Westpac Affirms Wealth Management Focus

Westpac briefed the market yesterday on BT Financial Group, its wealth management division and reaffirmed that Wealth remains a strategic priority for the Group and it was continuing to invest to grow the business.

They showed this picture of financial products over the lifetime.

They argued that there will be strong growth in superannuation (faster than credit growth) and returns above the the Institutional Bank.  18.5% of Westpac Group customers have at least one BT Financial Group product although individual segment shares are small.

Finally, they reinforced their mobile strategy.

BT Financial Group (BTFG), Chief Executive, Brad Cooper, said the Group’s strategy was to provide superior service and that required looking after all of a customer’s financial needs throughout their life.

“Having a strong wealth and insurance operation is imperative to deliver this and BTFG has invested to transform its operations to help more Australians plan for their best financial futures,” he said.

Mr Cooper said while the industry is facing some near term headwinds from volatility and the uncertainty and costs associated with regulatory change, the longer term prospects are very positive. This is particularly true with superannuation balances expected to grow at around 8% per annum over the next decade.

“There is an increasing awareness of the need to fund retirement by Australians. Currently financial advice is only being accessed by one in five people. Add to that superannuation assets doubling to around $4 trillion over the next nine years and there is an obvious need to help more Australians into a dignified retirement,” he said.

“We have been improving our market leading wealth solutions across our business to better help customers through all life stages. Customers are rightly demanding more convenience, flexibility and the ability to be helped on their terms and we have reshaped our business and built the tools to meet these needs.

“This has included a new flexible advice model that offers everything from general and single-topic advice to full personal advice delivered when and where the customer wants, a partnership with Allianz to broaden our general insurance product set, and a new Super Check service that has helped 5,400 customers consolidate around $100 million of their retirement savings.

“Our investment in BT Panorama has created the most advanced Wealth platform in the country for both advisers and customers. For the first time, customers can view and transact seamlessly right across all their financial services in one place. This includes banking transactions, savings, credit cards, home loans, insurance, superannuation and investments.

“Within Panorama, customers can pick and choose from a wide range of investment options – from the simple, through to the more advanced – based on an individual’s objectives, financial situation and needs,” he said.

Mr Cooper also referenced BTFG’s life insurance business as a standout industry performer. Our customer focused strategy and prudent approach to risk has seen us avoid the more recent claims issues experienced by other life insurance participants.

“Life is an integral part of our product set and our business is strong,” he said.

“We have a disciplined approach to how our products are distributed, with most sold through an adviser, as we believe that life insurance is a complex product that needs either personal or general advice to support it.

“Additionally, our strong policy framework and transparent claims management processes has further strengthened our business. Our claims philosophy has consistently focused on customer wellbeing, with attention given to early intervention and rehabilitation so customers can return to work as quickly as possible. This approach has seen us routinely recognised by claimants, and the industry, as having the best Claims team,” he said.

Suncorp wealth arm placed on ‘negative watch’

From InvestorDaily.

Suncorp’s life insurance and superannuation division has been placed on ‘negative watch’ by S&P after the bank revealed it is considering “strategic alternatives” for the business, including divestment.

In a statement released yesterday, S&P Global Ratings said the strategic importance of Suncorp Life and Superannuation Limited (SLSL) has “weakened” following statements made in Suncorp’s annual result.

In last week’s annual result announcement, Suncorp revealed it is implementing an “optimisation program” for its Australian life insurance business as well as “exploring strategic alternatives”.

In response, S&P has lowered its financial strength and issuer credit ratings on SLSL to ‘A’ from ‘A+’, which it said “reflects a reduced level of uplift in the rating from group support”.

S&P said it has also placed Asteron Life’s ‘A+’ rating on watch with “negative implications, reflecting uncertainty as to the level of integration of the entity with the group”.

The research house said Asteron Life is now only “strategically important” for Suncorp – a downgrade from its previous “core status”.

“This downgrade follows Suncorp’s announcement that it has undertaken a strategic review of its Australian life insurance operations, which includes potential divestment of the operations. As such, we no longer consider SLSL as being highly unlikely to be sold,” said S&P.

“The weak operating performance of the life operations relative to group expectations has  triggered the group’s strategic review. This weaker performance also contributes to our assessment of slightly lower group support for SLSL compared with that for Asteron Life,” said S&P.

