The advice and investment week in focus - 8th November

1) In December it will be two years since the government received Michelle Levy's set of 22 recommendations stemming from the Quality of Advice Review, and all the industry has to show for it are minor tweaks to the advice administration process. "Quick wins", the financial services minister called them. While Treasury remains stalled on drafts for the second, more meaningful tranche of reforms, which will pare back SOAs and introduce a new class of advice, the industry has started coming up with its own solutions. This week Colonial First State and Viridian Financial Group announced an agreement for Viridian to provide relatively affordable units of one-off, topic-based financial advice to CFS FirstChoice superannuation, pension and investment members. CFS FirstChoice customers will be able to access a Viridian adviser in "modular blocks" which start at $500 each, with eligible topics including personal investments, superannuation, pensions, retirement planning and Centrelink. More complex and specialised topics like aged care and UK pension advice will be excluded. Any combinations of blocks with be capped at $3,000.

2) The corporate regulator has concerns about the rapid growth of private markets at the expense of public listings, with the speed of capital see-sawing from one end to the other the subject of a discussion paper to be released in the coming weeks. At a recent speech in front of the Parliamentary Joint Committee on Corporations and Financial Services at its inquiry into ASIC oversight, commissioner Joe Longo explained that as a "modern, confident and ambitious" regulator, it was working to proactively identify developments that could sully its reputation as custodian of "one of the cleanest listed equity markets in the world". The decline of public markets has therefore not escaped its attention. Within the private markets realm, private equity's ascent has been well documented over the past few decades. But with banks broadly subject to higher lending standards and wary of inflated market risks, a burgeoning class of private debt providers have joined the private equity brigade. They lend to companies that banks are wary of, with loan terms that are more flexible. Returns are attractive, and stable, but relatively untested in a serious downturn.

3) The number of financial advice issues that made their way to the Australian Financial Complaints Authority plummeted in the 2023/24 financial year, despite all the consumer harm and associated complaints linked to the collapse of Dixons Advisory. Advice complaints dropped 26 per cent in the financial year, according to AFCA's recent annual review, down from 4,840 to 3,559. This continues a downward trend for complaints about advice and investments across the five years AFCA has been in operation, with the only anomaly being a spike in complaints last year.

According to AFCA senior ombudsman for advice and investments, Alexandra Sidoti, the "growing trend" towards less complaints reaching AFCA can be primarily attributed to a more professionalised industry that has higher standards of education and compliance than it did in the period before the Hayne Royal Commission.

4) Australian investors' love for domestic equities remains strong, but repeated exhortations from advisers to diversify seem to be finally taking root, with interest in international equities superseding that of domestic equities, according to recent data from VanEck. Investors in Australia – especially retirement age investors who prioritise income yielding investments – have historically preferred domestic equities because of the imputation credits attached, effectively doubling the income paid. For advisers and investors alike, the idiosyncratic nature of our franking credit system has always provided an investment conundrum: how heavily do you tilt to domestic equities to capture the extra income while also adhering to basic principles of asset allocation risk by spreading investments across classes? That tension seems to be settling, with "more people than ever" looking to expand their overseas portfolio, according to VanEck. More than 75 per cent of Australian investors are planning to invest internationally next year, while about 70 per cent are considering domestic equities.

5) Shawn Blackmore, AustralianSuper’s first chief retirement officer, will strike out from the fund this month to start a new venture. Blackmore spent 17 years at AustralianSuper, with chief executive Paul Schroder highlighting his achievements for members during the Covid crisis and as the architect of its retirement strategy. “Because of his deep experience and knowledge of the sector and its members (Shawn) has set a path for the fund where we have a much greater understanding of how retirement is different and deeply personal for each member,” Schroder said in a release. “Shawn’s contributions to AustralianSuper will be long lasting and I want to thank him on behalf of members and the Board for all the work he has done over the past 17 years.” Blackmore spearheaded?AustralianSuper’s recent move to give its members an “account for life” that would straddle accumulation and drawdown?and reduce friction in the transition to retirement.