Financial Planning October 2014

PP24

3096

/000

11

Volume 26 Issue 9

October 2014

$15.00

The journey to greatness

THIS ISSUE: Succession Planning / Professionals Congress 2014Deeming of Account Based Pensions / Related Parties and SMSFs

Ray Martin hosts a discussion with

respected Australians who are inspiring others

Clients concerned about global markets?

Past performance is no guarantee of future results. The services and products provided by PIMCO Australia Pty Ltd (ABN: 54 084 280 508, AFSL: 246862) are only available in Australia to persons who come within the category of wholesale clients as defined in the Corporations Act 2001. They are not available to persons who are retail clients, who should not rely on this communication. Before making an investment decision investors should consider, with or without the assistance of a securities advisor, whether the information contained herein is appropriate in light of their particular investment needs, objectives and financial circumstances. Information contained herein has been obtained from sources believed to be reliable, but not guaranteed. No part of this publication may be reproduced in any form, or referred to in any other publication, without express written permission. © PIMCO, 2014.

PIMCO has the answers.As global markets continue to shift and evolve, investors need to think differently about how to pursue and reach their long-term financial goals.

PIMCO can help you guide your clients through today’s investment landscape. Drawing on the experience and insight of our global network, PIMCO’s strategies offer a framework for conversations with your clients to address their needs and help meet their investment objectives in an evolving market.

Find the answers at pimco.com.au/theanswers

ALTERNATIVES. BONDS. EQUITIES. INCOME.

ContentsOctober 2014

24

2014

4 CEO message

6 News

8 Financial Planning Week

36 Chapter events

38 Centrelink

39 Directory

Financial Planning magazine is the offi cial publication of the

Financial Planning Association of Australia Limited (ABN 62 054 174 453)

www.fpa.asn.au • [email protected] • Level 4, 75 Castlereagh Street, Sydney NSW 2000

Phone 02 9220 4500 • Fax 02 9220 4580

Editor: Jayson Forrest

Locked Bag 2999, Chatswood NSW 2067

T: 02 8484 0906

E: [email protected]

Editorial Director: Tom Reddacliff

T: 02 9220 4549


Publisher: Zeina Khodr

T: 02 8484 0851


ABN 80 132 719 861 www.cirrusmedia.com.auCopyright Cirrus Media 2014

Average Net DistributionPeriod ending Mar ’1410,367

© 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 Cirrus Media. 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 © 2014 Shutterstock. ISNN 1033-0046 Financial Planning is published by

Cirrus Media 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.

Advertising: Jimmy Gupta

T: 02 8484 0839

M: 0421 422 722


Advertising: Suma Donnelly

T: 02 8484 0796

M: 0416 815 429


October 2014 | 3

10 Clarity of purposeAfter seven years on the FPA Board, with the last four as chairman, Matthew Rowe is stepping down but not before he refl ects on just how far the profession has come in that time. JAYSON FORREST reports.

14 CONGRESS: Journey to greatnessFour prominent Australians will discuss what greatness means to them, and how greatness in others has inspired them along their respective life journeys.

20 The BoardroomWith voting closing for this year’s FPA Board elections on 14 October, three Board Directors share their insights about what’s involved being on the Board.

24 Buyer bewareSuccession planning is as much about buying a practice as it is about selling one, but beware of the traps before getting out the cheque book, says JANINE MACE.

28 Deeming of ABPs CPD MONTHLY: With the recent passing of legislation, deeming rules will apply to new Account Based Pensions (ABPs) from 1 January 2015, impacting many clients, writes ANNA MIRZOYAN.

32 What can Kevin do?CPD MONTHLY: BRYAN ASHENDEN continues his look at the concept of related parties and SMSFs, with particular focus on regarding control of a trust and suffi ciently infl uencing a company.

Over the coming months, we

will invest much energy into

securing recognition of the high

standards of FPA members and

the value of the CFP® mark –

with government, other industry

stakeholders and consumers, too.

Behind our ongoing

campaigning are indisputable

fi gures that illustrate that high

quality fi nancial advice is linked

to consistently high standards.

Since 2009, the FPA has

been collecting data on ASIC

enforcement action concerning

individuals in relation to fi nancial

advice.

Numbers show that FPA

members represent signifi cantly

less than 5 per cent of the

overall ASIC enforcement action

each year – even though they

represent nearly 50 per cent of

fi nancial planners in Australia.

From a consumer trust

perspective, the numbers speak

for themselves.

Increasing standardsEducation has very much been

in the spotlight over the last few

weeks, and it will remain in the

spotlight for weeks to come.

The FPA has made several

submissions over the past

months, most recently to the

Parliamentary Joint Committee

(PJC), outlining recommendations

on lifting the educational and

professional standards of fi nancial

planners in Australia.

While it’s important that we

increase entry standards for

those joining the profession, it’s

also important we make known

the standards so many fi nancial

planners already commit to.

These standards have no

meaning, if consumers are not

aware of them.

We need a collaborative

approach to educating

consumers on where to look

for trusted fi nancial advice,

so they no longer feel fearful

or confused. Trust has to be

earned and the right building

blocks will help us achieve this.

These building blocks include

the separation of professional

fi nancial advice from product

sales, enshrinement of

the term fi nancial planner/

adviser, higher education

and certifi cation standards,

and the implementation of a

national register of fi nancial

planners. These measures will

go a long way towards creating

this separation. This level

of transparency is critical to

building trust and confi dence in

our profession.

Recognising excellenceLast month, we called for FPA

Award submissions and once

again, our awards program has

been a popular initiative. The

awards are designed to publicly

recognise superior outcomes

for clients when professional

fi nancial planning expertise is

provided in line with the FPA

Code of Professional Practice

and Code of Ethics.

When so much air-time is

dedicated to the wrongdoings

in our industry, it’s important we

take time to give credit where

it’s due. We’ll be announcing

winners soon and presenting

the national winners with their

award at the 2014 Professionals

Congress, taking place in

Adelaide on 19-21 November.

At the Congress, we’ll also be

recognising other contributors,

such as Life members,

committee contributors and

the highest performing CFP®

student last year.

To book your place at

the Congress, visit www.

fpacongress.com.au.

Hope to see you in Adelaide.

Mark Rantall CFP®

Chief Executive Offi cer

Give credit where it’s due

FPA members put their clients fi rst. They meet higher

education standards and commit to upholding a world-class

professional code. In my opinion, that level of dedication

deserves widespread recognition.

4 | Financial Planning www.fi nancialplanningmagazine.com.au

CEO Message

Aberdeen Multi-Asset Real Return Fund –

on the look-out for the best opportunities.

At Aberdeen, we understand that asset classes

can move quickly and unexpectedly. That’s why our

Multi-Asset Real Return Fund moves dynamically

between them, taking advantage of market conditions

to build wealth over time. So your investments can

take flight – while volatility is kept in check.

For more information on Aberdeen’s multi-asset

funds, please visit multiasset.com.au

Issued by Aberdeen Asset Management Ltd ABN 59 002 123 364 AFSL 240263.

We’re driven

To navigate fixed income markets.

At Aberdeen, we explore the fixed income landscape

to find the best investment opportunities. Our multi-

strategy approach delivers diversification benefits

within a robust risk framework.

For more information on Aberdeen’s fixed income

funds, head to aberdeenasset.com.au

The FPA has made a formal

submission to the Parliamentary

Joint Committee (PJC), outlining

its recommendations to lift the

educational and professional

standards of planners in Australia.

The recommendations in the

submission follow the framework

of the FPA’s 10-Point Plan, with

particular focus on a minimum

degree to become a new fi nancial

planner and recognition of the role

played by professional bodies in

assisting with consumer protection.

A summary of the key

recommendations in the PJC

submission are:

1. From 1 January 2018, new

fi nancial planners and fi nancial

advisers must:

a. hold an approved degree (AQF7

level) as a minimum entrance

education standard to be eligible

to provide Tier 1 personal

fi nancial advice.

b. meet relevant experience

requirements equalling one year

full-time in the previous three

years.

2. Existing fi nancial planners will be

eligible for appropriate transition

arrangements, including bridging

courses, completing additional

units of study, or completing

assessment options to meet the

new education requirements by

1 January 2019.

3. The current RG146 be dropped

and replaced with a holistic

framework to fi nancial adviser

education, including a new

curriculum approved by the

Financial Planning Education

Council (FPEC) at AQF7 level.

4. All fi nancial planners will be

required to meet minimum CPD

requirements of 90 points/hours

over a triennium.

5. No national exam required

if a new degree qualifi cation

and education framework is

implemented.

6. The development and

implementation of a co-

regulatory design, which

recognises and facilitates the

role of ‘recognised’ professional

bodies in assisting the regulator

to achieve its consumer

protection and confi dence

mandates.

7. Professional bodies are

recognised by meeting

certain qualifi cation criteria (ie,

Professional Standards Council).

8. The use of the titles fi nancial

planner and fi nancial adviser

be permitted only by individuals

holding a Practicing Certifi cate

as a member of a recognised

professional body.

9. General Advice be re-termed

‘general or product information’

and be limited to the provision

of ‘factual information and/or

explanations’ relating to fi nancial

products.

“The PJC Inquiry, designed

to examine fi nancial planner

education, professional standards

and ethics, and recognition of

professional bodies, will help

advance the profession of fi nancial

planning,” said FPA chief executive

offi cer, Mark Rantall.

“Australia’s largest institutions

have recently stepped up and

announced they will be lifting their

education standards for the benefi t

of consumers and the profession.

This is in line with our 10-Point

Plan to restore trust in the fi nancial

planning profession. Consumers

deserve this and more, which is

why getting the outcomes of this

inquiry right is so important.”

PJC submission calls for a lift in standards


News

AMP’s fi nancial planning academy, Horizons, will launch an online Masters

program with Griffi th University, enabling candidates to gain a Master of

Financial Planning through a fl exible program that incorporates academic

studies and practical experience.

The new program has been jointly developed between Griffi th University

and AMP Horizons, providing a fl exible pathway for candidates to gain

a university qualifi cation and employment opportunities across AMP’s

licensee groups.

Griffi th University Associate Professor, Mark Brimble said the online

program will build on the theoretical and practical base of the existing

AMP Horizons program, while for individuals aspiring to become planners

under the AMP umbrella, the new Masters degree will offer a learning

process embedded within industry frameworks.

“There exists two major trends in education; developing the capabilities of

students to study online, plus the alignment of study programs with the

industry to provide a holistic practical and theoretical framework,” Brimble

said. He believed this initiative will comfortably bridge these two areas.

According to AMP Horizons Director, Ameila Constantinidis, this new

Masters program with Griffi th University will provide an alternative

pathway for planners across AMP’s network to achieve AMP’s new

education standards.

These new standards require all existing and new planners to hold

an appropriate professional qualifi cation or designation, such as the

CFP® mark or Masters in Financial Planning. New fi nancial planners

must complete this qualifi cation within fi ve years of joining an AMP

licensee, while existing fi nancial planners have up to 31 December 2019

to do so.

AMP Horizons also has a partnership with the University of New South

Wales (UNSW), which provides eligible graduates of the Horizons

Professional Year Program, the opportunity to gain academic credit

towards a Graduate Diploma or Masters qualifi cation in fi nancial

planning at the UNSW’s Australian School of Business.

The fi rst intake for the Griffi th University Masters program will commence

in November 2014.

AMP and Griffi th Uni launch online Masters program

28%the percentage of planners

who rely on direct referrals from existing clients as their main

marketing strategy.

11%the percentage of planners who rely on referrals from networking

as their primary marketing strategy.

33%the percentage of planners

who utilise referrals from formal business partnerships as their

main marketing strategy.

11%the percentage

of planners who rely on their website/blog as their main

marketing strategy.

Source: Slice Survey – August 2014.

October 2014 | 7

Melbourne-based practice –

Scholten Collins McKissock – has

won the prestigious Gold Award

in the Accounting and Financial

Services category of the Australian

Business Quality Awards, for

successfully adhering to high

service standards and exceeding

the expectations of its clients.

Now in its seventh year, the

Australian Business Quality

Awards acknowledges enterprises

that demonstrate outstanding

service levels as assessed by

their clients. The organisation

measures businesses against

a range of internationally-

recognised principles of best

practice in client service.

“We are truly proud of this

accomplishment, which clearly

demonstrates our commitment to

provide our clients with an overall

quality service,” said Scholten

Collins McKissock practice

principal, Matthew Scholten. “In

our business, the client is central

to everything we do.”

The Australian Business Quality

Awards aim to raise the bar in

customer service by encouraging

businesses to be the best at what

they do and rewarding those

that excel in their respective

fi elds. Open to any organisation,

regardless of its size and the

nature of its business, the

awards evaluate how effective

an organisation is in performing

against its own and best practice

customer service standards.

There are three categories of

awards presented: the Bronze

Award for organisations that gain

a score of 70-80 per cent; the

Silver Award for a score of 80-90

per cent; and the Gold Award for

a score of 90 per cent or higher.

