demonstrates many age pensioners actually live very frugally. Many pensioners live below even the “modest” retirement standard proposed by ASFA ($23,469 for a single and $33,766 for a couple, who own their own home). Indeed, many pensioners are cautious and keep a cushion of assets, whether because of concern about risk, to pay for age care when frail, or to leave a bequest to children or grandchildren.

What’s changed

Why would age pensioners choose to spend big now? Well, it’s a rational response by part-pensioners to the proposed budget asset tests. If the anecdotal behaviour is writ large, a lot of the potential revenue gains (estimated at A$2.4 billion over 5 years) from the asset test changes may disappear.

Apart from the home, the financial and other assets of age pensioners are tested above a limit, so as to target the pension. The age pension is also subject to an income test. At the moment pensioners are assessed under both the income test and the asset test: whichever test gives the lower pension rate is applied. This allows considerable scope for sophisticated pension planning.

The 2015 budget includes changes to the age pension asset tests which deliver benefits at the low end but which are quite draconian for those who have accumulated some assets.

For homeowners, the asset free areas are to rise from $202,000 to $250,000 for single home owners and from $286,500 to $375,000 for couple home owners, but the asset test taper rate will double, from $1.50 per fortnight ($38 a year) per $1,000 to $3 per fortnight ($78 per year) per $1,000.

Pensioners who do not own their own home – and who are much less well off than those who own a home – will benefit from an increase in their threshold to $200,000 more than homeowner pensioners.

On a superficial view, these seem like reasonable changes. But they may have significant behavioural effects and there could be a better way to achieve the government’s policy goals.

Savings taxed: how the government is changing behaviour

The age pension can be thought of as a universal payment combined with an in-built income tax (the income test, which has a 50% tax rate up to the cut out point) and an in-built wealth tax (the asset test).

The effect of the change in policy is to reduce the asset cut-out point where the age pension ceases. Under current asset taper rules, the effective wealth tax rate in the asset test is 3.9% above the threshold. The budget proposal of a taper of $3 per fortnight per $1,000 implies a wealth tax rate of 7.8% ($78 per year per $1,000) above the new thresholds. With real returns of around 5% on many investments currently, the wealth tax effectively confiscates the whole of the real return above the thresholds.

A home-owner couple will see their pension cease at assets of $823,000 compared to over $1.1 million currently. But this home-owner couple with $823,000 in savings would not necessarily have a higher living standard than a home-owner couple with $375,000 in savings; indeed, it could well be lower.

Overall, under the proposed new system, income from savings would be very heavily taxed. Assuming a return to savings of 5%, the effective marginal tax rate could be as much as 160% (the wealth tax rate of 7.8% divided by a 5% return). This creates a disincentive to save. For the conservative investor the situation is even worse, as products like term deposits offer rates only slightly higher than inflation.

An alternative approach: deeming an income return

The Henry Tax Review and the Shepherd National Committee of Audit both recommended that the separate age pension asset test should be replaced by a comprehensive means test that deems income from assets.

A deeming approach disregards actual income from an asset. Only deemed income is included, based on a sensible choice of rate of return, such as the return on bank interest. At 1.75% and 3.25% rates, this is quite a conservative rate of return.

In fact, we already deem income returns in the current pension system, for assets including bank accounts, term deposits, shares, managed funds, loans to family members and superannuation funds (if you are age pension age).

Widening the deeming rules would return us to the “merged means test” which operated in Australia up to the 1970s. Under the test, all assets apart from the home were deemed to yield 10% per annum and actual income from assets was disregarded. The assumed yield on an annuity purchased at age 65 was 10%. Currently an indexed annuity at that age would yield around a third of that in real terms, and even a “growth” investment strategy will yield only 5% to 6%, so a deeming rate around 6% could be justified.

