Fund Product, Company and Regulatory Updates as at 9 April 2019

Product Updates

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QB launches execution algorithm on ASX
Quantitative Brokers (QB) has launched its execution algorithm on the Australian Stock Exchange derivatives market. QB is an independent providers of algorithms and analytics for clients in the futures and United States cash treasury markets, with this launch its first in the Asia-Pacific region.

QB opened a Sydney office in late 2018. A new transaction cost analysis tool has also been released across selected ASX Futures instruments to provide superannuation funds, asset managers and hedge funds a broker-neutral tool to measure execution quality of algorithmic orders and direct market access and voice broker trades.

Zurich closes international equities fund
Zurich Investments has closed an income-focused international equities fund after a strategic review. The Zurich Investments Global Equity Income Scheme is now deregistered.

New alternatives platform launch
FinClear has released its Holder Identification Number (HIN) Platform, which uses the HIN of end investors to hold investments, rather than a custodial wrap model available on many Australian platforms. The platform offers clients and advisers lower fees and no brokerage costs.

The HIN system was introduced after the 1987 stock market crisis to ensure investors had individual ownership of their shares. The wrap platform model has remained successful due to the packaging and reporting benefits, however this comes at a cost, both in terms of portability and fees. FinClear offers the same packaging and reporting benefits, without the layered custodial model.

Australian Super increases insurance premiums
The cost of total and permanent disability and income protection cover will increase for Australian Super members with default insurance cover as of 1 June 2019.

The move has been attributed to the Federal Government’s recent Protecting Your Super legislation updates that will remove a chunk of inactive member account balances from the fund. These inactive accounts will be transferred to the Australian Tax Office. Each member’s updated insurance coverage and costs will vary depending on age, work rating, and cover levels.

Company Updates

Important Strategic Insight update! - ISS acquires Strategic Insight
Institutional Shareholder Services, a leading provider of end-to-end responsible investment and governance solutions globally has announced the purchase of Strategic Insight.

IFM Investors opens European office
With offices already in the United Kingdom, Germany and Switzerland, IFM Investors is opening a new European office in Europe within six months. Amsterdam may be a contender.

NAB scraps 'introducer payments’
Referral payments will no longer be made to ‘introducers’ after the Royal Commission. Introducer payments are a sum paid to a third party for recommending the bank. The bank will still accept referrals, but there will no longer be an incentive payment for such referrals.

Some sporting clubs benefit from the payment program, with the clubs now to be supported by sponsorship of the equivalent value. Other moves from the bank towards being a ‘better bank’ include keeping rural and regional branches open, opening new regional customer connect centres, and extending protections of the Code of Banking Practice to small businesses with less than $5 million in total borrowings.

New small caps boutique at Fidante Partners
Stephen Wood, Victor Gomez and David Haddad, all former UBS Australian Small Companies Fund team members, are setting up a new boutique at Fidante Partners, with plans for a new unit trust. Eiger Capital, named after a Swiss mountain, will use Fidante for its investment process, running a small caps fund with 30-35 small caps from the ASX and the NZX. All three will co-manage the strategy. A new unit trust is in the pipeline, with capital and ratings starting from scratch.

Christian Super launches Aboriginal and Torres Strait Islander reconciliation plan
Christian Super has announced a reconciliation plan to better support Aboriginal and Torres Strait Islander communities.

The plan includes strengthening cultural awareness and understanding of staff, improving access to services and financial literacy for the super fund’s Aboriginal and Torres Strait Islander members. Some impact investments will have a new focus. The plan is part of Reconciliation Australia, with formal commitments by corporate, government and non-profit organisations to ‘turn good intentions into positive actions’.

VicSuper and First State Super consider merger
A non-binding memorandum of understanding has been signed between VicSuper and First State Super, with a merger on the cards. VicSuper has $22 billion in assets and over 249,000 members, while First State Super has $91 billion in assets and over 700,000 members.

Regulatory Updates

Refundable franking credits removal fails committee approval
The report from the inquiry into the removal of refundable franking credits for individuals and self-managed superannuation funds has been released, with the ‘view that the policy is inequitable and deeply flawed’.

Tim Wilson, chair of the committee, said that removing refundable franking credits will unfairly burden people on modest incomes who have already retired, and who are unlikely to be able to make up for the lost income, and rely on the Age Pension. If the proposal went through, 900,000 Australians could lose up to a third of their income as a result. The committee has strongly recommended against the removal of refundable franking credits.

View the full report

Budget relaxes super contribution rules for retirees
Three new measures have been put in place in the most recent Budget to facilitate older Australians saving more money to their superannuation balances.

  • Relaxing the contribution work test so Australians aged 65 and 66 can make voluntary super contributions (concessional and non-concessional) without meeting the work test. Currently 65 and 66-year olds can only make voluntary contributions if they work a minimum of 40 hours in a 30-day period.

  • Increasing the age limit for spouse contributions, going up from 69 to 74. Currently those aged 70 and over cannot receive contributions made by another person on their behalf.

  • Extending eligibility for bring-forward arrangements, with those aged 65 and 66 to make three years’ worth of non-concessional contributions to their superannuation balance in a single year. Currently only those aged under 65 can make such a contribution.

Other updates affecting super include:

  • Current tax relief is to become permanent for merging superannuation funds

  • SuperStream will permit electronic requests to super funds for release of money.

  • A Superannuation Consumer Advocate organisation will be set up to provide input on behalf of consumers in policy discussions and educate and assist consumers in the superannuation system.

  • Protecting Your Super Package has been delayed until October 2019 for opt-in of group insurance policies for those with balances less than $6,000 and those aged under 25.

Product dashboards for MySuper products temporary disclosure-related relief extended
ASIC has amended its disclosure obligations relating to choice product dashboards for superannuation trustees. Trustees must produce and disclose dashboards for MySuper products, but the regulations have not yet been made.

UK and Australia agree to strengthen post-Brexit cooperation
The UK Financial Conduct Authority (FCA) and the Australian Securities and Investments Commission (ASIC) have agreed two Memoranda of Understanding on continuity arrangements once the UK is no longer part of the European Union. This ensures cross-border cooperation between regulators.

APRA’s new powers in the super realm
APRA has been empowered to take action on trustees and underperforming funds with an amendment to a treasury law. APRA can now take action on organisations not fulfilling their prudential obligations, and impose civil penalties on trustees and their directors for breaching obligations to members. Previously APRA could only act after a contravention had taken place, or where there was an urgent threat to members’ interests.

New laws for financial product design and distribution pass
Financial product providers have new obligations regarding product design and distribution, with new legislation passed. Providers must determine the target market for financial products they offer, and make this known to the public. Any complaints made about the product and distribution by consumers must be relayed from the distributor to the provider. MySuper products, margin lending facilities, securities issued under employee share schemes, and fully paid ordinary shares are exempt.