Practice goes for gold

*At tAA 31 M31 M31 MMarchhha c 2012014.44

009 009 009 009 AF9 AF9 A9 A SL NSSLSL NL No. 4o. 4o. 4093409340934099340 (“0 (“0 (“0 ( FideFideFided litylityityy AusAusAusu traltraltralia”)ia”)ia”)ia”). Fi. Fi. F delideliddelielity Aty Aty Aty Austrustrustraliaaliaalia is is is a mea mea membermbermber ofofof thethethe FIL FIL FIL F LimiLimLimiLimitedtedted grougrougroup ofp ofp of comcomcomco panipanipanian es ces ces ces commoommoommoommoom nly nly nlynly knowknowknowknowo n asn asn asas FidFidFidFidelitelitelitelity y yyThisThisThh docdocdocdo umenumenumeent wat wat wat was iss iss iss ssuedsuedsuedsuede by by yby by FIL FIL FILF RespRespRespResponsionsonsionsionss ble blebbleee EntinEntinttE ty (ty (ty (ty AustuAusAustAustA raliralaliralralia a) La) La) La)a) Limitmitmitm ed Aed Aed Aed ABN 3BN 3BN 3BN 33 143 143 143 148 058 058 058 0559 0999yooyoyou. Yu. Yu. Yu. Y. You sou soou so houlhoulo d cod cod coconsidnsidnsidnsidnsider ter ter ter ter he Phe Pheh roduroduoduo ct Dct Dt Disclisclisclclosurosurosuosure Ste Ste Se Statematematemtementsentsentsent (“P(“P(“PPDS”)DS”)DS”) forforforf FidFidFidelitelitelitty Auy Auy Auy A strastrastraalia lia lialia prodprodprodp uctsuctsuctsucts befbefbefbefore ore ore o makimakimakiima ng ang ang ang decdecdeccd isioisiosioisi n abn ababn aboutoutouout whetwhetwhether her her e to ato ato ao acquicquicquicq rerererWorlWorlWorlWorldwiddwiddwidwide Ine Ine Ine InI vestvestvestvestmentmentmentment. Yo. Yo. Yo. You shu shu shu s ouldouldouldouldd conconconconsidesidesidedsid r whr whr whhhhetheetheetheetthehhether thr thttr this ppsis ppis ps produroduoduoduoduro ct ict ict ict ct s aps aps apaps appropproppropproppro riatriatriatriatate foe foe foe foe f r yor yor yor you

usstralatratratralia oa oia oon 18n 18n 1 00 100 100 119 219 219 219 2270 o70 o70 o70 o70 r byr br byr by dowdowdoownloanloanloadingdingding it it itt fromfromfrofrom ourouro webwebwebwe sitesitesitesite at at att www.www.www.www fi defi defi delitylitylityit .com.com.comcomo .au..au..au..au. ThiThihiThih s dos dos dos cumecumecumecum nt mnt mnt mt mt ay nay nay nay not bot bot bot bbe ree ree ree r prodprodprodrodproduceducededucuced or or or o trantrantrantransmitsmitsmitsmitted ted tedted withwithwithwithout out out out thethethethhor hor hor hor hr old old old oldold thethethethethe prodprodprodprodpro uct.ucuct.uct.uct. TheTheTheThee relrelrelrellevanevanevanevevant PDt PDt PDPt PDP S caS caS caS can ben ben ben be obtobtobttbobtaineaineaineained byd byd byd bb conconcononntacttactacttactct ingingingingingng FideFideFideFidedelitylitylitylityy AusAusAusAuAustrttrtgeded invinvinvinvinvinvinvestmestmestmestmestmestmestment ent enent scheschescheschesc mes mes mes mess is Fis Fis Fis FIL RIL RIL RIL Respoespoespes nsibnsibsible Ele Ele Entitntitntity (Ay (Ay (A(Austrustrustrus aliaaliaalia) Li) Li) Li) L mitemitemitemited ABd ABd ABd ABN 33N 33N 3N 33N 148148148148 05905905905905 0090009009009. Fi. FiF. Fidelidelidelidelity, ty, ty,tyty, FideFideFideFidedelitylitylityity WorWorWoW ldwildwidwldwid de Ide Idede Invesnvesnvesnvestmentmentmentmeme t, at, at, at nd tnd td tnd the Fhe Fhe Fhe Fidelidelideldelity ity ityity WorlWorlWorlWorldwiddwiddwiddwiddeeeeprioprioprioprioprior wrr wrr wrr wrwritteitteitteittetten pen pen pen pen permisrmisrmisrmismissionsionsionsionsion of of of of of FideFideFideFideFidelitylitylitylitylity AusAusAusAusA traltraltralraalia. ia. ia. iaia The The The The TT issuissuissuissus er oer oer oer oof Fif Fif FiFiF delidelidelidelidedelidelity’sty’sty’sy stty s manmanmanmanmanma agedagedagedagedageaga

IL RL RIL RL RRRespoespoespoespoespoespop nsibnsibnsibnsii le Ele Ele Ele Ee EEntitntitntntitntitnt y (Ay (Ay (Ay ((Austrustrustrustrustraliaaliaaliaaliaalia) Li) Li) Li) L mitemitemitemited.d.ddInveInveInveInveInvestmestmestmestmestment lnt lnt lt nt logo ogo ogo ogo go andandandandand F syF syF syF syF symbolmbolmbolmbolmb areareareare tratratratratrademademademademademarks rks rksrks rks of Fof Fof Fof Fof FIL LIL LIL LL LIL Limitimitimitmitm ed.ed.ed.ede © 20© 20© 20© 2© © 20© 202 14 F14 F114 F14 F14 F4 FIL RIL RIL IL RILIL FIL1FIL1FIL1FIL1100620062006200 222

AT FIDELITY, WE SEE THINGS OTHERS DON’T.

uuumememem n.n.n. WWWhihichchh iis s a aEgEggsgsgs aarerere aa vvvalalaluauauablblble e e sososourururcecece ooof f f alalalbububub mmm

ss lololoveveved d d bybyby tthehehekekeey y iningrgrg edededieientntnt iin n thththe e e cococosmsmsmeteteticicic cccrererer amamams s s

grgrg owowwiningg InInndididiananan mmididddldld e e e clclclasasass.s.s.

mamamandndnd fforor SoSoSo aas s s InInIndidianann iincncomomomesess gggo o o upupup, , sosoo dddoeoeoesss dededemmm

mm.. GrGrGreaeaeat t tcococosmsmsmeteteticicics s s anananddd thththeee egegeggsgsgs ttthehehey’y’y’rerere mmmmadadade e e e frfrfromomom.

aalllllly y yneneenen wswswss iiiif ff f yoyoy u’u’u’u rereree aaa cccchihihickckckkenenen fffararaarmememer.r.r. BBButututt aaan n n n eqeqeqe uauauaua

nnnnveveveveststststorororo imimimimpopopopoortrtrtrtanananant t t inininsisisisighghghg t t t t ififff yyyyououou’r’r’re e e aaa glglglg obobobalalaal eeeeququququuititititieieieies s ss inininin

exexexpopoposesesed d d d tototoo ttttheheheh ggggrororoowiwiwingngngg cccosososmememetititicscscs iiindndndususustrtrtry.y.y.

prprroaoaoachchch ThThT atata ’s’ss tthehe aadvdvannantatagege oof f FiF deded lilitytty’s’’s uuniniiquque e apapppppp

ssss 11112222totototot rrrrreseseseseseaeaeaeaarcrcrccrch.h.h.h IIIt t t tt alalaa lolooowswsws oooovevevver rr r 353535353 0000 exexexexpepepepep rtrtrtrts s s s acacacacacrorororossssssssss

iit’t’t’sss nononootttcocococounununntrtrtrieieieies*s*s*s* tttto o o o thththhthininininnk kk k k asasasasa ooooonenenene... BeBeBeBecacaccaususussee e e afafaftetetet r r alalaa l,lll

SSSSeeeeeeee mmmmororororeeejuststst wwhahat t yoyou uu knknk owowow, ititii ’s’s hhow yyouuuu ccononono nenenenectctctct iiiit.t.t.t. SSSS

attatat fi fififi dededeliiiity.com.au//reeeeseseararararchchchchadadadadvavavavantntntntagagagagage3e3e3e3e3

WHY THE HOUSEWIVES OF DELHI LOVE THE CHICKEN FARMERS OF IOWA

Vale: Michael SummersIt is with sadness that the FPA

reports the passing of long

time FPA member, Michael

Summers. Michael was a

former Chair of the Gold

Coast Chapter, and was part

of the current committee. He

dedicated nearly 40 years

to fi nancial planning, was an

active member of the FPA and

sat on several committees.

Michael was also active with

the Gold Coast and District

Rugby Union, where as

Chairman, he was involved in

the advancement of rugby on

the Gold Coast from juniors

through to representative level.

Michael passed away

peacefully in his sleep on

23 August.

Griffi th Business School

has teamed up with Zanetti

Recruitment & Consulting for a

study of remuneration rates and

incentives in the fi nancial planning

industry.

The nationwide survey is currently

underway, and seeks to examine

how remuneration levels are

structured in small and medium

enterprises across the fi nancial

planning market. The study

also looks at incentives across

all job categories following the

implementation of the FoFA

reforms.

“The aim (of the survey) is to

deliver meaningful information to

participating fi nancial planning

business owners,” said Griffi th

University Associate Professor,

Mark Brimble.

“We anticipate it will provide

incredibly rich data to help

business owners in their decision-

making around existing staff

structures and potentially improve

the attraction of new staff to their

business.”

Current results of the survey

indicate that 44 per cent of

respondents have business

turnover greater than $1 million

and for 7 per cent it is greater

than $5 million.

Sixteen per cent of practices are

self-licensed and 61 per cent

have been in operation for greater

than 10 years.

Currently, 130 businesses

have completed the survey,

representing almost 60 per cent

of the target number.

The full results of the survey are

expected to be released in early

November.

Survey of planner remuneration


News

Financial Planning Week 2014Rebuilding the trust gap

The recent fallout stemming from the failings of parts of the

Commonwealth Bank around the delivery of fi nancial advice to clients,

squarely put the media and regulatory focus once again on the fi nancial

planning profession. As such, a key focus of this year’s Financial Planning

Week was to rebuild the trust gap between fi nancial planners and the

public, which is absolutely vital if the profession is to improve the national

standards of the retirement savings and fi nancial security of Australians.

“The fi nancial planning profession has been in the spotlight recently, and

education announcements made during Financial Planning Week by

large fi nancial institutions [primarily around adopting key elements of the

FPA’s 10-Point Plan] are another win for consumers because they will

ultimately result in better protection and quality of advice,” said FPA chief

executive offi cer, Mark Rantall.

This year’s interactive ‘Ask an Expert’ Q&A on the FPA website proved

hugely popular with consumers, generating 66 questions and attracting

over 22,700 visits – over double the number of visits recorded last year.

The ‘Ask an Expert’ service allowed people to submit their questions to

an expert panel of FPA practitioners.

The most popular topics on this forum included superannuation, home

loans, pensions and retirement.

The FPA also ran a consumer blog throughout Financial Planning Week,

which focused on different demographic groups, providing targeted and

relevant content for each group.

The blog recorded 23,117 views, with 86 per cent of these views for the

‘Getting fi nancially ahead in your 20s and 30s’ blog by Zoe Lamont.

“This piece about getting ahead in your 20s and 30s was most popular,”

Rantall said. “Often we assume that people who fi t into this demographic

aren’t actively looking to manage their fi nances, but Financial Planning

Week has revealed that their appetite for advice isn’t much different from

the retirement age group.”

Just under 7,000 people viewed the FPA’s ‘Find a Planner’ directory

during Financial Planning Week, with 2,246 different planner profi les

viewed at least once. This equates to 28 per cent of FPA planner profi les

being viewed during this one week period.

The FPA also ran an intensive media campaign during Financial Planning

Week that targeted key consumer media and social network channels.

The FPA campaign promoted all its practitioner members, as well as its

5,500-strong CFP® professionals, with the ads asking consumers to look

for a CFP® professional when seeking fi nancial advice. These ads were

rotated in the media with other ads that continued to promote the higher

standards of all FPA practitioner members.

Financial Planning Week generated 48 pieces of media coverage, with a

potential viewership of 20,269,278.

Rantall said he was delighted by the level of consumer engagement

Financial Planning Week achieved for the profession.

“For 14 years, the goal of Financial Planning Week has been to show

Australians the positive impact that qualifi ed advice can have, and also

encourage them to seek personal advice of their own,” he said.

“I want to thank those members who have contributed to the success

of this year’s Financial Planning Week by contributing to the blog and

‘Ask an Expert’ forum. We represent a community of professionals who

are passionate about improving the lives of their clients through qualifi ed

fi nancial advice, not only during Financial Planning Week, but ongoing.”

The FPA recently celebrated its 14th consecutive Financial Planning Week (25-31 August), with over 22,000 visits to the ‘Ask an Expert’ online page, demonstrating the strong interest in fi nancial advice amongst consumers.

© Rabobank Australia Limited

Legal stuff but nothing sneaky: *Subject to change and applies to a SMSF or trust 90 Day Notice Saver account on balances up to $250,000. For Notice Saver product details, please visit rabodirect.com.au/keyaccountsnoticesaver. RaboDirect is a division of Rabobank Australia Limited ABN 50 001 621 129 AFSL no. 234700. The RaboDirect Terms and Conditions and Notice Saver Product Disclosure Statement are available at rabodirect.com.au. You should consider the relevant disclosure documents before making any decisions relating to any of our products.

3.80%p.a.*

NOTICE SAVERFlexible High Interest Account

Offering up to

variable

Because Your Clients Trust You To Offer Them The Very Best

Looking for a better way to invest your clients’ cash?

Our Notice Saver Account can maximise their earnings. We just need to receive 90 days’ notice before a withdrawal.

Clients can choose to have monthly interest paid into a High Interest Savings Account, or re-invested in their Notice Saver Account.

Talk to our Key Account Services teamOur experienced and enthusiastic team is

dedicated to the financial services industry.

Ask us about our flexible and attractive

Notice Saver Account today.

FLEXIBILITYAdd to clients’ savings as often as you like

FAIR Zero fees, so your client’s money stays theirs

CHOICE Choose from 31, 60 or 90 day notice periods

Call Us 1800 79 10 79Email us [email protected]


Chairman

“We stand on the shoulders of those who came before us.”

Looking back at his seven years

on the FPA Board, Matthew

Rowe is justifi ably proud of the

achievements the FPA has made,

most notably moving down the

path of professionalism by lifting

the educational and professional

standards of planners in Australia.

It’s been a tough gig for the FPA

chairman, who after seven years

on the Board with the past four

spent as chairman, relinquishes his

position on the Board at this year’s

AGM in November. But it has been

a gig that Matthew has embraced

with passion and enthusiasm that

some may say almost verges on

the fanatical.

Refl ecting back over the past

seven years, Matthew says his

motivation to join the Board in

2007 was due to a strong belief

in giving something back to the

profession that he has received

so much from. He recalls some

sagely advice: “A very wise person

once told me that a professional is

a debtor to their profession.”

The last seven years have been a

tumultuous and evolutionary time

for the profession. But Matthew

sees the real change over that

period coming not from regulation

but through the positive difference

coming from within the profession

to the way in which planners want

to be seen.

“Financial planners are changing

the language of those in

management positions within

their organisations. The language

of sales, product and distribution

is going. Planners now speak of

value, advice, client and quality,”

Rowe says. “I have seen a growing

confi dence in my colleagues that

our professional obligation over-

rides that of any management

short-term incentive. It is this

sense of professional obligation

to do the right thing that will drive

further change from within.”

HighlightsMatthew is quietly satisfi ed with

the achievements the FPA and

Board have been able to deliver

to members over his seven

year tenure, but when asked to

pick some highlights, his praise

quickly returns to the passion and

engagement shown by members,

FPA staff and the Board to steer

the industry towards becoming a

profession.

“It has been so important to have

a team that has passion for the

profession of fi nancial planning,

which can only come from being

emotionally invested with our

cause. I am reminded time and

time again, that people who are

fi nancially invested only expect

a return, but people who are

emotionally invested, seek to

contribute.

“We have clarity of purpose in the

FPA. This has enabled our Board

and leadership team to operate

well above industry politics and

self-interest that had at times

plagued our organisation. The only

faction in the FPA is the faction

of individual fi nancial planning

professional practitioners and it is

a faction of over 10,000 strong.”

After seven years on the FPA Board, with the last four as chairman, Matthew Rowe steps down in November, but not before he refl ects on just how far the profession has come in that time. Jayson Forrest reports.

October 2014 | 11

Continued on p12

Elaborating on the above point,

Matthew concedes that the

7 April 2011 vote to change the

FPA’s membership structure,

by removing the large Principal

category to become an individual

practitioner focused association,

was a defi nite highlight for him as

chair of the FPA.

With 94 per cent of practitioner

members voting in favour of

this change at an Extraordinary

General Meeting, it was a

defi ning moment for the FPA in its

journey to become a professional

association. It also provided the

Board with an overwhelming

mandate from members. “It was

the day,” says Matthew “that the

FPA was born as a professional

association in the true meaning.

“The vote meant we moved

on from being an industry

association representing the

commercial interests of a very

diverse membership, to become

a professional association acting

in the public interest on behalf

of individual fi nancial planning

professional practitioners only.

