IN THIS ISSUE

• FOFA continues to headline
• Quick Tip: Investment Myth – Crowd support indicates a sure thing
• Happiness: the new measure of economic success
• It’s lights out for UK Pension Transfers
• Weekly Market Update – opt-in opportunity

FOFA continues to headline

Last week Australia marked the fifth anniversary of one of it’s most high profile financial collapses – the liquidation of Townsville based Storm Financial (it’s 14,000 clients, many retired were left nursing an estimated $3 billion in losses). The timing is unfortunate to say the least, as the storm cloud over the Abbott Government’s proposed ‘watering down’ of financial reforms continues to make weekly headlines.

The latest vocal enemy seems to be the government’s traditional supporters – retirees, who through their representative bodies (Council of the Ageing and National Seniors Australia) have mounted heavy campaigns to quash the amendments. Traditionally a vunerable sector (this week’s Storm anniversary is a raw reminder), it seems only natural that the groups charged with protecting retirees want to shield them from bad advice (and bad products), an unfortunate by-product of inappropriate remuneration structures.

But amongst the fury we also find rejoicing – many investors are embracing the new reforms.
In short the coalitions changes will enable investors to engage an advisor for specific advice on a specific issue (and therefore at a reasonable cost).

Under the existing legislation investors must go through a “best interests” process with an adviser, a confusing concept cleverly explained by one Sydney Morning Herald journalist as follows;

“Imagine if you couldn’t get a carpenter to replace your front door unless he first undertook a complete structural integrity check of your entire house. It might be in your “best interests”, but it means a $500 job becomes $5000 and very few front doors get fixed” .

The Coalition’s changes to the “best interests” duty means cost effective, limited advice will be available to investors previously unable to access it.

Click here to read more about the FoFA changes and what they mean to you FoFA Roll-back 2014.

Investment Myth – Crowd support indicates a sure thing

This “safety in numbers” concept has its origin in crowd psychology. Put simply, individual investors often feel safest investing in a particular asset when their neighbours and friends are doing so and the positive message is reinforced via media commentary.

But it’s usually doomed to failure.

The reason is that if everyone is bullish and has bought into the asset there is no one left to buy in the face of more good news, but plenty of people who can sell if some bad news comes along. Of course the opposite applies when everyone is bearish and has sold – it only takes a bit of good news to turn the market up. And as we have often seen at bear market bottoms, this can be quite rapid as investors have to close out short (or underweight) positions in shares. The trick for smart investors is to be sceptical of crowds.

Happiness: the new measurement of economic success

In Australia, as with most western cultures, we often use Gross Domestic Product (GDP) to measure our success, however, there is another measurement which is gaining traction for more accurately depicting a country’s worth. It’s called the Gross National Happiness Index (GNH) and it implies that development should take a holistic approach to the notion of progress. Looking at economic output alone to determine a nation’s success only gives a crude indication of what is really happening – for one it accounts for negative transactions, like sales of weapons…

It’s lights out for UK Pension Transfers

Changes, likely to be effective in April 2015, will ban transfers from public sector final salary schemes and may also be extended to include private sector final salary schemes.

The ban will prevent transfers to Australia from these schemes, leaving members with less than 12 months to take action.

Weekly Market Update

At FinSec we understand how important it is to keep you informed, but we also realise that what is relevant to one client may not be to another. Our solution is to provide communications that are ‘opt-in’ only. This means you choose or ‘opt-in’ to receive particular information.

In February we introduced the ‘Weekly Market Update’. This update includes the following key information;

• Investment markets and key developments over the past week
• Major global economic events and implications
• Australian economic events and implications
• What to watch over the next week
• Outlook for markets

If you would like to join the many FinSec clients already receiving this weekly update – please ‘opt-in’ by emailing finsec@redbeard.com.au.

FinSec Disclaimer