Another Nail In The Investment Lending Coffin

AMP has announced it will no longer accept loan applications to refinance stand-alone investment property loans with investment property security as reported by Australian Broker.

Effective tomorrow, 16 February, the bank will also be increasing Investment Interest Only rates by 0.30%, and Owner Occupied Interest Only products by 0.30% per annum.

“We will no longer accept loan applications to refinance stand- alone investment property loans with investment property security. Refinances that include owner- occupied and investment properties remain acceptable, subject to security property values,” the bank said in the announcement.

Investment Principle & Interest products are also increasing by 0.25% pa, effective tomorrow (16 February).

Along with these changes the non-major has also announced notable credit policy changes. The maximum LVR for purchases of investment property loans is reducing to 70% (including LMI), while the credit card servicing rate for calculating loan serviceability will increase from 2.5% to 3% of the credit limit. This change impacts all new loans (owner occupied and investment).

“The changes announced today do not impact pipeline deals or our existing customers and there is no change for new owner-occupied principle and interest loans,” the statement said.

“These changes are being made after recent shifts in consumer behaviour and competitor activity in the property market.”

Sally Bruce, Group Executive AMP Bank commented: “We actively manage our credit policies to ensure we prudently manage risk and align with regulatory requirements.

“With sustained high levels of activity in the property market in 2017, we will continue to closely monitor developments and put measures in place to control and manage the future growth of our investment property portfolio,” she said.

AMP’s changes come following a similar crackdown on investment lending by CBA, last week.

SMSF contribution levels almost triple in response to super changes becoming law

AMP says SMSF trustees looking to make the most of the current rules have significantly increased contributions, according to the latest SuperConcepts SMSF Investment Patterns Survey.

In the December 2016 quarter contribution levels almost tripled, increasing by 181 per cent from $3,040 in the September quarter to $8,550.

 

The rise in contributions follows the Government’s confirmation that the proposed Super changes will come into effect on July 1 2017.

SuperConcepts Executive Manager Technical & Strategic Solutions Phil La Greca said the findings were not surprising and he anticipated contribution levels would continue to increase during the next two quarters due to the brief window of time to make large non-concessional contributions until 30 June 2017.

“The current non-concessional amounts apply for the remainder of this financial year and investors are taking advantage of the limited time available to them. We expect a continued uplift in the level of nonconcessional contributions in the lead up to July 1,” said Mr La Greca.

The current $180,000 after-tax contributions cap, and the three year $540,000 bring-forward rule remain until 30 June 2017.

Cash levels were also up in Q4 (from 18.1 per cent in the September quarter to 18.4 per cent in the December quarter).

Mr La Greca said it was likely the increased cash levels were related to the higher contribution levels being received.

The trend to invest through the use of exchange-traded funds (ETFs) continued to grow, with ETFs representing four per cent of all assets during the December quarter. ETFs were mostly used in the International Equity Sector, which represented 16.7 per cent of all international equity holdings.

The trend to use a limited recourse borrowing arrangement for property continued. The overall allocation to property loans increased to 81 per cent in the December quarter, up from 75 per cent the previous quarter. Meanwhile the number of financial asset loans decreased from 25 per cent to 19 per cent.

“The ATO’s safe harbour guidelines on related party loans explains the continued drop in the number of financial asset loans,” said Mr La Greca.

The quarterly SuperConcepts SMSF Investment Patterns Survey covers approximately 2,800 funds, a sample of SMSFs administered by Multiport (part of the SuperConcepts group) and the investments they held at 31 December 2016. The assets of the funds surveyed represent approximately $3.2 billion.

About SuperConcepts<
SuperConcepts is a leading provider of self-managed superannuation fund (SMSF) administration, software and education services to SMSF trustees, accountants and financial advisers, servicing more than 55,000 funds. SuperConcepts comprises a number of sub-brands including AMP SMSF, Ascend, Cavendish, Multiport, Justsuper, SuperConcepts, SuperIQ, superMate, yourSMSF and a part ownership of Class Ltd. Find out more at www.superconcepts.com.au.

