Financial Planning magazine

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Th is issueTop 10 traps of SMSF gearing

Charging for a professional service

Social advice: the new way of doing business

FPA members rally to help disaster victims

FIRE, FLOODS

AND FREE ADVICE

VOLUME 25 | ISSUE 3 | APRIL 2013 | $15.00

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20 Pioneering practiceGreen Associates was one of the fi rst practices to

sign up to the FPA’s Professional Practice program

back in October 2011. A year and a half on, it’s a

decision that has been vindicated, says Craig Green.

JAYSON FORREST reports.

22 Top 10 traps of SMSF gearingAs SMSF trustees become more confi dent with

borrowing for direct property in their portfolios,

PETER TOWNSEND warns against some of the

specifi c gearing traps that trustees and their

advisers need to be aware of.

26 Facing up to the competitionIt’s becoming a very crowded market for fi nancial

planers as new third-party entrants, like Wesfarmers

and Virgin, eye off the wealth management industry.

But, as JANINE MACE writes, planners are well

placed to deal with this new world of contraction

and competition.

30 Charging for a professional serviceBULLETPROOF FINANCIAL PLANNING: DANTE

DE GORI and JOHN BACON discuss some of the

practical issues of Opt-in, including obviating the need

for Opt-in, and the annual Fee Disclosure Statement.

36 Fire, fl oods and free adviceThe recent onslaught of natural disasters has left

many Australians with nothing more than the clothes

on their backs as they begin to pick up the pieces.

And yet, fi nancial planners are in a unique position

to help them via the FPA Pro Bono Service, as

CAROLINE MUNRO discovered when talking to

three practitioner members.

42 Social adviceAs BAZ GARDNER writes, social advice is about a

new way of doing business, where planners shift

perspective, remove artifi cial constraints that are

out-dated, and truly innovate the ways in which they

manage relationships with their clients.

Regulars4 CEO Message

6 News

8 Opinion

13 New CFP® Professionals

16 CFP® Practitioner Strategy

41 Centrelink

44 Chapter Event Review

46 Event Calendar

47 Directory

EDITOR Jayson Forrest

Locked Bag 2999, Chatswood NSW 2067

Phone: (02) 9422 2906 Facsimile: (02) 9422 2822

[email protected]

EDITORIAL DIRECTOR Emma Hodgkinson

Phone: (02) 9220 4517

[email protected]

PUBLISHER Zeina Khodr

Phone: (02) 9422 2198 Facsimile: (02) 9422 2822

[email protected]

ADVERTISING Jimmy Gupta

Phone: (02) 9422 2850 Mobile: 0421 422 722

[email protected]

ADVERTISING Peter Kalantzis

Phone: (02) 9422 2695 Mobile: 0416 815 429

[email protected]

© Financial Planning Association of Australia

Limited. All material published in Financial Planning

is copyright. Reproduction in whole or part is

prohibited without the written permission of the

FPA Chief Executive Offi cer. Applications to use

material should be made in writing and sent to

the Chief Executive Offi cer at the above e-mail

address. Material published in Financial Planning is

of a general nature only and is not intended to be

comprehensive nor does it constitute advice. The

material should not be relied on without seeking

independent professional advice and the Financial

Planning Association of Australia Limited is not

liable for any loss suffered in connection with

the use of such material. Any views expressed in

this publication are those of the individual author,

except where they are specifi cally stated to be

the views of the FPA. All advertising is sourced

by Reed Business Information. The FPA does not

endorse any products or services advertised in the

magazine. References or web links to products or

services do not constitute endorsement. Supplied

images © 2013 Shutterstock. ISNN 1033-0046

Financial Planning is published by Reed Business

Information Pty Ltd on behalf of the Financial

Planning Association of Australia Limited.

, CFP® and CERTIFIED FINANCIAL PLANNER®

are certifi cation marks owned outside the U.S. by

the Financial Planning Standards Board Ltd. The

Financial Planning Association of Australia Limited

is the mark’s licensing authority for the CFP marks

in Australia, through agreement with the FPSB.

20

3036

Financial Planning is the offi cial publication of the Financial Planning Association of Australia Limited (ABN 62 054 174 453)

Web: www.fpa.asn.au | E-mail [email protected] | Level 4,75 Castlereagh Street, Sydney NSW 200 | Phone (02) 9220 4500 | Facsimile: (02) 9220 4580

Average Net DistributionPeriod ending Mar’1210,519

Features April 2013

www.fi nancialplanningmagazine.com.au | FINANCIAL PLANNING | APRIL 2013 | 3

CEO MESSAGE

Since the start of my term back in July 2010, I have

been committed to realising the FPA’s mission and

implement a three-year strategy to transform the

FPA from an industry body to the fi rst professional

association for individual fi nancial planning

practitioners in Australia. I am delighted to have

the opportunity to see through many other exciting

initiatives that continue to bubble away.

EnshrinementEnshrinement of the term ‘Financial Planner’

remains a high priority on the FPA agenda. At

the time of print, it was very likely that the topic

of enshrinement would be tabled for discussion

by Parliament in late March. This date marks

the conclusion of many months of hard work

and campaigning on behalf of FPA members

and consumers. If the legislation is passed, we

will have reached a critical milestone in helping

Australians fi nd the right advice and helping

professional fi nancial planners gain the recognition

they deserve. You’ll fi nd all you need to know on

the latest policy updates through FPA Alerts, your

weekly FPA Express and on our website.

Strength in numbersI was thrilled to hear that the number of CFP®

professionals worldwide recently reached 150,000,

refl ecting a growing commitment to best practice

that goes far beyond Australia. CFP® certifi cation

continues to be the pre-eminent designation in

fi nancial planning and the FPA is proud to be a

leading member of the global Financial Planning

Standards Board.

On home turf, this commitment continues to be

demonstrated by our own fi nancial planners. CFP®

certifi cation enrolments have increased by 42 per

cent on last year and we have already welcomed

on board over 1,000 new FPA members since July.

As you already know, fi nancial planners will not be

able to join the FPA as a new practitioner member

without an approved degree from 1 July this year.

As the deadline draws closer, we will be making a

lot of noise about this date to the fi nancial planning

community, reinforcing this message to those who

have not yet joined the FPA. We have commenced

an intensive campaign and you will see one of our

fi rst advertisements within this April edition.

This does not affect existing practitioner members,

however, if you have any colleagues who are

licensed fi nancial planners and do not hold an

approved degree, encourage them to sign up and

become part of a growing FPA community, before

it’s too late.

Bulletproof RoadshowsContinuing our support for members in the

transition to FoFA compliance, the FPA will run

Bulletproof Financial Planning workshops for every

Chapter throughout April, May and June this year.

This is a great opportunity to put your own

questions to members of the FPA Executive Team

on the rapidly changing FoFA legislation and

what you need to do to be ready for 1 July 2013.

During the session, you will be taken through the

Bulletproof Financial Planning Toolkit that contains

various tools and resources developed especially to

help you prepare for the post-FoFA environment.

Those who attend will benefi t from 1 CPD point

and receive a copy of our ‘Guide to Bulletproof

Financial Planning’, a collection of easy reference

guides that clearly map out the key elements of the

FoFA reforms and the professional obligations of

FPA members.

Your invitation to the Bulletproof Roadshow will

arrive in your inbox shortly, so make sure you look

out for it. In the meantime, save the date of your

local Chapter session (see page 46 of this issue).

Further details can be found on our website.

FPA Professionals CongressThe 2013 FPA Professionals Congress Committee

is busy preparing a program that will delight and

excite you and your fellow colleagues. On October

16, 17 and 18, our newly revised and revamped

annual event will bring together our professional

community to enjoy high quality technical content,

best practice strategies and of course, networking

opportunities.

This annual FPA gathering will continue to be the

must-attend gathering of the professional fi nancial

planning community in Australia. Registration

details will be sent to you later this year, but make

sure you pencil the date in your diary now.

My team and I maintain that there is never a dull

moment at the FPA. An extended term as CEO

marks the beginning of new goals, new milestones

and new campaigns for the benefi t of the

Australian public and on behalf of FPA members.

Make sure you stay tuned.

Mark Rantall CFP®

Chief Executive Offi cer

ALWAYS ONWARDS, ALWAYS UPWARDSI was honoured to accept an invitation to extend my term as CEO of the Financial Planning Association last month.

4 | FINANCIAL PLANNING | APRIL 2013 | www. fi nancialplanningmagazine.com.au

–– “An extended term as CEO marks the beginning of new

goals, new milestones and new campaigns for the benefi t of the

Australian public and on behalf of FPA members.”

We see it as your clients do; as money made or lost.

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Some measure their performance by relative returns.

Sydney-based practice Quantum Financial has

been nominated by the NSW Business Chamber

as the Australian nominee for the prestigious 2013

International Business for Peace Award.

The Business for Peace Foundation, based in

the Norwegian capital city of Oslo, presents

this award to “inspirational business leaders

who are identifi ed by the global networks of the

International Chamber of Commerce and the

United Nations Development program”.

An independent jury will choose seven honourees

from 90 nominated companies based in one of

60 countries. The jury includes two Nobel prize

winners – Muhammad Yunus (whose Grameen

Bank pioneered micro-lending worldwide)

and Michael Spence (Professor Emeritus of

Management at Stanford University’s Graduate

School of Business).

Quantum Financial’s nomination for this

prestigious international award follows its

success late last year, when it took out two of

the five 2012 NSW Business Chamber Awards

for businesses across the North Eastern Region

of Sydney. The financial planning practice was

awarded winner of the ‘Excellence in Business

Ethics Award’, while brother and sister, Claire

Mackay CFP® and Tim Mackay CFP®, were the

first ever joint winners of the ‘Business Leader

Award’.

The 2013 International Business for Peace Award

will be announced on 14 May, 2013.

The industry’s newest association, the SMSF

Owners’ Alliance (SMSFOA), has joined

other aligned associations to call on the

Government and Coalition to rule out further

taxation of super in the upcoming Budget.

Speaking to Financial Planning magazine,

SMSFOA executive director Duncan Fairweather

said that speculation about another tax raid

by the Government on superannuation in the

Budget has caused much apprehension among

Australians that the rules will be changed yet

again and their savings will be reduced by tax,

meaning they will have less to retire on than they

had planned.

“The Government should not be raiding the

nation’s savings to fi x its budget problem,”

Fairweather said. “Over spending is the real

cause of the Government’s problem. It is

raising more revenue than any government

before it, but it is also spending more. In the

past fi ve years, tax revenues have gone up 40

per cent but spending has risen even faster at

46 per cent.

It’s a view supported by Financial Services

Council (FSC) chief executive offi cer John

Brogden, who says that over the four year

Budget estimates period, the cost to revenue

of increasing the superannuation guarantee

from 9 to 12 per cent and the Low Income

Superannuation Contribution Scheme

amount to $2.4 billion. However, the negative

impact of combined tax and other changes is

$7.8 billion – a net reduction in concessions

of $5.4 billion.

“Super fund members have had enough. They

are sick and tired of constant changes and want

certainty,” Brogden said. “We have reached

a point where we can no longer stand on the

sidelines and allow further erosion of super.”

In its pre Budget submission, the SMSFOA

has called on the Government for higher and

more fl exible contribution caps.

“Australians with broken employment

patterns, including many women, the self-

employed, people unemployed through

structural change and those individuals

nearing retirement are disadvantaged by a

fi xed annual cap,” Fairweather said.

“For such groups, income can vary

dramatically year-by-year or through their

working life and they are thus discriminated

against under current contribution ‘cap’

policies. The SMSFOA is calling on the

Government to show greater contribution

fl exibility to these groups and provide

incentives for, and not restricting, such

groups to save for their retirement and

thus not become a cost burden on the

Government.”

ASIC has reconfi rmed its stance

against churning in life/risk insurance,

saying the issue is a focus for the

regulator. Speaking at a recent industry

function, ASIC commissioner Peter

Kell said there were still too many bad

practices regarding churn and warned

that if the industry didn’t think it was a

problem, it should think again.

Kell was supportive of the industry

adopting a self-regulatory approach to the issue, but was

disappointed the Financial Services Council’s (FSC) call for

tackling the issue had not progressed. He said ASIC had identifi ed

signifi cant amounts of inappropriate advice, including cases of life

policies being replaced for no valid reason, policies being replaced

with more expensive polices, instances of clients’ personal

circumstances not being taken into account, and fraudulent

statements. Kell did not provide specifi c examples.

Speaking at the same event, FSC chief executive offi cer John

Brogden was scathing in his assessment of the FoFA deadline,

saying the 1 July implementation date was a “level of indecent

hast” imposed on the industry by the Government.

Brogden said the speed in which the Government is trying to

implement FoFA was a clear indication that it wanted the reforms

in place in case it loses the upcoming federal election. “The

Government has put in place a level of panic within the industry,”

Brogden said.

He was also critical of scaled advice, saying it was one area of the

FoFA reforms that remained contentious. “Scaled advice will leave

planners unprotected and vulnerable to criticism and prosecution

down the track.”

Quantum nominated for International award

Call to defend superChurn on the radar

NEWS


Nominees: Claire and Tim Mackay.

Peter Kell, ASIC.

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a s e

One, three, fi ve, seven and tentrick pony.

Past performance is not a reliable indicator of future performance.This document was issued by FIL Responsible Entity (Australia) Limited ABN 33 148 059 009 AFSL No. 409340 (“Fidelity Australia”). Fidelity Australia is a member of the FIL Limited group of companies commonly known as FidelityWorldwide Investment. You should consider whether this product is appropriate for you. You should consider the Product Disclosure Statements (“PDS”) for Fidelity products before making a decision whether to acquire or hold theproduct. The relevant PDS can be obtained by contacting Fidelity Australia on 1800 119 270 or by downloading from our website at www.fi delity.com.au. This document may not be reproduced or transmitted without the prior writtenpermission of Fidelity Australia. The issuer of Fidelity’s managed investment schemes is FIL Responsible Entity (Australia) Limited ABN 33 148 059 009. *Source: Mercer Investment Performance Survey of Wholesale-Equity-Global-Large Cap (Core) ending December 2012 . Quartile rankings/returns after fees. This is a survey of funds available to retail (non institutional) investors. The Fidelity Australian Equity Fund’s relative performance / ranking may change if compared to a diff erent universe. **Global market coverage data is based on FIL Limited coverage of the MSCI World Index as at 31 December 2012. Fidelity, Fidelity Worldwide Investment, and the Fidelity Worldwide Investmentlogo and F symbol are trademarks of FIL Limited. © 2013 FIL Responsible Entity (Australia) Limited.


Do you and your clients perceive a diff erence between the terms ‘fi nancial planner’ and ‘fi nancial adviser’? If so, what is it and what term do you use to describe yourself?