“The vote enabled us to say very

clearly: this is who we are. ‘We’re

a professional body for individual

practitioners who act in the

public’s best interest.’ We never

had that clarity before. It gave

us clear messaging around our

purpose: what we want to do; why

we exist; and our values.

“It is something that took many

people almost 20 years to

achieve. As such, it is important to

recognise that in this endeavour,

we stand on the shoulders of

those who came before us.”

Matthew says it was really from

7 April 2011 that the organisation

and members came together,

because they were all lined up

behind a common purpose.

“Every single decision from that

point was based on: is this in the

public interest, and is this what

a professional body should be

doing. From there, we formed our

policy framework, so that now

we have four policy pillars when

we make any decision: public

interest, professional practitioner,

government and regulations, and

Code of Professional Practice. This

made decision-making easier and

quite transparent.”

Today, the FPA is fi nancially

sustainable, with its operating

costs met by individual

membership revenue only. It is

not beholden to any third-party

or competing interests, which

Matthew is justifi ably proud of.

FoFAWhen it comes to FoFA, Matthew

is surprisingly pragmatic. He

agrees the reforms have been

challenging for some members,

but believes most practitioners

have been evolving their business

and advice models for some

years, towards implementing

the principles FoFA originally set

out around client best interest

and the removal of confl icted

remuneration.

But he is less accommodating

around the way the profession

was treated by government and

competing stakeholders.

“The real challenge was having our

profession treated like a political

football. There are a lot of very

good members of the FPA who do

the right thing each and every day.

They suffered a lot over four years

of FoFA implementation, but we

will be stronger for it. The scandals

that have plagued fi nancial

planning have acted as a catalyst

for a lot of lids to be lifted on the

unacceptable, the confl icted and

low standards that are well past

their use by date.

“The Australian public have told

us they don’t accept RG146;

they don’t accept confl icted

remuneration; and they will not

tolerate it if we don’t act in their

best interest. They are telling us

they expect fi nancial planners to

be someone who they can trust

and respect, because what we do

is of vital importance to them.”

10-Point PlanMatthew is noticeably proud of

the FPA’s 10-Point Plan for the

future of the fi nancial planning

profession. He sees it as an

important and pro-active initiative

by the FPA, which has already

garnered support from ASIC and

Government.

The major players in fi nancial

services have adopted signifi cant

elements of this plan for their

advisory networks. This is a

signifi cant achievement for the

direction the FPA is taking the

profession, in preparing planners

for the next steps required for a

clear separation between product

and advice, and in delivering

professional autonomy for fi nancial

planners.

“The FPA is the only body that has

put forward such a comprehensive

plan. There might be elements of

the plan that people disagree with,

or perhaps need to be refi ned,

but ultimately, leadership is about

making decisions and not simply

making noise for the sake of media

and profi le. In this respect, the

FPA is certainly relevant. I measure

relevance through the change

produced for fi nancial planning –

the outcomes delivered, and not

the noise made.”

Matthew is confi dent that the

FPA will look back in 12 months,

after the next PJC Inquiry, with

90 per cent of the 10-Point Plan

having been implemented. “Our


“A very wise person once told me that a professional is a debtor to their profession.”

Chairman

plan will deliver good outcomes

for consumers and therefore, the

profession can only benefi t.”

Standing for what is rightHowever, in the fallout from the

CBA fi nancial planning scandal

earlier this year, the FPA (and

Matthew personally) faced strong

criticism over its tough stance

over the issue, particularly its call

for a National Summit on fi nancial

advice.

Matthew concedes that of his

entire professional career, this was

the most diffi cult time for him, both

personally and professionally. It

was a lonely time for the chair of

the FPA.

“This was an issue playing out

relentlessly in the national media,

day-after-day, and there appeared

to be no circuit breaker. The

scandal had reached out beyond

the industry into the lounge rooms

of ordinary Australians to become

the topic of conversation at family

barbeques. The scandal became a

character test for fi nancial planning

and like all character tests, much

is revealed through the choices

people make.

“With the benefi t of hindsight,

could I have done some things

differently – yes, of course – but

saying this, we made a choice

that we would not defend the

indefensible. We made a choice

to set policy positions that serve

the public interest. We made a

choice to put ourselves and our

professional body in harm’s way to

stand with Australians for a better

fi nancial future,” he says.

“As always, history will cool

emotions allowing people to calmly

judge actions taken and outcomes

will be clinically assessed with

the benefi t of hindsight. We only

have to look at the impact our

actions are now having on lifting

educational standards amongst

our major institutions to gain an

insight as to how history may judge

whether the ugliness was worth

fi ghting through.”

And considering this was the

loneliest time of his professional

career, would he do it all over

again? “Absolutely,” he says. “It

was the right thing to do.”

BoardWith the FPA Board elections

coming up in November, Matthew

has some fi nal advice for any

members considering nominating.

“Leave any political or commercial

agenda you may have behind. No

matter what platform you think you

are elected on, the FPA’s purpose

is to stand with Australians for a

better fi nancial future. If you don’t

get this ideal, then you should

expect your behaviour to be called

upon very quickly and repeatedly

by your Board colleagues.

“Undertake the Australian Institute

of Company Directors (AICD)

program, because being a good

practitioner doesn’t necessarily

mean you have the skills to be

a strong contributor as a Board

Director – understand that you are

there to govern not manage.

“Most importantly, serve time

within a Chapter or Committee,

get to know the organisation,

understand our culture, become

informed and make a contribution

at a grass roots level. This grass

roots contribution will hold you

in good stead amongst the

approximately 900 colleagues

you will need to vote for you. It will

also show your potential Board

colleagues that you earned your

seat with them, having done the

same hard yards they have.”

The futureSo, what is the future looking like

for the FPA and the profession?

Matthew pauses. “It’s a great

question.”

He looks towards a future post

the recent Senate inquiries into

FoFA and ASIC, and the PJC

inquiry into Standards, Education

and Ethics.

“Firstly, I fi rmly believe that in the

not too distant future, you will only

be able to call yourself a fi nancial

planner if you are a member of an

approved professional body. The

term fi nancial planner/adviser will

become restricted in law and it

will be linked to membership of a

professional body.

“Secondly, RG146 will be

completely revamped. You will

now need an approved degree

as a minimum entry requirement

into our profession and you will be

required to hold membership of an

approved professional body.

“Thirdly, there will be a national

register – available to the public

– of all fi nancial planners giving

Tier 1 advice to retail clients. It

will detail your education, work

history, professional membership

and standing, your licensee and

ownership. It will help us track and

remove the bad apples. It will help

consumers verify the good planners

and help us get rid of the spruikers.

“And fourthly, the public will

look for CERTIFIED FINANCIAL

PLANNER® practitioners as the

trust mark in planning. We know

that 94 per cent of consumers

looking for a fi nancial planner

would rather seek out the services

of a CFP over a non CFP.”

LegacyWhen asked to talk about his

legacy as chairman of the FPA,

Matthew is characteristically

uncomfortable. It’s not a subject

he enjoys addressing.

“Let members and the profession

judge me for what I’ve done,”

he says.

“No one really understands what

it’s like to be the chair of the FPA

unless you have actually done the

job – it’s unrelenting.

“I think every chair that the FPA

has had over our 20-year history

has left the organisation in better

shape than they found it. To me,

this is the mark of success. I

believe I have continued in the

tradition of our chairs and have

left the organisation in some way

better for being there.

“The team at the FPA has

achieved more than I ever thought

possible when I fi rst joined the

Board seven years ago. It’s been

a remarkable journey.”

So, does that mean he has

achieved all that he has set out

to do?

“I think so,” he says. “There is

nothing left on my ‘to do’ list,

other than to thank the members

and supporters who take time

away from their professional

efforts and families to make

their own contribution to our

professional community. Whether

they are Board members, Chapter

Chairs, Committee members or

volunteers for Future2, they serve

to form part of our professional

community; they contribute

to something more than

themselves.”

As a parting comment, Matthew

is keen to end this interview the

same way he began it.

“I took on the role as chairman to

make a positive difference, and

I believe in some ways, I have

made a positive difference,”

he says.

“I do know one thing though,

I am very proud to call myself

a CERTIFIED FINANCIAL

PLANNER® practitioner and an

FPA member, and I am part of

a professional community that

stands with Australians for a better

fi nancial future.”

October 2014 | 13


Our focus for Congress is to inspire greatness among the fi nancial planning profession.

Respected journalist Ray Martin,

will be one of four high-profi le

Australians appearing at the

opening plenary session of

this year’s FPA Professionals

Congress on Thursday, 20

November.

In keeping with the Congress

theme – ‘Inspiring Greatness’ –

Martin will host a panel of highly

respected Australians – Jihad

Dib, Tara Moss and Ita Buttrose

– who will each discuss what

greatness means to them.

They will draw upon their

experience and interaction with

other people, to discuss how

greatness in others has inspired

them throughout their lives.

“There is no one better

qualifi ed to open this year’s

Congress, and we look forward

to Ray taking us on a journey

through the lives of these three

Australians,” says FPA chief

executive offi cer, Mark Rantall.

“Our focus for Congress is to

inspire greatness among the

fi nancial planning profession

and it is appropriate to open the

event with a discussion among

four esteemed Australians,

including Ita Buttrose, the 2013

Australian of the Year.

“These four Australians have all

made a difference in the lives

of others through their chosen

vocation. We fi rmly believe that

planners are doing the same

in the lives of their clients, and

Congress is about highlighting

this message and inspiring

planners to continue making a

difference.”

As the host of this panel

discussion, Ray Martin needs

no introduction.

He was awarded an Order

of Australia in 2011 for his

The opening keynote presentation at the FPA Congress in Adelaide, will feature a compelling discussion about ‘greatness’. Hosted by celebrated journalist, Ray Martin, three inspiring Australians will discuss what greatness means to them personally, and how greatness in others has inspired them along their respective life journeys.

October 2014 | 15

Ray Martin, Jihad Dib, Tara Moss and

Ita Buttrose, join Andrew Denton,

Maggie Beer, Carl Richards CFP® and Michael McQueen, as an outstanding

line-up of speakers already announced for this year’s FPA

Professionals Congress.

For more information or to register your attendance, go to www.fpacongress.

com.au

Continued on p16

work in journalism, work with

indigenous Australians, and his

long involvement with charities.

His lifetime in journalism began

as an ABC cadet. In 1978,

he switched to Channel 9 to

launch 60 Minutes with George

Negus and Ian Leslie – a

program he still reports

for today.

In between this time, he

hosted Midday, A Current Affair

and countless network specials,

Federal elections and Carols by

Candlelight – winning fi ve Gold

Logies, over 20 Silver Logies

and an unmatched number of

People’s Choice Awards. His

best-selling autobiography, Ray:

Stories of My Life was published

in 2009.

The panel will feature esteemed

author, businesswoman,

media editor and committed

community and welfare

advocate, Ita Buttrose.

Twice voted Australia’s most

admired woman, Ita Buttrose

was the youngest ever editor of

The Australian Women’s Weekly,

the founding editor of Cleo,

the fi rst woman to ever edit a

major metropolitan newspaper

in Australia as Editor-in-Chief of

the Sydney Daily and Sunday

Telegraphs, and the fi rst woman

director of News Limited.

Another member on the panel

is the Principal at Punchbowl

Boys’ High School, Jihad Dib,

who managed to change the

culture of an entire school

through his modern-day

leadership style, which also

resulted in him winning the

Inspiration category for NSW

at the 2013 Pride of Australia

awards.

The panel will be rounded

out by Tara Moss, former

supermodel and author of nine

bestselling novels. Moss is a

voice for the rights of women

and children, and she will

explore how we are inspired to

greatness by our passion and

commitment.

In his unique and relaxed

journalistic style, Ray Martin will

take you on a journey through

the lives of his inspiring guests

at the opening plenary session

on Thursday, 20 November

at 9:30am.


Ray Martin will host a panel of

highly respected Australians

– Jihad Dib, Tara Moss and

Ita Buttrose.

Your story Do you have a story to

tell? If so, please contact the editor

on 02 8484 0906 or at editor@

fi nancialplanningmagazine.com.au

Congress

Dinner set to swingTom Burlinson and his

16-piece big band will

entertain diners at the Future2

Gala Dinner on Thursday 20

November. One of Australia’s

most popular entertainers,

Burlinson will salute the

masters of vocal swing,

performing some of the

greatest songs ever written.

Hosting this year’s event will be

celebrated media personality,

Ray Martin.

This is an evening event not to

be missed – so kick up your

heels and have some fun, while

helping to raise some money

for the Future2 Foundation.

The art of communicating with clientsLast year, dynamic speaker, author and master sketcher, Carl Richards CFP®, showed delegates ‘why’

simplicity is the key to communicating with clients. This year, he is back by popular demand, and will be

evolving last year’s theme be presenting an in-depth masterclass session on ‘how’ to communicate with

clients. This two-hour session is on Wednesday, 19 November at 2pm.

During this session, delegates will learn some simple, take-away strategies to enable them to more

effectively communicate with clients on supporting their fi nancial future.

Carl Richards is a CERTIFIED FINANCIAL PLANNER® and the director of investor education for the BAM

ALLIANCE, a community of over 130 independent wealth management fi rms throughout the USA. He is the

creator of the weekly Sketch Guy column in The New York Times and is a columnist for Morningstar Advisor.

Richards has also featured on Marketplace Money, The Leonard Lopate Show, Oprah.com and Forbes.com.

Places to this masterclass are limited, so delegates are advised to book early and reserve their place.

Attendees are able to separately register for this masterclass only, if unable to attend the Congress.

For more information, go to www.fpacongress.com.au

TAKE YOUR CLIENTS’ PORTFOLIO HIGHER

Legg Mason Brandywine Global Opportunistic Fixed Income Trust

Allocating to the right global fixed income strategy can open up a world of new opportunities. Broaden your

clients’ horizon with a trust that rises above the fixed income benchmark, opportunistically searching the world for

the highest real yields whilst taking a risk controlled approach. The Legg Mason Brandywine Global Opportunistic

Fixed Income Trust is a leader in the Global Fixed Income universe. The numbers say it all:

Contact Legg Mason on 1800 679 541 or visit leggmason.com.au

1 Mercer Investment Performance Survey of Hedged Overseas Fixed Income (Australian Investors) (Sovereign) as at July 2014.2 As at 31 August 2014. Past performance is not indicative of future performance.3 The Lonsec Rating (assigned September 2014) presented in this document is published by Lonsec Research Pty Ltd ABN 11 151 658 561 AFSL 421445. The Rating is a ‘class service’ (as defined in the Financial Advisers Act 2008 (NZ)) or is limited to ‘General Advice’ and based solely on consideration of the investment merits of the financial product(s). In New Zealand it must only be provided to ‘wholesale clients’ (as defined in the Financial Advisers Act 2008 (NZ)). Past performance information is for illustrative purposes only and is not indicative of future performance. It is not a recommendation to purchase, sell or hold Legg Mason product(s), and you should seek independent financial advice before investing in this product(s). The Rating is subject to change without notice and Lonsec assumes no obligation to update the relevant document(s) following publication. Lonsec receives a fee from the Fund Manager for researching the product(s) using comprehensive and objective criteria. For further information regarding Lonsec’s Ratings methodology, please refer to our website at: http://www.beyond.lonsec.com.au/intelligence/lonsec-ratings. Legg Mason Asset Management Australia Limited (ABN 76 004 835 849 AFSL 240827) is part of the global Legg Mason, Inc. group. Legg Mason Asset Management Australia Limited makes no guarantee of capital or income returns. This document has not been prepared to take into account the investment objectives, circumstances or particular needs of a person. Before investing you should obtain a copy of the Product Disclosure Statement, “PDS”. A PDS for the Legg Mason Brandywine Global Opportunistic Fixed Income Trust can be obtained by contacting Legg Mason Asset Management Australia Limited.

