June, 2019

ASIC probe too late for too many

The watchdog is under investigation. Photo: Arsineh HouspianThe Senate inquiry into the Australian Securities and Investments Commission (ASIC) is long overdue but welcome.Senate launches inquiry onto ASICBusinessday Investigation: Planners go rogue
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For the past 13 years covering personal finance for The Sydney Morning Herald and The Age I have interviewed or received emails from dozens of victims of shockingly bad financial advice and of investments that failed. Billions of dollars have been lost, often the entire life savings of retirees.

There was the 61-year-old cancer patient who had inherited her parent’s house. Although she was assessed as a “defensive investor type by the financial adviser she was given a “diversified portfolio” which consisted mostly of Westpoint’s York Street Mezzanine investment in Sydney (which failed in 2005) and debenture-issuer Bridgecorp (which loaned money to property developers, including Westpoint and failed in 2007).

There was the age pensioner who put almost all of her life savings of $50,000 into an investment run by Australian Capital Reserve. She first heard of the investment through its advertising on TV. She emailed me after Australian Capital Reserve (ACR) collapsed: “My husband died last year and I will probably end up having to sell my home and try to get into a retirement village.” Then there was the 74-year-old widowed mother who has lost $23,000.

“She was attracted to the TV and newspaper ads, and started out investing $8000 [without telling us or asking our advice],” wrote a relative of the 74-year-old.

“She went on to add her matured fixed deposits from her bank over the past two years and built up her investment in Australian Capital Reserve to $23,000. Each time her notes were about to mature, she would receive a phone call from Australian Capital Reserve persuading her to add more to her investment.”

Sadness and frustration

Another wrote of her “sadness and frustration” at her mother’s misfortune.

“I spent the whole day with her at Perth Royal Hospital Breast Clinic, where she is undergoing further testing for breast cancer … and then came the ACR collapse. She lost $250,000. It was everything she had. She lives off a pension and used the interest to get herself something from time to time or to spend on the grandkids.

“She worked like a Trojan, as most in that generation did, and earned every cent herself, as a single mum. We could never get her to spend her money because something had to be left for her kids. She is totally spent, the life sucked from her. Her devastation is frightening.” One woman wrote to me about her sister who, at the age of 21, had had a horrific work accident. After several years, she won compensation.

“[She] is now 36, with three kids under the age of eight. In 1998, she was advised to invest all the money she had left – $180,000 – with ACR.

“You cannot even imagine how hard it was for me to be the one who informed her of her loss … Who will help my sister? Who will look after those three little kids?” And then there are those must try to find work when they were planning to put their feet up.

“My husband and I have just lost $250,000 due to the collapse of ACR. This was my husband’s retirement fund and, as he is 62, his chances of now getting a job are slim to none,” says another.

These are just some of the stories; there are many, many more over the past more than a dozen years. These disasters were not self-inflicted. They did not not come about because investors were greedy. They were told to go and see a property-qualified financial adviser or they invested in a seemingly low-risk investment “just like a bank account”.

Investors cannot be totally protected. But these people should have expected a better level of protection. Sometimes the victims are partially compensated, sometimes planners are banned and sometimes the perpetrators of dodgy investments are brought to justice.

But it has been too late too little. Usually, after the the money is lost. The Senate inquiry into the Australian Securities and Investments Commission comes after an investigation by Fairfax Media showing the regulator took 16 months to act on information from whistleblowers about serious misconduct inside the Commonwealth Bank’s financial planning unit. Hopefully, the inquiry will be wide-ranging and if lessons can be learned and acted upon, future generations of investors will be better protected.

John Collett is Personal Finance Editor

The original release of this article first appeared on the website of Shanghai Night Net.

NIB plays down takeover

Australia’s only listed health insurer, NIB, has played down the prospect of an imminent takeover offer for the online-only health insurer health上海夜生活m.au, but says it always keeps an eye out for acquisition opportunities.
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Fresh from informing the market that its pre-tax profit would likely come in at the low end of guidance, NIB management was quoted saying that it might buy health上海夜生活m.au, a one-year-old insurer with a financial relationship with the health comparison site iSelect.