WHAT’S IN A NAME?Q

OPINION

Want to have your say? Join the debate at www.fpa.asn.au/linkedin

What’s in a name? Although the dictionary has a

slightly different defi nition for the word lawyer and the

word solicitor, as a member of the general public, I

use the word interchangeably. In my eyes both words

describe the same profession. There might be a subtle

difference according to the legal profession but if there

is, it isn’t discernible amongst the general public.

On the other hand, there is a distinct difference

between a lawyer/solicitor and a barrister. The latter

is someone who is qualifi ed as a lawyer but who

generally spends all their time in court or working on

cases that may get to court for a hearing.

In an article by the FPA’s Dante De Gori, he argued

that in his eyes there was a difference between the

term ‘Financial Planner’ – someone who plans for the

future, and ‘Financial Adviser’ – a person who purely

advises (on the current) to paraphrase him. On the

other hand, others in the article argued there really

wasn’t any difference.

It was interesting during the height of the GFC and

the scandals surrounding Storm, Timbercorp and

Great Southern and so on, I met a former Chair of

the FPA at an FPA function. He told me that many

advisers he knew were staying away from both names

(Financial Planner/Financial Adviser) and instead

coming up with words such as Wealth Adviser, so as

to avoid the taint these titles were giving everyone in

the profession!

I call myself a CERTIFIED FINANCIAL PLANNER®

because I have the qualifi cation. However, I’m not

sure whether my title means much to the average

person. All they know is I help people with their

money and investments. In my more than 15 years as

an adviser, no one has ever asked me about my title

and variations on it. There is only one person I know

in 1998 who rang the FPA to check to see if I was a

member. Albeit nowadays, Google searches of my

name would be common.

In a nutshell, I don’t think clients perceive any

difference between the two terms. Ultimately, it’s

client perceptions rightly or wrongly that count.

Perception is reality until reality is changed!

When asked about my occupation at barbeques and the like, I describe myself as ‘having a

financial planning business’, and being a CERTIFIED FINANCIAL PLANNER®.

I’m hopeful the majority of my clients could articulate a difference between a

planner and an adviser, but I’m far less confi dent about the general public. I

fear the man or woman in the street would put everyone in our industry into the

same bucket, and that is a symptom of a problem in our fl edgling profession the

world over. Unfortunately, consumers are still learning to discern who is acting

professionally and in a client’s best interest, and who might be just fl ogging a

fashionable investment opportunity.

I spent the fi rst year or two of my 20 years in this industry as a life insurance

salesman. Deserved or otherwise, we had the same poor value, untrustworthy,

high-pressure sales reputation of the used car salesman, and were even derided

in popular culture – the oft-punched Ned Ryerson in Groundhog Day being just

one example. In practice, few actually used that salesman title, save for the odd

battered and bruised ‘lifey’ who liked to say ‘that’s what I am, and I’m proud to say

it’. I doubt even they actually introduced themselves that way at dinner parties.

The legacy here is not, in many ways, a good one. Before ‘lifeys’ abuse or troll

me, let me say that providing widows with cheques is a laudable cause, and

I’ve done plenty of it too, but it should be done as a high-value professional

practitioner and not as a Ned Ryerson. Don’t pine too much for the shoulder-

padded ’80s – there was a lot not to like.

Names do matter. Our two professional bodies – the AFA (Association of

Financial Advisers) and the FPA (Financial Planning Association) exemplify this.

Not just in the use of the planner versus the adviser nomenclature, but in the use

of the noun rather than the verb.

Let me explain. One acts primarily for its ‘advisers’, like a union acts for its

members, and the other also genuinely acts for the public interest – for fi nancial

planning rather than for fi nancial planners. Note, the Australian Medical

Association’s work and raison d’être includes improving public health. Take note,

they didn’t run with the Australian Medico’s Association.

Every practicing fi nancial planner provides advice, but not all advisers actually

do fi nancial planning. Within fi nancial services, ‘adviser’ is a more generic term,

and in our profession it implies simpler investment or life risk advice rather than

professional holistic fi nancial planning.

And by the way, and at the risk of being thought of as a complete pedant, I prefer

the ‘adviser’ spelling rather than the Americanised ‘advisor’!

Daryl La’Brooy CFP®

Financial Adviser, Hillross Financial Services

Licensee: Hillross Financial Services

Greg Cook CFP®

Managing Director, Eureka Financial Group

Licensee: Financial Wisdom

Consistency isn’t about luck; it’s about having a competitive advantage. Our portfolio managers have access to one of the best research capabilities in the world. This rich, shared insight gives us greater potential to identify opportunities and better understand risks.

Past performance is not a reliable indicator of future performance.This document was issued by FIL Responsible Entity (Australia) Limited ABN 33 148 059 009 AFSL No. 409340 (“Fidelity Australia”). Fidelity Australia is a member of the FIL Limited group of companies commonly known as FidelityWorldwide Investment. You should consider whether this product is appropriate for you. You should consider the Product Disclosure Statements (“PDS”) for Fidelity products before making a decision whether to acquire or hold the product. The relevant PDS can be obtained by contacting Fidelity Australia on 1800 119 270 or by downloading from our website at www.fi delity.com.au. This document may not be reproduced or transmitted without the priorwritten permission of Fidelity Australia. The issuer of Fidelity’s managed investment schemes is FIL Responsible Entity (Australia) Limited ABN 33 148 059 009. *Source: Mercer Investment Performance Survey of Wholesale-Equity-Australia-All Cap (Core) ending December 2012. Quartile rankings/returns after fees. This is a survey of funds available to retail (non institutional) investors. The Fidelity Australian Equity Fund’s relative performance / ranking maychange if compared to a diff erent universe. **Global market coverage data is based on FIL Limited coverage of the MSCI World Index as at 31 December 2012. Fidelity, Fidelity Worldwide Investment, and the Fidelity WorldwideInvestment logo and F symbol are trademarks of FIL Limited. © 2013 FIL Responsible Entity (Australia) Limited.

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OPINION

Clients are rather confused, as the two terms have not been highly

differentiated until fairly recently and for some, the term ‘fi nancial planner’ is

perceived as a relatively new description. However, over the last few years, the

term ‘fi nancial planner’ has emerged as less solely investment focused and

more holistic.

In people’s minds, the English language meanings might infer that the term

‘planner’ is a long-term, strategic relationship, whereas ‘adviser’ can be for ad hoc,

as well as longer term advice.

Therefore, the strict meaning of the words do create some problems, as some

members of the public steer away from fi nancial planners, believing they are only

relevant to higher-net-worth or more complicated fi nancial situations.

To further confuse the situation, the Future of Financial Advice reforms are focused

on fi nancial planners and yet the subject matter is fi nancial advice. One has to ask

how people cannot be confused between the terms ‘planning’ and ‘advice’, when it

comes to fi nances!

For this reason, it has been more the gradual acknowledgement of the profession

of fi nancial planning as a specifi c skill set, not linked to a particular fi nancial

product, that has enabled a defi nition to form in the minds of the public and within

the industry.

Due to being a CFP® practitioner, I am always very careful to ensure that I refer to

myself as a ‘fi nancial planner’ as opposed to a ‘fi nancial adviser’. The reasoning is that

if all qualifi ed fi nancial planners do this, the term will gain wider understanding and

acceptance as a mark of quality within the broader defi nition of fi nancial advisers.

This is why there needs to be a professional standard and defi nition enshrined

in law.

In my view, the broader Australian public uses

the terms interchangeably and makes no real

distinction between the terms ‘fi nancial planner’

and ‘fi nancial adviser’. This is unfortunate for

the majority within the profession, as it means

that everyone in the industry is impacted by any

negative press. As the profession develops and

the public increasingly recognises the need for

fi nancial advice, this will change going forward.

In my view, the differences are signifi cant and

for some people a fi nancial adviser is suitable,

whereas for others a fi nancial planner may be

more appropriate. It really depends on what the

needs of the client are.

I see that a fi nancial adviser‘s primary role is

to assist with one specifi c aspect of a client’s

needs (like investment, superannuation

or insurance), whereas a fi nancial planner

adopts a more holistic view of a client’s overall

situation, focusing on the bigger picture.

However, for the average Australian, these

differences are irrelevant and as an industry,

we can waste a lot of unnecessary energy on

this distinction.

A bigger concern in my view is that there are

a number of others who can call themselves a

‘fi nancial planner’ including:

• product sales representatives;

• life insurance brokers;

• stock brokers;

• general insurance brokers;

• mortgage brokers;

• real estate agents;

• fi nancial information service (FIS) offi cers;

• fi nancial counsellors;

• bank tellers;

• accountants;

• lawyers;

• paraplanners;

• business development managers (BDMs);

• client service representatives;

• tax agents;

• property developers; and

• auditors (especially those who deal with SMSFs).

It’s a bigger concern for the industry that so

many people are able to call themselves a

fi nancial planner, which can potentially muddy

the waters for us all.

If we look at other professions, the description

is a lot narrower which is why it becomes

an exclusive and highly regarded term. For

example, there are restrictions on who can call

themselves a lawyer or a doctor. However, when

you consider who can be a fi nancial planner, the

list is very broad.

Anna-Louise Brown CFP®

Authorised Representative, eWealthBuild

Licensee: Madison Financial Group

Charles Badenach CFP®

Private Client Adviser and Principal, Shadforth Financial Group

Licensee: Shadforth Financial Group

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OPINION

Based upon media and client usage, the terms ‘financial planner’ and

‘financial adviser’ are generally considered to be interchangeable in

the general community. Defining these two terms has become a topic

of conversation, if not contention, amongst some in the financial world

because it is proposed (as of the date of writing) that both terms be

enshrined in legislation as protected terms that cannot be used by just

anyone.

The proposed legislation would only allow those with appropriate licensing

under the financial services laws to use those terms or similar.

Whilst the terms also have mixed usage in financial circles, ‘financial

planner’ it seems to me implies something more than ‘financial adviser’.

The term indicates that a strategic approach will be taken in regard to any

advice provided.

‘Financial adviser’ on the other hand tends to imply that a more product-

focused approach might be taken. A clear example would be someone

providing only a stock broking service who in my view would be a financial

adviser rather than a financial planner.

One thing I am certain about, all parties in financial services are heartily

fed up with media reports regarding aggrieved clients who have fallen

victim to poor practices by unlicensed participants in our field, especially

when people who are not even licensed hold themselves out to be

financial planners or financial advisers.

It is understandable that consumers may be uncertain of what these

terms might mean but have a right to at least be certain that those

describing themselves as providers of financial advice meet the barest

minimum standard set by the law – i.e. be licensed appropriately.

Assuming legislation is passed, consumers dealing with persons using

those terms would then have at least some legally mandated protection

from those who hold themselves out to be something they are not. It

seems inconceivable that we can continue to allow those who are not

licensed to use the term financial planner or financial adviser.

Peter O’Toole is also a Director of the Financial Planning Association.

Peter O’Toole CFP®

Principal Adviser, Portfolio and Wealth Management

Licensee: Godfrey Pembroke

–– Defi ning these two terms has become a topic of conversation, if not contention, amongst some in

the fi nancial world because it is proposed (as of the date of writing) that both terms be enshrined in

legislation as protected terms that cannot be used by just anyone.

1. What excites you most about being a CFP® professional?

I was excited to achieve my CFP® designation because it

represented achieving the highest professional designation as a

fi nancial planner, which has been an important goal for me in my

career to date.

Being a CFP® practitioner also distinguishes me apart from other

fi nancial planners in the industry and helps me to become part

of an elite group of practitioners within our industry. I am also

very proud to share with my clients my CFP® certifi cation status,

as another way to demonstrate how committed I am to my

ongoing training and professional development.

2. As a CFP® practitioner, what do you consider to be the three

biggest issues facing you this year?

What I consider to be three of the biggest issues facing the

industry also represent some of the greatest opportunities for

practitioners, such as myself, to seize this year.

Firstly, FoFA certainly represents signifi cant reform in the

industry. While some practices will be overwhelmed by these

reforms, other practices have been well ahead of the game in

terms of already applying the key principals in the every day

course of business. For these businesses, being FoFA-ready can

really distinguish their reputation in the industry and may serve

as a way to attract and retain key talent to their business.

The second important issue relates to effectively communicating

and engaging with clients. I believe that fi nancial planners will

need to continually work on their value-proposition and the way

this is delivered to their clients, especially in light of some of the

FoFA reforms. The difference between a successful planner

and someone who achieves mediocre results lies with the way

the fi nancial planner is able to articulate their value proposition

and more importantly, have the support and resources to follow

through with their commitments to their clients. Where a fi nancial

planner can clearly demonstrate the value they bring to the client

relationship, clients will continue to pay for fi nancial advice, year

after year.

Lastly, the fi nal key issue and priority for me this year relates to

refi ning my client base and taking measures towards working

almost exclusively with my ideal client type. I have realised that

while I can help a large range of clients, there is a segment in

particular that I really enjoy working with and with whom I have

successful, quality relationships with. Therefore, to help foster

the right kinds of referrals from these clients, I am again focused

on refi ning my ‘emotional intelligence’ skills. If I can really

get this skill set right and continue to use and develop it, the

opportunities will be abundant.

3. What can the FPA do to help you as a CFP® practitioner?

I believe that the FPA needs to continue to promote and

encourage practitioners to enroll in the program. In addition, the

FPA also needs to maintain focus on what the CFP® designation

represents to the consumer. As the FPA represents our collective

voice and the industry, it’s important that campaigns to the

consumer are kept front of mind.

4. How did you fi nd the four ‘Es’ to CFP® certifi cation (ethics,

education, examination and experience)?

I found the ethics and experience the easy part of the program.

As I have been a practising fi nancial planner for a number of

years now, these elements were familiar to me and I could draw

from my past experiences.

However, the most challenging part was certainly the education

and examination component. The time required to complete my

CFP® certifi cation was signifi cant and juggling this commitment

with my full-time role was very challenging. On refl ection, I realise

there never will be a good time to study, so I am glad that I

persevered and have now completed this designation.

5. What advice do you have for anybody starting out with their

CFP® certifi cation studies?

For those undertaking their CFP® certifi cation studies, I’d

recommend they allow themselves plenty of time to work

through the modules and complete the assignments. Don’t

underestimate the time needed to dedicate to this study.

I’d also encourage all students to use the online portal and the

subject experts, as they are excellent resources. I also found that

the ability to post questions on the portal and chat with fellow

students was very helpful and insightful.

