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Email. special.interest@charteredaccountants.com.au

Headlines

1. Chairman's Message
2. Financial Planning Update
   • Important Message- CA- Financial Planning Specialist Directory
   • Financial Planning Chapter Newsletter Update
   • Congratulations and Welcome-CA-Financial Planning Specialists
   • The Insitute and Financial Planning
   • Continuing Professional Development
3. News and Updates
   • Raising the Profile
   • Business Forum
4. Government and Regulator Updates
   • The Regulator
   • Statement of Advice- ASIC
   • Super Choice Changes- Reminder
5. Consumer Responsibility - Where does it start and end?
   • ATO Super Update June 2006
   • Super contributions must be paid by 28 July 2006
6. Chartered Accounting financial planners master the class
   • Financial Planning Planning Speciaist Profile
7. Regional Updates

1. Chairman's Message

In 2005 the Institute of Chartered Accountants (in conjunction with CPA Australia) issued APS12, our statement of financial planning "best practice". The central proposition of APS12 is that "fee for service" (as defined) is the only remuneration model that is consistent with independence and professionalism.

We did not go so far as to "ban" commission, as we accepted that there might be a place for these in certain limited circumstances. However, we clearly stated that disclosure of remuneration is not enough. The real issue is the form of the remuneration, the method of its calculation, and who pays it.

Since the publication of APS12 there has been extensive public debate about remuneration models in the trade and general media. No doubt, disasters such as Westpoint have encouraged the discussion.

We are now at a point in the debate where the remuneration principle espoused in APS12 is a widely accepted industry benchmark. This is both surprising and gratifying, because only six months ago the accounting profession's position was being widely criticised as self-seeking and unrealistic.

Unfortunately, there is still a significant section of the financial planning industry (including The Financial Planning Association itself) which clings to the notion that disclosure of remuneration is all that is required, and that commission remains an equally acceptable form of remuneration, provided that it is disclosed. This position is often justified by reference to the importance of "choice" for consumers.

The accounting profession disagrees with this position. We strongly assert that while disclosure is essential, it is only half of the equation in the development of a truly independent and professional approach to financial planning. The other half is that an appropriate "fee for service" remuneration model will remove, and will be seen to remove, much of the potential bias that may otherwise exist where the placement of products is involved in providing advice to a client.

We are not talking here of a commission rebate being swapped for a "fee for service" based on a percentage scale. This may also give rise to serious bias.

What we are talking about is a "fee for service" calculated after consideration of each client's unique set of circumstances. This fee may be based on an hourly rate or on a scale of fees, but the key issue is that it must NOT be based directly on a client's asset base (known in the industry as "funds under advice").

The accounting profession should be proud of the fact that we are leading the industry in terms of what is acceptable in this fundamental area of practice. For many people, including some of our own members, APS12 has proved to be challenging and commercially inconvenient. However, it is clear from the support it has received from a wide range of sources that it represents the future of "best practice" in professional financial planning.

Robert M.C.Brown, B.Ec., FCA
Chairman, National Financial Planning Committee

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2. Financial Planning update

The last couple of months have been an exciting and also challenging time for those in the financial services industry. There has been the release of the ASIC Shadow shopping report, changes to superannuation in the Budget, Government requesting further comment on a range of corporate and financial services regulations, media coverage on Westpoint, the fee for service versus commission debate (as mentioned in the Chairman's message) and AML. All of which again emphasizes the importance of financial planning services for chartered accountants.

• Important Message: CA-Financial Planning Specialist Directory

  As you would be aware a directory of the CA-Financial Planning Specialists has been released and communicated to members in public practice. The objective of this directory is to provide members who are not licensed under FSR the opportunity to contact Financial Planning Specialist members to provide a comprehensive service to their clients. The release of this directory has been very well received.

  Unfortunately it appears that a few Financial Planning Specialists have not been included for a variety of reasons. The Directory was based on those Specialists who were listed in "Find a CA" on the Institute website and those who registered following emails and the newsletters.

  The directory is updated on a monthly basis as new Specialists join, currently there are 13 members who are applying to be Financial Planning Specialists.

  If you believe you should have been included or would like to register to be included please send through an email to: finplanchapter@icaa.org.au as soon as possible. Please include details of your name, the business, a contact phone number, email address and suburb/ state.