 

AMP Reports A Loss Of $344m

AMP reported their FY16 results today, a net loss of $344m compared with a profit last year of $972m last year. They also announced a share buy-back of up to $500m.  The final dividend was maintained at 14 cents a share, franked to 90 per cent making the FY 16 dividend 28 cents a share.

It is a complex business, with many moving parts, and an offshore expansion strategy in sharp contrast to the major retail banks!

The business took a hit from a $415 million loss in Wealth Protection reflecting negative claims experience and capitalised loss.

Underlying profit was A$486 million compared with A$1,120 million prior year, reflecting actions announced in October 2016 to stabilise Australian Wealth Protection.

The wealth management businesses performed better, (AMP Capital, AMP Bank and New Zealand).

International expansion in China, Europe and North America continues. China Life AMP Asset Management Company (CLAMP) is the fastest-growing investment manager in China, with assets under management (AUM) rising 55 per cent year on year.

They focusses on cost management: A$200 million, three-year efficiency program completed in 2016 and a new efficiency target set for 2017.

They have a strong capital position with A$2.3 billion surplus on 1 January 2017 following consolidation of life companies. Underlying return on equity 5.6 per cent, down from 13.2 per cent in 2015, reflecting Wealth Protection performance.

Business unit results

Australian Wealth Management
The impact of difficult trading conditions was partly offset by effective cost and margin management. AUM was up 5 per cent to A$121 billion following a strong end to the year. Total net cash flows of A$336 million (FY 15: A$2.2 billion) were lower, consistent with an industry-wide slow down amid market and regulatory uncertainty. Improving customer sentiment underpinned a lift in discretionary contributions in Q4 2016.

Targeted product enhancements supported strong cash flows on AMP’s flagship North platform, with net cash flows up 11 per cent on FY 15 and AUM up 30 per cent. Cash flows from AMP Flexible Super reduced as flows switched to North as expected. Corporate super cash flows were lower reflecting the lumpy nature of mandates. AMP’s developing omni-channel advice network, campaigns to capitalise on a more favourable market environment, corporate super pipeline and further product enhancements are expected to support cash flows in 2017 and beyond.

AMP deliberately reduced adviser numbers in 2016 by tightening the classification of authorised representatives. A higher-than-usual number of advisers also decided to retire or leave the industry in the face of challenging industry conditions and increasing education and professional requirements.

AMP Capital
AMP Capital’s strong performance reflected increased fee income driven by growth in real estate and infrastructure investments. Controllable costs increased as the business continued to invest in international growth and build its distribution capability.

External net cash flows were A$967 million (FY 15: A$4.4 billion) and were impacted by challenging market conditions in Australia and Japan, partly offset by good institutional flows into real estate and infrastructure asset classes. FY 16 finished with a strong origination pipeline, including A$3.1 billion of available investor commitments. In China, CLAMP’s AUM increased 55 per cent year on year.

Australian Wealth Protection
Performance was impacted by negative experience and the actions to stabilise the business announced in October 2016, including strengthened assumptions, which led to a one-off capitalised loss of A$484 million. Total experience losses for the year were A$105 million. Claims experience inQ4 2016, capitalised and other one-off losses, and the reduction in embedded value were all within guidance provided in October 2016. AMP group’s reported earnings were also impacted by aA$668 million charge for goodwill impairment as a consequence of declines in the potential recoverable amount of the Australian Wealth Protection business.

The consolidation of AMP Life and NMLA – a Part 9 transfer – released A$145 million in regulatory capital on 1 January 2017, while a reinsurance agreement for 50 per cent of the AMP Life portfolio (25 per cent of total exposure) released a further A$500 million of regulatory capital. These actions underpinned the board’s decision to return capital to shareholders through an on-market share buy-back. The process for a second tranche of reinsurance is now underway.

AMP Bank
Above system growth in residential mortgages at 13% and expansion in net interest margin contributed to 15 per cent growth in operating profit.

The bank is investing in operational capacity to support continued growth, with retail mortgage sales via the aligned adviser channel up 24 per cent on FY 15. The bank’s cost to income ratio fell to 29 per cent as the bank benefitted from increased scale.