EMOTIONAL INTELLIGENCE

Name: Georgia Tucci CFP®

Position: Financial planner and team leader of Mercer’s Adelaide fi nancial advice team

Educational Qualifi cations: BAppFin, ADFS

Practice: Mercer Financial Advice, Adelaide

Licensee: Mercer Financial Advice (Australia)

CFP Designation: September 2012

Years as a Financial Planner: 6 years

ACTScott Malcolm CFP®

Money Mechanics

NSWPawan Luthra CFP®

Wealth Creation Advisers

William Cummins CFP®

NAB Financial Planning

Jack Tideswell CFP®

Exceptional Financial Planning

QLDDeborah Donoghue CFP®

National Australia Bank

Guy David Taylor CFP®

BDO Private Wealth Advisers

SASamuel Garreffa CFP®

Prescott Securities

Alex Butler CFP®

Prescott Securities

VICPatrick Barry CFP®

Partners Group

WAMichael Carmody CFP®

Byfi elds Financial Planning

Robert Frogley CFP® AEPS®

Strategic Wealth Solutions

John Hollyman CFP AEPS®

Rosenfeld, Kant & Co

Rod Cobain CFP AEPS®

WHK Melbourne

Kathryn Haas CFP AEPS®

RBA Financial Group

Douglas Tarrant CFP AEPS®

Level One Financial Planning

The FPA congratulates

the following members

who have been admitted

as CERTIFIED FINANCIAL

PLANNER® practitioners

and who have recently

achieved the AEPS®

Accredited Estate Planning

Strategist designation.

AEPS Practitioners

Th ere is a particular client segment that Georgia Tucci enjoys working with, and it’s this segment she hopes to focus on by fostering the right kinds of client referrals.


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Scenario• The client, Jack (not his real name), suffered severe

injuries from a motor vehicle accident when he was

eight-years-old.

• As a result of the accident, Jack continues to

experience a number of symptoms that interfere with

daily living activities.

• Jack received a compensation settlement of $4

million.

• Jack is 20-years-old.

Th e clientThe client’s lawyer contacted me whilst Jack’s damages

claim was being negotiated, and I was able to work

through with both Jack’s lawyer and his parents to

model the future cash fl ows for him. This assisted

Jack’s lawyers in negotiating a sustainable long-term

settlement sum for him.

As a result, Jack received compensation from the

accident in the form of a monetary settlement of

approximately $4 million. Jack is now 20 years of age

and still suffers from the effects of the motor vehicle

accident, and is still receiving intensive medical

treatment.

The default position was that the money was managed

by the State Government controlled Public Trustee, so

the fi rst step in the process was to make an application

to the Guardianship and Administration Board seeking

an order that would allow his parents to manage this

money on Jack’s behalf.


For Tasmanian planner Charles Badenach, considering an appropriate strategy for one of his clients suff ering severe injuries sustained from a motor vehicle accident, meant thinking outside the box.

AN UNUSUAL SITUATION

CFP PRACTITIONER

Name: Charles Badenach CFP®

Title: Principal and Private Client

Adviser

Practice: Shadforth Financial Group

Licensee: Shadforth Financial Group

Continued on p18

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To achieve this, I:

• prepared the documentation for the Guardianship

and Administration Board hearing. This involved

making submissions (both written and oral) before

the hearing and addressing the Board on why the

parents were suitable administrators; and

• adhered to the ongoing reporting requirements

outlined by Section 63 of the Guardian and

Administration Act 1995.

After the hearing, Jack’s parents were appointed

as administrators of their son’s affairs for a period

of three years subject to a number of stringent

conditions, including the appointment of myself to

assist in managing the monies.

Th e strategyIn considering the strategy for Jack, this was quite

an unusual situation in that given the signifi cance

of the injuries, superannuation was not an option

under the personal injuries provision. Payments

arising from personal injuries can be contributed

to superannuation and are excluded from the

non concessional cap. However, to enable the

exclusion to apply, it was necessary for me to

satisfy a number of steps in relation to the type and

administration of the payment.

The requirements are set out in Section 292-95

of the Income Tax Assessment Act 1997 for this

strategy.

It was also important to note that as the claim was

for both compensation for personal injury and for

other remedies (such as administration costs etc),

only the amount of the payment that related to

compensation or damages for the personal injury

and identifi ed in the court order as such, could be

contributed.

However, given the signifi cance of any potential

error with the contribution caps, I worked with the

lawyers to ensure that Jack met the requirements of

Section 292-95 of the Income Tax Assessment Act 1997 as follows:

1. As the contribution must be made within 90 days

of the later of the following:

a. The day on which the client received the

personal injury payment.

b. The day on which the agreement for settlement

of the personal injury payment was entered into.

c. The day on which the court order for the

personal injury payment was made.

In this instance, the court order was made in

December, the money paid in February but the

Guardianship and Administration Board hearing was

not until March. So to avoid any potential issue, I

obtained a legal opinion confi rming that the 90 day

period ran from 31 March 2012.

2. With regard to the breakdown of the payment, a

letter of advice was received from the lawyers acting

for Jack confi rming the breakdown of the payments.

In order to further protect Jack from an unlikely

contributions cap, the monies were deposited to

superannuation as follows:

• Personal injury sum $3.4 million.

• Non concessional contributions:

– $150,000 before 30 June 2012.

– $450,000 in July 2012.

By making the non concessional contributions over

two fi nancial years, I was able to bring forward the

averaging provision.

Given Jack’s medical condition, he was able to

obtain two reports from medical practitioners

confi rming that “because of the personal injury,

it is unlikely that Jack can be gainfully employed

in a capacity for which he is reasonably qualifi ed

because of education, experience or training”.

By meeting a condition of release once the funds

were contributed to superannuation, he was able to

access these monies. A regular income stream was

set up in the form of an account-based pension to

meet Jack’s income needs. This money was paid to

Jack as a tax-free income stream.

The account-based pension was paid into a cash

management account in Jack’s name and from

this account a regular weekly allowance was paid.

Any large lump sum medical bills were paid from

the cash management account held outside of

superannuation. This had the added advantage

of providing a consolidated record of Jack’s

expenditure, which could then be forwarded to

the Guardianship and Administration Board in

accordance with the regular reporting requirements.

Benefi ts of the adviceThis strategy allowed Jack to:

1. Receive a regular and sustainable income stream

from the superannuation environment as a ‘tax-free’

pension;

2. Minimise the amount of tax which he paid by

using the most tax effective structure available to

Jack;

3. Have his parents control the compensation

monies by replacing the Public Trustee. This

signifi cantly reduced the fees payable by Jack and

allowed the asset allocation to be tailored to suit

Jack’s unique personal situation. The default asset

allocation provided by the Public Trustee’s managed

fund was an issue that seriously concerned Jack’s

parents.

4. Diversifi ed the asset base and provide the

opportunity to invest in direct property and other

assets that were not available under the default

position.

5. Have access to a cash management account

outside of superannuation which provided

a consolidated record of Jack’s expenditure

requirements. This was administratively simple

and also met the requirements as required by the

Guardianship and Administration Board.

Charles Badenach CFP® was the Tasmanian state runner-up in the 2012 CFP® Professional Best Practice Awards.

CFP® practitioners make positive and discernable

differences to the lives of their clients every day.

Please share your stories and strategies you think

have made a positive difference to the lives of

your clients. Please send your details to

editor@fi nancialplanningmagazine.com.au or

phone (02) 9422 2906.

Share your strategies

CFP PRACTITIONER

–– In considering the strategy for Jack, this was quite an unusual situation in that given the signifi cance of the injuries, superannuation was not an option under the personal injuries provision.

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a member.degree to becomeyou’ll need an approved

After june 2013

PROFESSIONAL PRACTICE

Canberra-based fi nancial planning practice Green

Associates was one of the fi rst practices to sign up

to the FPA’s Professional Practice program back in

October 2011. A year and a half on, it’s a decision

that has been well vindicated.

“The Professional Practice program sets an industry

benchmark for providing high-quality fi nancial

advice,” says Green Associates chief executive

offi cer Craig Green CFP®. “The certifi cation is

supported by industry qualifi cations, demonstrated

best practice business operations, and proven

success in meeting the fi nancial planning needs of

clients.”

Craig Green’s enthusiasm for fi nancial planning

is infectious and it’s hard not to be swayed by

his vision for a universally recognised profession

that is respected and credible. He fi rmly believes

that can be achieved by, amongst other things,

complying with the Professional Practice’s

program.

“With the credibility of the profession having

been eroded in recent years, what will really help

the profession regain that credibility are fi nancial

planners themselves, and the good work they do

for their clients,” Green says.

“Shared professional standards and benchmarks

that are strived for and recognised by other

planners and related industries will help planners

rebuild that credibility. The Professional Practice

brand is that benchmark.”

CriteriaWhen talking about a ‘benchmark’, Green refers

to the three criteria for becoming a Professional

Practice, which include a commitment to higher

and ongoing education standards. He speaks of

the requirement that 75 per cent of planners in a

practice are registered as FPA members, with 50

per cent of the practice’s planners being CFP®

practitioners or in the process of achieving the

CFP® designation.

Back in 2011, the Deakin-based practice had

already undergone its own quality assurance

program as an authorised representative of Charter

Financial Planning. By doing so, it had already ticked

most of the boxes required to become a Professional

Practice, except for education.

“Meeting these criteria wasn’t a chore for the

business. Instead, we looked at it as being a

new project,” Green says, speaking highly of the

commitment from the practice’s planners and

support staff to ensuring the criteria was met.

“Green Associates has been evolving as most

businesses do. This meant we had planners with

different competencies and education levels.

However, all our planners were more than willing to

commit to further education, and with this positive

attitude, it meant that meeting the education

requirements of the criteria has not been diffi cult.

“Green Associates sets high goals for our business

and our education, enabling us to provide quality

Along with CFP® certifi cation, the FPA Professional Practice brand is a benchmark by which fi nancial planning can become a universally recognised profession. Jayson Forrest spoke to one of the program’s pioneering participants, Craig Green.

Th e brand that stands for professionalismGreen Associates: Benchmarking credibility

PROFESSIONAL .............................................................

PRACTICE.............................................................


advice and service to our clients. The Professional

Practice requirements are a great benchmark to set

for our advice and service goals.”

Even though the current legislative and economic

environments have been in a state of fl ux, Green fi rmly

believes that doesn’t mean that building a business is

not in “our” control. Instead, he sees adhering to the

Professional Practice criteria as an accomplishment

for his business, enabling it to follow through on the

practice’s own strategic planning.

BrandingBut what does the brand mean to clients?

Green is honest in his assessment.

“Existing clients are perhaps not completely sure

what the brand means at this stage, but it’s a

great opportunity for us to explain to them what

was required to become a Professional Practice.

However, when we surveyed our new clients, they

did tell us that the Professional Practice brand

gave them the reassurance they were dealing with

profi cient planners and cited it as one of the reasons

they chose our practice over competitors. That was

extremely gratifying.”

Green Associates actively promotes the Professional

Practice brand, ensuring it appears on promotional

material and signage around the reception area, as

well as on stationary, newsletters and the website.

“When we were granted use of this brand,

we promoted the brand to all of our clients in

our newsletter. We also actively promote the

brand and our Professional Practice status at

community events and other business networking

opportunities.”

Th e futureSo, as a Professional Practice partner, how can the

FPA continue to help Green and his practice?

It’s a question that gets him thinking.

“With public perceptions of the profession being

tainted by industry groups and political factions,

I believe the Association needs to perhaps

concentrate more on promoting individuals;

the individual adviser and the individual client.

Quality planning revolves around the ongoing

relationship between these two groups, not what

type of fee is being charged, or whether it’s

transactional advice or limited advice models.

“Personally, I believe the Association needs to

give the adviser the appropriate tools to make

this relationship evident to the regulators. The

FPA has provided the benchmark with the

Professional Practice program. It’s a great

initiative. Now, the FPA needs to provide those

members, who need it, with the appropriate level

of support to achieve this certifi cation.”

Green believes the fi nancial planning industry

did not make best use of the opportunity to self-

regulate, but believes if self-imposed protocols

are put in place with the means to achieve them,

then further regulation may not be required.

“With these building blocks of consistency

and client relationships, the fi nancial planning

profession could be its own best marketing

machine. And the FPA’s Professional Practice

brand is the right step in that direction.” •

Professional Practice

CRITERIAIn order for a practice to be recognised as

a Professional Practice, it must fi rst meet

three criteria. These are:

1. Eligibility

A fi nancial planning practice must have

at least 75 per cent of planners registered

as FPA members, with 50 per cent of

the practice’s planners either being a

CERTIFIED FINANCIAL PLANNER®

or in the process of achieving the CFP

designation. The practice must also be

prepared to fulfi ll and commit to all the

requirements of being a Professional

Practice.

2. Commitment

Practices must enter into a commitment

with the FPA by signing an agreement to

be a Professional Practice. This agreement

includes rules around maintaining their

eligibility to the brand by agreeing to,

satisfying and upholding the criteria of

being a Professional Practice.

3. Ongoing

Practices must agree to participate in the

Quality Practice Audit Program (QPAP).

Cost

For practices wanting to join the

Professional Practice program, please

contact Member Services on

02 9220 4500 or go to www.fpa.asn.au.

For more information on becoming a Professional Practice, please call Member Services on 02 9220 4500.


Craig Green,

Green Associates


SMSF

the top 10 traps

SMSFGEARING


Demand for advice on SMSF borrowing grew

in 2012 and is likely to continue to grow

this year, as investors look to move out of

cash and continue to show caution with the

share market. I believe SMSF trustees will

show even stronger interest in borrowing

for direct property in their portfolios in

2013.

I also see greater confi dence by trustees

in pursuing property plans inside

superannuation portfolios, rather than being

personally held. However, I believe there are

specifi c SMSF gearing traps that trustees

and their advisers need to be aware of.

We continue to notice a number of mistakes

or poorly developed approaches commonly

being made in the borrowing process

by trustees and their accountants and

advisers.

The SMSF loan under s.67A of the SIS

Act is not an ordinary loan. It takes careful

planning to get the loan correctly settled,

not only in order to guarantee compliance

with the superannuation legislation but also

with a view to the stamp duty issues. It is

particularly important to ensure that any

subsequent transfer of the property from

the holding trustee to the SMSF trustee

when the loan is repaid attracts only

nominal stamp duty.

I recommend avoiding the following 10

traps when dealing with SMSF gearing.

Failing to understand the lender’s requirementsBecause SMSF lending is

functionally different from ordinary

property lending, SMSF advisers and their

trustee clients cannot make any assumptions

about what lenders are looking for from them.

Carefully check with the lender as to what

requirements they have for SMSF limited

recourse loans. Remember that banks and

brokers are learning just as fast as everyone

else is in this area. Trustees should expect

closer scrutiny than ordinary property

loans because the lender is offering limited

recourse terms.