Ranked No. 1 over 1, 2 and 3 years1


Congress

Workshop streamsThis year’s Congress features four dedicated workshop streams – Best Practice,

Leadership, Personal Development, and Technical. The following is an overview of

the 24 sessions* available to delegates.

Best Practice

Cloud technology:

Digital disruption or

profi table growth?

How can you use cloud technology, and

what are the benefi ts and risks. Can a digital

strategy change your business economics?

Remuneration in

a Best Interests

world

Learn how to structure remuneration options

in a ‘Best Interests’ world.

Business planning

for success

Learn how to develop a business plan that will

maximise your chances of success.

Courage under

pressure: The

whistleblower

speaks

Learn about the whistleblower policies and

protections of regulators and the FPA. Hear

from whistleblower, Jeff Morris.

Positioning your

practice for change

This session will look at trends and their

potential impacts on the advice profession for

the 2020s and beyond.

The Art of

Communicating

Advice

How can you learn to communicate complex

strategies successfully? How can you adapt

your approach to clients with widely varying

levels of education and knowledge?

Leadership

Leadership: Are you

up for the challenge

Learn how to use leadership skills within your

practice to the benefi t of your clients.

A corporate guide

to mental health

and increased

productivity

Improve your work/life balance, and your

potential and productivity.

Harnessing the

right talent

Learn how to effectively use fl exible work

arrangements to actively attract and retain the

best people.

Get your GRIT

together

Find out how you can use internal dialogue to

resolve road blocks. Learn practical methods to

help your colleagues get through the rough times.

Practice makes

perfect: Lessons

from the frontline

Frontline leaders and practice owners share

their leadership experience and insights in a

panel discussion. Find out how they deal with

the challenges of running an advice practice.

Leading a positive

culture: Creating

a non-whinge

workplace

Learn how to move from ‘fi xer’ to ‘facilitator

and delegator’. Gain insight on how to identify

different behaviour styles and take steps

towards the ‘Go or Grow’ conversation.

Personal Development

A check up from

the neck up

What are the keys to identifying and

combating different sources of stress in the

workplace? Learn strategies for keeping work

stress out of your personal life.

The changing face

of survival

Our world is changing rapidly and the

reasons for longevity, or the lack of it, have

evolved enormously over the centuries.

Take a tour through history and gain some

surprising insights that will serve to enrich the

conversations you have with your clients.

Work/life balance:

Is it all in your

mind?

What are the best strategies for striking

a balance between your personal and

professional life? How can you recalibrate

your own personal blueprint?

Why we waste so

much time (and

how not to)

How can you manage your time more

effectively? Discover how to get more output,

with less input, and fi nd out what’s required

for success.

See it. Believe it.

Achieve it

Learn how to develop a performance mindset

and achieve great results in diffi cult times.

Leveraging your

personal brand

through LinkedIn

Explore the ways you can use LinkedIn

to grow your professional networks and

business opportunities.Technical

Managed

accounts: The next

best thing?

Discover the role of effi cient model portfolios

within managed accounts.

Unpacking CGT

rollover relief

provisions

How can you help clients minimise CGT

through specifi c rollover relief taxation

provisions?

Limited recourse

borrowing under

the spotlight

Discover the key issues of borrowing with

different assets. What will the future of gearing

look like within SMSFs?

Applying ‘best

interests’ to

insurance

Hear from a panel of expert practitioners on

methods to meet the ‘best interests’ duty

when giving insurance advice.

Unravelling

aged care

Learn about the top fi ve aged care strategies, and

how to effectively communicate with the families of

clients requiring aged care assistance.

Deciphering your

role in estate

planning

Hear a practical case study on the issues to

resolve when faced with estate planning for

blended families.

* Program subject to minor changes

Technical

Best Practice

Personal Development

Leadership

October 2014 | 19

Professionals Congress Program*

Time Wednesday 19 November

12:00pm Registration open

2:00pm Masterclass – Carl Richards CFP®

4:00pm Transition to AGM

5:00pm FPA Annual General Meeting

5:30pm Networking drinks

7:00pm Day concludes

Time Thursday 20 November

7:30am Registration open

7:30am Network breakfast, Expo Hall

9:10am Move to Main Auditorium

9:30am Congress opening and keynote session: Ray Martin, Ita Buttrose, Jihad Dib and Tara Moss

11:00am Morning Tea, Expo Hall

11:30am Technical Best Practice Personal Development Leadership

12:30pm Networking lunch, Expo Hall

1:45pm Technical Best Practice Personal Development Leadership

2:45pm Transition between workshops


4:05pm Transition between workshops


5:25pm Free time

7:30pm Future2 Gala Dinner

Time Friday 21 November

7:00am Registration open

7:30am Network breakfast, Expo Hall Women in Finance breakfast with Maggie Beer

8:45am Move to Main Auditorium

9:00am Keynote speaker: Michael McQueen

10:00am Morning Tea, Expo Hall


11:30am Transition between workshops


12:45pm Network lunch, Expo Hall

2:00pm Move to Main Auditorium

2:10pm FPA Awards and closing keynote speaker: Andrew Denton

3:30pm Professionals Congress closes

* Subject to minor changes

Technical Best Practice Personal Development Leadership


From the Boardroom

With voting closing for this year’s FPA Board elections on 14 October, three Board Directors share their insights about what’s involved being on the Board. Jayson Forrest reports.

Roundtable

PaticipantsLouise Lakomy CFP®, Senior Financial Planner, Crystal Wealth Partners

Matthew Brown CFP®, Practice Principal, MiQ Private Wealth

Patrick Canion CFP®, Chief Executive Offi cer, ipac Western Australia

Louise LakomyPatrick Canion

Matthew Brown

October 2014 | 21

Financial Planning (FP): What

motivated you to join the FPA

Board in the fi rst place?

Patrick Canion (PC): I had

reached a stage in my career

where I had the ability and desire

to serve. I fi gured I had enough

experience to have a worthwhile

opinion on things. I had also

been pretty critical of the FPA in

the past, and thought, I’ve either

got to put up or shut up. I really

did believe in what the FPA was

seeking to achieve; to become

a professional association. So, I

wanted to be able to play a part

in that.

Matthew Brown (MB): Having

been involved at a Chapter level

for the previous 10 years, and

Chapter Chair for four years,

I wanted to be involved more

from a strategic level and be a

part of the signifi cant reshaping

of the FPA. I believe we’re on

the brink of redefi ning fi nancial

planning as a profession. With

my experience as a practitioner,

I felt I had something to offer.

Financial planning has given me a

25 year career, so joining the FPA

Board was an opportunity to give

back to the profession that has

supported me.

Louise Lakomy (LL): I’ve

always been passionate about

improving the educational

standards of fi nancial planners.

When I became a fi nancial

planner nearly 15 years ago, I

was shocked that there wasn’t a

minimum educational standard

in place. Prior to becoming

a fi nancial planner, I was one

of the fi rst group of nurses

to come through as degree

qualifi ed. Because of that degree

qualifi cation, I experienced

fi rsthand the change in attitude of

doctors and the public towards

nursing, which is now one of

the most trusted professions in

Australia. So, since becoming

a fi nancial planner, it’s always

been my dream that one day,

planners will sit alongside nurses

as being another one of the

most respected professions in

Australia.

FP: What’s involved being on

the FPA Board?

LL: There’s a lot of time and

effort involved in being a Board

member. We have about eight

face-to-face meetings a year,

including strategy days, which

range from one to two day

meetings. There is also a lot of

reading required, as the Board

papers are quite thick and

lengthy, so you need to set aside

a fair bit of time to read them

prior to the Board meetings.

FP: Would you say the

function of the Board is quite

strategic?

PC: Defi nitely. A key part of being

a Board member is understanding

what the role of the Board is. It’s

not to second guess the daily

operations of the FPA. The Board

actually needs to be very strategic.

That’s something this Board has

done very well. We don’t make

decisions just looking at the next

week or the next month. We take

a three to fi ve year perspective

and look at how the implications

of decisions might roll out into the

future. We also try to anticipate

things. So, in actuality, the Board

is very different in practice than

what many members may expect.

MB: You need to at least double

your expectations around the time

involved being on the Board. As

Louise said, there’s a lot of reading

and understanding of issues

that’s required. You’re actually

right in there at the coalface

of development of policy and

the shaping of where fi nancial

planning should go.

To me, being a Board member

is a huge responsibility. You’re

there representing members and

members’ funds. And you’re also

representing the professional

community. So, you’ve really got

to look at the various viewpoints

coming from the diverse spectrum

of members. And then you’ve got

to debate and negotiate a better

outcome for fi nancial planners.

That involves government

policy, education standards and

consumer awareness.

FP: Being a Board member

means bringing a different set

of skills to the position. How

do you best prepare for being

on the Board?

LL: The best way to prepare is

being a Chapter Chair, as I was

with the Sydney Chapter for

six years. Being involved at a

Chapter level better prepares you

for understanding how the FPA

works.

PC: The Australian Institute

of Company Directors (AICD)

program is an excellent way to

help prepare, because it gives

you good insight into governance

and responsibilities and the role

of the Board member. Equally,

I think any opportunity that

members, who aspire to join the

FPA Board, get to serve on other

boards, provides really good

practical preparation for them.

MB: From a governance point of

view, you are actually a director

of an organisation. That comes

with a huge corporate governance

responsibility. Additionally,

because the FPA is a not-for-profi t

organisation, it means we are

dealing with members’ money.

Like Patrick, I’m a chairman of

another not-for-profi t and I’ve

been on a couple of other not-

for-profi t boards. You really need

to have that level of experience

to understand the responsibility

you have at your hand. So, being

on the Board doesn’t mean just

wandering in there, reading a

couple of Board papers, making a

couple of decisions and heading

off again. It’s far from that.

FP: What do you feel has

been the major achievements

of the Board during your

respective terms on it?

LL: The major achievement has

been the transformation of the

FPA from what was an industry

association to now being a

practitioner association. Our

dealings with government have

been much more successful

because we know who we are

and what we stand for. We also

have a robust code of ethics and

professional practice in place,

which is paramount to being a

true profession.

PC: The FPA is seen now as

a credible player in anything to

do with fi nancial services. And

that’s in the eyes of the other

stakeholders, including the

Government, Treasury, ASIC, and

the Financial Services Council.

If anything comes up to do with

fi nancial advice, the FPA is invited

to the table.

That all new members now have

to have a degree qualifi cation

to get voting rights, is a big line

in the sand for the FPA. I also

think the way we are working

to restructure our member

engagement through the creation

of regional Chairs is important.

And I’m proud that with all the

changes we’ve had, the FPA is

fi nancially secure. The Board has

overseen, and the management

has brilliantly implemented, a

position where we don’t need

corporations or sponsors to be

fi nancially secure. And we’ve

done it without increasing

member fees, as well.

Continued on p22


Roundtable

MB: The constitutional change

the FPA has undertaken over the

last 3-4 years has enabled us to

re-engage with members and

really become a true professional

association for practitioner

members. Also, it has enabled us to

become much stronger and more

visible in the community. We’ve also

had the opportunity to be at the

forefront of policy development, and

engagement with government and

stakeholders. And I’m really proud

that we haven’t raised membership

fees for the last three years. Yet,

we’ve been able to manage the

organisation with a surplus and

protect it fi nancially.

FP: How has the fi nancial

planning profession changed

over your period on the Board?

MB: I believe the regulatory

environment has become a lot

clearer for planners and licensees.

There’s been a lot more consumer

protections put in place, and some

clarity around that. Over the past

few years, the FPA has stayed on

message about what we felt was

the right approach for our members

and consumers, and where the

profession needed to go.

I’ve seen a lot of work done – and

being done – in the education

space, particularly in improving the

education requirements of fi nancial

planners and our engagement

with universities and the education

providers. Our involvement with

the Financial Planning Education

Council (FPEC) has been a positive

move by the FPA. I think we’ve got

a really robust framework around

advice now.

FP: The fact that the FPA

is working so closely with

universities, says a lot about

the direction the FPA has taken

over the past three years. Do

you agree?

PC: I totally agree. It demonstrates

that the FPA as an organisation

is not just concerned about itself,

but is actually concerned about

providing a career pathway for

people who aspire to be a part of

our profession. It’s about ensuring

the continuity of fi nancial advice

for all Australians. So, the fact

that the FPA has put its money

where its mouth is, and brought in

independent experts to drive that,

is something that Board members

are very proud of.

LL: I am on the FPEC and I’m

proud of how far we have come in

such a short period of time. We’ve

begun setting education standards

at the highest level. It’s very

exciting. There’s still a lot of work

to do, but I believe the profession

is united around this. And with the

high benchmark we are setting for

ourselves, this has given us more

credibility and the ability to talk to

government openly and frankly.

PC: The fact that government and

politicians want to talk to the FPA

is a tremendous achievement.

Politicians, the Government and

the regulator all now accept the

necessity of peer accountability as

part of a professional framework.

So, we’ve got the law and we’ve

got the regulator, but now we need

a professional association to hold

planners accountable. If you’re

going to be a fi nancial planner,

you’ve got to part of an association

that does that. That’s something

that really only happened

because of the Board’s vision on

accountability, and Mark Rantall’s

persistence in implementing it.

FP: In another benchmark

initiative from the FPA, it

recently released its 10-Point

Plan for the future of fi nancial

planning in this country. How

well received was this plan

from the membership?

PC: The feedback from members

has been tremendously positive,

because again, the FPA is

showing vision and leadership.

Sure, there’ll still be parts of the

pathway to work out and details

to be fl eshed out. But members

have told me they’re proud to be

part of an association that actually

defi nes the ground, rather than

just being reactive.

FP: The fact you’ve got four of

the main distribution networks

adopting a lot of the principles

of the 10-Point Plan, says a lot

for the FPA and its strategic

direction. Do you agree?

PC: I do. The people who run

those institutions are beginning

to see that, from a business

perspective, fi nancial advice can

be a good investment for their

shareholders, regardless of any

product manufacture or product

issues. They’re actually saying:

‘This is a good way for us to focus

our own business directions.’ So,

their mindset is shifting from just

being product distribution points.

FP: In terms of professionalism,

is the FPA heading in the right

direction?

MB: Absolutely. Financial

planning is looking extremely

bright. The key here is the fact

that the FPA is being recognised

as the peak professional body

for fi nancial planners. The

10-Point Plan shows we’re

being proactive now instead of

being reactive. We’re actually

being positive on how we want

the fi nancial planning profession

to look like in the future. We’ve

been communicating this future

direction with our members,

government, stakeholders and

the wider community. They know

our position. We now have a

responsibility to make sure we

deliver, not only for our members,

but for the community.