“We expect the continued strength in [Asteron Life]’s inforce premiums, operating experience and emergence of planned profit margins to support the financial contribution of the group’s New Zealand life operations, in contrast to SLSL’s weaker operating performance.”

House passes professional standards bill

From The Financial Standard.

Federal laws which will affect the future of the financial planning industry passed the House of Representatives last night.

The Corporations Amendment (Professional Standards of Financial Advisers) Bill, which was first introduced into Parliament in November 2016 by the Coalition, passed the House on the first sitting day of 2017.

Minister for Revenue and Financial Services Kelly O’Dwyer said the Bill comes in response to the actions of a minority of rogue financial advisers.

“Over time, repeated instances of inappropriate advice have led to a reduction in consumers’ trust in the financial advice industry,” O’Dwyer said during a reading of the Bill.

“Reduced trust acts as a barrier to consumers seeking financial advice, which is a poor outcome for both consumers and the industry.”

O’Dwyer recognised the majority of financial advisers have provided high-quality advice to their clients, adding that the measures debated will help to rebuild confidence in the industry.

Under the legislation, financial advisers will be required to hold a degree or a qualification equivalent to a degree, complete a professional year, pass an exam, and undertake continuous professional development.

A single uniform code of ethics will also set the ethical principles that advisers must comply with.

O’Dwyer hopes that the passing of the Bill means that more Australians will have the confidence to seek financial advice, noting that currently only one in five seek advice.

The new professional standards regime will commence on 1 January 2019, following successful passage through the Senate.

Labor’s last minute amendment

Prior to passing the House, Shadow Assistant Treasurer Andrew Leigh called on the government to apologise to victims of bad financial practice following their vote against Labor’s proposed financial advice measures.

“The house calls on current Liberal and National Party parliamentarians to apologise for the disregard their colleagues in the 43rd parliament showed for the many victims of bad practice in the financial advice sector when they voted against Labor’s Future of Financial Advice measures,” Leigh’s proposed amendment stated.

Leigh offered three additional amendments, drawing attention to the lack of trust consumers have in the financial services industry.

Speaking to Financial Standard this morning, head of policy and government relations for the FPA Benjamin Marshan said that while he feels positive about how the Bill passed the house, he is disappointed with Labor’s response, given that the industry is desperately seeking certainty.

“The amendments that the ALP proposed were trying to play games and show up the Government,” Marshan said.

“It’s disappointing that given that financial planners have been looking for certainty. Consumers are looking for increased trust and passing the Bill through unanimously shows that the ALP didn’t have any philosophical issues with the Bill.”

Marshan added that the FPA is looking forward to the Bill passing quickly through the Senate on Thursday.

“We’re encouraged by the commitment that the government is showing to the industry,” he said.

Labor’s amendment was defeated 75-68.

One in two Australian households expected to be retire ready

Fifty-three per cent of Australian households are expected to have enough for a comfortable retirement from their combined superannuation savings, personal assets and the Age Pension, according to the latest CommBank Retire Ready Index released today.

When the Age Pension is removed, the number of households that can afford a comfortable retirement reduces to 17 per cent, and to just six per cent when the calculations are based on superannuation only.

Linda Elkins, Executive General Manager Advice, Commonwealth Bank said: “The good news is that many Australians who may not currently be on track for a comfortable retirement are very close. A little bit of planning could see them reach the comfortable level.”

CommBank commissioned Rice Warner to prepare the report, which shows that many Australians are close to achieving the comfortable retirement standard defined by the Association of Superannuation Funds of Australia (ASFA). The report shows that while 53 per cent of Australian households are on track, a further 18 per cent are projected have 80 to 99 per cent of what they will need.

The overall results are mixed across cohorts and age groups, and highlight the growing importance of superannuation in helping Australians achieve a comfortable retirement.

Millennials will need to save harder for retirement than other cohorts due to their longer life expectancies. Superannuation will play an important role and will comprise, on average, 78 per cent of retirement assets for 25 year-olds working today.

“The CommBank Retire Ready Index shows how important superannuation will be for the long term financial well-being of young Australians. Many people do not become engaged with superannuation until later in their working lives, but taking a keener interest in superannuation now, consolidating accounts into one super fund and contributing a little more each week can help younger Australians stay on track for a comfortable retirement,” Ms Elkins said.