The lender will likely want proof that the

fund deed provides the necessary power

to borrow. An update of the trust deed may

be needed if the trust deed has not been

amended since the legislation was introduced

in September 2007 or materially revised in

July 2010.

Will the lender require the member to agree

to a particular contribution program to ensure

suffi cient money in the fund to meet any

shortfall in income from the property? If so,

has the trustee considered whether that

program will be possible and advisable?

Will the lender require sign off by the fund’s

accountant, fi nancial planner and lawyer

Continued on p24

As SMSF trustees become more confi dent with borrowing for direct property in their portfolios, Peter Townsend warns against some of the specifi c gearing traps that trustees and their advisers need to be aware of.

1.


before proceeding? Will the lender require

personal guarantees? Can the members

provide guarantees and remain compliant?

Will the bank require that the SMSF trustee and

or the holding trustee be companies? Where

the fund is buying business real estate from

a related party, will the bank expect to see a

full contract (arguing s.109 of SIS) rather than

simply a transfer document.

Be sure you have carefully considered all the

lender’s requirements before proceeding.

Failing to appoint an SMSF loan championSMSF borrowing and purchasing can

be complex. I have identifi ed 15 main

stages in a typical transaction that have to

be successfully negotiated. Each stage in the

lending process needs to be handled in the

correct sequence.

There are many players who may be

involved, including (if an arm’s length

purchase is being funded) the real estate

agent, the vendor, the vendor’s solicitor, the

fund’s conveyancing solicitor, the lender, the

loan broker, the lender’s solicitor, the fund’s

superannuation solicitor, the custodian, the

fund’s accountant, the fund’s fi nancial planner

and the stamp duties offi ce … twice.

The process needs a champion – someone

who drives the process on behalf of the

fund and understands all of the issues. An

investment/compliance transaction of this kind

will go seriously wrong unless someone takes

complete control. The property experts will

ignore the investment/compliance issues and

the investment/compliance experts will ignore

the property issues.

Appointing an SMSF loan champion to oversee

the entire process is essential and will almost

certainly save time and money. The failure to do

so will likely result in confusion and problems.

The fundamental point is that limited recourse

borrowing can be a complex transaction and

such transactions require drivers.

Not paying the entire purchase price from the SMSFBuying property sometimes requires

quick responses and these can be

fatal for SMSFs buying and using a loan. The

stamp duties legislation in the various states

can catch trustees if the good faith deposit is

paid from their own pocket and not quickly

reimbursed by the SMSF.

All the money must come from the fund or

its lender. Further, there must be a clear

documentary trail showing this to be the case.

If you suddenly realise that the purchase has

been completed without complying with this

rule, then seek advice immediately. A solution

may be possible but time is of the essence.

Monies provided by the lender pursuant to

the loan agreement with the SMSF trustee

are treated as being provided by the SMSF

trustee.

Not arranging the stamping of the holding trust deedThe holding trust deed must be

stamped to ensure that any ultimate

transfer from the holding trustee to the SMSF

trustee attracts only nominal stamp duty.

Further, it must be stamped within the period

allowed for stamping (generally either two or

three months after fi rst execution).

And even though the amount of duty may be

nominal, tempting the fund to delay paying

that duty, it makes sound, practical sense to

have all documents stamped when the people

and the fi nancial records relating to the

documents are readily available.

The documentary evidence could be very

diffi cult, if not impossible, to fi nd in, say, 10

years time when the loan is being repaid.

Double stamp duty could result.

Note that the holding trust deed cannot be

stamped until after settlement of the purchase.

The duties authorities need confi rmation that

the settlement money only came from the fund

(and its lender) and this confi rmation cannot

be provided until after settlement.

Th e lender as holding trusteeThe idea that you can save money

by having the lender act as the

holding trustee in a related party

loan to an SMSF is a fallacy. It will result in

a fundamental confl ict of interest. SMSF

trustees and their advisers don’t need the

extra grief of having the ATO questioning if

this arrangement is suitable and compliant.

The presence of that confl ict (where the

holding trustee is both the bare trustee for

the fund and the lender to the fund) will

undermine the ‘absolute entitlement’ of the

SMSF. This in turn could have at least land

tax and CGT repercussions for the fund, not

to mention undermining SIS compliance. The

arrangement should be avoided.

Th e holding trustee as the borrowerThe SMSF trustee must be the

borrower. The parties to the loan

contract must be the lender and the SMSF

trustee. The holding trustee on the other hand

is the buyer. The sale contract is between the

seller and the holding trustee.

If the holding trustee is the borrower, although

the provisions of s.67A are avoided (there

being no loan to the SMSF), full stamp duty

will be payable on any transfer of title from the

holding trustee to the SMSF trustee, rather

than nominal duty. The very existence of the

holding trust may itself be non-compliant in

that case.

Th e holding trustee having active dutiesThe only function of the holding

trustee is to hold legal title to the

property while the loan is outstanding, grant

the mortgage to the lender and enter into

leases of the property.

SMSF

–– Appointing an SMSF loan champion to oversee the entire process is essential and will almost certainly save time and money. Th e failure to do so will likely result in confusion and problems.

2.

3.

4.

5.

6.

7.


If the holding trustee has active duties to

perform and does not act at the direction

of the SMSF trustee, then the holding trust

may be a GST entity, be required to prepare

and lodge tax returns, and the ‘look through’

approach from the holding trust to the super

fund may not apply for income tax and CGT

purposes.

Some of the banks require holding

trust deeds to contain active additional

requirements on the holding trustee. I do not

recommend these and believe, in any case,

that they are unnecessary.

SMSF trustee as purchaser – mixing structuresOften we are confronted with an

exchanged contract where the SMSF

trustee is the buyer. This is a breach of s.67A

and must be rectifi ed for the transaction to

proceed. Clients should seek advice before

they take any step in a limited recourse

borrowing.

Most limited recourse borrowing

arrangements are structured to take

advantage of the ‘apparent purchaser’ or

‘agency purchaser’ duty concessions. If so,

the purchaser must be the holding trustee.

One prominent lender requires the holding

trustee to be a company it controls.

Consequently, this lender will require the

SMSF trustee to be the purchaser and special

conditions are included in the contract

of sale to the effect that the vendor will,

on settlement, transfer title to the bank-

nominated holding trustee rather than to the

SMSF trustee. This arrangement confers

additional control to the lender but does

not cause its company to be party to, and

possibly entangled complications arising

from, the contract of sale.

Generally, this structure of a limited recourse

borrowing arrangement involves different

steps, parties and transactions and, in NSW

at least, more stamp duty.

Out of date SMSF trust deedsLimited recourse borrowing for

super funds is relatively new and

dates from September 2007. There

was a signifi cant alteration in the law in July

2010. Trust deeds of SMSFs drafted before

September 2007 are unlikely to permit

trustees to enter into such arrangements and

are unlikely to confer on trustees the relevant

powers for such arrangements.

Lenders’ solicitors will review the trust deed

of SMSFs which are making borrowing

applications. If the trust deed has not been

recently updated, lenders may require

appropriate amendments. While amending

a super trust deed is not necessarily an

onerous task, typically the SMSF trustee

will be told of the need to amend shortly

before the intended settlement date. Usually,

settlement cannot occur unless and until the

amendments are made.

Knowing and understanding the lender’s

requirements (such as updating the super

trust deed) at the outset of the transaction

will permit any necessary amendments to be

made without delaying crucial steps of the

transaction.

Related party loans that breach s.109S.67A does not prohibit the trustee

of the SMSF from borrowing from a

related party. However, it is important

the lending arrangement does not breach

other provisions of the SIS Act.

For example, s.109 of the Act provides that

the fund and its related parties have to deal

with each other so that the terms of the

transaction are no more favourable to the

other party than those which it is reasonable

to expect as if the parties were dealing at

arm’s length.

The phrase ‘no more favourable to the other

party’ has been considered by the ATO in ID

2010/162 where it says this means “the terms

cannot be more favourable to the related

party than would have been the case had

the parties been dealing at arm’s length, but

there is no contravention of s.109 if the terms

are more favourable to the SMSF”. There may

still, however, be a contravention of other

provisions such as the sole purpose test.

Although these are informal comments by the

ATO to the effect that the fund can borrow

interest-free from a related party, those

comments are yet to be fi nalised as ATO

policy. As such, great care should be taken in

relying on these comments.

The calculation of the amount of the interest

rate, the term of the loan, the frequency of

interest payments, the obligation and timing

of principal repayments, and the security

offered for the loan must all therefore meet

the test in s.109. My advice usually is for

the client to ensure that the terms can be

obtained elsewhere in the market. Keeping

a record of that could prove useful if a

suggestion of a breach is made.

In summarySMSF borrowing requires careful planning

and good advice from people with

experience. That way, the traps – like these

10 - can be avoided. •

Peter Townsend is principal at Townsends Business & Corporate Lawyers.

–– Knowing and understanding the lender’s requirements (such as updating the super trust deed) at the outset of the transaction will permit any necessary amendments to be made without delaying crucial steps of the transaction.

Peter Townsend,

Townsends Business &

Corporate Lawyers

8. 9.

10.


While they might not be donning running shoes

and doing sprint trials, many fi nancial planners

probably feel their life is almost as competitive as

that of a professional athlete.

Increased commoditisation of advice, volatile

investment markets, bad media coverage and

declines in traditional sources of revenue are all

making life very challenging.

Overlay that with the transformation being wrought

by the regulatory change from the Future of

Financial Advice (FoFA) and Stronger Super

reforms and you have one very unsettled market.

It is just the type of environment that allows new

entrants to emerge. Free from the costly legacy

systems and processes holding back many

existing players, they are able to capitalise on the

situation and aggressively compete.

One expert who has identifi ed a number of

challenges for the advisory sector is Strategy

Steps director, Assyat David, who believes it is

important for planners to think carefully about

how the fi nancial services industry and their own

business environment are changing.

“It is a ‘horse or cart’ situation, with a lot of change

in the industry and also increased competition,”

she says.

“Consumers are changing their attitudes and

regulators are also changing things, with the

combination leading to signifi cant change. With this,

greater competition can spring up everywhere.”

Changing attitudes to investingThe shift in consumer attitudes, in particular,

represents a major competitive challenge for

advisory businesses.

David argues clients are moving from the

traditional, outsourced, ‘do-it-for-me’ approach to

one where they seek involvement and control with

a ‘do-it-with-me’ approach. This is illustrated by

the increasing dominance of the SMSF market.

“Advisers are missing out on capturing these

clients because the focus (perceived or real) on

products, rather than strategy, has meant advisers

have largely failed to satisfy the preferences and

needs of SMSF clients,” she explains.

Those practices which still remain focused on

managed funds or platform selection are missing

the boat.

“Clients have a shifting preference for direct

and low cost assets that are transparent and

accessible by the retail investor. Managed funds

may be considered expensive and in recent

PART 1: It’s becoming a very crowded market for fi nancial planers as new entrants, like Wesfarmers and Virgin, eye off the growing asset base in the wealth management industry. But, as Janine Mace writes, planners are well placed to deal with this new world of contraction and competition.

Competition

LIKE MOTHS TO A FLAMEFACING UP TO THE COMPETITION


times, their average performance (relative to a

benchmark) have not been suffi ciently stellar to

attract investors’ attention,” she notes.

Steve Prendeville, director of Forte Asset Solutions,

agrees this is creating competitive pressure,

particularly in a period of lower investment returns.

“We have seen the continued growth of SMSFs

and self-directed investors and when the

tide comes back in, I am not confi dent the

consumer will come back to advisers in the

same manner as before. It is more likely we will

see the growth of specifi c or limited advice and

not necessarily advice with ongoing monitoring,”

he notes.

This shift away from full service advice to advice

dealing with specifi c problems the client may be

facing is signifi cant.

“Clients at all levels along the wealth scale

are increasingly looking for advice that deals

with single issues that are currently at hand,

rather than holistic advice. Dealer groups that

predominantly offer holistic advice risk bucking

this trend and marginalising their business and

client advice,” David warns.

She believes clients seeking holistic services are

likely to shrink as a proportion of the industry,

with a growing number more likely to be self-

directed and favouring direct assets and listed

managed funds, such as ETFs.

Competitive forcesAlthough changing client attitudes may be keeping

planners awake at night, many experts also believe

the advisory industry is competing against the

community’s negative perceptions – due in part to

both the GFC and a few bad apples.

Sue Viskovic CFP®, managing director of Elixir

Consulting, agrees the market is increasingly

competitive, but often in non-traditional areas. “For

example, there is a competitive struggle around

getting good returns after the GFC. Ironically, this

is a time when clients benefi t from advice but they

are still very nervous. People are looking for trust

and guidance towards smart decision-making,”

she says.

“Planners are also competing with mainstream

media horror stories about bad advisers and

advice. People want to take advice, but the

problem is who can they trust and is it tailored to

them? Advisers are competing with their external

environment.”

Long-time industry commentator and managing

director of Paragem, Ian Knox, agrees the testing

competitive environment is coming from several

sources.

“The biggest issues over the past few years are

the GFC’s arrival and the loss of assets, the lack

of confi dence in future growth of markets and

the poor media image of planning as a result of

product and business collapses,” he says.

“The challenges for practice heads are determined

by a number of factors, of which FoFA is an

infl uence, but not an overarching conundrum.”

Such a turbulent environment usually breeds

enhanced competition.

“When there is disruptive change, it can be a

lucrative time to enter a new market,” David

notes. “Change will make it more competitive in

the future.”

Caught between the majorsThe fi erce competition occurring within the wider

fi nancial services industry – particularly the banking

sector – is spilling over into the advice space.

According to Prendeville, the big banks made

noticeable attributions to the wealth management

side of their businesses in the recent reporting

season, highlighting the growing importance of

this sector.

“It is a hyper-competitive environment for

distribution in the institutional space at the moment

and this is leading to signifi cant merger and

acquisition activity by AMP, MLC, IOOF and SFG

Australia,” he explains.

“I expect to see more plays in the distribution area.

Ninety per cent of the industry is institutionally

owned, but we will still see more land-grabs occur.”

The battle for market share and distribution at

the institutional end is making the market “quite

ugly”, Knox says, with many medium and smaller

dealerships pinned down in the relentless crossfi re.

“Institutions are fi ghting among themselves and

paying artifi cially high prices to keep the end

consumer,” he says.

“The grab for distribution is leading an accelerated

trend towards consolidation in practices. The

Continued on p28

Assyat David,

Strategy Steps

majors are offering licensing services for

nothing, so this is making it very diffi cult for

other practices. For small dealers, they are up

against it.”

Prendeville believes many institutions are keen

to protect both their product distribution and

margins in a post-GFC environment.