• Financial Planning Newsletter update

  To enhance the quality of the offering to the members of the Financial Planning Chapter the newsletter is being revamped to include additional technical information. We are in discussions with some specialist providers to enhance the newsletter with both technical and practical content. These changes will be incorporated in the next edition of the newsletter.

  In the next edition of the newsletter 2 topics to be covered are: "Hedging portfolios and with derivatives" and "reverse mortgages". The recent sharemarket volatility indicates that it is an opportune time to review some derivative strategies. In the financial services industry there have been very few products that have developed and continued to develop at such a pace as reverse mortgages. The industry body SEQUAL will be providing an overview of the most recent issues.

  Congratulations and Welcome - CA-Financial Planning Specialists

  The following members have had their application to join the Financial Planning Chapter approved and are now accredited CA-Financial Planning Specialists.

  • Mr Anthony Francis Della, CA
    Della Financial Services Pty Ltd
    Chermside STH QLD

  • Ms Joanne Dawson CA
    Executive Wealth Strategies Pty Ltd
    South Melbourne VIC

  • Mr Andrew Frith, CA
    Leenane Templeton Pty Ltd
    Newcastle, NSW

  • Mr Geoffrey Gill, CA
    Harrison & Gill
    Frenchs Forest NSW
    

  • Mr Aaron Johansson, CA
    Fellowes and Partners
    Gladstone QLD

  • Mr Glen Rice, CA
    Aspire SRS Pty Ltd
    Apsley QLD

• The Institute and Financial Planning

  A question that arises from time to time is whether the Institute is intending to conduct a Conference specifically for members involved in financial planning. The current view is that in light of the range of conferences available through dealer groups and various associations that a multi-day conference per se is not a priority. This issue was tabled at the recent National Financial Planning Chapter Committee meeting. The Committee is currently considering the possibility of having a half day or full day event. The seminar would need to have a specific focus/ purpose. It was agreed that there was a need for an event where members involved in financial planning could be brought together. The solution being considered is to run an event in a capital city. This is being considered for later in the year.

  Should you have any suggestions or comments please email them to Hugh Elvy via email: finplanchapter@icaa.org.au

  Continuing Professional Development

  The Institute conducts a range of seminars and training sessions in regards to superannuation such as on SMSF issues and a technical series. We are currently reviewing the offerings in terms of financial planning. The basis for this is that more of our members are applying for their own AFSL and therefore require training solutions. Again it needs to be appropriately assessed as there are wide number of training providers with a variety of offerings. It has been suggested training solutions should incorporate practice management topics relating to accountants practices and financial planning.

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3. News and updates

• Raising the Profile

  As previously stated one of the key initiatives of the Institute and the Financial Planning Chapter is to raise the profile of Chartered Accountants within the financial planning industry. It is critical for the Institute to be involved in the various debates within the industry and to position itself as a leader.

  Over the last couple of months the Institute has significantly raised its profile in the media.

  For example a Newspoll survey commissioned by the Institute regarding consolidation of superannuation funds result in over 30 pieces of coverage including main stream press and trade publications. Additionally the Institute has been widely quoted in regards to key industry issues such as Westpoint, ASIC shadow shopping, the fee for service/ commission debate and Budget super changes. Again this coverage has included trade publications such as Money Management, IFA, ASSET and main stream publications such as BRW, Sydney Morning Herald, The Australia, The Herald Times etc.

  The Institute now regularly receives requests from the media for commentary on important industry issues.

  Should have issues you believe the Institute should be raising, please forward these to Hugh Elvy on: finplanchapter@icaa.org.au

• Business Forum

  Over the last a couple of weeks, Business Forum has been successfully conducted throughout the country. The number of sessions specifically focusing on financial planning and superannuation was raised significantly this year. In fact with the super changes in the Budget, one of the largest sessions run in Sydney was the Superannuation session with over 150 attendees. It is expected to further develop these superannuation and financial planning streams for next year.

  Additionally, this year the members of the National Financial Planning Committee were actively involved, chairing many of the financial planning and superannuation sessions and raising the profile of the Financial Planning Chapter to members.

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4. Government and Regulator Update

• The Regulator

  The Institute continues to build a strong relationship with ASIC specifically in regards to financial planning and FSR. The Institute is working with ASIC on a number of projects such superannuation fund consolidation, conflicts of interest and the recent Corporate and Financial Services consultation paper. This paper raises many significant issues for our financial planning members and in many cases improving the services that are delivered to clients. The Institute worked on a joint submission with the CPA and NIA in regards to this paper.