“We have looked at a Jetstar-type brand [discount brand] for the broker market… there are a number of points of merit in it, but at this stage we have rejected this strategy… but you never know, we might simply buy health上海夜生活m.au,” an analyst note quoting management said.

The broker behind the note, Baillieu Holst, is involved with iSelect’s sharemarket listing this month.

The health comparison site iSelect has a $75 million facility with health上海夜生活m.au, allowing the fledgling insurer to defer payments for several years. Just over $9 million had been utilised at 31 December, a note by broker Credit Suisse said in May.

NIB spokesman Matthew Neat said the insurer “would be interested in buying any health fund, it doesn’t matter how big or small”.

“We’re more than happy to have discussions,” he said this week. Mr Neat added that of the 34 other health funds, health上海夜生活m.au was likely to be more open to an offer because it was “more commercial”.

NIB has failed to merge with a number of funds since it listed on the sharemarket in 2007.

It said last week that its pre-tax profit would likely come in at the low end of its guidance of between $75 million and $78 million.

It added that the retail broker channel, including iSelect, “continues to grow and will account for around 30 per cent of sales in financial year 13”.

“We expect this trend to continue and retail brokers remain a key part of our distribution strategy,” NIB said.

It is the Coalition’s policy to privatise Medibank Private, Australia’s largest health insurer with 3.7 million members.

The original release of this article first appeared on the website of Shanghai Night Net.

‘Whipping boy’ – why the dollar is diving

The dollar against the greenback over the past 12 months.Prices to soar as dollar falls: economistsDollar needs sharper drop to help industryCurrency plunges after Fed flags end to QE
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Thursday’s hefty sell-off has starkly underlined the reversal in the Australian dollar’s fortunes, with the currency moving from being the darling of global investors to their “whipping boy”.

Investors are rushing out of risky assets like the Australian dollar amid growing signals the US Federal Reserve is set to slow down its $US85 billion a month stimulus program as the US economy improves.

The currency plunged to an almost three-year low of 92.62 US cents, a fall of nearly 3 US cents, overnight as Fed chairman Ben Bernanke revealed a possible roadmap towards the end of the bond-buying scheme.

It extended its fall to a new 33-month low of 92.42 US cents shortly before midday as new data out of China, Australia’s largest trading partner, showed that its manufacturing sector weakened in June to a nine-month low.

Australian dollar ‘singled out’

While other commodity currencies such as the Mexican peso, Brazilian real and South African rand have also declined against the US dollar, the Australian currency has been singled out for harsher treatment, currency strategists said.

‘‘[It’s become] a whipping boy for the broader market turmoil that we are seeing,’’ NAB’s head of currency strategy, Ray Attrill, said.

‘‘It’s increasingly clear investors – and not necessarily just investors in the currency markets – have been using the Australian dollar and the liquidity that is available, as it is one of the most largely traded currencies in the world, as a hedge,’’ Mr Attrill said.

‘‘That’s probably why it has fallen almost more than any other emerging market currency. I don’t think it is specifically saying that we are more negative about Australia than we are about Europe. It’s that people have learnt to use it almost as a proxy for broader risk aversion and as the hedge against, for example, long equity portfolios.’’

The recent volatility in the value of the Australian dollar and expectations of a lower interest rate meant the currency was becoming less attractive in the ‘‘carry trade’’,  Rochford Capital Derek Mumford said.

The ‘‘carry trade’’ is where investors borrowed currencies with low interest rates and invested in currencies with higher interest rates. An increase in the volatility of a currency would expose investors to the potential for losses.

The Reserve Bank’s current easing cycle, which has seen it reduce the cash rate by 200 basis points since November 2011, and its continued easing bias also meant the difference in yields between Australia and lower interest rate countries was narrowing.