“There is a level of protectionism and a new

business requirement behind many of the

current developments,” he says.

This is seeing some dealerships struggle.

“In the past six to 12 months, a number of

dealerships have closed down overnight – such

as Morrison Carr and AAA Financial Intelligence

– and it seems clear that other long-term

business structural problems were causing

the problem, not FoFA. For example, they may

have attracted the wrong calibre of advisers or

were not charging enough for support services,”

explains Knox.

“The tailwind of regulation change is that many

dealerships that are totally reliant on volume

payments and shelf fees, will lose these under

FoFA and be forced to charge a proper fee.”

Rising dealer fees will tighten the competitive

screws further on some practices.

“FoFA is impacting the clarity on cash fl ow and

this is a major change for the industry,” Knox says.

He believes another challenge is the age of some

practice owners, with practice pricing issues

further heightening the competition pressures

being felt by many planners.

“The industry has a demographic problem with

people expecting a value for their business as it

was fi ve years ago,” he says.

“Financial planners are faced with activating

signifi cant changes in their business, or

stepping out now. This means practice heads

are increasingly vulnerable to offers by the

majors.”

New entrantsAdded to these issues, many planners are also

feeling squeezed as new entrants eye off the

growing asset base in the wealth management

industry.

As David notes: “When you have competition

and change, you never know who will be

your competitors in the future. For fi nancial

planners, the key message is change will lead

to competition, especially through regulatory

change.”

She sees a number of fresh competitors sizing

up the market. “The new competitors include

mortgage companies, credit unions and even

research houses who are trying to get involved

and offer distribution. This means life is going to

be tougher than in the past.”

The growing dollars within the superannuation

and fi nancial services sectors are generally

drawing competitors like moths to a fl ame.

“You only need to look at the funds invested

and the compulsory nature of superannuation to

see it has become a beacon for people looking

to make money. For example, we are already

seeing Coles and Virgin tapping into their existing

customer base – especially in single issue areas

like insurance,” Viskovic notes.

Prendeville agrees companies with a large

customer base – or a willingness to capitalise on

changing markets – will look towards the advice

market.

“There is a great opportunity for the ‘disturbers’.

Mark Bouris’s Yellow Brick Road is a great

example. This is what he did with Wizard and

it’s exactly what John Symond did with Aussie

Home Loans when he entered the mortgage

market,” he explains.

“Those companies that have penetration through

their access to a large customer base – like

Coles’ new insurance offer – will have a greater

opportunity.”

Lower barriers through new internet-based

technologies are also encouraging fresh entrants.

Social media platforms like Moneytribe allow

clients to engage directly with fi nancial product

sellers for personalised product offers and

advice in areas such as health insurance and

mortgage products.

In the medium-term, one of the major sources

of competition is the accounting profession,

which under its new limited licence, will be able

to more aggressively enter the advice space.

“In general, government and regulators view the

accounting industry more favourably in terms of the

way they price things and the trusted relationship

they have with clients. Accountants are one of the

main areas of competition,” David says.

The new rules will not allow accountants to

recommend specifi c products, but clients will

be able to get tailored strategic advice and

then make their own decisions. “This leads to

fi nancial planners having a reduced ability to

value add,” David notes.

But it’s not all bad news. Although the competitive environment for planners may be challenging, next month Financial Planning takes a look at the many causes for optimism and suggests some strategies that practices can consider in order to deal with the new world they fi nd themselves operating within. •


Competition

• Volatile investment markets and returns.

• Changing client attitudes.

• Greater interest in self-directed

investments.

• Reduced focus on product and platform

selection.

• Media coverage of ‘bad apples’ in the

advice market.

• Ageing demographics of the planning

community.

• Reduced income streams due to

regulatory change.

• New market entrants leveraging existing

client bases.

• Technology lowering barriers to entry in

some areas.

• Changes to the accountants’ exemption

rules.

Key competitive challenges

Steve Prendeville,

Forte Asset Solutions


“It’s been hard work, but we’ve been having a bit of

fun with it.”

These are not the words you would expect from

someone competing against several banks, a real

estate agent, a Yellow Brick Road franchise and a

local accountant offering planning services all within

15 metres of his offi ce, but Cameron McAusland

CFP® is very upbeat.

Since opening his two-person practice in Randwick

in Sydney’s eastern suburbs in January 2011,

McAusland has been tackling the challenges

presented by a very competitive advisory market.

He is one of the fi rst planners to use the new MLC

Advice concept for his practice.

“The idea is to have a retail shop offer in a high

traffi c area with a professional fi t-out – lots of glass

and high visibility. We want people not to be scared

to come in,” McAusland explains.

“It was slow to start, but with the ability to leverage

off an institutional name, it has grown strongly. We

hit the ground running and I’ve never been this busy

before in my career.”

Although the street frontage has been an important

competitive tool, McAusland has also spent

considerable time developing an appropriate and

competitive business model based on service fees,

rather than commissions, except for insurance

products.

“We spent a lot of time on the business structure for

the practice. When FoFA was fi rst talked about, we

started to get active and were ready for it 18 months

ago,” he explains.

The fee approach is also designed to be

competitive.

“We offer access and reasonably priced advice.

We changed the pricing structure from a fl at fee of

around 1 per cent to what I consider ‘reasonable

pricing’. In a business sense, we are not cheap but

reasonably priced,” he explains.

“The pricing is based on the number of strategies

and the complexity of the client’s situation. For

example, the number of super funds they have, if it

includes a company or trust, or whether they have a

mortgage.”

Within that approach, McAusland also works with

the client to develop a suitable fee level. “We base

the pricing on what the client wants us to work on.”

He is fi nding many clients are limiting the scope of

the strategies on which he advises. “We often start

with a limited scope. Clients are often happy to go

with the implementation of two to three strategies

and then more later when they can afford it.”

This is part of building the relationship. “We have

the opportunity to do good work for them and then

build trust and a longer-term relationship.”

Another key competitive strategy comes in terms

of the practice’s approach to marketing. “I am very

active in the local community and this has been our

marketing concept since day one,” he explains.

“I grew up locally and went to the local school and

played local sport, so I am not some ‘blow-in’. I have

an existing community network.”

McAusland is involved in a number of community

groups and activities, such as his local Nippers at

Coogee Beach, and he is currently vice president

of the Coogee Chamber of Commerce, both of

which provide a low-key way to market the practice

through personal relationships.

“I’ve been on the beach and people have started

talking to me after seeing our marketing in the local

paper. Then they know where to come when a

trigger event occurs for them,” he explains.

Despite the competition surrounding him,

McAusland takes a deliberately relaxed approach to

winning client business.

“I have consciously not been aggressive in both

the strategies we suggest and the discussions we

have with clients. My personality suits a ‘softly-softly’

approach,” he notes.

“We don’t push anyone, as I have seen it in my

previous role and it doesn’t work long-term. There

is no pressure on clients to implement what we

suggest and I am very conscious of not being a

salesperson but an adviser. The evidence is that

what we are doing is working, as we are extremely

busy at the moment.”

Although business is picking up, McAusland is

under no illusions about the competitive nature of

fi nancial planning today. “I think there is a lot of

competition out there.”

When it comes to ensuring the sustainability of a

practice, he believes one of the fi rst places planners

need to look is at their existing book.

“It is really important to look at the tail closely and

try to build a relationship with them. Financial

planners need to get their heads around that part of

their business,” he says.

“Every three to six months, we contact the tail and

offer a no-obligation review and update on their

position to get more information, so if a trigger event

occurs, they know who to come to and we can

help. We have had clients that were in the tail, but a

trigger event occurred and they have now become

‘A’ clients.” •

Case study: Local valuesCameron McAusland,

MLC Advice

–– “I grew up locally and went to the local school and played local

sport, so I am not some ‘blow-in’. I have an existing community

network.”Cameron McAusland

Community involvement is Cameron McAusland’s key strategy to tackling the local competition.


BULLETPROOF FINANCIAL PLANNING

CHARGING FOR APROFESSIONAL SERVICEin a fi nancial planning environment

Th e Opt-in regimeThe Opt-in regime in its current form is something

that the FPA does not support. If the Coalition

does win government later this year, they have

indicated they will remove the Opt-in regime from

the FoFA legislation. But until then, it is important

for planners to know what their obligations are if you

are caught in under the Opt-in regime.

A Class Order relief and the approval of a Code of

Conduct may mean that for a member of the FPA,

this particular regime may not be applicable to

you. But depending on your situation, and whether

you’re a member of the FPA or not, you should be

aware of the Opt-in regime, its obligations and its

implications for you.

Th e Opt-in rulesOpt-in was designed as a result of stakeholders

highlighting to the Government that there was

an issue with passive income. In other words,

there was income derived by fi nancial planners

and licensees from clients for little or no service.

Effectively, many clients were not aware they

were paying trail commissions. Interestingly, what

was really highlighted to the Government was the

corporate superannuation employer plans, where

there were potentially thousands of members of

those plans paying a trail commission to somebody

they had never met or heard off.

Also, you have situations where super funds

and super products change hands in respect to

advisers, and again that trail commission was being

paid but the individual didn’t know who it was being

paid to. So, there was a big question mark about

what that fee was for and what services were being

derived for that. So, the fundamental reason for

the Opt-in regime was to empower consumers and

clients to effectively say that they either wanted to

continue paying that fee for the services they were

aware of, or stop paying that fee.

Under FoFA, commissions are being banned from

1 July 2013. So, moving forward, what this means is

that in a fee-for-service environment, there are no trail

commissions, and all fees that clients negotiate and

pay are effectively transparent and agreed to with the

planner. In addition, clients have every opportunity to

stop paying those fees if they choose to.

However, the Opt-in regime only applies to new

clients from 1 July 2013. It doesn’t apply to existing

clients that advisers have been providing fi nancial

planning advice to. Instead, Opt-in applies to new

clients who you have not previously provided

personal fi nancial advice to, whereby the individual

agrees to enter into an ongoing fee arrangement

with the planner.

Although Opt-in offi cially kicks in on 1 July this year,

it could apply earlier but only for those licensees

who have opted in to FoFA early. However, currently

only four licensees have actually done that.

Th e 30-day ruleA planner’s fi rst Opt-in notices will not be required

to be issued until after 1 July 2015. For example, if

you have a client with an anniversary date of 1 July,

then you will need to issue that notice within 30

days from that date. And from the date the renewal

notice is sent, the client has only 30 days in which

to return it.

However, the 30-day rule is quite strict. The Opt-in

renewal notice must be issued by the adviser

within 30 days from the anniversary date and the

client then has 30 days to respond from the date

the renewal notice is sent. If the client doesn’t

return their renewal notice within 30 days, then the

arrangement between you and the client ceases

and the planner must implement processes to

stop receiving fees from that client. At this point,

the planner has no further obligation to continue

providing advice to that client.

The anniversary date is technically defi ned when

you enter into an ongoing fee arrangement with

the client. For example, that can be the day when

the SOA was signed, the terms of engagement was

signed, or even when the client service agreement

was put in place.

Practical issues of Opt-inQ: What happens when an existing client changes platform?If the arrangement with you in respect of the

ongoing service arrangement is not terminated,

then that client remains as an existing client, so

Opt-in will not apply with that client. The only time

when an existing client becomes a new client and

will be caught under the Opt-in regime, is when the

arrangement between the planner and the client is

terminated.

Q: What are the obligations if the client does not Opt-in?The obligations around the initial piece of advice

you provided always remains in place. But, your

obligation to continue servicing and advising that

client in an ongoing arrangement ceases. By not

opting in, the client has made a decision that

they do not want ongoing advice. Equally, your

As part of the Bulletproof Financial Planning series, FPA General Manager, Policy and Conduct, Dante De Gori discusses the practical issues around Opt-in and answers some commonly asked questions.

–– “Th e 30-day rule is quite strict. Th e Opt-in renewal

notice must be issued by the adviser within 30 days from

the anniversary date and the client then has 30 days

to respond from the date the renewal notice is sent.”


obligation to continue servicing that client and being

responsible for that client ceases as a result of the

client not opting in.

So, once the 30-day renewal period has passed,

your obligation to continue honouring your

ongoing service arrangement with the client, and

your obligations to continue providing advice to

that client, ceases. If the client wants to come

back to you and recommence their arrangement

with you again, then that’s something you can

start up with them again. But in the meantime,

you also have an obligation to ensure you stop

receiving any fees from that client.

So, when you are working with platform providers

or receiving direct debit payments from bank

accounts, you need to consider how you will

terminate those fee arrangements to ensure you

don’t continue being paid those fees. Of course,

some of that will be out of your control, but you

will still need to be able to prove your intent and

what you have done to try and stop receiving

those fees.

Q: If the client renews after the 30-day renewal period, does that require a new SOA for the client? If all you are doing is restarting the ongoing service

arrangement, and you’re actually not providing the

client with any new advice, then you won’t need a

new SOA, but you may want to start a new contract

in respect to the ongoing service arrangement.

However, if you do want to provide the client with

new advice, then that will require a new SOA.

Q: If the client is going on holidays and you send out the Opt-in renewal notice earlier than required, does that trigger a new anniversary date?If you send the Opt-in renewal notice early, which a

planner is allowed to do, the 30-day renewal period

still applies. So, if the notice does go out earlier,

then you may trigger a new Opt-in anniversary date

for the client. As such, the client is still required

to send back the Opt-in renewal notice within 30

days of this new anniversary date – not their old

anniversary date.

For example, if the anniversary date was 30 June,

you can’t send the renewal notice on 30 April and

still expect the client to respond within 30-days of

the previous 30 June anniversary date. Instead, the

client will need to respond within 30-days to the

new anniversary date of 30 April.

Q: How can a client confi rm Opt-in – by original signature, email, phone call and fi le note?Parts of the Opt-in confi rmation will be in writing,

such as with a client signature, but anything that

can be recorded or used as evidence is allowed

in respect to Opt-in, such as a returned email or

a recorded phone call. However, a fi le note is not

permitted as confi rmation of Opt-in. You do need

to have some type of evidence from the client

that they have opted in, and of course, the best

way to do this is with a signature.

Q: Can you combine your Opt-in renewal notice with your Fee Disclosure Statement?Yes, however, the Fee Disclosure Statement

needs to be sent annually, but does not need

to be returned by the client, and the Opt-in

renewal notice needs to be sent out every

second year and does require to be returned by

the client.

Q: What happens when you buy a fi nancial planning business/book of clients?When buying a book, you do need to be mindful

of who is the fee recipient. This is very important

because sometimes the fee recipient could be

the licensee, while other times it could be you,

the fi nancial planner. And I believe you are

looking at scenarios where corporate authorised

representative arrangements are more likely to be

fee recipients, and employed planners are more

likely not to be fee recipients, but it will depend on

the arrangement. When purchasing a client book,

once you know who the fee recipient is and that

fee recipient has been signed over to you, then

those clients should remain with you as existing

clients and they shouldn’t be subject to the Opt-in

arrangement.