LL: And in terms of education

standards, we are heading in

the right direction. The fact that

the Government is now looking

at a degree as a minimum entry

requirement to the profession

– well, I never thought it would

happen this soon. It’s our belief

that a degree and the CFP®

designation, hand-in-hand, are

the minimum standards, and

the Government is actually

considering it. This is extremely

exciting and will be one of the

things that will transform fi nancial

planning into a true profession.

FP: How do you view your term

as an FPA Board member?

LL: After six years on the Board,

my term is coming to an end.

Without a doubt, my term has been

extremely challenging. But during

this time, the Board has always

been united. This has provided us

with the strength to stand for what

we believe is the best outcome

for our members. By raising

the educational standards of all

fi nancial planners, this can only be

a great outcome for planners, as

well as the wider community.

MB: After three years, I am up

for re-election. I’ve really enjoyed

the opportunity to work closely

with the FPA team at head offi ce.

It’s really heart-warming to see

their commitment and passion

for members and the profession.

We set a goal of getting the term

fi nancial planner/adviser enshrined

in law. We’re on that path right

now. And making advice more

accessible to consumers is

something, I believe, we have

achieved. But there’s a lot more to

do, and that’s why I am seeking

re-election for another three years.

PC: Like Matt, I am also up for

re-election. As a Board member,

I feel a mixture of pride but I am

also fortunate to have been a

October 2014 | 23

member of the Board during one

of the most tumultuous times

since the Financial Services

Reforms in the early 2000s.

We’ve been able to play a key

role in helping shape the future of

fi nancial advice as a profession.

It may sound corny, but you just

feel very lucky and very humble to

have played a part in that.

FP: What else is on the FPA

Board’s agenda?

MB: It’s important to have the FPA

recognised as the peak professional

body for fi nancial planners. The

enshrinement of the term fi nancial

planner/adviser is also important.

Consumers need to be confi dent

that when they sit in front of a

planner, that person is highly

qualifi ed, they’ve got experience,

they’ve got a certain education

standard and they’ve got the

ability to give them quality advice.

Enshrinement will help us deliver

that confi dence to consumers.

We also need to separate the

product and advice component

of fi nancial planning; this is really

important. People need to know

that members of the FPA are not

product sellers or fl oggers; that

we provide strategic advice.

We represent more than 10,500

members. Over the next three

years, that number will climb

signifi cantly. Because of the work

we’ve done over the last six years,

there will be a lot more planners

who will join the FPA now and be

a part of that.

PC: One of the challenges that

the organisation has is to ensure

that we have a clear membership

pathway without compromising

the high standards of entry we’ve

set. It’s really important that we

get a professional pathway for

student members, to ensure that

the organisation remains strong.

The other area we still have a lot

of work to do as a Board is in our

grassroots member engagement.

We have done a lot of work in

restructuring the engagement

with our Chapters, but there’s still

more to do. We’ve established

the position of regional Chairs,

which effectively cover one per

state and territory. They form the

Regional Chair committee, which

I’m currently the chair of. Its role

is to advise the Board on policy

matters that affect practitioners,

but also to ensure that there’s

a conduit between FPA

management and the Chapter

Chairs, for example, when we

design our roadshows and roll out

our member communications.

It also gives a focal point for

Chapter Chairs who come up with

some absolutely brilliant ideas.

It gives them a focal point for

getting that implemented into FPA

processes and procedures.

FP: How important is

continuity on the Board?

LL: It’s very important. That’s why

we have these elections every

couple of years. By only having

a couple of Board positions up

for election, we avoid the whole

Board exiting at once.

MB: I agree. Once the

constitutional change occurred

and we became a true practitioner

member association, there was

a strong desire to have good,

qualifi ed practitioner members

on the Board. The consistency

of having these representatives,

who share the same vision going

forward, is important.

PC: I think one of the reasons

this Board has achieved what it

has, is due to the continuity of

Board members. However, this

year there will be some degree of

renewal, with Louise and Matthew

Rowe retiring from the Board.

So, it will also be refreshing to

have new talent join the Board.

Obviously, I’m a strong advocate

for continuity, seeing that I’ve

renominated.

FP: For anybody wanting

to join the FPA Board, what

advice do you have for them?

LL: You have to be able to commit

the time and hours required of the

role. You will be required to review

a large amount of Board papers.

We have eight meetings a year,

but they can be one or two days.

So, you might have to commit to

up to 16 days per annum out of

the offi ce. Being a Board member

is a great role. I recommend it to

anyone who’s passionate about

the profession and the future of

fi nancial planning.

MB: You really need to be prepared

to work hard. You have to come

in there with a strong belief and

commitment to driving fi nancial

planning as a profession. There

is a lot of reading and a lot of

consulting, particularly with people

like Dante De Gori, in order to

better understand regulatory issues.

It’s also important to realise that

being a Board member, you

can’t come in with a self-interest

agenda. You’re there to work

together for the collective of

fi nancial planners in Australia.

You’ve also got to work with the

major stakeholders, as well. The

reason why this Board and the

FPA has been so successful over

the last three years, is that we

have all worked very well together.

That’s why I think consistency and

continuity is so important.

PC: If you’re prepared and if

you’re passionate about the

fi nancial planning profession

and making it better for the next

generation, then being a Board

member will be worth every

moment of it. If you’re looking

to come in and blow your own

trumpet and push your own

agenda, then the Board is the

wrong place for you.

As well as the Board meetings,

there’s also the committee work

that Board members are involved

with. Each Board member

is expected to be part of a

committee. That takes additional

time and commitment. And, of

course, there is the interaction

with other committee members,

who aren’t necessarily Board

members. It’s a lot of hard work

but it’s incredibly satisfying.

MB: And there’s also the projects,

too. For example, Patrick worked

on the regional Chairs strategy.

Louise was involved in the

education piece, and I was working

on the insurance side of things.

So, there’s a lot more involved

in being on the Board than most

members would know. There is a

lot of hard work. You have to have

a passion for fi nancial planning

and be able to cope with the

demands and workload of being

on the Board.

Board Elections 2014Voting is now open for the election of three FPA Board Directors. Existing Board members Patrick Canion CFP® and Matthew Brown CFP® are seeking re-election for another term, while Louise Lakomy CFP® and Matthew Rowe CFP® will retire from the Board after having served six years and seven years respectively as FPA Board members.

Voting closes on 14 October, with the election results published on 22 October.

Only CFP® and AFP® practitioners are eligible to vote.


Buyer beware

Succession planning is as much about buying a practice as it is about selling one. But there are many traps that potential buyers need to be

aware of before getting out the cheque book, writes Janine Mace.

Succession planning


essmucracoutth

ps ersof

e cJ

Succession planning

|

Succeas ma praboBut trapbuye

aware out thewrites

Succession planning

Succession, exiting the industry,

or just plain old selling out. They

are phrases practice owners know

they will need to use one day – just

not today.

Although hanging on can be good,

it makes life hard for younger

buyers looking to expand an

existing practice or start out on

their own.

For a number of years there have

been far more buyers than sellers

in the planning industry, explains

Forte Asset Solutions director,

Steve Prendeville.

“In 2013-14, there was an artifi cial

merger and acquisitions freeze due

to the Federal election, change of

government and FoFA changes.

The industry was in a holding

pattern until December and then

FoFA was repealed in mid-2014,”

he says.

However, that situation may be

changing. “There has been a

dramatic scarcity of businesses

for sale, but increasing numbers

have been appearing in the past

few weeks. Activity is back with a

vengeance.”

Paul Tynan, chief executive offi cer

of Connect Financial Service

Brokers, agrees sellers have been

thin on the ground. “Often dealer

groups are keen to avoid losing

funds under advice, so businesses

have not been appearing on the

market.”

Those that have materialised have

been picked up by a range of

purchasers.

“Buyers are coming from right

across the spectrum. From

private equity through to people

from outside the industry,

mortgage brokers and even

real estate agents. It’s not just

institutions,” he says.

“The current sweet spot is a

book of $200,000 to $500,000

in fees, so you can just tuck it

into the bottom line of an existing

business.”

Do your homeworkWith supply rising, the thought of

adding some new clients or going

out on your own may be tempting.

But the experts warn potential

buyers need to tread warily before

getting out the cheque book.

“The transaction process is not

as easy as people think and it

can take a long time,” Prendeville

warns.

Tynan believes potential

purchasers should start with the

basics. “First of all, you need to

look at whether you want to join

the aligned or non-aligned world

– especially in the new FoFA

environment,” he says.

“If you are a new entrant, you

need to make some fundamental

decisions before you start looking

at businesses. You need to think

about where you want to be in

the future.”

This also means carefully

scrutinising client ownership.

“You need to understand whether

it is a salaried licensee structure

where the institution owns the

clients. There is a big appetite for

these businesses at the moment,

as otherwise the client can walk,”

Tynan says.

The potential for growth is also

another important consideration.

“When buying a business, you

are buying access to clients and

income streams, so you need to

check if those income streams are

solid,” he says.

“You need to check whether or not

there are growth opportunities and

think about how you are going to

grow them.”

Buyers also need experienced,

unbiased advice before

committing.

“You need to understand what

you are buying and who you are

talking to. Are you buying a client

book, an ongoing business,

or just a bunch of orphan

clients? There are a number of

companies with a lot of clients

on their books that do not

October 2014 | 25

Continued on p26

Current market valuations for planning practices

Revenue type Multiple

Financial planning 2.4 – 2.8

Financial planning books (C and D

clients)

2.0 – 2.4

Financial planning (fee-for-service

non-platform)

1.0 – 1.5

Risk 2.7 – 3.1

SMSF advice 2.5 – 2.8

Income stream 2.2 – 2.5

Corporate super 0.5 – 1.0

Source: Connect Financial Service Brokers, September 2014.

Steve Prendeville


Succession planning

represent real business, only a list

of phone numbers,” Tynan warns.

“We are getting a lot of phone

calls, but this is an environment

where it needs to be ‘buyer

beware’.”

Funding problemsBrokers urge purchasers to

get their borrowing facility in

place before looking at buying

opportunities.

“This is a critical factor. The

current environment is highly

competitive and we are

receiving 20 to 30 enquiries for

every metropolitan business

brought to market. Those who

have pre-approved fi nance

are considered as preferred

buyers,” Prendeville says.

This may be easier than in the

past, as the fi nancing market is

broader than in recent years.

“Financing has got easier, as

now it’s not just NAB lending

money for practices. Macquarie,

Westpac and St George are also

providing fi nance, while ANZ

has entered the market with

fi nancing for its own distribution

channels. This means we are

starting to see some competition

and choice in the fi nancing

market,” he says.

Despite the extra lenders,

Prendeville says borrowers need

to understand the options that

are available.

“Is your fi nancier a cashfl ow

lender that will fi nance on the

value of your business and the

target business?”

Most banks also require much

more information before lending

and have tougher reporting

requirements than in the past.

Cashfl ow modelling now needs

to include scenario testing for

the worst, middle and best case

situation, Prendeville says.

“Lenders now require reporting

from borrowers almost monthly,

as they have much less risk

appetite post-GFC.”

Under the hoodOnce the basics are in place, it’s

time to look under the hood and

review the details.

“You need to check the cultural

fi t. Research the people and

understand the business itself.

Does it use platforms? What is

the product mix used? Is there

margin lending or tax structures

like managed investment

schemes,” Tynan says.

“Look at the client base and

the demographic mix within it.

You need compliance records

for at least three years and your

screening should also include

the reputation of the current

owner.”

Prendeville agrees potential

purchasers need to look closely

at what they are buying.

“You need to know where the

funds under management

are and on what platforms.

Look at the revenue, the age

segmentation of clients, whether

the practice is dependent on key

planners or staff, and whether

there are pre-existing referral

partnerships in place.”

Pricing the buyAlthough fi nding the right practice

or book can be diffi cult, agreeing

on the correct price is usually just

as tough.

Tynan says many practice owners

continue to base their sale

expectations on the prices of years

gone by.

“It’s natural for sellers to overvalue

their business. It’s been their life,

blood, sweat and tears, and now

selling that lifetime of work is

an emotional undertaking – but

ultimately it is the current market

that determines price,” he says.

Unlike many other industries, prices

for smaller planning practices

remain linked to recurring revenue

rather than profi t.

“Financial planning is different,

as there are synergistic benefi ts

fl owing from having increased

funds under management, lower

overheads and lower dealer

group fees, so the orientation in

valuations is not on profi tability.

It is similar to purchasing a rental

book in real estate agencies, as

the merged profi tability of the

business is more important than

the income,” Prendeville explains.

According to Tynan, recurring

revenue remains the key valuation

tool in the planning profession.

“Over $1 million, it is mainly earnings

before income tax (EBIT), but if it is

less, the valuation is usually based

on recurring fees. It is a size thing. If

you are evaluating a business for a

partial buy-out, however, it is usually

done on an EBIT basis.”

As the profession shifts away from

emphasising trailing commissions,

he believes the dominance of

recurring fees will disappear. “Fee-

for-service will lead to more use of

EBIT in the future.”

Top tips for buyersPotential buyers need to ask some key questions when it comes to

selecting a business or client book. Do you want a business:

• similar to your own, or one with a speciality that extends your

service offer and enhances client engagement and retention?

• in the same geographic area?

• suitable for re-engineering (e.g. from commission to fee-for-service),

as there is often revenue uplifts and therefore a capital value uplift?

• already fee-for-service, so integration is faster and easier?

• servicing C and D clients, or all client types (A through to D)?

• offering an opportunity to re-engineer your business model?

Buyers also need to consider the following:

• Aside from free cashfl ow above debt servicing, what do you

want from the purchase?

• Do you want to retain staff and strengthen your team? Will this

be an opportunity to upgrade the quality of your support staff?

• Would you move dealer group for the right opportunity, better

service delivery and brand recognition, decreased dealer fees, or

other benefi ts?

• Can you lower your age demographics and increase the value

of the combined business?

• Will you be able to secure new referral relationships?

• What scale benefi ts will be achieved to enhance profi tability?

• What costs will be involved?

Source: Forte Asset Solutions

Paul Tynan

October 2014 | 27

Financial Planning (FP): When

did you begin looking at

succession?

Tony Gilham (TG): I have just

turned 63, so the idea has been

on my mind for many years. Fifteen

years ago, I recruited Paul Nicol

straight out of university. Paul

initially became a paraplanner, then

a full-time adviser. It wasn’t long

before Paul realised he would like

to own some equity and several

years ago, bought his fi rst parcel of

shares. A couple of years ago, he

bought more.

We now have fi ve shareholders

with equity in our company and

Paul has a stated objective of

being the majority shareholder in

the next three or four years. The

other three shareholders have

only minor percentages.

FP: How long will it take for full

transition?

TG: The transition of share

ownership will be completed in

about six or seven years and I

will end up owning somewhere

between 22 and 30 per cent.

I expect I will maintain my

shareholding and have a modestly

active interest for maybe another 10

years. After that, I might consider

selling my remaining shareholding.

FP: How will the practice

operate?