  An important issue in our efforts in building strong relationships with Government and the regulator is working with the other accounting bodies. In the last month we have worked closely with the CPA and NIA on a number of initiatives where we have common issues. This ensures we keep the accounting profession as an integral component of the financial planning industry.

• Statement of Advice - ASIC

  Amongst the many media releases by ASIC one in particular drew my attention. It was not the fact that a financial planner had been banned for 3 years, but rather the reason for the ban.

  ASIC alleged the individual failed to provide a Statement of Advice (SOA) to his clients in a timely manner. Under the Corporations Act, an SOA must be given as soon as practicable and in any event, not later than the fifth day after a financial service is provided. ASIC's investigation identified instances where the individual had failed to provide SOAs for periods between three weeks and two months after providing financial services such as superannuation rollovers.

  ASIC's review of files relating to clients indicated he had failed to make adequate enquiries concerning clients' personal circumstances and demonstrate regard for the information obtained through such enquiries.

  ASIC also expressed concern regarding the planner's product knowledge and capacity to provide reliable advice.

  The key issue here is that these factors are commonsense issues that every planner should know and apply. How is it despite the increase in regulation and compliance that planners can still operate in this fashion. Interestingly, one of the key points to come out of the ASIC shadow shopping survey was the number of examples where an SOA was not provided where personal financial advice was provided. In some cases it maybe said that that the advice may have related to only small superannuation balances and 'hold' recommendation but there was also an example where the advice related to a superannuation balance of over $200,000.

  As stated earlier we are working with the Regulator and government in regards to superannuation consolidation advice and the Consultation paper asked for comments in terms of when an SOA is required. However, the core message is that as financial planners we must "know our clients", "know our products" provide appropriate advice and document our recommendations to clients in an SoA. These are minimum requirements as financial planning builds as a profession.

• Super Choice changes - Reminder

  From 1 July 2006, up to 500,000 additional employees will be able to choose a superannuation fund under amendments to the superannuation guarantee law by the Workplace Relations Amendment (Work Choices) (Consequential Amendments) Regulations 2006.

  Information on what employees should consider and links to the Super Choices booklet can be found on www.superchoice.gov.au

  These changes will apply to employees working for a corporation who were previously employed under a State industrial award. Known as 'notional agreement preserving State awards' - these are old State awards which now have effect under the Federal workplace relations system.

  If employers are an incorporated business and they have employees under a State award, they should check whether they are now under one of these new federal workplace agreements. Employers and employees can get information on WorkChoices on the website www.workchoices.gov.au or by calling the WorkChoices Infoline on 1300 363 264.

  Employers affected by this measure will have to give an employee who commences work on or after 1 July 2006 a Standard choice form. Existing employees can request a form after that date. The form can be downloaded from the superchoice website or by calling the Australian Taxation Office on 13 10 20 and quoting NAT number 13080. Questions related to choice of fund can also be directed to 13 10 20.

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5. Consumer Responsibility - Where does it start and end?

In light of the high levels of media coverage in regards to financial planners, Westpoint, disclosure etc, a key concept that continues to arise is the need for consumer understanding and education. Whilst financial planners have a high level of responsibility and trust, the consumer has a level of responsibility also. Not only is the challenge for consumers to understand the complexities of the financial services industry, it's strategies and products, there is the important issue of consumers wanting to take on the responsibility.

These days consumers are generally time poor, as a result many consumers look to experts and professionals to save themselves time and angst. Therefore financial planners are faced with consumers who are looking to "outsource" the solution to a problem. The increase in a phenomenally wide range of general services available to consumers is an indicator of the consumer no longer wanting to allocate time to what they perceive to be "chores".

A consumer will contact a service provider/ professional when they are out of their depth or don't have the time. The challenge is encouraging consumers to take responsibility to be proactive in the relationship with their financial planner. If you think about it, how often have we employed a "professional" or "expert" to provide a service in an area that we have little expertise or for that matter interest.

For example, if you have little interest or understanding about cars are you going to spend time repairing/ servicing it yourself - unlikely or obtain a full understanding of what was completed by the repairer. In most cases you want your car repaired and even if they explain what they have done it is unlikely you will comprehend it or want to comprehend the details. How many of us have read through the DL brochure outlining the Terms and Conditions of a new credit card, we should but more often than not we don't. We trust the provider has made an appropriate recommendation. In addition, both these example for many consumers are of a lower level risk.