Deeming rates can be set to achieve the sort of budget savings sought by the government with fewer issues for fairness and perverse incentives. A deeming rate of, say, 6% combines with a pension taper of 50% to give an effective marginal wealth tax rate of 3%. This is much less than the effective 7.8% wealth tax rate in the budget measure.

Deeming allows a pensioner to have either modest income or modest assets but not both. It does not unfairly advantage those who maximise their entitlements by planning under both income and asset tests, as the current system allows. A wider deemed base could save as much at a lower effective wealth tax rate than that proposed by the government.

The bigger picture

Australia has highly generous tax concessions for retirement saving, but quite harsh treatment on the pension side. Why incentivise savings through super tax breaks and then penalise savers under the means test?

Home owner retirees are much better off than those who do not own their home and the age pension means test does not touch the top cohort of superannuation savers who receive a hugely disproportionate share of superannuation tax breaks. In contrast to most middle income savers who eventually need some level of age pension with its implicit wealth tax, the top cohort who don’t need the age pension are never subject to any wealth or bequests tax.

ASIC enhances Financial Advisers Register

ASIC has now launched the second stage of the Financial Advisers Register (FAR) which now includes information about advisers’ qualifications, training and memberships of professional bodies.

The register, which has been available to the public since the end of March this year, can be searched on ASIC’s MoneySmart website www.moneysmart.gov.au. To date there have been more than 60,000 visits and more than 100,000 searches undertaken on the register.

There are more than 23,000 financial advisers now on the register. It contains details of persons employed or authorised – directly or indirectly – by Australian financial services (AFS) licensees to provide personal financial advice to retail clients on investments, superannuation and life insurance.

ASIC Deputy Chairman, Peter Kell said, ‘From today consumers will be able to see the qualifications and professional memberships in addition to the basic information about advisers already available on the register. We want consumers to be able to make an informed decision in their choice of adviser and the register is a good starting point.’

ASIC has also made available data from the Financial Advisers Register to the Australian Government website www.data.gov.au which can be downloaded free of charge. The data snapshot will enable easy and quick analysis of aspects of the financial advice industry.

The transition phase for the new register will end at the end of September 2015. From 1 October 2015 late fee penalties will apply. ASIC can take action for providing a false or misleading statement to ASIC under the Corporations Act.

Managed Funds Up By 5% To $2.6 Trillion At March 2015

The ABS data today shows further substantial growth in managed funds. At 31 March 2015, the managed funds industry had $2,618.7b funds under management, an increase of $114.2b (5%) on the December quarter 2014 figure of $2,504.5b.

The main valuation effects that occurred during the March quarter 2015 were as follows: the S&P/ASX 200 increased 8.9%; the price of foreign shares, as represented by the MSCI World Index excluding Australia, increased 1.8%; and the A$ depreciated 6.9% against the US$.

At 31 March 2015, the consolidated assets of managed funds institutions were $2,073.0b, an increase of $100.3b (5%) on the December quarter 2014 figure of $1,972.7b.

ManagedFundsTrendsMar2015 The asset types that increased were shares, $45.8b (8%); overseas assets, $34.2b (8%); units in trusts, $10.8b (5%); other financial assets, $3.4b (13%); short term securities, $3.3b (4%); bonds, etc., $2.9b (3%); land, buildings and equipment, $2.7b (1%); loans and placements, $0.9b (2%); and derivatives, $0.7b (34%). These were partially offset by decreases in deposits, $4.3b (2%); and other non-financial assets, $0.1b (1%). The chart below shows the unconsolidated mix at end March 2015.

ManagedFundsSplitsMar2015At 31 March 2015, there were $536.7b of assets cross invested between managed funds institutions. At 31 March 2015, the unconsolidated assets of superannuation (pension) funds increased $106.2b (6%), life insurance corporations increased $14.3b (5%), public offer (retail) unit trusts increased $8.9b (3%), cash management trusts increased $1.4b (6%), friendly societies increased $0.2b (2%), and common funds increased $0.1b (1%).