TG: Paul will fully take over

management of the business in

the next two or three years. He is

probably running 80 to 90 per cent of

most of the day-to-day things now.

FP: How did you approach the

succession process?

TG: We basically did everything

internally. Initially, we got an external

valuation, had contracts drawn up

and entered into a vendor’s terms

arrangement. We all know what

we want, which is a seamless

ownership transition without any

client concerns. We have told

everyone upfront about the process.

FP: What is the key to a

successful transition?

TG: Make sure your existing

service standards are maintained

and clients are comfortable with

the process.

GFM Wealth Advisory Founding Partner, Tony Gilham CFP®,

shares his own experience with sucession planning.

Winding down

Platinum Investment Management Limited ABN 25 063 565 006 AFSL 221935 trading as Platinum Asset Management® (“Platinum®”) provides financial services and products. Refer to www.platinum.com.au for more information about Platinum and the current Product Disclosure Statements (“PDS”) for the relevant Fund. You should consider the relevant PDS prior to making any investment decision to invest (or divest) in a Fund, as well as your particular investment objectives, financial situation and needs. Platinum is a member of the Platinum Group® of companies.

It’s tempting to imagine that a successful company offers the prospect of a profitable investment.

But how do you know when a company’s success is blinding it to the need for change and evolution?

For unusual insights and a clearer perspective, visit www.platinum.com.au

NOTHING FAILS LIKE SUCCESS.


CentrelinkTo answer questions

www.fi nancialplanningmagazine.com.au/cpd

With the recent passing of

legislation, deeming rules will

apply to new Account Based

Pensions (ABPs) from 1 January

2015. No doubt, this may

impact many clients immediately

or in the future and may reduce

their entitlement to Government

benefi ts.

To ensure the new assessment

of ABPs does not have an

adverse impact on clients, it

is important to review their

situation before 31 December

2014, and determine if they

will benefi t from grandfathering

provisions that apply to ABPs

commenced before 1 January

2015.

Summary of the new rulesFrom 1 January 2015, new

ABPs will be assessed the same

way as fi nancial investments,

such as cash, shares and

managed funds, are assessed.

This means that these ABPs

will be subject to deeming rules

for Income Test purposes when

determining an individual’s

entitlement to Centrelink and

DVA benefi ts.

The deeming will apply to:

• Account Based Pensions.

• Account Based Annuities

(currently not offered in

Australia).

The deeming will not apply to:

• Defi ned Benefi t Pensions.

• Lifetime and Life Expectancy

Annuities.

• Fixed Term Annuities if the

term is longer than fi ve years.

Deeming rulesUnder the deeming provisions, all

fi nancial investments are assumed

to earn a certain rate of income

as shown in Table 1, regardless of

the income actually generated.

Although the deeming thresholds

are indexed in line with the CPI in

July each year, there is no set time

for updating the deeming rate.

Changes to deeming rates are

only made if analysis of a range

of relevant factors that determine

the deeming rates indicates that a

change is appropriate. Any increase

in deeming rates in the future may

result in a reduction in a pensioner’s

Centrelink and DVA entitlements.

Grandfathering provisionsGrandfathering provisions will

apply to ABPs commenced

before 1 January 2015 where:

• the person was receiving

an eligible Income Support

Payment immediately before

January 2015; and

• since 1 January 2015, the

person has been continuously

receiving an eligible Income

Support Payment.

These ABPs will retain the current

Income Test assessment for social

security purposes where the

pension payments are assessed

concessionally, allowing for the

return of the capital (also known as

the Centrelink Deductible Amount).

Grandfathering will also apply to

ABPs that meet these conditions

and revert to a reversionary

benefi ciary following the death of

the pensioner if the reversionary

benefi ciary is in receipt of an

eligible Income Support Payment

at the time of reversion and if they

continue to receive an eligible

Income Support Payment.

Deeming of Account Based Pensions post 1 January 2015

ANNA MIRZOYAN

FIDUCIAN PORTFOLIO

SERVICES

THIS ARTICLE IS WORTH

0.50 POINTS

CRITICAL THINKING

Includes

• Making a Reversionary

Death Benefi t Nomination

• Considering multiple

Account Based Pensions

• Grandfathering provisions

Table 1

Customer Threshold^ Deeming Rates^

Single

Up to and including

$48,0002.0%

Above 3.5%

Member of

a couple

Up to and including $79,600 (combined) 2.0%

Above 3.5%

Member

of allowee

couple

Up to and including $39,800 2.0%

Above 3.5%

^ Rates and thresholds are effective as at August 2014.

October 2014 | 29

CPDMONTHLY

Eligible Income Support PaymentsEligible Income Support

Payments include most

social security pensions and

allowances, such as:

The following non-means tested

payments are not an eligible Income

Support Payment and will not allow

the person to take advantage of

grandfathering provisions:

• DVA War Widows/Widowers

Pension1;

• DVA Disability Pension (Total

Permanent or Total Temporary

Incapacity Pension);

• Carer Allowance.

In addition, individuals holding a

Low Income Health Care Card

but not in receipt of an eligible

Income Support Payment will

not be able to take advantage of

grandfathering provisions.

Who will be affected by these changes?Not all pensioners will be affected

by these changes, as the amount

of most pensions and allowances

the person is entitled to depend

on the level of their assets and

income. Both tests are applied

and the test that gives the

lower entitlement is applied.

If the pensioner has fi nancial

investments only, the interaction

between the income and assets

tests means that as the level of

their assets rises, the pension

entitlement will start reducing by

the income test. Once the level of

fi nancial investments reaches a

certain threshold, the assets test

becomes the determining test.

This means that pensioners with

relatively high ABP balances

will not be affected by these

changes, as their pension

entitlement will be determined by

the Assets Test.

As explained in Table 2, a

single homeowner with fi nancial

investments below $139,000 and

no other income/assets will be

entitled to the full Age Pension

and will not be affected by these

changes.

If the value of a pensioner’s

fi nancial investments falls between

$139,000 and $253,000, their

pension entitlement will be

determined by the Income test.

These pensioners will be affected by

deeming changes, as the additional

assessable income will reduce their

age pension entitlement.

A single homeowner pensioner

with fi nancial investments in

excess of $253,000 will have their

pension entitlement assessed

under the Assets Test and as

such, will not be immediately

affected by deeming changes.

They may, however, be affected

by deeming changes in the

future, as the value of their

fi nancial investments reduces.

It appears that more non-

homeowners will be affected

by these changes than

homeowners. The reason being

is that non-homeowners can

have higher levels of assets

when compared to homeowners

before their pension entitlement is

determined by the Assets Test.

Following case studies explain

how fi nancial planners can

maximise their client’s entitlement

to Government benefi ts by

commencing an ABP for the

client before 1 January 2015.

Case Study 1Ronald (aged 64) is a single

homeowner and is currently in

receipt of a Disability Support

Pension. Ronald has the following

assets/investments:

Principal residence – $500,000

Personal assets – $10,000

Cash held in the bank – $10,000

Super held in accumulation

account – $200,000

If Ronald used his superannuation

benefi ts to commence an ABP

before 1 January 2015 and draws

a minimum pension, his ABP

will be concessionally assessed

under the Centrelink Income Test

and will be grandfathered after

January 2015. Ronald will be

entitled to a part pension of $815

per fortnight.

In comparison, if Ronald retains

his superannuation benefi ts in

an accumulation account and

commences an ABP after 1

January 2015, his ABP will be

deemed by Centrelink and he will

be entitled to a part pension of

$795 per fortnight. (See Table 3.)

As a result, Ronald’s fi nancial

planner was able to increase his

Continued on p30

Table 2

Family Situation Maximum pension reduces

under Income Test

Cross over point above which

pension reduces under Assets Test

Homeowner Single $139,000 $253,000

Couple (combined) $245,000 $320,000

Non-

Homeowner

Single $139,000 $519,000

Couple (combined) $245,000 $586,000

Note: Table 2 is based on Centrelink rates and thresholds effective as at August 2014.

Centrelink Pensions/Allowances DVA Pensions/Allowances

• Age Pension

• Austudy Payment

• Benefit Parenting Payment

(partnered)

• Bereavement Allowance

• Carer Payment

• Disability Support Pension

• Mature Age Partner Allowance

• Newstart Allowance

• Parenting Allowance

• Partner Allowance

• Pension Parenting Payment

(single)

• Sickness Allowance

• Sole Parent Pension

• Special Benefit

• Widow Allowance

• Widow B Pension

• Wife B Pension

• Wife Pension

• Youth Allowance

• Age Service Pension

• Carer Service Pension

• Income Support

Supplement

• Invalidity Service

Pension

• Partner Service Pension




entitlement to Centrelink benefi ts

by commencing an ABP for

Ronald before 1 January 2015.

Case Study 2William (aged 61) and Margaret

(aged 60) are a married couple,

non-homeowners. William is in

receipt of a Disability Support

Pension and Margaret is in

receipt of a Carer Payment.

William and Margaret have the

following assets/investments:

Personal assets – $10,000

Cash held in the bank – $20,000


account – $200,000 (William)


account – $150,000 (Margaret)

Similar to Case Study 1, if

William and Margaret use their

superannuation benefi ts to

commence an ABP before 1

January 2015 and each draw

minimum pensions, their ABPs

will be concessionally assessed

under Centrelink Income Test

and will be grandfathered

after January 2015. They will

be entitled to a full pension of

$635.40 per fortnight each.

If they commence these ABPs

after 1 January 2015, they will

be entitled to a part pension of

$593.30 per fortnight each. (See

Table 4.)

Post 1 January 2015Financial planners must take

extra care post January 2015

if dealing with clients with

grandfathered ABPs.

The following events on or

after 1 January 2015 will result

in a pre 2015 ABP losing its

grandfathered assessment and

the new ABP will be deemed:

• Consolidating multiple ABPs;

• Changing providers;

• Winding down a self-managed

superannuation fund (SMSF)

and rolling the funds to

another superannuation fund;

• Rolling an existing ABP to

an accumulation account,

combining with the funds

retained in an accumulation

account and re-starting a

new ABP;

• Adding or removing a

reversionary benefi ciary;

• Ceasing to receive an eligible

Income Support Payment;

• Using superannuation death

benefi ts to commence a new

ABP for a non-reversionary

benefi ciary.

Tips and opportunities between now and 31 December 2014For clients who can potentially

benefi t from grandfathered

ABPs after January 2015,

now is the time to review

their fi nancial situation and

make the necessary changes.

Financial planners may

potentially maximise their clients’

entitlement to Centrelink and

DVA benefi ts by considering the

following strategies:

• Making a Reversionary

Death Benefi t Nomination –

Grandfathering will apply to an

existing ABP with a Centrelink

Deductible Amount that reverts

to a reversionary benefi ciary

following the death of the

pensioner if the reversionary

benefi ciary is in receipt of

an eligible Income Support

Payment at the time of

reversion and if they continue

to receive an eligible Income

Support Payment.

• Reviewing a reversionary

nomination within an

existing ABP – There may

be situations where the

reversionary nomination

is no longer appropriate

(i.e. marriage break down,

separation). As such, it may

be worth asking members with

an existing reversionary death

benefi t nomination, whether

their nomination is appropriate

and if there is a need to make

necessary amendments before

January 2015.

• Considering multiple ABPs

– In situations where the

superannuation member is

working and must retain an

active accumulation account,

it may be worth considering

multiple ABPs, a pre 2015

ABP and a post 2015 ABP.

By using most of the existing

superannuation benefi ts to

commence an ABP before

January 2015 and retaining

a small balance in an

accumulation account, the

fi nancial planner may be able

to preserve the concessional

assessment of the pre 2015

ABP under grandfathering

provisions.

This may also apply to

individuals currently in receipt

of eligible allowances (such

as the Newstart Allowance or

the Widow Allowance), as the

upper Assets Test threshold

applied to allowances

and certain payments are

signifi cantly lower than those

applied to the Age Pension.

By transferring the maximum

allowable amount to an

ABP before January 2015

and retaining the remaining

balance in an accumulation

account, the fi nancial planner

will be able to maximise a

client’s entitlement to certain

Centrelink benefi ts now and

also in the future when the

person reaches their qualifying

Age Pension age.

• Considering a Non

Commutable ABP – This

strategy may be considered

where the client is not able to

fully access their preserved

superannuation benefi ts before

January 2015. This may occur

when the person has reached

the preservation age and is

engaged in part-time/casual

or seasonal employment,

while also receiving an eligible

Income Support Payment.

• Consider re-starting an

existing ABP – In situations

where the value of an existing

ABP has increased and the

client’s life expectancy has

reduced or where there have

been commutations taken

from an existing ABP, it may

be benefi cial to re-start the

Table 3 If ABP is

commenced

before 1

January 2015

If ABP is

commenced

after 1

January 2015

Disability Support Pension

which will later convert to

Age Pension

$815 per

fortnight

$795 per

fortnight

Difference of $20 per fortnight

Table 4 If ABP is

commenced

before 1

January 2015

If ABP is

commenced

after 1

January 2015

Disability Support Pension

and Carer Payment. Both

pensions will convert to

Age Pension in future

$635.40 each

per fortnight (full

pension)

$593.30 each

per fortnight

(part pension)

Difference of $84.20 per fortnight combined

October 2014 | 31

ABP before January 2015. The

implementation of this strategy

may increase the Centrelink

Deductible Amount of a client’s

ABP when compared with the

current amount.

The strategy may also apply

to clients with an existing

ABP and an accumulation

account. Combining these two

accounts and re-starting the

new ABP before January 2015

may be benefi cial now and/or

following retirement.

• Consider changing providers

– Changing superannuation

providers after 1 January 2015

will result in the new ABP being

deemed by Centrelink. As

such, it would be benefi cial to

include this in the discussion

topics during the review

meeting and thus change

providers before January 2015

if the client is not happy with

the current provider.

Similarly, if the client holds

an ABP within an SMSF

and they wish to reduce the

administrative burden and

simplify their affairs, it may

be benefi cial to implement

the rollover from the SMSF to

an alternate provider before

January 2015.

• Consider consolidating

multiple ABPs into one –

Extra care must be taken

when considering this strategy.

There may be situations where

the client holds multiple ABPs

for estate planning purposes.

In addition, the Centrelink

Deductible Amount and the

pension payments drawn from

each ABP must be carefully

assessed to ensure the client

will not be disadvantaged by

consolidation of existing ABPs.

• Consider claiming an

eligible Income Support

Payment if turning Age

Pension age shortly after

January 2015 – There may

be situations when it may be

worthwhile to recommend

claiming an eligible Income

Support Payment, such as

the Newstart Allowance,

and commencing an ABP

before January 2015 to take

advantage of grandfathered

rules. Please note this strategy

may not be appropriate

for every client. The

appropriateness of the strategy

will depend on a client’s

individual circumstances and

their ability to satisfy eligibility

criteria for Newstart Allowance

(i.e. actively seek employment,

willing to undertake suitable

paid employment).

• Consider reducing the level

of Centrelink assessable

assets – In situations where

the person has reached their

Age Pension qualifying age

but is not entitled to the Age

Pension, as the value of their

current assets exceeds the

threshold by a small amount,

consideration should be given

to gifting up to the allowable

thresholds, purchasing a

funeral bond or a burial plot,

completing home renovations,

upgrading furniture or

travelling.