New Zealand Financial Services
Performance was driven by improved margins in wealth management and experience profits in the life insurance business. Excluding the effect of the loss of transitional tax relief, operating earnings increased 14 per cent, with tight cost management improving the business’s cost to income ratio. AUM increased 9 per cent, reflecting positive market performance and net cash flows.

Australian Mature
Operating earnings of A$151 million reflected anticipated portfolio run off and lower bond yields, partly offset by cost control and better persistency

Capital management

AMP continues to actively manage capital with Level 3 eligible capital resources A$2,195 million above minimum regulatory requirements at 31 December 2016, up from A$1,917 million at 1 July 2016. Effective 1 January 2017, the consolidation of AMP’s two life companies (AMP Life and NMLA) increased excess regulatory capital by a further A$145 million.

The strengthened capital position also reflects the execution of the reinsurance agreement.

Capital released from reinsurance provides the capacity for capital to be returned to shareholders.An on-market share buy-back of up to A$500 million will begin in Q1 2017.

A FY 16 final dividend has been maintained at 14 cents per share, franked at 90 per cent, with the unfranked amount being declared as conduit foreign income. The total FY 16 dividend is 28 cents a share. This reflects the largely non-cash nature of the one-off losses incurred in Australian Wealth Protection. AMP’s dividend policy target range is 70 to 90 per cent of underlying profit. The dividend reinvestment plan will be neutralised by on-market purchases.

Cost program

AMP’s three-year business efficiency program completed in FY 16 with A$200 million in pre-tax recurring run rate cost benefits delivered in line with expectations.

AMP is committed to a 3 per cent reduction in controllable costs in 2017, excluding AMP Capital and allowing for continued investment in growth businesses and channel experiences. AMP Capital will be managed on a cost to income basis, which is appropriate for the profile and growth ambitions of this business.

 

 

When Size Matters: $200,000 threshold key to SMSF performance

AMP says large SMSFs perform better than small SMSFs because they are more diversified, operate more effectively and have longer experience in the sector.

This is according to new joint research from SuperConcepts and the University of Adelaide’s International Centre for Financial Services.

Released today, the new research report –When size matters: A closer look at SMSF performance – looks at fund characteristics that contribute to superior performance of SMSFs.

SuperConcepts General Manager of Technical Services and Education, Peter Burgess, said the research revealed when a fund reaches a balance of $200,000, the benefits of investment diversification start to kick in.

“Our research shows size matters with large SMSFs performing better than small ones. Performance, diversification and expense ratios continue to improve as a fund increases in size,” said Mr Burgess.

Professor Ralf-Yves Zurbrugg from the University of Adelaide said there is a “double whammy” for those SMSFs with balances under $200,000.

“These funds not only have much larger expense ratios compared to larger funds, but they also lose out due to their inability to achieve adequate levels of investment diversification,” said Professor Zurbrugg.

Large funds are more efficient in their operation, in terms of the direct expenses involved in managing an SMSF. When a fund reaches $550,000 under management, its expense ratio dips below two per cent and diversification and performance is comparable to the largest funds.

When size matters: A closer look at SMSF performance is the first in a series of reports to be released by the SMSF Centre of Excellence which aims to examine the relationship between fund activity and performance, diversification and performance, and the relationship between trustees seeking advice andperformance.

Using data from over 20,000 SMSFs from 2008/09 until 2014/15, the report examines how fund size affects performance as well as other fund characteristics including investment diversification and expense ratios. SMSFs in the data set have outsourced their administration, and possibly other aspects of their operation to an external party.

 

AMP Bank increases variable interest rates on investment loans

AMP Bank has announced an increase to  variable interest rates on residential investment loans of 15 basis points,  effective 6 January 2017 for new customers and 9 January 2017 for existing  customers.

The AMP Professional Pack Home Loan  variable interest rate for investor loans $250,000 and above will increase from  3.99 per cent to 4.14 per cent per annum.

There are no changes to variable  interest rates for owner occupied loans.

Sally Bruce, Managing Director AMP  Bank commented: “We remain focused on supporting our customers with competitive  interest rates.

“Changes to our home loan rates take  into account increasing wholesale funding costs and the need to maintain a  balanced portfolio in line with regulatory guidelines,” she said.

