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Most trusted adviser – Shane Light

You may have seen in one of our recent blog that our Head of Advice and Senior Financial Adviser, Shane Light, was selected as a top six finalist in the AFA Adviser of the Year Awards.

While Shane has not progressed to the grand finals (narrowly missing out on a spot in the top three by just two points), we’re excited to announce that he has been invited to appear as a trusted adviser on the Beddoes Institute’s Most Trusted Adviser Network.

Soon you’ll be able to find Shane’s face among those listed as Australia’s best financial advisers – congratulations to Shane on this great achievement!

This invitation came off the back of the fantastic feedback received in the client experience survey undertaken as part of the Award’s judging process, which many of our financial planning clients have completed.

We are humbled by the responses received from our clients as part of this survey process – your feedback is important to us and helps us make sure we’re delivering on the high standards we strive to uphold. We wish the top three finalists for the AFA Adviser of the Year Awards the best of luck as they progress through to the stages.

Superfund? Or Super funding carbon emissions?

In late July the news broke that Queenslander Mark McVeigh, a young man with a degree in ecology, was taking his industry superfund manager to court for its inaction on climate change. The story didn’t quite get the traction it deserved as most people weren’t interested in headlines that made the issue out to be a case of ‘another millennial complaining about climate change’. While that isn’t completely untrue, this issue runs much deeper and everyone should know why it relates to them.

For a lot of people, superannuation is a bit of a mystery. Even the most basic questions can confound the average worker: What company is your super invested with? What investment model are they investing your money into? What investment products do you own inside your superannuation?

As a long-term lifetime asset made up of 9.5% of every dollar the average worker has ever made, superannuation really should command more attention from Australians. And that is what this legal battle is about, a demand for information.

Superannuation funds including industry funds, retail funds and self-managed super funds, are all trusts. This may seem like a fancy legal term, but it merely describes a relationship. In this case the trustee (the superfund) is under an obligation to hold and invest superannuation moneys in trust on behalf of the beneficiaries (Australian workers) until such time as they have retired and are eligible to withdraw their hard earned savings. The important point here is that the superfund never owns the money, they are simply the custodians of the money for a period of time.

As trustees hold a position of significant power over beneficiaries, they are subject to strict legislative rules. These include acting with care, diligence and skill, and reviewing the performance of the trust investments once a year. However, there is also a lot of old case law that influences the management of trusts. Mr McVeigh will be relying upon an old ruling that stated that beneficiaries have a right to information which pertains to their property.

As the industry superfund is holding his money in trust, he argues that he has a right to know what the company’s long term strategy to deal with climate change is. It is an interesting argument as the Australian Prudential Regulation Authority has already recognised climate change as a “defining issue for financial stability”.

Should the superfund reveal they have no strategy, could they be found to have failed their duty to act with care and diligence? Do you know what strategy your superfund is using to best benefit you in the future?

As the royal commission turns its gaze towards the superannuation sector, Australia will soon find out why Superannuation companies are so eager to hide information for their customers.

When the mystery that is the superannuation industry is compared to the experience that financial planning clients have when they take control of their own super; the differences are amazing. Financial advisers are subject to requirements to act in their client’s best interests by finding out what clients want to achieve and what levels of risk a client is comfortable with. Moreover, with every statement of advice produced all the research for every investment recommended is provided to the client to review.

If control and clarity around your super appeals to you, contact a financial adviser today.

General advice warning: The information contained herein is of a general nature only and does not constitute personal advice. You should not act on any recommendation without considering your personal needs, circumstances and objectives. We recommend you obtain professional financial advice specific to your circumstances.

Proposed changes to Superannuation Industry (Supervision) Act (SISA)

If you’ve got a Self-Managed Superannuation Fund (SMSF) you may know that each year the fund has to sign off on an investment strategy that outlines the types of investments that it’s approved to invest in. This strategy is set by the trustees and is completed within the frameworks stipulated in the Superannuation Industry (Supervision) Act (SISA).

Currently, the SISA outlines obligations to formulate, review regularly and give effect to investment, risk management and insurance strategies. But strangely enough, there are no obligations for trustees to consider the retirement income needs of their members and outline how the SMSF will finance those needs.

In the 2018-2019 Federal Budget the Government proposed a retirement income framework that intends to increase individuals’ standard of living, increase the range of retirement income products available, and empower trustees to provide members with more guidance during their transition into retirement.

As part of this framework, the Government has proposed a further condition to the SISA. If legislated, investment strategies must include a ‘retirement covenant’. This will make it mandatory for trustees to develop a retirement income strategy for their members to ensure that the SMSF can meet the pension and retirements needs of its members.

Trustees must formulate, review regularly and give effect to a retirement income strategy to help members meet their income objectives during retirement.

The Retirement Income Position Paper proposes that a retirement strategy needs to be implemented and trustees need to engage with their members. They state that a number of factors should be taken into consideration when designing the strategy in order to optimise each member’s retirement outcome. These include:

  • maximising income for life for members;
  • the potential life spans of members and the costs and benefits of managing longevity risk for members as a whole;
  • managing risks that affect the stability of income, including inflation;
  • providing members with access to capital;
  • member needs and preferences for the factors above;
  • the costs and benefits to members of developing a CIPR in-house compared with offering a CIPR developed and managed by a third party or a combination of both in-house and a third party;
  • expected member eligibility for the Age Pension; and
  • whether and how cognitive decline may affect outcomes.

So, what now? If you have an SMSF, the short answer is nothing. Our advisers at The Hopkins Group will track this proposal as it progresses through our legislative system and will keep you in the loop. As the trustees of many SMSFs, our clients can sit back and know that we stick to their obligations. Want to know more? Contact one of our advisers today.

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