These asset test reduction

strategies may assist

in reducing the level of

assessable assets to fall

below the Assets Test upper

threshold.

• Consider eligibility to Low

Income Health Card (LIHC) –

A client’s eligibility to the LIHC

is based on their Centrelink

assessable income, which

includes assessable income

from ABP. Clients who are not

in receipt of an eligible Income

Support Payment may lose

their LIHC after January 2015

when deeming rules apply

to their ABP. As such, where

possible, consideration must

be given to claiming an eligible

Income Support Payment

before January 2015 to retain

the card.

ConclusionFor It is benefi cial to consider

these strategies and make the

necessary changes between

now and the end of December

2014, and take advantage of the

grandfathering provision where

appropriate.

Anna Mirzoyan, Technical Services,

Fiducian Portfolio Services.

Footnotes

1. Most recipients of War

Widows/Widowers Pension are

also eligible to receive the DVA

Income Support Supplement.

1. In which of the following cases would the death benefi t paid

via the estate to a benefi ciary not be a tax-free payment:

a. If paid to a former spouse.

b. If paid to a friend of a person who dies in the line of duty as

a member of the Australian Federal Police.

c. If paid to an adult non-dependant child of the deceased.

d. If paid to a dependant child (aged 13) of the deceased.

2. A death benefi t paid as an income stream is taxable:

a. When either the deceased or the beneficiary is at least 60

years of age.

b. Only if the beneficiary is at least 60 years of age.

c. Only if the deceased was under age 60.

d. Only if the deceased and beneficiary are under age 60.

3. The trustee of a superannuation fund has made a decision

to make a death benefi t payment to Alison, age 61. Alison is

the daughter of a deceased member and is not a death benefi t

dependant. Which of the following statements is correct?

a. The entire benefit will be received by Alison tax-free

regardless of the member’s superannuation components.

b. Alison can only receive the superannuation death benefit

payment as a lump sum.

c. The taxable portion of the death benefit payment will be

taxed at Alison’s marginal tax rate with 15 per cent offset.

d. Alison is able to receive the entire benefit tax-free if paid as

an income stream.

4. The implementation of a re-contribution strategy is generally

appropriate where:

a. The death benefit will be paid to the member’s spouse.

b. The death benefit will be paid to the member’s dependent

child.

c. The death benefit will be paid to the member’s adult

children.

d. The member is over the age of 65 and retired.

CPDMONTHLY




In a previous article in Financial

Planning magazine (August 2014

issue), we started to explore the

concept of related parties and

self-managed superannuation

funds (SMSFs).

Revisiting the definition

under Section 70B of the

Superannuation Industry

(Supervision) Act (SIS Act), a

Part 8 associate of an individual

(referred to as the primary

entity) is:

a. A relative of the primary entity;

b. If the primary entity is a

member of a SMSF:

i Each other member of the

SMSF;

ii If the SMSF is a single

member SMSF with a

corporate trustee – each

director of the corporate

trustee; and

iii If the SMSF is a single

member SMSF with

individual trustees – those

individuals;

c. A partner of the primary entity

or a partnership in which the

primary entity is a partner;

d. If a partner of the primary entity

is an individual – the spouse or

a child of that individual;

e. A trustee of a trust (in their

trustee capacity) where the

primary entity controls that

trust; and

f. A company that is suffi ciently

infl uenced by, or in which a

majority voting interest is held

by:

i The primary entity; or

ii Another entity that is a

Part 8 associate of the

primary entity because

of another paragraph of

Section 70B or because of

another application of this

paragraph; or

iii Two or more entities

covered by the preceding

paragraphs.

In the previous article, we looked

in detail at paragraphs (a) to (d)

of the above defi nition. Bearing

in mind that the ‘primary entity’

is a member of the fund – let’s

call him Kevin – we then turn

to paragraphs (e) regarding

control of a trust and (f) regarding

suffi ciently infl uencing a company.

Control of a trustAs is often the case, the SIS Act

does provide some assistance

in trying to understand certain

provisions by providing more

defi nitions. In this case, Section

70E(2) states that an entity (in this

case, Kevin) controls a trust if:

a. a group in relation to the entity

has a fi xed entitlement to more

than 50 per cent of the capital

or income of the trust; or

b. the trustee of the trust, or

a majority of the trustees of

the trust, is accustomed or

under an obligation (whether

formal or informal), or might

reasonably be expected, to

act in accordance with the

directions, instructions or

wishes of a group in relation

to the entity (whether those

directions, instructions

or wishes are, or might

reasonably be expected to

be, communicated directly or

through interposed companies,

partnerships or trusts); or

c. a group in relation to the entity

is able to remove or appoint

the trustee, or a majority of the

trustees, of the trust.

There are two important elements

to the above defi nition. The

fi rst is that it is not an inclusive

defi nition. That is, you don’t have

to meet the requirements in all

three parts for the relevant level of

control to exist. Just meeting one

of the three options is enough.

The second important element is

that the defi nition introduces the

concept of ‘a group in relation

to the entity’, which is defi ned to

mean either:

a. the entity acting alone; or

b. a Part 8 associate of the entity

acting alone; or

c. the entity and one or more

Part 8 associates of the entity

acting together; or

d. two or more Part 8 associates

of the entity acting together.

Looking at each of the three

options under the control

defi nition, under the fi rst option

it is important to note that the

defi nition relates to more than

a 50 per cent entitlement of

the capital or income of the

trust. It doesn’t require the fi xed

entitlement to be both capital

and income – only one of them is

required, but it does require the

entitlement to be fi xed.

This becomes particularly

important in the context of a

discretionary trust.

Most discretionary trusts do not

offer any fi xed entitlement to

the income of the trust. Rather,

the distribution of that income

is determined each year at the

What can Kevin do?BRYAN ASHENDEN

BT FINANCIAL GROUP

THIS ARTICLE IS WORTH

0.50 POINTS

CRITICAL THINKING

Includes

• Majority voting interest in

a company

• Suffi cient infl uence over

a company

• In-house asset restrictions

October 2014 | 33

CPDMONTHLY

discretion of the trustee. There

may be a limited (or fi xed) group

of benefi ciaries who can receive

the income, but none of them

have a fi xed entitlement to a

particular amount each year.

Whilst many may simply conclude

that a discretionary trust will

never be controlled under this fi rst

element, it is always important

to consider any entitlement to

capital.

As an example, the trust deed

may stipulate that any income

of the trust is distributed at the

discretion of the trustee, but that

any capital distributions must be

directed to a particular person (or

persons). If that distribution is at

least 50 per cent to the defi ned

group, then the relevant level of

control will exist.

The second option, regarding

whether the trustees are

accustomed to acting in

accordance with the wishes

of the group, is one that will

generally be based on the

particular arrangements in place.

Trustees do have specifi c duties

they must uphold, often as set

out by the terms of the trust

deed. It does become important

to determine whether a pattern

of action has been established

over time, and this may be

more prevalent if the trust is a

unit trust. In these situations, a

signifi cant unit holder may be

able to infl uence the decisions of

the trustee, and as such could be

viewed as having control.

The third option is defi nitely one

to consider in light of the terms

of the trust deed and whether a

person has the right of appointer

granted to them. Such a person

would have the power to appoint

a new trustee to the trust.

As an example, let’s assume

that Kevin is one of the potential

benefi ciaries of a discretionary

trust, but has no fi xed entitlement

to any of the income or capital

of the trust. In the last four

years, Kevin has received annual

distributions ranging between 20

per cent to 50 per cent of each

annual distribution.

The current trustee of the trust

is George, who is not related in

any way to Kevin or Kyra (Kevin’s

wife). Under the terms of the trust

deed, Kyra (whilst not a potential

benefi ciary) has been granted

appointer rights, such that she

could replace George if she

wanted to. As a result, with Kyra

being a relative (and therefore

Part 8 associate) of Kevin, there is

a group in relation to the primary

entity (Kevin) that has the right to

remove or appoint a trustee. As

a result, George (in his capacity

as trustee) becomes a Part 8

associate and therefore a related

party to Kevin’s SMSF.

Majority voting interest in a companyA company will be a Part 8

associate of an SMSF member

and therefore a related party of

that member’s SMSF where a

majority voting interest in that

company is held by the member

and/or their Part 8 associates.

A majority voting interest is fairly

straight forward – it requires the

member (and their associates) to

be in a position to cast, or control

the casting of, more than 50 per

cent of the maximum number

of votes that might be cast at a

general meeting of the company.

The main importance here is the

need for more than 50 per cent

of the votes. Having exactly half

of the relevant votes will not be

suffi cient. Even where someone

owns more than 50 per cent

of the shares in a particular

company, it may not constitute

control if some of those shares

don’t give a right to cast a vote at

a general meeting.

Suffi cient infl uence over a companyThe other manner in which

a company may be a Part 8

associate of an SMSF is if the

company, or a majority of its

directors, is accustomed or under

an obligation (whether formal or

informal), or might reasonably be

expected, to act in accordance

with the directions, instructions

or wishes of the member and

the member’s Part 8 associates

(whether those directions,

instructions or wishes are, or

might reasonably be expected

to be, communicated directly or

through interposed companies,

partnerships or trusts).

This is referred to as the ‘suffi cient

infl uence’ test.

What constitutes suffi cient

infl uence can only be determined

on a case-by-case basis, and

as indicated above, there are a

number of different options for

determining whether it exists.

As an example, let’s assume that

Kevin owns 50 per cent of the

shares in a particular company,

and with that comes the right to

cast 50 per cent of the votes at a

general meeting of that company.

We know that 50 per cent does

not constitute Kevin having a

majority voting interest, as that

requires more than 50 per cent of

the votes. But could it be enough

to have suffi cient infl uence?

The answer to this may depend

on who holds the remaining 50

per cent.

Consider the following:

• If the remaining 50 per cent

was held by someone unrelated

to Kevin, then arguably no-one

has control, unless one of the

parties effectively acts as a

silent investor and allows the

other (who presumably has the

A majority voting interest is fairly straight forward – it requires the member (and their associates) to be in a position to cast, or control the casting of, more than 50 per cent of the maximum number of votes that might be cast at a general meeting of the company.

Continued on p34




relevant expertise) to make all

the decisions.

• In a 50/50 situation like the

above, if the rules of the

company determined what

would happen in the event of

a tie in votes, then that may

indicate where control really lay.

• If the remaining 50 per cent was

not held by one shareholder,

but instead was held by a

number of small shareholders,

then this may indicate

that Kevin, as the majority

shareholder, has suffi cient

infl uence over the company.

In each of the above scenarios,

they are only indicators as to

whether suffi cient infl uence

may exist with a particular

shareholder (or group of

shareholders). It is the actual

activities that have occurred on a

historical basis that would need

to be considered to determine if

suffi cient infl uence is actually in

place, and therefore, whether the

company would be regarded as

a Part 8 associate.

Why is the concept of related parties important?Under super legislation, there

are a number of provisions that

either restrict or limit transactions

that can be undertaken between

a superannuation trustee and a

related party.

Whilst these restrictions

and limitations apply to all

superannuation trustees (whether

SMSF or not), in practice they are

generally only ever considered in

the context of a SMSF, as many

public offer and industry funds

simply do not participate in these

transactions.

Providing a loan or fi nancial assistanceSection 65 of the SIS Act

provides that a trustee of a fund

must not lend money or provide

fi nancial assistance to a member

of the fund or a relative member.

It does not go so far as to prevent

loans to related parties (who are

not relatives), but that becomes

important later on in relation to

in-house assets.

The term ‘relative’ used in this

provision is the same defi nition as

used in determining who is a Part

8 associate.

We discussed this in a previous

article, but to reconfi rm, it is

defi ned in Section 10 of the SIS

Act to mean:

a. A parent, grandparent, brother,

sister, uncle, aunt, nephew,

niece, lineal descendant or

adopted child of the individual,

or his or her spouse; and

b. A spouse of the individual or of

any other individual referred to

in paragraph (a).

Whilst a loan is relatively straight-

forward, what constitutes the

provision of fi nancial assistance

can be quite broad.

For example, allowing a relative to

rent business real property from

the fund at a rate below market

rental would be a form of fi nancial

assistance.

Acquisition of assetsSection 66 of the SIS Act

states that a trustee must not

intentionally acquire an asset

from a related party of the fund.

Of course, it’s hard to envisage

when dealing with a related party

who you could unintentionally

acquire an asset from.

As a result, the focus under this

prohibition again comes back to

the SMSF trustees understanding

who the related parties of the

fund are.

As always, there are exceptions

to this rule, otherwise it would be

impossible for a fund to operate.

For example, the term, ‘acquire

an asset’, is specifi cally defi ned

to exclude the acceptance

of money. If this was not the

case, then it would be nigh on

impossible to make a contribution

to a superannuation fund.

An additional exception for funds

with less than fi ve members (ie,

SMSFs) is the ability to acquire

business real property from a

related party at market value.

There are two important parts for

this exception to apply.

First, the property needs to be

acquired for market value – it

cannot be at an artifi cially infl ated

or defl ated price.

Second, the property needs

to be business real property of

the related party at the time of

acquisition. It is not relevant for

these purposes whether the

asset remains business real

property or not after the SMSF

has acquired it.

Does this mean the related party

could do something with the

property immediately before its

transfer to make it ‘business real

property’ when it hasn’t been

used in that context previously?

The answer to this should be,

no – whilst there doesn’t appear

to be a specifi c anti-avoidance

provision around this particular

section (there are for others), the

nature of a business is that it is

ongoing – not something that

has a short-term/transactional

nature.

In-house asset restrictionsWhilst the previous two examples

are outright restrictions on the

activities that a trustee is allowed

to perform, the in-house asset

rule is not.

Rather, it allows certain

transactions to occur or be

undertaken, but there is a

limitation on the level of those

activities.

An in-house asset is defi ned in

Section 71(1) to be an asset of

the fund that is:

• a loan to, or an investment in, a

related party of the fund;

• an investment in a related trust

of the fund; or

• an asset of the fund subject to

a lease or lease arrangement

between a trustee of the fund

and a related party of the fund.

As most would be aware, there

are a number of exceptions to

this general defi nition, the most

common of which is the exclusion

of a lease between a trustee and

a related party, where the subject

of the lease is business real

property.

In this defi nition, you can also see

that a loan from a trustee to a

related party (who is not a relative

and therefore prohibited under

section 65) would be regarded as

an in-house asset.

Having an asset defi ned as an

in-house asset is not a bad thing.

The only restriction around in-

house assets is that at all times,

trustees need to ensure that the

proportion of the fund’s total

assets represented by

in-house assets does not exceed

5 per cent, or that an asset that

is acquired would not cause

the fund to exceed the 5 per

cent limitation at the time of

acquisition.

Provided this threshold is

complied with, in-house assets

should not be of concern to

SMSF trustees.

Of course, this is on the proviso

that valuations are monitored to

ensure they don’t exceed the

permitted level in the future.

Some SMSF trustees were

caught out by this during the

global fi nancial crisis as other

asset values fell signifi cantly,

resulting in a relative increase in

the proportionate value of the

fund’s in-house assets.

