The advice and investment week in focus - 7th April

By Drew Meredith

1) After years of competition and co-operation in equal measure, the Financial Planning Association (FPA) and the Association of Financial Planners (AFA) have come together to form one major association aimed at representing Australian financial advisers. As of April 3, the two groups will form the new Financial Advice Association Australia (FAAA) as a single team in one office on Clarence St, Sydney. The merger comes after five years of industry rationalisation sparked by the Hayne royal commission, the exit of the banks from the industry and the implementation of higher ethical and educational standards for financial advisers. The hope is that the merger will create a single, stronger voice to represent the financial advice industry on a national level to policymakers and regulators. The merger received overwhelming support from AFA and FPA members, with only 8 per cent indicating that they didn’t support the union. In a recent survey completed by CoreData, 79 per cent of advisers said “sensible regulation of the industry” will be the best indicator of the new association’s effectiveness.

2)  Treasury’s review into the Your Future Your Super (YFYS) regulations, launched in late 2022, has culminated in a more flexible approach to the performance test. But the extension of that test into trustee-directed products could mean extreme difficulty for exclusionary and conservative options. The key changes to the YFYS performance test, announced on Tuesday (April 4), are threefold: the application of the test to trustee-directed products (TDPs); the extension of the length of the test to 10 years; and the introduction of a handful of new and updated benchmarks to make some asset classes more manageable within the constraints of the test. The new benchmarks include low-risk alternatives (25/75 equities/bonds) and high-risk alternatives (75/25 equities/bonds); disaggregated benchmarks for emerging and developed markets in global equities; and disaggregated benchmarks for fixed income, including ex credit.

3) According to AMP Capital’s John Julian and Talaria Capital’s Chad Padowitz, investors seeking infrastructure exposure in the volatile investment environment can take advantage of real-asset exposure and put options to reap income without relying on dividends. Speaking at The Inside Network’s Growth Symposium in Sydney, Julian – investment director and manager of the AMP Capital Core Infrastructure Fund – said the global push to net zero has created infrastructure opportunities that will define the investment landscape for the long term, even as volatility and uncertainty become more entrenched. Speaking about the changing economic environment, Talaria’s Padowitz stressed that the market disruptions put a greater importance on correlation among assets as rising interest rates hit different sectors on different timelines.

4) The nation’s 15th biggest licensee network, Sunshine Coast based Infocus, has leant into its technology capabilities with the launch of a new tool that allows advisers to link client information from its customer relationship (CRM) system directly to its investment platform. Developing both its CRM, PlatfromplusAMS, and its managed account-enabled investment platform, PlatfromplusWRAP, has been a key element of the network’s value proposition to advisers, according to Darren Steinhardt, who founded the business with his wife Stephanie (both pictured) almost 30 years ago. Infocus has about 100 practices, 200 advisers and $10 billion in client funds under management under its purview. Steinhardt and his wife are the largest shareholders of the business, holding around 50%, while there are 110 shareholders total.

5) Paris-aligned benchmarks (PABs) are meant to reduce portfolio carbon emissions in line with the Paris Agreement on limiting the rise in global temperatures to below 2°C and preferably to 1.5°C. But they mostly do that by excluding pollutive companies altogether, meaning that investors who use the current approach only “look like they’re doing something” when they aren’t really helping the transition at all, according to Scientific Beta (SciBeta). “One of the greatest issues we see is defunding certain sectors,” says Mike Aked, senior investment specialist at SciBeta. “We need a transition and the sectors that require serious transition, particularly utilities, need substantial funding.”