In the 60-64 year-old age group, couples are expected to be better off than singles but will have reduced retire readiness as they have not received the long term benefits of compulsory Superannuation Guarantee contributions. On the other hand, younger age groups are expected to have less in assets at retirement outside of superannuation when compared with their older counterparts.

“The report also shows that more men than women are retire ready. Women have longer life expectancies, and therefore need more assets to maintain a comfortable level of retirement. Women also generally have lower retirement savings due to career breaks during their child bearing years and lower average income levels throughout their working lives.”

Ms Elkins also said: “People who are approaching retirement could give their savings a boost by taking advantage of the current superannuation contribution caps before they are reduced on 1 July.”

“It is important that people of all ages understand how much they will need to save now to secure their financial futures.”

“To help Australians see how on track they are for a comfortable retirement, CommBank has developed a retirement calculator. This is a good first step to see how retire ready you are and is a useful resource to help you get on track to reach your goals for a comfortable retirement,” she said.

Bank platforms ‘squeezing’ fund managers

From InvestorDaily.

Too much fund manager value is being “eaten up” by the high administration service fees of the major platforms, argues the ASX.

Speaking to InvestorDaily, ASX senior manager for investment products Andrew Campion said the investment management value chain should be more aligned with the people who actually generate wealth for investors – fund managers.

“We feel that presently too much value is eaten up by administration services. It’s not the actual person or firm that’s generating wealth for the end client,” Mr Campion said.

“If you squeeze the fund manager they just have less money to spend on research and less money to incentivise their staff,” he said.

This conviction is reflected in the relatively low fee ASX charges fund managers for inclusion on the mFund settlement service: 1.4 basis points (bps), or 0.014 per cent.

“If you look on a PDS for a fund manager and you see their expense ratio is 70 bps, 1 per cent or 1.2 per cent – they might be getting far less when they’re on a platform. Sometimes less than half as much,” Mr Campion said.

Sometimes a fund manager using larger platforms can be “squeezed” down to a fee of as low as 15 basis points “even though their direct retail fee structure is 70-80 bps or 1 per cent”.

“When we talk to managers, they’re staggered that they get to keep all of their fees,” Mr Campion said.

“We don’t feel like having a website that you can log into and have statements generated should cost 100 bps.”

There are now 170 products available on the mFund settlement service, with total funds under management (FUM) amounting to $250 million (up from $110 million 12 months earlier).

The ASX recently received approval from ASIC to include longer-form PDS products on mFund, in addition to shorter-form PDS products.

Longer-form PDS products, which include hedge funds, make up 20 per cent of the approximately $300 billion Australian retail fund management sector and are likely to be attractive to the mostly self-directed investors who use mFund, Mr Campion said.

“Although it’s only 20 per cent of the overall pie, we think as these funds come onto the platform it will be much more than 20 per cent of the mFund business,” he said.

Of the total $250 million in FUM on mFund, 40 per cent of it is self-directed and 60 per cent comes through advised channels, Mr Campion said.

Eighty per cent of the users of mFund are SMSFs, he added.

High-net-worth investors embracing robo-advice

From Investor Daily.

Robo-advice platforms’ capacities are expected to continue growing in the coming year, according to Finovate, expanding their functionality to include broader wealth management functions and cater to high-net-worth customers.

The “myriad” financial needs facing Millennials, coupled with increasing longevity risk confronting older investors, has driven change in the robo-advice space, Finovate research analyst David Penn said, with the improving abilities of such services now extending beyond “traditional boundaries”.

“The growing capacity of robo-advisers to help manage other aspects of personal finance supports a more expansive view of wealth management and financial planning,” he said.

“This includes everything from health care planning, insurance, even real estate, education and leisure.”

As robo-advice becomes “both more sophisticated and more accepted”, high-net-worth investors are increasingly making use of these services to manage parts of their finances, Mr Penn said.

“Catering to high-net-worth clients, according to some, involves both greater technological sophistication on the part of robo-advisors as well as more extensive customer service,” he said.

“Specifically, high net worth clients may require access to more complex investment vehicles, including non-equity investments, as well as more advanced rebalancing and tax harvesting than the average investor.”

Fintech services designed to help high-net-worth individuals manage their wealth are already emerging on the market, Mr Penn said, adding that high-net-worth individuals already using these services had increased their investment from 5 per cent to 20 per cent in the last two years alone.


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.


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.