Whilst these are rather simplistic analogies it is a major issue for financial planners.

The first clear message for consumers is that their financial situation is most critical and in many ways as important as addressing their health issues. (It may well be that a consumer's financial situation actually impacts on their health.) A consumer's financial situation is a key driver to their lifestyle and future goals. Further a consumer's financial position, particularly at retirement, cannot be readily rectified if the advice is not appropriate.

Even when it comes to consumer education, this can be complex and at times overwhelming. ASIC provides a consumer website FIDO www.fido.asic.gov.au which can be immensely helpful to consumers. There is information on how to select a financial planner, details on types of products and structures, how to assess risk and a variety of money tips. When we compare to a few years ago consumers now have access to a wide range of information, especially as a result of the internet. (Just Google "Financial Planning" and over 7 million results come up.) The difficulty again is that the information is there, but still requires the consumer to take responsibility to access, read and comprehend the information. To direct a consumer to this website requires more than providing details of the website, it also entails directing the client to the where on a website and offering to explain the information.

Until consumers take a greater responsibility, the financial planner must take up additional responsibility. It cannot be underestimated the level of responsibility and trust financial planners have. As many of us would have experienced, written disclosure, as set out in a Statement of Advice, whilst meeting regulatory responsibility, does not ensure consumer understanding. Financial planners must ensure the advice is always appropriate.

We cannot underestimate the level of responsibility and trust financial planners hold.

• ATO Super Update June 2006

  The ATO has released its latest Super Update.
  www.ato.gov.au/superprofessionals

• Super contributions must be paid by 28 July 2006

  Superannuation payments for the quarter ended 30 June must be made to a complying superannuation fund or retirement savings account by 28 July 2006, even if employers contribute more frequently than quarterly.

  If employers do not pay the full amount due by 28 July 2006, a Superannuation guarantee charge statement - quarterly (NAT 9599) must be lodged and the superannuation guarantee charge paid to the Tax Office on or before 28 August 2006.

  The charge includes the unpaid superannuation contribution, an interest charge of 10% a year and a $20 administration fee for each employee with unpaid superannuation. The superannuation guarantee charge is not tax deductible.

  From 30 June the Superannuation Holding Accounts (SHA) Special Account will be closed to employer deposits from this date. If an employer deposits or attempts to deposit money to the SHA special account after this date they will not satisfy superannuation or choice of fund law or reduce an employer's liability to the superannuation guarantee charge.

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6. Chartered Accountant financial planners master the class

As previously highlighted last year we had 12 Chartered Accountants who made it into the financial planning elite after being named in the Personal Investor magazine's top 50 Masterclass.

Here is another profile - Colin Ritchie of MTP Wealth Accountants in Inverell, NSW.

FINANCIAL PLANNING SPECIALIST PROFILE

1. How long have you been involved in Financial Planning?
   I have been involved for around 20 years. Initially I combined looking after a busy business services practice and doing financial planning for those clients. About seven years ago, I made the decision to move completely into financial planning and provide financial planning advice to clients of other accountants within the firm that I was with at the time.

2. What made you decide on Financial Planning as a specialisation?
   I initially made the decision to get involved with financial planning because I felt that the quality of advice that clients were getting from other advisers was so poor, that anything I could do would have to be an improvement. I felt that financial planning was an area, that if clients received quality advice, then it could really make a difference to their ability to reach their financial goals.

3. How did you get into the Financial Planning industry?
   The firm I was with at the time did not do financial planning, so even though I was an employee at the time, I hounded the partners to get involved in the area. The firm decided to take on a franchise with a financial planning firm and I became an Authorised Representative of that firm.

4. What do you enjoy most about being a CA - Financial Planning Specialist?
   Chartered accountants enjoy a position of high regard in the community, so I like to think that clients view our financial planning services as a highly professional service. Unfortunately the financial planning industry continues to suffer bad press as a result of some of the "cowboys" in the industry and it is important that as a chartered accountant, you can differentiate yourself from that perception.

5. What do you consider to be the greatest challenge in your role as a FP specialist?
   The greatest challenge for financial planners working in a professional accounting office is always getting access to the clients. While I have worked hard to develop this with my own firm and I think that it works fairly well, I constantly hear financial planners in accounting practices complaining about this.