 

AMP realigns business to focus on performance and growth

AMP  Limited today announced a series of changes to its senior leadership team to create clearer accountability for driving short-term business performance and delivering longer-term growth.

AMP Chief Executive Craig Meller said the new group structure delivers sharper  focus on performance in the core Australian businesses, drives efficiency  across the group and provides increased emphasis on the growth drivers in the portfolio.

amp-struct1The key changes to the group leadership team are:

  • Wealth Solutions and Customer: Paul Sainsbury will lead a new division bringing together customer, wealth  management and product solutions.
  • Advice and New Zealand: Jack  Regan, currently Managing Director New Zealand, will lead an expanded  portfolio, assuming responsibility for AMP’s advice businesses.  Mr Regan will retain responsibility for the  management of AMP New Zealand.
  • AMP Bank: Sally Bruce will join the  group leadership team as Group Executive, AMP Bank.
  • Insurance: Megan Beer will be appointed Group Executive, Insurance, bringing single point accountability to the stabilisation and management of the insurance business.
  • Technology and Operations: Craig Ryman will become Group Executive, Technology and Operations, assuming an expanded portfolio combining IT and operations.
  • Enterprise Risk Management: Saskia  Goedhart, Chief Risk Officer, will join the group leadership team.

The leadership changes are effective 1 January 2017.  Management of the other divisions remain  unchanged.

As a  result of the changes, three executives will leave the organisation: Pauline  Blight-Johnston, Group Executive, Insurance, Super and Risk Management; Rob  Caprioli, Group Executive, Advice and Banking; and Wendy Thorpe, Group  Executive Operations.  Ms Thorpe had  previously advised her intent to retire and will leave the business in early  2017 after helping to ensure the smooth transition of the operations  function.  Ms Thorpe will also shortly  join the board of AMP Bank as a Non-Executive Director.

“I would like to thank those  executives who are leaving the organisation for their contribution to AMP and  to the transformation of our core Australian business during the past three  years.  I wish each of them well for the future,” said Mr Meller.

 

AMP Significant Reinsurance Deal Announced, Takes Hit

AMP Limited today provided an update on its Australian wealthprotection business and reported cashflows and assets under management (AUM) for the thirdquarter to 30 September 2016.

amp-pic

In addition, AMP announced two significant actions as part of its update to address the marketconditions for wealth protection in Australia:

  • the implementation of a significant reinsurance arrangement with Munich ReinsuranceCompany of Australasia Limited (Munich Re), and
  • strengthening of best estimate assumptions across both AMP Life and NMLA effective31 December 2016.

AMP Chief Executive Craig Meller said: “We’ve seen consistent deterioration in the insurance sector over the course of 2016 and, despite the progress on claims transformation to date, it has significantly impacted the performance of our wealth protection business.

“Today’s actions are designed to re-set the wealth protection business. They will improve the group’s earnings stability, free-up capital and help bring into focus the growth potential of AMP.

“While cashflows remained subdued during the third quarter, they were impacted by the ongoing uncertainty in superannuation legislation leading to lower consumer confidence in the system,advisers adjusting to the enhanced regulatory environment and recent investment market volatility

“However AMP is optimistic that the recent superannuation reforms will reverse this trend.”

Business update for the Australian wealth protection business

The series of actions AMP announced today will, subject to regulatory approval, release capitalfrom the wealth protection business and provide greater earnings stability across the group.In more detail they are:

Significant reinsurance deal

AMP’s focus is to reposition the wealth protection business in Australia as significantly less capitalintensive with market-leading products and a transformed claims philosophy and process.

AMP Life has executed a binding quota share agreement with Munich Re to reinsure 50 per cent of $750 million of annual premium income of the AMP Life retail portfolio (including income protection and lump sum business). The agreement will commence on 1 November 2016.

The agreement creates the potential to release up to $500 million of capital from AMP Life subject to regulatory approval. This initial tranche of reinsurance will reduce the magnitude of earnings volatility from the Australian wealth protection business for the AMP group.

The estimated net impact from the agreement on the Australian wealth protection business profit margins is a $25 million reduction annually from FY 17.

AMP intends to pursue further tranches of reinsurance when time and conditions suit.