October 2014 | 35

Could there be more in the future?One of the areas that seem to be

under considerable scrutiny at the

moment is in relation to limited

recourse borrowing arrangements

(LRBAs) by SMSFs.

At present, provided all other SIS

Act requirements are complied

with, for example, the section 66

general prohibition on acquiring

assets from related parties,

there is nothing within the LRBA

provisions that prevent the SMSF

borrowing from a related party.

Indeed, related party SMSF loans

has been an area of much focus

and discussion within the industry

and with the Australian Taxation

Offi ce around areas such as nil

or below market rate loans, and

of late, a focus on non-arm’s

length income (or special income)

considerations.

With the Financial System

Inquiry taking an increased

focus on the use of leverage by

SMSFs and expected to make

recommendations to Government

in this area, and the continued

focus of the Australian Taxation

Offi ce in this area, one would

have to think it may not be too

much of a stretch that related

party loans become prohibited

into the future.

Related party rules are complexThe rules around related parties

are complex, and anyone who

provides advice to SMSF trustees

need to ensure they are well

versed in the intricacies that

abound within this provision of

the SIS Act.

Indeed, from 1 July 2014,

trustees are faced with a new

set of penalties (often referred to

as the speeding ticket penalties)

if any of these provisions are

breached.

The related party rules are here to

stay and as mentioned, could be

expanded into more areas of the

SIS Act. Like it or not, you can’t

choose your relatives.

Bryan Ashenden is Senior

Manager, Technical Consulting,

Practice Management, BT

Financial Group.

Having an asset

defi ned as an

in-house asset is not

a bad thing. The only

restriction around

in-house assets is that

at all times, trustees

need to ensure that

the proportion of the

fund’s total assets

represented by

in-house assets does

not exceed 5 per cent,

or that an asset that

is acquired would

not cause the fund to

exceed the 5 per cent

limitation at the time of

acquisition.

1. The Bacon SMSF wishes to undertake a limited recourse loan

to purchase a property. Which of the following elements of this

potential transaction are prohibited?

a. The Bacon SMSF obtains a loan from Kyra (the spouse of a

member).

b. The loan is proposed to be at a nil interest rate.

c. The asset to be purchased is a residential property owned

by Bill (the brother in law of a member).

d. All of the above.

2. The Bacon SMSF wants to acquire 51 per cent of the shares in

Investment Co, a company which invests into a variety of shares

and managed funds. The remaining 49 per cent are owned by an

unrelated party. Can this transaction by undertaken?

a. Yes, there are no prohibitions on this transaction.

b. No, as the investment will constitute an in-house asset of

the fund.

c. Yes, as the assets are being acquired from an unrelated

party.

d. Yes, provided the 5 per cent in-house asset limitation is not

exceeded.

3. The Bacon SMSF owns 49 per cent of the shares in Footloose

Co, which undertakes the production of movies. The remaining

51 per cent are owned by a number of small investors. Which of

the following best describes this situation:

a. Footloose Co would be a related party of the Bacon SMSF,

as the SMSF is the largest shareholder.

b. Footloose Co would not be a related party of the Bacon

SMSF, as the SMSF doesn’t control the company.

c. Footloose Co may be a related party of the Bacon SMSF if

its directors are accustomed to following the directions of

the trustees of the Bacon SMSF.

4. The Bacon SMSF proposes to purchase vacant land from Fred

– a related party – for market value. The fund would then build a

factory on the land and lease it out. Can this occur?

a. Yes, because the land will become business real property of

the fund.

b. No, because the land is not business real property of Fred.

c. Yes, because the land is being acquired for market value.

CPDMONTHLY


Chapter Event Review

Thank you to our Chapter supporters

AIA Australia

ANZ Wealth

BOQ Specialist Bank

BT Financial

Hays

IOOF

Energy Super

MLC Sales

Morgan Stanley

Vanguard

Upcoming Chapter events

6 October

Geelong: Member Lunch

7 October

Brisbane: Women in Financial

Planning Lunch

17 October

Western Australia: Young

Professionals Lawn Bowls

28 October

Sydney: Women in Financial

Planning Lunch

The FPA congratulates the following members who have been admitted as CERTIFIED FINANCIAL PLANNER® practitioners.

ACTMatthew Coman CFP®

Beames & Associates

NSWAndrew Murphy CFP®

Credit Suisse

NTBree Bounsall CFP®

RetireInvest

SAMatthew Todd CFP®

Securitor Financial Group

Matthew Kelly CFP®

Australian Central Credit Union

VICLauren Hendy CFP®

Westpac

Adriano Donato CFP®

Roskow Independent Advisory

Chris Geremia CFP®

AMP

WADarrell Carmody CFP®

LightHouse Capital

The future of advice

Elev8-ing young professionals

The Sydney Chapter recently held its Elev8

event – an event specifi cally tailored for young and

young-at-heart professionals who want to hear from

other ‘grassroots’ professionals about ideas that can

transform their own business and themselves.

Over 60 fi nancial planners, students and fi nancial

services professionals attended the September 11

event to hear other professionals talk about topics

that they are passionate about.

Jason Dunn, from St George Financial Planning,

provided an inspiring presentation about turning

his life around by quitting smoking and adopting

a healthier lifestyle, including participating in ultra-

marathons.

He spoke about his greatest achievement of

becoming the fi rst Australian to be invited to run

the demanding Himalayan ‘La Ultra – The High’ – a

333km, non-stop, ultra-marathon held in the Indian

Himalayas in August 2014. Of the nine people invited

to run this event, only one participant fi nished.

Unfortunately, this wasn’t Jason.

He spoke about the mental and physical endurance

required to compete in ultra-marathons, and how this

preparation also helped him in his everyday work.

Other speakers included Matthew Christensen, from

Hill Capital, who spoke about ‘value, up-sell’, and

Peter Bobbin (Rockwell Olivier), who provided an

inspiring presentation on how Future2 grants are

giving young Australians in need, a chance for a

brighter future.

The Chapter is grateful for the support of BOQ

Specialist of this event.

Leading social media expert,

Baz Gardner, from The Social

Adviser, was the guest presenter

at the Sydney Chapter’s

September Breakfast. In an

absorbing presentation, Baz

gave attendees a glimpse of

what the future of advice will

look like – from animating advice

documents, to ‘crowdsourcing’,

to creating multimedia support

teams overseas.

Baz spoke about the ways in

which technology is changing

fi nancial services. Websites,

such as ‘Gofundme’ (a

crowdfunding website for

raising venture capital money),

‘CrowdSpring’ (a website for

outsourcing logos, graphic

design and branding) and

‘Doodler’ (a website for

animated video) are providing

cost effective solutions for

planners to more actively engage

with their clients.

Baz and The Social Adviser

team will be on-hand at the

Professionals Congress in

Adelaide (19-21 November)

to drive the social media

component of the Congress.

Josh Logan and Karen Truman.

Speakers: Matthew Christensen (Hill Capital), Jason Dunn (St

George Financial Planning) and Peter Bobbin (Rockwell Olivier).

ADELAIDE 19-21 NOVEMBER 2014

FPACongress_PP10_14_outlines.indd 1 19/09/2014 12:47:09 PM


Centrelink

Changes to aged care services

Increased transparencyFrom 19 May 2014, all residential aged care providers were required

to publish the maximum accommodation prices they will charge from

1 July 2014, information on payment options and a description of key

features of each type of room.

This will provide older people and their families with clear pricing

and accommodation information to help those who are considering

aged care to compare prices and facilities and make fully informed

choices. It will also enable providers to highlight the best features

of their services and facilities, making the sector more transparent

and competitive.

Enhancements to My Aged Care To assist older people and their families in considering their care

options, My Aged Care – both the website (www.myagedcare.gov.au)

and the contact centre 1800 200 422 – have expanded the information

that is available online and over the phone.

One important addition to the website is the Fee Estimators that can

assist in providing people with an estimate of the fees they may be

expected to contribute to the costs of home care and residential

care. The Fee Estimators can be found at:

www.myagedcare.gov.au/fee-estimator/residential-care

Income testing arrangements for home care packages From 1 July 2014, income testing will mean that people with similar

incomes will pay similar fees for their home care based on what

they can afford to pay. The Government contribution amount will be

dependent on their capacity to pay. If a person in aged care receives

a full-rate of pension, they will not be asked to pay an income-tested

care fee.

Changed means testing in residential aged care From 1 July 2014, people will have greater choice and control

over how they pay for quality, affordable residential care. While the

Government will continue to fund much of people’s residential aged

care costs, a new means test will determine aged care contributions

to both accommodation and care costs.

New accommodation payments for residential aged careFrom 1 July 2014, the current accommodation bonds and charges

will be replaced by accommodation payments for all new residents.

The Government will continue to fully meet the accommodation

costs of residents with low means and partially support others.

Residents who are not eligible for any government accommodation

assistance because they have the means to pay, will be required to

make an accommodation payment. People going into aged care will

have 28 days after they enter care to choose how they pay for their

accommodation – either as a refundable deposit, a daily payment

amount, or a combination of both.

Removal of the distinction between high and low care in residential aged care As of 1 July 2014, there is one level of approval only for permanent

residential care. This means anyone with a permanent residential

care approval can seek a place at any aged care home that can

meet their needs.

All existing high care and low care permanent residential care approvals

automatically became permanent residential care approvals.

The removal of the distinction between high and low care in

permanent residential care makes arrangements simpler, more

fl exible and more transparent, without compromising the quality of

care provided.

These changes only impact people who entered care from

1 July 2014. For people who were already in care on 1 July, their

arrangements stay the same, unless they leave care for a period of

more than 28 days. If a person changes aged care homes, they can

choose to opt into the new fi nancial arrangements.

For more information about the aged care reforms, go to:

www.dss.gov.au/agedcarereform

For more information about accessing aged care services, visit

My Aged Care at www.myagedcare.gov.au or call 1800 200 422.

Over the next few years there will be changes to how aged care services are paid for

and delivered. Some fundamental changes need to be made to ensure the system is

sustainable, affordable, provides diverse and rewarding career options, and encourages

businesses to invest and grow. The changes offer people who are considering aged care

more choice and control.

October 2014 | 39

FPA Chapter directory

FPA BoardChair

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 CommitteesInterim Regional Chapter

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®


Member Services: 1300 337 301

Phone: 02 9220 4500

Fax: 02 9220 4582

Email: [email protected]

Web: www.fpa.asn.au

New South WalesSydneyVicky AmpoulosChairpersonT: (02) 9303 6223E: [email protected]

Mid North CoastJulie Berry CFP®

ChairpersonT: (02) 6584 5655E: [email protected]

NewcastleContact: FPA EventsT: (02) 9220 4543E: [email protected]

New EnglandDavid Newberry AFP®


RiverinaMarie Suthern CFP®

ChairpersonT: (02) 6921 1999E: msuthern@fl ynnsprake.com.au

Western DivisionPeter Roan CFP®

ChairpersonT: (02) 6361 8100E: peterr@roanfi nancial.com

WollongongMark Lockhart AFP®

ChairpersonT: (02) 4244 0624E: mark@allfi nancialservices.com.au

ACTCanberraRick ForsterChairpersonT: (02) 6273 0444E: [email protected]

VictoriaMelbourneJulian Place CFP®


Albury WodongaWayne Barber CFP®


Ballarat

Paul Bilson CFP®


BendigoGary Jones AFP®

ChairpersonT: (03) 5441 8043 E: [email protected]

GeelongBrian Quarrell CFP®

Chairperson T: (03) 5222 3055E: [email protected]

GippslandRod Lavin CFP®


Goulburn ValleyJohn Foster CFP®


South East MelbourneScott Brouwer CFP®

ChairpersonT: 0447 538 216E: [email protected]

SunraysiaMatt Tuohey CFP®


QueenslandBrisbaneSteven O’Donoghue CFP®

ChairpersonT: 0457 528 114E: steven.o’[email protected]

CairnsDanny Maher CFP®

ChairpersonT: (07) 4051 7799E: dmaher@fi ducia.net.au

Far North Coast NSWShane Hayes CFP®

ChairpersonT: 0411 264 002 E: shane@dfafi nancialplanners.com.au

Gold CoastMatthew Brown CFP®


MackayMatthew Stevens AFP®

ChairpersonT: (07) 4957 2252E: matt@fi nlinx.com.au

Rockhampton/Central QldDavid French AFP®


Sunshine CoastGreg Tindall CFP®

Chairperson T: (07) 5474 1608E: [email protected]

Toowoomba/Darling DownsBob Currie CFP®


TownsvilleDeidre Walsh CFP®


Wide BayContact: FPA EventsT: (02) 9220 4543E: [email protected]

South AustraliaPetra Churcher AFP®


Northern TerritoryAlex Brown CFP®


Western AustraliaRandall Stout CFP®


TasmaniaHobartTodd Kennedy CFP®


Northern TasmaniaChris Elliott CFP®


To update these details, please advise FPA Events on 02 9220 4543 or [email protected]

Important Notice: The Accelerator Cash Account is a product of the Commonwealth Bank of Australia ABN 48 123 123 124, AFSL 234945 (‘CBA’). Distributed by Australian Investment Exchange Ltd ABN 71 076 515 930, AFSL 241400 (‘AUSIEX’) a wholly owned but not guaranteed subsidiary of CBA, through CommSec Adviser Services. CBA and its subsidiaries do not guarantee the obligations or performance of AUSIEX or the products or services it offers. Please consider the Accelerator Cash Account General Information Statement and Terms and Conditions before making any decisions. Fees and charges apply. This has been prepared without taking account of the objectives, fi nancial and taxation situation or needs of any particular individual. For this reason, you should, before acting on the information in this material, consider the appropriateness of the information, having regard to your client’s objectives, fi nancial and taxation situation and needs, and if necessary seek appropriate professional advice. ^Money Magazine 2014 awards. *The interest rate is only available to new accounts opened from 18 November 2013 in the name of an Individual, Joint Individual, SMSF and Family Trust and for existing account holders who opened their account before 18 November 2013. For other rates please contact us to discuss. This assumes no referral fee or commission is being paid as a reduction in the interest rate and may vary anytime without notice. Interest is calculated daily and paid monthly. ® Registered to BPAY Pty Ltd ABN 69 079 137 518.

The cash account that ties it all together.

Our newly enhanced CommBank

Accelerator Cash Account weaves

dedicated support, effi cient management

of your clients’ cash and award-winning^

client facilities into the one powerful account.

Enjoy the benefi ts you’d expect from

a leading provider:

• Real-time client portfolio and balance

views, plus the convenience of making

online cash transactions, including

BPAY®, on your clients’ behalf.

• Exceptional support and service from

our dedicated team.

• Your clients will benefi t from 24/7 access

to their account, provided by Money

Magazine’s Bank of the Year.^

We make switching easy.

Transfer client cash portfolios with our

complimentary transition service, including

assistance with updating direct debits and

credits. Plus, your clients can enjoy an

additional 0.50% interest above the RBA

cash rate on balances in their CommBank

Accelerator Cash Account.*

Call 1800 646 151CommSecAdviserServices.info/cash

Talk to us about switching today.

Upgraded adviser

functionality

Market leading

client experience

Support from one of the

world’s strongest banks

Documents

Financial Planning October 2014