Q: Why does Opt-in not apply to intra fund advice?The intra fund advice model is not permitted to

provide ongoing services or complicated advice.

As such, Opt-in does not apply to intra fund advice

because this advice model is not ongoing. The

funds can only charge the member a fee to cover

the intra fund advice costs but this fee is only

related to transactional pieces of advice. •



THE FPA ONGOING SERVICE SOLUTION: Obviating the need for Opt-in

The FPA has been responding to the broader

situation relating to Class Order relief which

was one of the options available that the FPA

has been able to negotiate in the context of

these changes with Opt-in. And in order to

do that, what the FPA has come up with is a

solution in relation to the underlying problems

around the charging of clients. These include

trail commissions, or the issue of clients

potentially paying for services they don’t

particularly need, understand or benefi t from.

In order to come up with a solution around

these issues, the FPA wanted to clearly identify

what the professional role of the planner is,

and understanding the importance of the

professional nature of the client engagement.

Opt-in is one way of addressing that problem

but the FPA actually believes there are better

ways of dealing with this issue. The FPA has

put forward some solutions to Government.

Specifi cally, in relation to Opt-in, what the FPA is

proposing is to put the focus back on the role of

the adviser in establishing client engagement in

the fi rst place.

The FPA has identifi ed the following issues that

need to be solved with Opt-in.

Firstly, it’s the issue with passive income

and whether or not consumers are getting

the service they are paying for or getting a

benefi t from. But it’s also about building a

more professional response to the problem

identifi ed here.

If we think about the way a professional services

business operates, there is an initial piece

of advice, an initial service that’s agreed to

between the adviser and the client, and the

ongoing services that are provided. It’s these

professional ongoing obligations that the FPA is

focusing on.

So, what the FPA has said in this context is that

Opt-in isn’t just about advice but all services

provided by planners. Obviously, the planner is

central to providing the fi nancial planning advice

and making recommendations to clients – not

only about their own services but also about

other services which may be part of that advice,

such as services provided by the licensee or

platform. We talk about those in terms of third

party services.

We think all services should be covered for

in a professional model, and the key to that

is that the services should be suitable for the

particular client, having regard for things like

the usability, the usefulness, the duration, the

benefi t and the complexity of those services.

This is not something that is new when

thinking about the Code of Conduct. The same

principles that apply when recommending a

product, apply when recommending a service

– it’s a question of suitability.

The costs of services are clearly an important

issue in terms of understanding suitability. So,

Principle 3 (see p33) that the FPA is proposing

for changes to the Code is to ensure that the

cost of services to the client is suitable, as

measured by the benefi t (both tangible and

intangible) to the client.

So, at the point of recommendation, what the FPA

is also saying is that by recommending and setting

up services for the client and implementing those

services, the important aspect of that is to ensure

that the suitability question has been reviewed

and that the adviser is establishing a review

timetable for those services.

Effectively it’s not a ‘set and forget’ scenario. We

think the adviser has a professional obligation to

ensure that the services remain suitable for the

client, and that’s something that gets picked up

at the review point. It’s at this point in relation

to reviews that we need to ensure that services

have been delivered and utilised.

Through that re-engagement piece, what we

are endeavouring to do is form the basis for the

re-contracting of those services.

This is the model the FPA believes is most

appropriate in the professional services context,

and we think it really focuses the role back onto

the fi nancial planner to ensure they get suitable

recommendations to the client in the fi rst place,

and for them to think about the suitability in

terms of the services, the usefulness, the

benefi ts, the duration, the complexity of those

services to the client, and also the cost.

The cost is an important factor in understanding

how those services fi t into the client’s objectives,

the strategy and all those types of things.

And also, at the point at which all those services

are engaged, for the planner to also agree with

the client on a review date for those services.

And then, through this review process, the

planner can confi rm with the client that the

services had been utilised and were of value to

them, and whether or not the services should

continue after the date of the review. •

FPA General Manager, Professional Standards, John Bacon addresses issues around the FPA’s solution to obviating the need for Opt-in, while outlining the FPA’s eight core principles for delivering this.

–– “We think the adviser has a professional obligation to

ensure that the services remain suitable for the client, and that’s something that gets

picked up at the review point.”


PROFESSIONAL SERVICE CHARGING and renewal (Opt-in)

ONGOING SERVICES NEGOTIATION

Principle 1: Services can include any form of

professional service able to be accessed by the planner

for the client (including third party).

Principle 2: Services should be suitable for this client

(including but not limited to consideration of usability,

usefulness, duration, benefi t, and complexity of those

services).

CHARGINGPrinciple 3: Cost of services to the client should be

suitable, as measured by the benefi t (both tangible and

intangible) to the client.

Principle 4: Originator and costs of services will be

clearly identifi ed and remuneration payable to the

planner will be clearly disclosed.

Principle 5: Only services that have been agreed to can

be charged for.

RE-ENGAGEMENTPrinciple 6: Confi rmation of services previously

delivered will be provided at an agreed review point.

Principle 7: Services that have not been utilised by the

client should be clarifi ed for suitability at review point.

Principle 8: Continuation of services to be delivered will

be gained in the form of producible evidence.



RESETTING THE CLIENT ANNIVERSARY DATESCENARIO 1: Disclosure date is known (existing clients)

This scenario applies when you know the disclosure date of the client. In

this scenario, the start date with the client is 3 May 2010, and an ongoing

arrangement with the client commenced on this date through the SOA

that was provided. Obviously, in 3 May this year, no FDS is required

because FoFA doesn’t start until 1 July 2013. However, 3 May 2014 is the

anniversary date, so a FDS will be required 29 days after the anniversary

date (1 June 2014).

For this particular client, you do not have to issue an Opt-in renewal

notice, as the client was a pre 1 July 2013 client, but you would still have

to issue an FDS. But, if the client was a new client post 1 July 2013, then

the Opt-in will be required with the FDS.

3 MAY 2010

Ongoing fee

agreement

commences

(SOA,

terms of

engagement,

client service

agreement).

3 MAY 2013

No FDS

required.

3 MAY 2014

FDS issued

before the end

of 30 days from

the anniversary

date (ie, 1 June

2014). The FDS

must include fees

expressed as

dollar amounts

actually paid

in the last 12

months, services

available and

services actually

received.

3 MAY 2015

FDS must be

issued to the

client. Note:

New clients

would also

require an

Opt-in notice

from this date.

and FDS for all

Q: If you are not providing fi nancial product advice and charging a

fi xed monthly fee, does Opt-in still apply?

If you provide personal fi nancial advice to a retail client and that

individual has signed an ongoing fee arrangement with you, then that

individual will have to comply with Opt-in and also the Fee Disclosure

Statement (FDS). Ongoing services don’t have to necessarily relate to

fi nancial products.

In order to be clear, I want to emphasise that Opt-in and the FDS are

separate obligations under the law. Opt-in only applies to new clients

and is only required every two years. Opt-in requires the client to

clearly acknowledge in the renewal notice that they want to continue

with the advice. While the annual FDS applies to all clients in which

the planner has an ongoing arrangement with, including existing

and new clients. The FDS does not require the client to reply or

acknowledge the statement.

The obligation to adhere to Opt-in and FDS is on the planner, who is

the recipient of fees.

A planner can provide the FDS in a number of formats, such as a

letter, via email or online. The FDS does not have to be returned by

the client. The document must include the actual fee being paid by

the client in the 12-month period of the FDS that is being sent out.

The fee must be in dollar terms, not a percentage. For those planners

who charge as a percentage-based fee, this needs to be equated to

as a dollar fi gure for the 12-month period. And the FDS must also

include the services available to the client and the actual services

used by the client.

Q: What if you don’t have an ongoing fee arrangement but simply

charge a fee as the advice is provided?

If you don’t have an ongoing fee arrangement and just simply charge

a fee as the advice is provided, then you are not required to provide a

FDS and also do not need to comply with the Opt-in regime.

Dante De Gori answers questions around the annual Fee Disclosure Statement (FDS) and discusses how planners can reset their client anniversary date for the FDS.

ANNUAL FEE DISCLOSURE STATEMENT RG245


SCENARIO 2:Resetting the date to 1 July for existing clients

With respect to the start date, in Scenario 2, there is an option for planners

under the regulatory guide for FDS to potentially re-set the anniversary date,

meaning you don’t have to send the FDS to various clients every week.

For example, you might decide to send your FDS to all your clients at the

same time, or you may decide to send your FDS to your A-rated clients at a

certain date and your B-rated clients at another time.

Planners have two options in which they can do that. The following is

Option 1.

Option 1: The legislation allows you to do this is in respect to sending a FDS

in a fi nancial year. Your only opportunity at doing this for all your existing

clients is by doing this before 30 July this year. So, if you send a FDS to all

your clients before 30 July 2013, you can effectively reset all your existing

clients to a 1 July fi nancial year anniversary date. This is irrespective of when

your clients fi rst started with you. As such, your ongoing obligation for these

clients will be annual on 1 July of each following year. This option is only

available for existing clients.

KNOWN OR

UNKNOWN

DATE

Ongoing fee

arrangement

commences

(SOA, terms of

engagement,

client service

agreement).

1 JULY 2013

FDS issued

before the end

of 30 days from

the anniversary

date (ie, 30 July

2013). The FDS

must include fees

expressed as

dollar amounts

actually paid in the

last 12 months,

services available

and services

actually received.

1 JULY 2014

FDS issued

before the

end of 30

days from the

anniversary

date (ie, 30

July 2014).

1 JULY 2015

FDS must be

issued to the

client. Note:

New clients

would also

require an Opt-

in notice from

this date.

SCENARIO 3: New anniversary date

With respect to the start date, in Scenario 3, there is an option for

planners under the regulatory guide for FDS to potentially re-set

the anniversary date. Planners have two options in which you

can do that. The following is Option 2 (Option 1 is discussed in

scenario 2).

Option 2: There might be occasions when you are unable to send

out your FDS by 30 July to your existing clients. This option allows

the planner to pick a date between 1 July 2013 and 31 January

2014.

If you decide to pick a date in this seven month period, then you

have to inform the client in writing of this new anniversary date,

explain your reasons for the date, and send a FDS within 30 days

of this date. This option only applies to existing clients.

So, in this particular case, 1 September 2013 has been used as an

example of resetting the anniversary date for clients.

If you reset the anniversary date, whatever the anniversary date is, the

FDS must relate back to that 12 month period that you have reset. If you

want to use fi nancial year, then you will have to reset the anniversary

date to fi nancial year (as explained above) and if you don’t want to use

the fi nancial year, then the 12-month period must relate to the period

you have chosen. •

NO DATE

Ongoing fee

arrangement

commences

(SOA, terms of

engagement,

client service

agreement).

1 SEPTEMBER

2013

FDS issued before

the end of 30

days from the

anniversary date

(ie, 30 September

2013). The FDS

must include fees

expressed as

dollar amounts

actually paid in the

last 12 months,

services available

and services

actually received.

1 SEPTEMBER

2014

FDS issued

before the

end of 30

days from the

anniversary

date (ie, 30

September

2014).

1 SEPTEMBER

2015

FDS must be

issued to the

client. Note:

New clients

would also

require an Opt-

in notice from

this date.


PRO BONO

FIRE, FLOODS

AND FREE ADVICE

Th e recent onslaught of natural disasters has left many Australians with nothing more than the clothes on their backs as they begin to pick up the pieces. And yet fi nancial planners are in a unique position to help. Caroline Munro spoke to three planners who are off ering their expertise via the FPA Pro Bono Service.


The start of 2013 brought with it fl oods,

cyclones and virulent bushfi res. Floods swept

through areas of Queensland and New South

Wales, some areas still recovering from

unprecedented fl ooding just two years before.

Fires broke out in New South Wales and

Victoria, and the nation watched in horror as

people were trapped on the Tasman Peninsula

… Victoria’s Black Saturday bushfi res still

sharp in our collective memory.

In response, the FPA has relaunched its Pro Bono Service, a program that is designed to connect disaster victims with a CFP® or AFP® practitioner who volunteers their time and expertise free of charge.

Chris Palmer CFP® of C2G Financial Services in Wide Bay, Queensland, was personally affected by the fl oods and cyclones that ripped through Bundaberg earlier this year. But it was nothing compared to the losses experienced by others, he says. Hundreds

of houses were extensively damaged while 45 were utterly destroyed. Four of Palmer’s clients lost their homes. It was a one-in-200 year event that came just two years after what had been described as a one-in-a-100 year fl ood, says Palmer.

“So we’ve had the two biggest fl oods ever seen in Bundaberg two years apart and it was rather devastating,” he says. “A lot of houses that had just been renovated after the 2010/11 fl oods were basically destroyed.”

Palmer signed up to the FPA Pro Bono Service when he realised the extent of the devastation experienced by a number of his own clients, whose homes were either swept away by the fl oods or battered to pieces by the cyclones that wreaked havoc through the area at the same time.

Glynn Phillips CFP® of Falconer Financial Services in Hobart has been promoting the FPA

Pro Bono Service via Tasmania’s Department of the Premier and Cabinet and the Bushfi re Recovery Taskforce, and has also offered his fi nancial planning expertise to people along the Tasman Peninsula. He says one of the things many people found diffi cult to come to terms with was how indiscriminate the fi res were.

“When you go down there you see six or seven completely fried, melted houses, and then one totally untouched house,” says Phillips. “I think a lot of people are experiencing something like survivor’s guilt. It is raw.”

He described some areas as nothing but a “sea of burnt matchsticks”.

“It’s staggering. But then you drive through to the other side and it is normal Tasmanian bush, dense and lush,” Phillips says.

Continued on p38

The cruelty of fi re was also witnessed by Sandy

Dunshea CFP® of Fortnum Financial Advisers in

Dubbo, New South Wales. He saw fi rsthand the

destruction the fi res wrought on farmers and the

community of Coonabarabran.

“When you talk to some of these property owners

and graziers who have lost absolutely everything,

you realise they were lucky to get off the property

with one vehicle and the clothes they had on their

backs,” says Dunshea. “When you go through

a person’s place, driving past all the livestock

carcases, and see that they have lost all their

sheep and they’ve only got 20 cattle left out of

180, it is pretty gut-wrenching.

“While it is emotional for them to be talking to you

about it, it also pulls on your heartstrings and you

can’t help but get emotional about it,” he adds.