Strengthening of best estimate assumptions and goodwill impairment

The challenges AMP has faced in its Australian wealth protection business over the last three years have been accentuated in 2016 by deteriorating experience across the life insurance sector.

This has been driven by a range of factors in a period of unprecedented external scrutiny.

This trend has continued into Q3 2016 resulting in an experience loss of $44 million.

Having reviewed experience against long-term trends, AMP has come to the view that the current trends are structural in nature. In response, AMP expects to strengthen best estimate assumptions across both AMP Life and NMLA (including retail and group income protection, claims and lapses)from year end.

As a result, the following underlying profit impacts are anticipated:

  • capitalised losses and other one off experience items in the order of $500 million in FY 16,and
  • reduction in Australian wealth protection profit margins for FY 17 in the order of $65 million.

The anticipated assumption changes will reduce the Australian wealth protection embedded value at FY 16 by approximately $1.0 billion at a 5 per cent discount margin. The reinsurance agreement results in a negligible change in embedded value (prior to any capital release from AMP Life).

Goodwill attributable to the Australian wealth protection business is expected to be fully impairedby $668 million when preparing the 2016 year-end financial statements. This reflects a decline inthe potential recoverable amount for the Australian wealth protection business in line withreductions in embedded value.

The impairment charges will not impact AMP’s FY 16 underlying profit.

Note that all items above are approximate, unaudited and subject to change as full year reporting processes are completed. The Part 9 consolidation of NMLA with AMP Life is on track and will notbe impacted by the assumption changes or goodwill impairment.

Wealth protection experience for Q3 2016

Experience losses for Q3 16 were $44 million compared with experience losses of $42 million in1H 16, reflecting:

  • retail income protection experience losses of $18 million
  • retail lump sum experience losses of $8 million
  • group insurance claims experience losses of $12 million, and
  • lapse experience losses of $6 million.

Q3 16 experience reflected ongoing challenges in the market environment, seasonality of lapsesand lower than expected Group Salary Continuance and income protection terminations.

2H 16 wealth protection experience guidance/

AMP’s Australian wealth protection business continues to operate in a difficult market environment.As a result, if year to date trends continue into Q4 16, in addition to the impacts of potential bestestimate assumption changes, experience losses for the Australian wealth protection business in2H 16 are likely to be in the order of $75 million. However, experience by its nature will be volatile from period to period.

FY 17 wealth protection guidance

FY 17 profit margins for the Australian wealth protection business are expected to be impacted bya combination of strengthened assumptions ($65 million) and execution of the reinsuranceagreement ($25 million). As a result, profit margins in FY 17 are expected to reduce byapproximately $90 million.

Q3 16 Cashflows and AUM update

Australian wealth management net cash outflows were $327 million for the quarter, down from net cashflows of $241 million in Q3 15, driven by the uncertainty in superannuation legislation,advisers adjusting to an enhanced regulatory environment and recent investment market volatility driving weaker inflows in retail products. AMP is optimistic that recent government announcements will reverse the trend in superannuation contributions.

Internal inflows were $4.4 billion in Q3 16 ($4.3 billion in Q3 15) representing 61 per cent(57 per cent in Q3 15) of total cash inflows.

Total AUM was $118.1 billion, up 3 per cent from $115.0 billion at the end of Q2 16 (up 6 per centfrom $111.1 billion at Q3 15). The increase since June 30 reflected positive investment market movements during the quarter. Average AUM increased by 3 per cent to $117.8 billion from Q3 15

AMP’s leading wrap platform North reported net cashflows of $1.1 billion in Q3 16, up 2 per centfrom Q3 15. 49 per cent of North’s net cashflows were externally sourced. North AUM grew to$25.2 billion at the end of the quarter, up 8 per cent from $23.4 billion at the end of Q2 16 and increased by 32 per cent from $19.1 billion at Q3 15.

AMP Flexible Super reported net cash outflows of $83 million in Q3 16, down from net cashflows of$274 million in Q3 15, driven by increasing preference for North by new and existing pension customers and the weaker industry environment. Flexible Super AUM increased by 2 per cent inQ3 16 to $15.7 billion and increased 8 per cent from $14.4 billion at Q3 15.

