Agribusiness advice clarified
Kathy Bowler
A new CPA Australia guidance note outlines how its members can assist clients with agribusiness managed investment schemes (MIS).
It explains the parameters of advising in this area for both Australian Financial Services Licensed (AFSL) and non-licensed members, and also identifies some of the key comparators used in distinguishing between agribusiness schemes, including the risks associated with them.
According to Kath Bowler, CPA Australia financial planning policy adviser: “It highlights the key factors that people need to take into account if they are advising in this area. Because we represent licensed and unlicensed members, we take every opportunity to remind them where the line is.”
One of the primary aspects of agribusiness MISs it highlights is the distinction between forestry and non-forestry related schemes, with the often vastly different return timeframes significantly impacting their various tax treatments.
“It affects the capital gain, the timing of the returns. We’re just trying to draw attention to the different features of these products, and in doing so that helps to explain the changing tax treatments as well,” Bowler said.
The guidance note looks first at how CPA members can decide whether an agribusiness MIS is an appropriate product investment for their client, and then highlights the various features and risks of the assets.
“It’s looking at the category generally, and then the specifics of one versus another.
“We’re also trying to draw attention to the risks that are specific to this class, because sometimes they’re not really discussed É they’re often talked about as high risk or alternative, but [it looks at] what makes these assets riskier than investing in the stock market,” Bowler said.
These risks include the much longer time horizon relative to many other assets, taxation risks, agricultural risks and the lack of a secondary market or index for agricultural MISs.
“You can’t see how these assets are tracking on a regular basis. There’s no index and no indication of whether management is looking after your product or not,” Bowler said.
“Often, you may not know the outcome of that until the end, until it’s too late. And with the lack of secondary market É if you do discover there’s a problem, you can’t get rid of them.”
Recommended for you
The popularity of ETFs, which are approaching $200 billion in Australia, is a potential threat to the advice landscape if consumers opt to invest directly, according to this senior partner.
A former AMP financial adviser has urged advisers in the BOLR class action against AMP to object to the “unfair and unreasonable” $100 million settlement sum as the objection deadline approaches on 22 May.
Two Victoria-based financial advice practices have merged and rebranded as Forbes Fava Saville Financial Planning, as the firm realises the benefits of added scale.
The Financial Services and Credit Panel has made its latest ruling over a case involving an incorrect Statement of Advice.