Phillips says fi nancial planners who do insurance

work usually have the skills to deal with people

emotionally. But he admits that witnessing the ruin

left behind by a natural disaster is a different matter

entirely. He was disconcerted when he came across

a woman who laughed about the fact that she did

not want the grass to grow back because she no

longer had a lawnmower to cut it. “I wasn’t sure if I

should laugh along with her or not,” says Phillips.

What Palmer is seeing in Bundaberg is certainly

taking its toll.

“I must admit, I have been close to crying

a number of times,” he says, recalling the

experiences of a client who lost her home to a

cyclone. “She’s 79 and she has a 55-year-old

mentally-disabled daughter. They were literally

in their beds when the cyclone came through

and ripped the roof and walls off. It is incredibly

upsetting when you know these people and it’s not

third-hand anymore.”

For such a proud community, it was also diffi cult to

see people come into the evacuation centres, says

Palmer, who volunteered through his Rotary Club to

help provide meals and comfort to people who had

nowhere else to go.

“There were 80-year-old ladies having to bed

down on stretchers in public,” he says. “They are

just not used to doing that sort of thing – it was

very upsetting and stressful for them.”

However, Palmer notes that it was also uplifting

to see how well most people handled their

predicament and heartening to see the community

spirit that arises from a disaster.

“I was surprised at the number of people that came

out to help,” he says, referring to the ‘Mud Army’

that helped residents remove over 30cm of silt and

mud from their properties.

Phillips says people got a lot of relief from the fact

that Tasmania is such a nautical place and the

boating community came together to give aid and

help evacuate people stranded on the Tasman

Peninsula.

Dunshea says it was amazing that in

Coonabarabran, despite such a horrendous fi re,

there was not a single loss of life.

“When I was over there, talking to some farmers

and some other people, the memories of the

Victorian bushfi res were pretty fresh in their

minds,” he says. “So when they were told to leave

their farms, they did.”

And the communities surrounding Coonabarabran

were quick to react when help was needed,

Dunshea notes. He is also an active Rotarian and

helped rebuild fencing to secure whatever livestock

the fi res left alive.

Dunshea says people often underestimate the

impact they can have through the simplest of

actions. “People think they have nothing to offer

but sometimes it’s enough to just go and give some

physical help,” he says. “Just giving some support

and comfort can be unbelievably welcome.”

Palmer agrees that helping out in small ways can

open up great opportunities to make a difference.

“Even handing out ready-made meals created

an opportunity to help people in more ways than

simply feeding them,” says Palmer. “It wasn’t just a

case of handing a meal over – in a lot of cases you

were sitting there talking with the people and just

going through it. The very fact that they knew that

someone cared helped a lot.”

Th e little thingsNatural disasters leave victims in such a state of

shock that they often do not know what to do fi rst.

Palmer admits there is little a fi nancial planner

can do in the fi rst few weeks of a disaster. Yet

little can mean a lot to someone who has lost

everything.

“Just the fact that there is someone they can go

to for information as a starting point is so valuable

because in most cases people wouldn’t have a clue

where to start,” says Palmer.

Dunshea says there are a lot of other things

happening in a person’s life once everything they

own has been wiped out. “There are a lot of things

that affect people mentally and they often don’t

have a clue where to start,” he says. “Some also

don’t know how to ask for help because they are

very proud people.”

The simple act of listening provides people with a

great source of comfort and hope because they will

invariably have a lot on their minds, Dunshea adds.

“A couple of people who I was referred to in

Coonabarabran are devastated,” he says. “They

are still in a state of shock and they don’t know how

to ask for help, and they don’t know where to start

to rebuild their properties and their lives. So racing

in there two or three weeks after the event to help

them get their fi nancial history back in order is

probably not a priority.

“First you need to establish contact with them, let

them know what services you can provide and that

it will be free of charge, and then when they are

ready, they can give you a ring,” Dunshea adds.

While the fi nancial recovery process is still in the

early stages for many people affected by disaster,

planners have many resources at hand that they


PRO BONO

–– “While it is emotional for them to be talking to you about it, it also pulls on your heartstrings

and you can’t help but get emotional about it.”

Sandy Dunshea

may take for granted. Photocopying, telephones,

email, scanners... these are all invaluable

tools for people who have had to sift through

burnt or fl ood-crinkled documents needed to

access funds, whether via super, insurance or

Government grants.

Palmer says clients walked into his offi ce not

knowing what to do next and initially, a lot of the

work involved fi lling out forms.

“It was more about doing things like photocopying

documents that had water damage or scanning

documents to send on to Centrelink, so they

could get assistance straight away,” he says.

Even providing an environment where people

do not have to wait for hours on end to speak to

someone can relieve a great amount of pressure,

Palmer notes.

“In some cases, people had to wait at Centrelink

for three or four hours before they could talk

to someone, giving them more time to dwell

on the disaster when they needed to be doing

something,” he says. “Whereas, people could

come along and talk to us pretty much on the

spot and on a more personalised basis.”

However, proving identity was a real battle,

although this was not as great a task for Palmer’s

existing clients, as he already held copies of

passports and driver’s licences. The half a dozen

victims of the fl oods who walked into his offi ce

on a referral basis provided a much greater

challenge for him.

“In those cases it is diffi cult to help,” says Palmer.

“When the fl oods hit, most people managed to

grab something but some people didn’t have

anything. They were literally at their wit’s end and

didn’t know where to go or what they could do.

But even though we couldn’t do a great deal for

them, the fact that we could refer them on to the

right area just relieved a lot of that anguish and

helped them to move on and start getting things

underway.”

In Tasmania, many people are only just starting

to emerge from the shellshock to understand the

new reality of things, says Phillips.


Continued on p40

• Hold the CFP® designation or Financial Planner AFP® designation, or have enrolled

in the CFP® certifi cation program;

• Have completed the registration form to be added to the FPA Pro Bono Program

(www.fpa.asn.au/media/FPA/ProBono_FPAMemberRegistrationForm.pdf); and

• Have their form counter-signed by their licensee.

Planners accepted onto the FPA Pro Bono Service scheme must provide pro bono

advice in accordance with the following conditions:

• The fi nancial advice will be provided at no cost to the client.

• The planner will fulfi l all the regulatory and professional requirements of providing

personal fi nancial advice, as defi ned under the Financial Services Reform Act and

the Corporations Act, and by the FPA’s Code of Professional Practice.

• Pro bono advice will be given with the same degree of competency, expertise and

professionalism and to the same high standard as any other work undertaken for a

fee paying client.

• The planner will refrain from using the pro bono role in any way to promote their

fi nancial planning business.

• The planner will refrain from any claim of special relationship with or endorsement

by Government based on participation in the scheme jointly with the Rural Financial

Counselling Service or any other organisation with which the FPA collaborates to

deliver pro bono advice.

To participate in the FPA Pro Bono Service, FPA members must:

FPA PRO BONO SERVICE

“So far the experiences recounted are just about

being ‘bloody lucky’ because there was no loss of

life,” he says. “But the money from the insurers and

the recovery task force is now starting to move out

to people and we’ll probably see a shift of mindset.”

Expertise come to lightTime will reveal the true extent of the recent spate

of natural disasters.

“Some people lost everything and some were

relatively unscathed,” says Phillips. “But the

fi nancial strength of the community has been

hammered and I expect that it will have a fl ow

on effect on some of my other clients at a later

stage. There would be very few fi nancial planners

in Hobart, in particular, who would not have

connections or clients with some property down

that way.”

Dunshea says a planner’s skills come to the fore

when people have overcome the shock and are

able to think things through logically.

“One of the fi rst things the planner can do is sit

down with the individual and help them recall their

insurance providers, superannuation funds and so

forth,” he says. This process enables the planner

to provide the client with a framework of all the

policies and cover that they possess, as well as

the savings they may have in the bank or in their

super, Dunshea adds. From there the planner can

take action to help them rebuild their fi nancial and

physical lives.

Palmer says while there is little fi nancial planners

can do in the immediate wake of a disaster, there

will be more to do as the months progress and

people start fi nding out what was covered by

insurance and what was not. He anticipates that

a lot of work will involve people who have been

doubly hit by the spate of fl oods in recent years.

“In the fi rst lot of fl oods a couple of years ago, the

insurance companies just didn’t cover them for

fl ood, end of story,” he says. “The problem is that a

lot of these places had never been fl ooded before

in recorded history, but the insurance companies

still said they were in a designated fl ood area so

they weren’t covered for fl ood. This time around a

lot more places were covered for fl ood because of

the actions of the Queensland Government. But

there are still a few people who aren’t covered.”

Even those with cover may not get all the money

necessary to rebuild and will have to start drawing

on savings and investments, Palmer adds. “For

those who are retired it is not such a big problem

accessing funds, but in a lot of other cases there

will be a big problem accessing funds if they are

not under Centrelink benefi ts. They won’t be able to

use the hardship provisions because a lot of these

people will be working to earn money, so we could

see some issues coming up with that.”

There may also be issues with people not being

allowed to rebuild at all and many may have to

relocate, Palmer notes.

Phillips says while the issues to be faced by

many Tasmanians affected by the fi res are

unknown at this stage, there is no doubt that

many will receive large payouts. “There will be

people receiving a large amount of insurance

money who will have to make decisions about

how it’s spent,” he says.

Phillips notes there is a vast mix of people on the

east coast and along the Tasman Peninsula, from

very wealthy commuter-types to true working class.

“A ‘shack’ in Tasmania can be anything from a

million dollar beachside house to literally a shack

that has been built in the traditional way with bits

and pieces,” he explains. “When it comes to the

latter, even if they get insurance payouts, they are

not going to be able to afford to rebuild. I think there

will be people thinking about relocating, as well as

those who want to rebuild but want to make the

right decisions about doing so.

“Fundamentally, fi nancial planners help people

make good decisions,” Phillips says, adding they

also help people consider things they never even

imagined might be an issue.

Dunshea has been involved in community work

for 20-odd years and believes there are a lot of

planners who contribute to their communities in

many ways.

“You get a great sense of personal satisfaction in being

able to help others less fortunate than yourself,” he

says. “I would suggest to any other fi nancial planner

that if they get the opportunity and they can see their

way clear to being able to donate some of their time

and expertise, then do it. Your help will be greatly

appreciated by those who need it.”

For more information about the FPA Pro Bono

Service, go to www.fpabestpractice.com.au/

fpaprobono. •


PRO BONO

Chris Palmer accepts a thank you plaque on behalf of his local Rotary Club for their volunteer work during the fl oods.

The plaque is handed to him by Major Tim Frankel of the 6th Aviation Regiment (The Redbacks).


DISASTER RECOVERY PAYMENTS

CENTRELINK

Floods and bushfi res have had a devastating effect

on communities in Tasmania, New South Wales and

Queensland this summer.

The Department of Human Services provides

several payments for individuals who have been

signifi cantly affected by a natural disaster.

For example, the Australian Government Disaster

Recovery Payment (AGDRP) is currently available

in declared Local Government Areas in Tasmania,

New South Wales and Queensland.

The payment of $1,000 for eligible adults and

$400 for eligible children helps people meet short-

term recovery costs and is available for people

who:

• are an Australian resident, and

• are 16 years or older or is receiving a social

security payment, and

• have not already received an Australian

Government Disaster Recovery Payment for the

disaster, and

• have experienced one or more of the following:

– they have been seriously injured;

– they are the immediate family member of an

Australian killed as a direct result of the disaster;

– their principal place of residence has been

destroyed or has sustained major damage;

– they have been unable to gain access to their

principal place of residence for a period of at

least 24 hours;

– they have been stranded in their principal

place of residence for a period of at least 24

hours;

– their principal place of residence was without

electricity, water, gas, sewage services or another

essential service for a continuous period of 48

hours;

– they are the principal carer of a dependent

child who has experienced any of the above.

Similarly, the Disaster Income Recovery

Subsidy (DIRS) is available for declared areas of

Queensland.

This payment supports disaster-affected

communities by helping to retain skilled workers.

This fortnightly payment – equivalent to the

maximum rate of Newstart Allowance for a period of

13 weeks – is available to eligible employees, small

business operators and primary producers in areas

where the payment has been activated.

For more information about eligible areas and the

assistance available, go to

humanservices.gov.au/disaster.

Change to the deeming rateThe Australian Government will reduce the pension

deeming rates from 20 March 2013 to benefi t

more than 740,000 pensioners by better refl ecting

returns available to them from their fi nancial

investments.

Deeming rates refl ect the standard rates of return

that pensioners can earn from their fi nancial assets.

They are used to determine how much pensioners

receive under means testing rules.

The lower deeming rate will decrease from 3 per

cent to 2.5 per cent for fi nancial investments up

to $45,400 for single pensioners or $75,600 for a

couple.

The upper deeming rate will decrease from 4.5 per

cent to 4 per cent for balances over these amounts.

From March 20 this year, pensioners and some

income support recipients will receive both this

indexation increase and the new Clean Energy

Supplement.

Payments affected by the deeming rate include

means tested payments, such as the Age Pension,

Service Pension, Disability Support Pension and

Carer Payment, income support allowances and

supplements such as the Parenting Payment and

Newstart.

For more information please go to

www.humanservices.gov.au

–– Floods and bushfi res have had a devastating eff ect on

communities in Tasmania, New South Wales and Queensland

this summer.

SOCIAL ADVICE

There has never been a better time to be a planner and we are about to embark

on a new era of innovation in service that is going to place the future of advice

fi rmly with a new breed of professional. This future does not lie in the hands

of regulators, nor is it dependant on investment markets or fi nancial product

manufacturers.

In the famous words of Alan Kay, “The best way to predict the future is to invent it”.

So join with me as we invent it together, for the sake of our profession, our clients

and ourselves.

The age of Social Business, or in our case what I like to call ‘Social Advice’, is

dawning – but it isn’t about social media (although it will certainly play a part).

Social Advice is about a new way of doing business, where we shift perspective,

remove artifi cial constraints that are out-dated, and truly innovate the ways in which

we manage relationships with our clients.

In this column over the coming months, I will be bringing you the latest in research

on client decision-making, with a focus on how to apply brand new technologies

and strategies to deliver more to your clients and become much more effi cient in

the process.

I will be relentless in exposing the huge amount of false information that is out

there: testing new ideas and theories, and showcasing to you what the new

leaders in your profession are doing, so that you too can be inspired to lead

the way.

Word of mouth and referrals are still the cornerstones of growing an advice-

based business, however, the way our clients communicate and where they

look for the validation of their decisions is completely changing. Conventional

planners who are ignoring leveraged communication media are quickly

becoming far less competitive, and their ability to maintain relevance in the

services that they provide to clients will be eroded very quickly over the next

few years.