Corporate superannuation reported net cash outflows of $69 million in Q3 16 down $96 million from Q3 15. The prior period benefited from member transitions from a large mandate win which did not repeat in Q3 16.

External platform net cash outflows were $454 million in Q3 16 compared to net cash outflows of$493 million in Q3 15. This improvement in net outflows was largely the result of lower net cashout flows from advisers who left Genesys offset by lower platform inflows as advisers continue touse North as the preferred platform.

SuperConcepts now supports 54,910 administration and software funds representing 9.5 per centof the market. Growth of 40 per cent in the quarter was driven by the acquisition of additional SMSF software clients as part of the strategic partnership with accounting software provider Reckon, announced in August. Administration funds in the quarter fell 336 to 16,440.Total reported assets under administration grew by $3.9 billion in the quarter to $22.2 billion primarily from a strategic collaboration with a big four accountancy firm.

AMP Capital net cash outflows for Q3 16 were $208 million, comprising external cash inflows of$498 million for the quarter and internal net cash outflows of $706 million.

External flows benefited from strong flows into the China Life AMP Asset Management Company(CLAMP) offset by redemptions from the China Growth Fund and the loss of a $500 million lowmargin passive equities mandate. Overall, external net cashflow performance continues to reflecta shift from lower to higher margin asset classes.

AMP’s share of the CLAMP alliance delivered strong flows of $786 million in the third quarter.This partially reflects timing impacts around money market fund flows, as well as new fundlaunches during the quarter.

AMP Capital AUM at the end of Q3 16 was $162.5 billion, up 1 per cent from $160.4 billion at theend of Q2 16 (and $157.5 billion at Q3 15). Average AUM increased 2 per cent over the quarter to$163.2 billion.

AMP Bank’s loan book increased 3 per cent to $16.6 billion at the end of Q3 16 from $16.0 billion at Q2 16. The deposit book increased $1,116 million (10 per cent) in Q3 16 relative to Q2 16.

AMP New Zealand financial services’ net cashflows of $122 million were $63 million lower than in Q3 15 reflecting lower KiwiSaver flows and a reduction in one off transfers of clients onto NZ financial services platforms. New superannuation cashflow mandates are expected in Q4 16following other providers opting not to enter the updated regulatory regime required by the Financial Markets Conduct Act.

Australian mature

Australian wealth protection annual premium in-force (API) increased 3 per cent in Q3 16 to$1,984 million compared to $1,927 million in Q2 16. The increase in API was primarily driven by a4.6 per cent increase in individual lump sum.

Dividend and capital update

The AMP Limited board will decide on the final 2016 dividend in February 2017, based on the conditions at that time.

Due to the one off and largely non-cash nature of the changes announced today, the Board intends to exclude these impacts on current profits when determining the final 2016 dividend. It will also consider AMP’s enhanced capital strength and future earnings sustainability.

AMP’s policy remains to pay dividends on a payout ratio of 70-90 per cent of underlying profits.

The impact of anticipated best estimate assumption changes will absorb approximately$270 million of regulatory capital. This will be covered from within existing capital surplus and thecapital release expected from the Part 9 life company consolidation which will be in the order of$100 million.

AMP maintains a strong balance sheet and is well capitalised. The proceeds from the reinsurance agreement are anticipated to increase the existing surplus to AMP’s minimum regulatory requirements, which at 30 June 2016 was $1.9 billion. Consequently AMP will consider a range of capital management alternatives including a return of surplus capital to shareholders.

 

One in four Australian workers financially stressed

Financial stress is now a fact of life for more than one in four Australian workers who say they have low confidence in their financial position and find it difficult to make ends meet.

New research, undertaken by AMP for its 2016 Financial Wellness report, revealed Australians’ confidence in their finances continued to decrease in the past two years from 54 per cent of people confident in 2014 compared to 48 per cent in 2016. Lower confidence is despite an increase in disposable cash held by Australians, rising 6.3 per cent over the past two years.

Payment-Pic

Vicki Doyle, Director Corporate Superannuation, AMP commented on the impact of financial stress on individuals in the workplace and business productivity.