   Accountants should be the natural providers of financial planning services to their clients and should dominate the industry. Many accountants however, don't want to be seen as "selling" to their clients and as a result, find it hard to refer to an "in-house" financial planner. The sad part of that, is that the client generally desperately needs the service and in many cases then goes off and sees someone else, who may or may not give the client the quality advice that their accounting firm could have given them.

6. What skills and attributes do you think distinguishes a CA-Financial Planning Specialist from other Financial Planning specialists?
   I have always found that having a solid accounting and tax knowledge that comes from being a chartered accountant, has helped me to provide tailored financial advice to clients. While I can readily interpret a set of financial statements or understand the tax implications of a particular strategy, as any chartered accountant can, many financial planners without the accounting background would struggle in that area.

7. What is your personal philosophy on Financial Planning?
   I believe that sound financial advice has the capacity to substantially change a person's life. We have a policy in our practice that we will help any client that is looking for advice and who are prepared to pay a fee to be helped. I have been at conferences and spoken to other planners who will not deal with clients who have less than say $100,000 to invest. I disagree with this approach.

   We have made a point of getting out to the local schools on a regular basis to talk about the general principles of financial planning. I find it amazing that the current school curriculum does not address financial planning issues for every student. No wonder as a nation we struggle to save.

8. Looking ahead - what do you consider to be the greatest challenge to the profession in the next 12 months? In the next 5 years?
   The financial planning profession will have enormous opportunities over the coming years as the population ages and more people move into retirement.

   As a profession we need to ensure that the ongoing bad publicity of the rogue advisers, does not limit those opportunities by driving the public away from financial planners.

9. What is the best financial advice you have ever received- and from whom?
   I grew up in an education system that did not provide financial advice, so consequently I was ignorant of the basic investment principles until I discovered them for myself. Maybe that is why I am so passionate about getting the financial planning message into schools.

10. What do you think the ICAA could be doing to support you as a CA - Financial Planning Specialist?
    I believe that the ongoing bad publicity surrounding the financial planning industry is likely to continue. If find it ironic that in the financial press, much is made of the fees/commissions debate, with commissions being seen as unprofessional, whereas a stockbroker who generally only charges by commission is seen as highly professional. This highlights to me that how you are paid is irrelevant, it is the quality of advice that is paramount.

    Accountants have a good reputation as providing quality advice, so the institute should be leveraging off this good reputation and showing a sceptical public that a chartered accountant who provided financial planning advice, is in fact a superior financial planner. Maybe then, over time, accountants can wrest back control of the financial planning industry and more Australians would receive quality advice.

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7. Regional Updates

NSW Financial Planning SIG Luncheons

Luncheons are held in NSW bi-monthly and are a great way for members to meet with other members as well as hear speakers from a wide variety of backgrounds.

The luncheons are held at:

Conference Centre (Level 5)
Institute of Chartered Accountants in Australia
Chartered Accountants House
37 York Street Sydney from 12.00pm to 2.00pm

Attendees qualify for 1.5 CPE hour.

The NSW Steering Group is always seeking to provide relevant topics for these luncheons. Members and Specialist of the NSW Chapter are invited to register their suggestions or feedback.

The meeting dates for the remainder of 2006 are:

• Friday 28 July 2006

  "Ageing Executives: Breaking the Taboos & Rising to the Challenges"
  Presented by Julie Perigo, Director, Re-inventors Pty Ltd.

• Friday 6 October - subject to be confirmed

• Friday 1 December - subject to be confirmed

For more information and to reserve your place, please call Kim McGuiness on 02 9290 5679 or email: kimm@icaa.org.au

If you are interested in attending any of the above activities or would like to find out details of events that are happening in your state please contact the following representatives at your regional office on the details listed below:

NSW & ACT - Kim McGuiness: Email - kimm@icaa.org.au Telephone - 02 9290 5679
VIC & TAS - Clare O'Neill: Email - clare@icaa.org.au Telephone - 03 9641 7407
WA - Samantha Huigens : Email - shuigens@icaa.org.au Telephone - 08 9420 0411
SA - Kerry Tonkin: Email - kerry@icaa.org.au Telephone - 08 8113 5508
QLD - Louise Collins: Email - lcollins@icaa.org.au Telephone - 07 3233 6504

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The Financial Planning Chapter Newsletter is available by subscription for $66.00 annually (inclusive of GST).

For further information please contact:

Lily Shin
Business and Practice Support Coordinator
The Institute of Chartered Accountants in Australia
Ph: 02 9290 5526
Email:business_practice@icaa.org.au

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