Westpac chief currency strategist Robert Rennie said the Australian dollar would continue its slide if the US dollar strengthens over the next few days.

‘‘The US dollar has found a strong base here and we should see multi-day gains going forward. The Australian dollar has been singled out in recent sessions for some pretty aggressive treatment,” Mr Rennie said.

‘‘Being liquid and having fallen as much as we have, I think that probably means that this story has further to go … 91.88 US cents is the next big objective that financial markets will be focusing on.’’

Economic fears

The recent slide in the dollar has also re-focused attention on the impact of China’s slowing economy on Australia, weak commodity prices and fears about the transition towards non-mining led growth in the country.

China’s latest manufacturing figures today re-emphasised fears about its slowing economy. The slowdown has also placed greater pressure on commodity countries and their currencies, as it meant there would be lower demand for raw materials, Mr Mumford said.

“All these currencies rely on strong growth from the big economic blocs – China, Europe and the US – that’s part of their attraction. While the global economy is growing strongly, then it sucks in raw materials.

“There’s potential that China – one of the world’s big growth engines because of their huge investment over the last few years and which doesn’t look like it will be repeated – is slowing down.”

The Australian dollar has lost more than 10 per cent of its value against the US dollar since early May, when it was trading at 103 US cents.

On the Reserve Bank’s trade-weighted index, which measures the Australian dollar against a basket of currencies, it has weakened from 80.2 in mid-April to 72.1 today.

Since early May, the dollar has fallen by 12.3 per cent against the Japanese yen from about 102 yen to 89.6 yen. It has slipped 9.6 per cent against the British pound, from 66 pence to 59.8 pence.

It has also dropped by 11.3 per cent against the euro, sliding from 78.6 euro cents to 69.7 euro cents.

The original release of this article first appeared on the website of Shanghai Night Net.

Road testing the new Holden Calais around nation

Sam Hall, left, and Stephen Ottley, right, are road testing the new Holden Commodore. Newcastle is their last stop on an Australia wide road trip. Picture: Jonathan Carroll IT was the final leg in a marathon journey around Australia, but motoring writers Stephen Ottley and Sam Hall said they were still feeling the pressure to get a new Calais V V6 to Sydney in one piece.
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The pair, motoring writers with drive上海夜生活m.au, were in Newcastle on Thursday for the final stop in the ultimate road test – a 23-day tour around Australia totalling more than 17,000 kilometres and visiting every capital city and most major regional centres.

‘‘This is the last stop before Sydney,’’ Mr Ottley said.

‘‘We’re feeling a bit of pressure to bring it home in one piece.

‘‘Touch wood we haven’t had a flat tyre or had anything go wrong during the trip, the car’s got a chip on the windscreen but that’s about it.

‘‘We’ll definitely be relieved to bring the car back in one piece because its been a pretty eventful trip at times particularly up in the Northern Territory.’’

Priced at $46,990 plus on-roads, the Calais V is $9800 cheaper than the equivalent outgoing VE model.

Add to that additional equipment including head-up display, electric park brake, standard sat-nav and internet radio, and VF buyers are some $15,300 better off in the hip pocket than VE counterparts.

Mr Hall and Mr Ottley were tasked with the final leg of the tour – from Darwin to Cairns and down the east coast to Sydney.

Before them other members of Fairfax’s Drive team took the car from Sydney to Melbourne down to Hobart and across to Adelaide and Perth.

The second leg took the car from Perth up the west coast of Australia to Darwin.

Mr Hall said the intense schedule hadn’t given them much time to reflect on their journey.

‘‘It’s all been a bit rushed, we’ve seen some amazing things but a lot of the time it’s been a case of having to rush onto the next town and get to each destination,’’ he said.

‘‘But we’ve sort of billed this as the ultimate road test and the car has definitely passed it.’’

Mr Ottley said the car’s performance during the journey had been impressive.