“Financial stress is a common occurrence in the Australian workforce, with more than 2.8 million employees, representing one in four workers, under financial stress in 2016.

“People who experience financial stress are more likely to be unable to work due to stressrelated sickness, which can affect their health and morale in addition to lowering workplace productivity – at an estimated cost of $47 billion in lost annual revenue for employers.

“It’s important we find ways to address levels of financial stress in the workplace. We know the real difference financial goals can make in preventing and overcoming financial stress. Australians who have clearly defined goals are much more likely to be financially secure,” she said.

Impact on productivity

The research shows financially stressed employees lose on average 6.9 hours of productive work per week and, on average, are absent 1.3 hours per week due to stress-related sickness.

Financial stress is highest among workers in accommodation and food services, with 35 per cent of people financially stressed. Employees are also at high risk of financial stress in healthcare and social assistance (32%), and administrative services (31%).

“In addition to the personal impact of financial stress, we’re also seeing a significant impact on business owners and operators through lost productivity and employee absenteeism, which is particularly high in the hospitality and healthcare industries,” Ms Doyle said.

Importance of goal setting

While the majority of people, at around 80 per cent of the workforce, already have financial goals in-mind, only 18 per cent of these people have a defined plan to achieve their goals.

“Employers can help their employees to bring clarity and shape to their financial goals by supporting financial wellness in the workplace. If employees have well-defined goals and a plan to achieve them, they are less likely to experience financial stress, helping them to be more productive,” Ms Doyle said.

Additional findings

  • Australians say common triggers for their financial stress are bad debt (50% of stressed workers), the need to save for retirement (35%) and providing for their family (34%). Missing bills and making mortgage repayments also contribute to higher levels of financial stress for 32 and 22 per cent of stressed employees, respectively.
  • Brisbane is the most financially stressed city, with 30 per cent of workers in this region experiencing financial stress. This is followed by Adelaide (25%), Perth (23%), Sydney (20%) and Melbourne (19%). Darwin and Hobart are the least financially stressed at 18 and 16 per cent, respectively.
  • Financial stress is highest in the accommodation and food services industry, with 35 per cent of employees stressed. This is followed by healthcare and social services (32%) and administration and support services (31%). Twenty-six per cent of employees in retail jobs say they are financially stressed.
  • The number of employees experiencing financial stress in the mining industry has significantly increased over the past two years, almost tripling from 9 per cent in 2014 to 26 per cent in 2016.
  • Females are more likely to experience financial stress with 30 per cent stating this is the case, compared to 19 per cent of males.
  • Single-parent families are at higher risk of experiencing financial stress (36%) compared to dual-parent households (21%).
  • Casual workers are more than twice as likely to experience financial stress compared to full-time or part time workers. Fifty-four per cent of casual workers are financially stressed compared to 22 and 27 per cent of full time and part time workers, respectively.
  • Low income is strongly correlated with financial stress with 34 per cent of people earning less than $50,000 p.a. under stress. However, the incidence of financial stress for highincome earners, earning $150,000 and above, is increasing with 16 per cent stating they are under financial stress compared with only 8 per cent in 2014.
  • Retirement is a trigger of financial stress, especially among employees aged 50 years and above. Concerns about retirement is the main cause of financial stress for one in five financially-stressed employees aged 50-59 and almost a third of employees aged 60 or above.

House price crash ‘unlikely’: AMP Capital

Australian house prices are facing a downswing over the next two years, but a crash in prices remains unlikely, according to AMP Capital as reported in InvestorDaily.

RE-Jigsaw

House prices in Sydney and Melbourne have risen by 60 and 40 per cent respectively over the past four years, said AMP Capital chief economist Shane Oliver – and the median house price in Sydney is now 12.2 times household income.

Additionally, Mr Oliver explained that the rise in house prices has “gone hand-in-hand” with increasing levels of household debt, making the debt to income ratio for Australian households one of the biggest among OECD countries.

“The surge in prices and debt has led many to conclude a crash is imminent, but we have heard that lots of times over the last 10-15 years. Several considerations suggest a crash is unlikely,” Mr Oliver commented.