Funnily enough, we are fi nding that this new revolution is much easier to embrace

by the ‘old hats’ of the profession, as their years of experience and highly developed

people skills, can be so easily applied to new media and new technology. Myths

like, “Social media is for younger clients and younger planners”, is something I will

disprove, as often understanding the technical aspects of the technology means

completely ‘missing the forest for the trees’.

Over this short period of time, we are also going to see a more rapid

transition of leadership in our profession, as the entrenched fi rms clinging

to old paradigms, who are ignoring this groundswell of innovation in the

planning profession, are quickly overtaken by those who are more nimble

and willing to adapt.

The exciting part is that the fi nancial planners who make use of these new tools at

their disposal will be able to reach the whole of the Australian population with their

own message. But remember, it shouldn’t be one that is technical; it should be one

that conveys the value of advice and the value of true relationships. The planning

community will no longer be beholden to the traditional press or their control over

perception.

The next evolution of our industry will be far more collaborative, because we

now also have the means to share ideas and collaborate in real time; we are

no longer limited by licensee borders, employment status or product volume

classifi cations. If you want to be among the leaders of your profession in this

new dawning, then it is imperative you share with others who are leading the

charge ... innovation breeds innovation.

Welcome to the future of advice – it is in your hands and I look forward to bringing

you the ideas, tools and stories to empower your journey.

Baz Gardner is the founder and principal of The Social Adviser.

THE FUTURE OF ADVICE


In a new column, Baz Gardner will expose some of the myths around social media and share ideas, tools and case studies that illustrate how any planner can become a leader in the new dawn of social media.

Be fully equipped using the FPA Code of Professional Practice to meet your obligations.

Align your advice process with regulatory requirements and the FPA Code in the key areas of Best Interests Duty, Opt-In, Scaled Advice, Confl icted Remuneration and Confl icts of Interest.

Understand what you can do diff erently in your advice process to enhance client engagement and deliver improved strategic advice.

Protect your advice and your business from client complaints and enforcement activity.

Build a sustainable and professional business for the long-term.

Bulletproof Financial Planning Roadshows visiting your local FPA Chapter during April - June.For details visit fpabestpractice.com.au/bulletproofroadshows

BOOK NOW!

Visit fpabestpractice.com.au/bulletproof

video updates

easy reference guides

webinar learning

FoFA FAQs

A practical education and resources toolkit

Whether you are new to the profession or an experienced fi nancial planning practitioner, this new practical education resource has been developed as part of the FPA’s commitment to support you through the FoFA changes and beyond.

WebinarRecordingsNOW AVAILABLE!

The Sydney Chapter’s fi rst Elev8 event for the year was well supported

by Chapter members, students and industry professionals.

About 100 people heard inspirational presentations from a

range of speakers including Kylie Macfarlane, who shared her

thoughts around the importance of ‘down time’ in achieving peak

professional performance. Kylie spoke about her decision to

take a one-year sabbatical and the lessons she learned during

this time which helped her achieve more in her professional and

private lives.

Cameron McAusland, as one of the pioneers of MLC’s direct

advice model, explained how he came to be involved in this

initiative. He also explained why he is so passionate about being

an entrepreneur and the importance of being part of the local

community.

Another speaker, Keith Peel, shared a deeply personal story

concerning one of his daughters. Keith spoke about the role

fi nancial planning has played in his life and how, with the help of

his planner, he will be able to pursue medical treatment for his

daughter overseas.

These three speakers joined Scott Dawkins, Tony Bingham and

Louise Lakomy who all shared inspiring stories.

Elev8 is a Sydney Chapter initiative, which goes to the heart of

learning and sharing. Elev8 is about engaging with young and

‘young-at-heart’ professionals who want to hear from other

‘grassroots’ professionals about fresh ideas and concepts on better

ways of engaging with clients, and transforming their own business

and themselves.

ELEV8 SHARES PERSONAL STORIES

CHAPTER EVENT REVIEW

REGIONAL ROUNDUP

Elev8: Sharing ideas and concepts on better ways of engaging with clients.

William Johns, John Alam, Tahni Morrison and Jerome Alam.

Pene Lovett and FPA Board Director Louise Lakomy.

Frank Casarotti and Shelly Pokorny.

Elev8 presenter Tony Bingham with Stewart Bell.

John Hill and Susan Rochester.

Claire Wivell Plater and Hillary Ray.

Rachel Bell and Mitchell Gallina.


Energy Super

OnePath

Professional Investment Services

Schroders

Terrington Consulting

Treasury Group

Thank you to our Chapter supporters

The recent Melbourne Chapter golf day players hit the

green for a shotgun start on a picture postcard course

at Yarra Yarra Golf Club. Following the golf was a lunch

and an offi cial presentation ceremony. For the fourth

consecutive year the major sponsor of the day was

nabInvest. The overall winners on the day were one of the

nabInvest teams: Felicity Hanes, Stuart Carboon, Darren

Shaw and Matt McDonald.

In conjunction with CPA Australia, the FPA is

offering members the opportunity to attend the

upcoming CPA Economic Update lunches.

The lunches will explore the future for the

Australian economy. Topics that will be

discussed at the lunches include:

• Can we trust the China/Asia boom to keep

on delivering?

• How is the Australian economy travelling

now and what is the outlook?

• When will the RBA’s interest rate cuts help

the slow lane of the two-speed economy?

• What other factors will help or hinder our

economic recovery?

• Will the negatives from Europe be

outweighed by our strong economic

relationships with China and the emerging

economies of Asia?

• When will the Bear stock market end, and

will it end with a bang or a whimper?

There are two remaining lunches being held

in Perth (9 April) and Sydney (19 April).

The cost for FPA members is $55 and $70

for non-members. For more information, go to

www.fpa.asn.au or email [email protected].

SHOTGUN START FPA/CPA ECONOMIC UPDATE

www. fi nancialplanningmagazine.com.au | FINANCIAL PLANNING | APRIL 2013 | 45


EVENT CALENDAR

EVENTS AND PROFESSIONAL DEVELOPMENT CALENDAR: APRIL 2013As part of the FPA’s commitment to support members through the FoFA changes, the FPA is offering members free recordings of the six completed webinars. This is

part of the Bulletproof Financial Planning initiative. This initiative comprises a resources toolkit and practical education delivered via webinars and short video updates.

Members can register for a copy of the recordings by going to www.fpabestpractice.com.au/bulletproof and follow the link to the recordings.

9 AprilCanberra: Member Lunch Seminar

12 AprilFar North Coast: Member Lunch

15 AprilGeelong: Member Lunch

18 AprilTownsville: Member Lunch

29 April-2 MaySydney: AEPS® course

17-20 JuneMelbourne: AEPS® course

17-18 OctoberSydney: FPA 2013 Professionals Congress

19 AprilWestern Australia

22 AprilHobart

22 AprilNorthern Tasmania

23 AprilMid North Coast

24 AprilNewcastle

24 AprilNew England

30 AprilBendigo

30 AprilBallarat

6 MayGeelong

6 MayGoulburn Valley

7 MayGippsland

7 MaySouth East Melbourne

8 MayMelbourne

10 MayWollongong

14 MayCairns

14 MayTownsville

15 MayMackay

15 MayRockhampton

16 MayWide Bay

17 MayNorthern Territory

21 MayAlbury Wodonga

22 MayRiverina

22 MayACT

28 MayWestern Division

30 MayFar North Coast NSW

30 MayGold Coast

31 MaySunshine Coast

31 MayToowoomba/Darling Downs

4 JuneSydney

7 JuneBrisbane

13 JuneSunraysia

14 JuneSouth Australia

CHAPTER EVENTS FPA CHAPTER BULLETPROOF FINANCIAL PLANNING ROADSHOWS

These dates may be subject to change. For more information, go to

www.fpabestpractice.com.au/bulletproofroadshows

Charging for a professional service in a fi nancial planning environmentPresenters: Dante De Gori and John Bacon

CPD: 1 point

This webinar is presented by FPA

General Manager, Policy and Conduct,

Dante De Gori and FPA General

Manager, Professional Standards, John

Bacon. This session provides a FoFA

update and includes a comprehensive

discussion of the Opt-in regime. Other

issues covered off in this session

include the FPA’s ongoing service

solution – ‘Obviating the need for

Opt-in’ – and the requirements of

practitioners to adhere to the annual

Fee Disclosure Statement (RG245).

Incorporating the new Best Interests Duty in your advice processPresenters: Neil Kendall and Dante De Gori

CPD: 1 point

This customised session features practical information

from Tupicoffs fi nancial planner Neil Kendall CFP® and

FPA General Manager, Policy and Conduct, Dante De

Gori. The webinar provides a FoFA update, followed

by a practical discussion of the Best Interest Duty and

the advice process. The presenters then explain how

to practically implement the Best Interest Duty into a

practitioner’s practice and advice process. The webinar

concludes with tips on putting all the key points together,

as outlined in the webinar.

The post-FoFA professional practice(designed for Professional Practices)Presenter: Dante De Gori

CPD: 1 point

In this webinar, presented by FPA General Manager,

Policy and Conduct, Dante De Gori, practice

principals and managers are provided with the

latest FoFA update, followed by a discussion of key

ASIC Regulatory Guides, including: Best Interest RG

175; the FPA Best Interest solution (ie, changes to

the Code); and Confl icted Remuneration. De Gori

concludes the webinar by providing tips that put all

these key points together.

• Business risk mitigation to save you time and dollars (designed for Professional Practices);• Staged advice; and• With change comes opportunity (designed for Professional Practices).

Register for a copy of these recordings at www.fpabestpractice.com.au/bulletproof and follow the link to the recordings.

Other webinars available in the Bulletproof Financial Planning series include:

DIRECTORY

CHAPTERS

NEW SOUTH WALES

Sydney

Vicky Ampoulos

Chairperson

Tel: (02) 9303 6223

Email: [email protected]

Mid North Coast

Julie Berry CFP®

Chairperson

Tel: (02) 6584 5655


Newcastle

Contact: Di Bungey

Tel: (02) 9220 4503


New England

David Newberry AFP®

Chairperson

Tel: (02) 6766 9373


Riverina

Marie Suthern CFP®

Chairperson

Tel: (02) 6921 1999

Email: msuthern@fl ynnsprake.com.au

Western Division

Peter Roan CFP®

Chairperson

Tel: (02) 6361 8100

Email: peterr@roanfi nancial.com

Wollongong

Mark Lockhart AFP®

Chairperson

Tel: (02) 4244 0624

Email: mark@jamfi nancial.com.au

ACT

Canberra

Rick Forster

Chairperson

Tel: (02) 6273 0444


VICTORIAMelbourne

Julian Place CFP®

Chairperson

Tel: (03) 9622 5921


Albury Wodonga

Wayne Barber CFP®

Chairperson

Tel: (02) 6056 2229


Ballarat

Paul Bilson CFP®

Chairperson

Tel: (03) 5332 3344


Bendigo

Gary Jones AFP®

Chairperson

Tel: (03) 5441 8043


Geelong

Brian Quarrell CFP®

Chairperson

Tel: (03) 5222 3055


Gippsland

Rod Lavin CFP®

Chairperson

Tel: (03) 5176 0618


Goulburn Valley

John Foster CFP®

Chairperson

Tel: (03) 5821 4711


South East Melbourne

Scott Brouwer CFP®

Chairperson

Tel: 0447 538 216


Sunraysia

Matt Tuohey CFP®

Chairperson

Tel: (03) 5021 2212


QUEENSLAND

Brisbane

Ian Chester-Master CFP®

Chairperson

Tel: 0412 579 679


Cairns

Danny Maher CFP®

Chairperson

Tel: (07) 4051 7799

Email: dmaher@fi ducia.net.au

Far North Coast NSW

Shane Hayes CFP®

Chairperson

Tel: 0411 264 002


Gold Coast

Philippa Sheehan AFP®

Chairperson

Tel: (07) 5667 7543


Mackay

Matthew Stevens AFP®

Chairperson

Tel: (07) 4957 2252

Email: matt@fi nlinx.com.au

Rockhampton/Central Qld

David French AFP®

Chairperson

Tel: (07) 4920 4600


Sunshine Coast

Greg Tindall CFP®

Chairperson

Tel: (07) 5474 1608


Toowoomba/Darling Downs

Bob Currie CFP®

Chairperson

Tel: 0420 301 081


Townsville

Deirdre Walsh CFP®

Chairperson

Tel: (07) 4775 5703


Wide Bay

Chris Palmer CFP®

Chairperson

Tel: (07) 4153 5212


SOUTH AUSTRALIA

Michael Farmer CFP®

Chairperson

Tel: 0435 934 820


NORTHERN TERRITORY

Alex Brown CFP®

Chairperson

Tel: (08) 8980 9300


WESTERN AUSTRALIA

Randall Stout CFP®

Chairperson

Tel: (08) 9200 3123


TASMANIA

Hobart

Todd Kennedy CFP®

Chairperson

Tel: (03) 6233 0651


Northern Tasmania

Chris Elliott CFP®

Chairperson

Tel: (03) 6323 2323


FPA CONTACTS AND CHAPTER DIRECTORY

Member Services: 1300 337 301

Tel: (02) 9220 4500 Fax: (02) 9220 4582

Email: [email protected] Web: www.fpa.asn.au

FPA BOARD

Chair

Matthew Rowe CFP® (SA)

Chief Executive Offi cer

Mark Rantall CFP®

Directors

Matthew Brown CFP® (QLD)

Patrick Canion CFP® (WA)

Bruce Foy (NSW)

Neil Kendall CFP® (QLD)

Louise Lakomy CFP® (NSW)

Julie Matheson CFP® (WA)

Peter O’Toole CFP® (VIC)

Philip Pledge (SA)

BOARD COMMITTEES

Member Engagement and Growth Committee

Patrick Canion CFP®


Professional Standards and Conduct Committee

Peter O’Toole CFP®


Audit Committee

Philip Pledge


Governance and Remuneration Committee

Matthew Rowe CFP®


Policy and Regulations Committee

Neil Kendall CFP®


Professional Designations Committee

Julie Matheson CFP®


CHANGES: To update these details, please advise Di Bungey on (02) 9220 4503 or [email protected]


It’s critical to adapt when conditions demand it. And conditions for Financial Planners are changing fast. The controls you have are the value of your advice and theproducts and services you offer. Taking control in tumultuous times is something Captain Richard de Crespigny knows a lot about. On a November day two yearsago, his Qantas Airbus A380 lost three engines and 21 of 22 operating systems.

But he adjusted fast to the new conditions, and managed to land the plane safely. That’swhy we’ve invited him to speak at our exclusive breakfast seminar for Financial Planners.To reserve your place, run your QR reader over the code below, or punch in adapt2013.com.au

Meet the man who can

in the toughest conditions – Captain de Crespigny

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