‘‘It’s riding on nineteen inch wheels, which are big wheels, and we drove across some pretty average roads and its been comfortable the whole time,’’ Mr Ottley said.

‘‘We did 988 kilometres in the first day and got back in the next day and it was fine.

‘‘It’s a really, really comfortable car.

‘‘It’s built for Australia that’s why it’s done so well.

‘‘Very few cars would have been able to tackle the variety of conditions we’ve tackled over 17,000 kilometres and do it so comfortably and easily.

‘‘We’ve been doing this eight days straight now and we’re still pretty fresh because its an easy car to drive its a really comfortable car.’’

Senate launches inquiry into ASIC

ASIC inquiry: The investigations will be wide ranging given the scale of the issues. Photo: Jim RiceWhistleblower: ASIC has let down CBA’s victimsASIC deputy chief: We took the right actionFairfax Special: Exposed – Planners go rogue
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The Senate has voted unanimously to hold an inquiry into the corporate watchdog following revelations in Fairfax Media that the regulator took 16 months to act on information from whistleblowers about serious misconduct inside the Commonwealth Bank’s financial planning unit.

A notice of motion was put in the Senate on Wednesday by Nationals MP John Williams and supported by the ALP’s Doug Cameron and Greens leader Christine Milne. The Senate voted on the motion today.

Senator Cameron said the inquiry into the Australian Securities and Investments Commission will be wide ranging, and given the scale of the problem, it is ”appropriate for the Senate to investigate a range of issues including financial planners, the Commonwealth Bank and ASIC”.

Senator Williams said he looked forward to the inquiry.

“Peter Kell [deputy chairman of ASIC] would not give any answers at a Senate estimates hearing in relation to the whistleblowers and what went on and so I hope to get them during the inquiry,” he said.

ASIC failed to act for 3½ years on information provided by CBA in June 2009 about serious allegations of forgery and fraud by a planner, who was allowed to continue to work in the industry during the regulator’s inaction.

“I will suggest to the committee that submissions open next month and we can expect to have public hearings later this year,” Senator Williams said yesterday. The committee is expected to report to the Senate in March next year.

The inquiry’s terms of reference include an examination of corporations legislation and whether it needs to be changed; a review of the accountability of the regulator; the effectiveness of its complaints management policies and practices and its approach to whistleblowers.

Jeff Morris, a CBA insider who revealed his identity to Fairfax Media, said protection in his case consisted of ”advising me to get out with what I had left”.

”When you choose to tread the path of the whistleblower you knowingly ‘take arms against a sea of troubles’,” he said. ”What you don’t expect though is for the odds against you to be lengthened by a Monty Pythonesque regulator.”

The CBA whistleblowers repeatedly contacted ASIC starting in late 2008 but were never asked to participate in an investigation or reveal their identity.

According to Mr Morris, the whistleblowers visited the regulator 16 months later after becoming ”sick of waiting”. Within a month, ASIC had moved to seize CBA files. An investigator later told Mr Morris that if they hadn’t forced the issue their report might still be ”bouncing around”.

An ASIC spokesman said: ”ASIC welcomes any inquiry that might unfold and looks forward to the opportunity of providing the inquiry with information on what we do and what we seek to achieve.”

CBA is declining to comment as the motion had not yet been passed, a bank spokeswoman said.

Despite support for the inquiry, some senators are demanding to know what role the Labor government has played in allowing ASIC to become a ”kangaroo court”.

Liberal senator David Johnston questioned Prime Minister Julia Gillard’s decision to give Greg Medcraft, ”a mate”, the job of ASIC chairman in violation of the government’s merit-based public sector appointment process.

”What on earth is going on here? The corporate regulator is run by someone who has a cloud over them. This kangaroo court of ASIC needs to confront a parliamentary inquiry,” he said in the Senate on Wednesday.

[email protected]上海夜生活m.au

The original release of this article first appeared on the website of Shanghai Night Net.