1. Financial literacy
2006 was the year the industry banded together to drive the message of financial literacy home. This followed shocking research results indicating dire levels of financial literacy across the nation.
A Newspoll survey commissioned by the Investment andFinancial Services Association found Australians in general still needed to improve their levels of financial literacy, but those who engaged the services of a financial planner were already ahead of the game.
Other research, conducted by Mercer, pinpointed a lack of financial literacy as one of the key reasons for a lack of preparedness to retire.
A number of initiatives were implemented to help tackle this phenomenon, including the Financial Literacy Foundation’s ‘Understanding Money’ campaign, the Australian Stock Exchange’s online share market game and the Australian Securities and Investments Commission’s radio program ‘Your Money’.
2. Succession planning
Succession planning has become accepted as a vital sustainability tool for financial planning practices.
Over the year, financial planning practitioners were advised that a sound succession plan could impact the ability of business owners to attract adequate funding to drive an entity forward.
Acting on this assumption, MLC addressed its succession planning issues by putting together a Succession and Acquisitions Services team dedicated to guiding planners through the process.
AXA’s succession planning tool, AXA Grow, also proved popular among advisers in their efforts to maximise the value of their business when the time came for the owner to retire.
3. Hedge funds
As of June 2005, the Australian hedge fund industry was valued at $35 billion, with $22 billion invested directly with hedge funds, and a further $13 billion invested in funds of hedge funds.
The Australian hedge fund industry continued to boom throughout 2006, making the nation by far the largest hedge fund manager in Asia, with twice the level of funds under management of Hong Kong — the second largest.
This prompted the Shadow Minister for Foreign Affairs, Trade and International Security, Kevin Rudd, to suggest it could become Australia’s next major export.
What it also did was lead the Australian Securities and Investments Commission to impose a greater regulatory review of hedge funds’ product disclosure documents, particularly in regard to the transparency of fees.
4. Listed property funds
Australia’s ageing population fuelled an upswing in the popularity of listed property funds (LPF), with 81 per cent of advisers placing investments in the asset class in the past 12 months, as revealed by Assirt/Wealth Insights research.
The survey of more than 400 financial planners discovered that LPFs were the third most utilised asset class, following closely behind Australian and international equities respectively.
And it is a trend that is likely to continue, considering fewer people are being born compared to generations before.
The high-yielding nature of the asset class is very attractive to retirees, as they need an income stream to live on.
5. SMSFs
Budget changes this year generated a spike in the number of self-managed superannuation funds (SMSF) being established in Australia, which rose to 3,000 a month in May from a normal level of registration of around 1,800 per month.
As a result, financial planners showed an increasing willingness to provide administration services for SMSFs, and the level of attention circling the products began to rise.
Most recently, the Australian Taxation Office signalled it will lift the level of compliance activity surrounding SMSFs by increasing the number of people working in its compliance area by 350.
Furthermore, CPA Australia issued a set of guidelines to assist members in advising clients about SMSFs and ensure appropriate advice was given.