Mr Oliver explained that debt interest payments relative to income are around 2004 levels, and lending standards in Australia have not dropped to levels seen in other countries.

The risk of housing oversupply is also unlikely to cause a price crash, as “this would require the current construction boom to continue for several years”, Mr Oliver said.

Mr Oliver added that the risks on the “supply front” are clearly rising in relation to apartments, where approvals to build additional units are running at more than double normal levels.

Altair Asset Management chief economist Stephen Roberts also cited rising levels of housing inequality in China as a risk factor to Australian house prices, explaining that the Chinese government’s recent focus on excessive house price speculation could have a flow-on effect on Australian prices.

“It is reasonable to assume that policy moves to contain house price inflation in China will increase and will reverberate through to investment demand for housing overseas too,” Mr Roberts said.

Both Mr Oliver and Mr Robertson commented that housing construction is likely to ease in 2017, however Mr Oliver remarked such easing would be unlikely to affect the economy as “this is likely to coincide with a fading in the detraction from growth due to falling mining investment and commodity prices”, where Mr Robertson said otherwise.

“The contribution to economic growth from housing will be less in 2017 than in 2016 and will probably lessen the contribution to growth from housing related consumer spending too,” Mr Robertson said.

“In time, policymakers will respond to the weakening outlook, probably with the RBA resuming its cash interest rate cutting program around the middle of 2017.”

AMP launches new advice business

AMP has launched a contemporary financial advice business, AMP Advice, creating a new customer experience and making goals-based advice more accessible to more Australians. AMP Advice combines interactive technology with personalised advice to help customers explore, plan, track and realise their goals.

RE-Jigsaw

The implementation follows an extensive period of testing and feedback from AMP’s aligned adviser network and customers.

AMP Advice encompasses:

  • AMP Advice branded practices located around Australia where customers can identify their goals using AMP’s new Goals Explorer technology. Working with a Goals Coach they can choose from 29 goals identified by AMP’s research as being most popular for customers or create new goals specific to their circumstances.
  • Access to My Money Style, a unique application customers complete to reveal their behaviours with money and risk appetite.
  • Advice Explorer scenario modelling which customers and advisers use together to develop lifestyle and financial plans targeted at achieving their specific goals.

AMP Group Executive Advice and Banking Rob Caprioli said the purpose of AMP Advice is to make goals-based advice more accessible to the 80 per cent of Australians who don’t currently have a relationship with a financial adviser.

“When delivered well we know face-to-face financial advice improves the lives of our customers.

“We also know the concept of personal goals has long been the foundation of the most effective financial advice. This principle has driven the development of AMP Advice, through which goals frame every aspect of the advice process,” said Mr Caprioli.

AMP research indicates that Australians who have clearly defined goals and a plan to achieve them are under considerably less financial stress.

David Akers has been appointed Managing Director, AMP Advice, reporting to Mr Caprioli. Formerly Director of Future of Advice Business Solutions at AMP, Mr Akers will lead AMP Advice as it expands its national footprint.

There are currently 11 AMP Advice practices located around Australia, with between 20 to 30 expected to be operational before the end of the year.

AMP’s employed adviser licensee, ipac, is currently transitioning to the model, with five locations now operating as AMP Advice.

AMP’s other aligned licensees, Hillross, Charter and AMP Financial Planning will continue to operate under their existing brands and structures.

In announcing AMP Advice, Mr Caprioli reinforced AMP’s commitment to its existing advice network.

“We are continuing to invest in technology and systems which will benefit all our advisers, allowing them to spend more time with more customers.

“We also recognise that to deliver more advice we must operate to the highest standards of professionalism,” said Mr Caprioli. “Ethics, education and high customer service standards will continue to be integral to how we deliver advice.”

In August 2014, AMP announced a series of measures across its advice network to significantly lift the bar on adviser professionalism and reinforce its commitment to stand behind the advice it gives to consumers.

AMP Advice is core to AMP’s strategy to become a more customer focused, goals-based organisation. It will integrate with a range of other AMP goals initiatives planned for release in the second half of 2016. These include the AMP Bett3r Account, which helps customers simplify their finances, a solution to help manage and optimise income through retirement and a holistic insurance offering.