Archive for July, 2013

REFILE-Boring no longer beautiful as Australia’s banks face ‘super’ shake-up

Wed Jul 31, 2013 7:38pm EDT

By Jackie Range and Jane Wardell

SYDNEY Aug 1 (Reuters) – The “boring is beautiful” model
that made Australia’s banks among the most profitable in the
world is in jeopardy, as government-backed growth in pension
funds is set to drain the money pool available for old-fashioned
retail deposits.

Gradual increases to compulsory contributions to retirement
funds will shake up Australia’s A$5 trillion ($4.53 trillion)
financial industry by forcing banks to compete harder for
deposits and explore riskier services well outside their comfort

“There’s going to be a big change to how funds flow into the
economy,” said Rodney Maddock, an economics professor at Monash
University. “The flow of cheap bank deposits is going to slow
down and banks are going to become less profitable unless they
can pass on the more expensive borrowing costs.”

Australia’s “Big Four” banks – Australia and New Zealand
Banking Group Ltd, Commonwealth Bank of Australia
, National Australia Bank Ltd and Westpac
Banking Corp – are due to report another series of
bumper profits in coming weeks after posting a record combined
A$13.2 billion cash profit in the first half.

The quartet has been paying out stellar dividends to happy
shareholders in recent years, attracting yield hunters from
around the globe and overtaking miners as the power behind
Australia’s upwardly mobile stock exchange.

Unlike their foreign peers which are much more reliant on
wealth-management divisions for profit, Australian banks have
been driven to a large degree by household bank deposits. More
than 40 percent of Commonwealth’s cash earnings in the 2012
financial year came from retail banking services.

But under rules being phased in by the government,
contributions to compulsory retirement funds, called
superannuation or just “super” in Australia, will increase from
9.25 percent of salary income to 12 percent from July 2019.

NAB forecasts the country’s superannuation pool will more
than double from around A$1.58 trillion currently to A$3.4
trillion by 2022, bigger than the current GDP of France.

To be sure, the expansion of superannuation is not entirely
negative for the banks. The Big Four are expected to participate
in the sector’s growth through their own wealth businesses,
while benefiting from the pension funds’ appetite for their
fixed-interest securities.

Each of the big banks already offers pensions products, but
they face stiff competition from dedicated retirement fund
managers and a host of foreign players including MFS Investment
Management, William Blair Company and Henderson Global
Investors Ltd.

Australia is “a bit of a honey pot for those global fund
managers who are looking for growth,” said Lachlan Colquhoun,
head of markets analysis at business banking research firm East
Partners in Sydney.

Analysts say banks will need to offer additional services to
feed growth – potentially taking on a larger
institutional-banking or wealth-management role, encompassing

“They are obviously trying to sell more of their
wealth-management products through the existing banking
network,” said Victor German, a banking analyst at Nomura in

In a further sign of this trend, NAB last week announced
veteran investment banker Craig Drummond as its next chief of
finance and strategy.

“Certainly that institutional segment is an area where the
NAB has traditionally not been strong, so they are shoring up
their capabilities in an area of weakness and doing something
about it by hiring Drummond who is a very well-credentialed
investment banker,” said Colquhoun.


Pension funds are likely to step into financial assets such
as home loans, another traditional preserve of the big banks,
and invest more in infrastructure projects as they seek returns
for investors in a highly competitive market.

“The increasing size of super funds and the reduction in the
funding advantage for banks means we’ll likely see a system
where natural long-term lenders such as super funds team up with
long-term borrowers such as mortgagees and infrastructure
funds,” said Monash University’s Maddock.

The banks are also facing competition from, and scrambling
to get a foothold in, self-managed superannuation funds. These
independent retirement plans – as opposed to those run through
mutual funds – account for 31.5 percent of the current
superannuation pool, according to the Australian Prudential
Regulation Authority.

Cross-selling wealth-management products is important to
banks, even if the jury is out on how successful they have been
at it, analysts said.

There is also some duplication of offerings. Westpac
provides services for self-managed super funds, while BT,
Westpac’s wealth-management arm, also offers advice and services
to self-managed super funds.

Westpac said that while products were separately branded,
they were ultimately managed together with BT. Still, that
leaves a concern that the two businesses may be competing for
the same customer.

“Are they cannibalising each other or are they working in
concert?” said Colquhoun.


Wednesday, July 31st, 2013 EN No Comments

Posted by Imaduddin

Posted by Imaduddin


imageZURICH: Leading Swiss bank UBS reported strong results for the second quarter on Tuesday in its drive to re-focus activities and turn the page on the financial crisis, but was cautious about the third quarter.

The bank, which is slimming down after turmoil during the crisis, reported pre-tax operating profit of 775 million Swiss francs (628 million euros, $833.6 million).

This was 21.0 percent less than the outcome in the first quarter, but it showed a big switch from a loss of 130 million francs for the second quarter of last year.

Last week, the bank had already signalled its results, reporting a net profit for the second quarter of 690 million francs, marking an increase of 62.5 percent from the figure in the same period of last year.

Those figures were announced when the bank said it was settling a dispute in the United States over subprime instruments by paying a fine of $885 million.

On Tuesday, it said that operating profit in the second quarter rose by 15.0 percent on a 12-month comparison to 7.3 billion francs (5.9 billion euros).

The activities of managing private wealth turned in a pre-tax operating profit of 557 million Swiss francs from a profit of 502 million francs last time, and from 664 million francs in the first quarter of this year.

It explained that the figure had fallen between the first and second quarters because it had had to pay 104 million francs under a tax agreement between Switzerland and Britain.

Excluding this charge, the pre-tax outcome had risen, it said.

Wealth management activities in the Americas, presented separately, raised pre-tax operating profit by 4.0 percent from the first-quarter figure to 243 million francs.

Managing director Sergio Ermotti said in a statement that he was highly satisfied with the results for the quarter.

Ermotti took over in 2011 after a scandal over losses by rogue trader Kweku Adoboli. He has overseen a big redirection of the bank to build on its strengths in wealth management.

In October it announced it was cutting down the size of its investment arm, tarnished by various scandals, with the loss of 10,000 jobs across the world.

UBS, which is turning the page on its recent dark period, also said that in the fourth quarter it might exercise its option to buy the shareholder funds of the so-called stabilisation fund run by the Banque Nationale Suisse.

This fund was created during the financial crisis as a rescue measure to prevent problems at UBS from destabilising the Swiss economy.

The price of shares in UBS showed a gain of 2.71 percent to 18.22 Swiss francs in morning trading. The SMI index of leading Swiss shares was up 0.14 percent.

Analysts described the results as “solid”.

But UBS was cautious abut the outlook for the third quarter, saying that the shadows of outstanding problems in the sovereign debt crisis, the banking system in Europe and the US federal budget, and uncertain prospects for the global economy, were weighing on clients’ confidence.


Wednesday, July 31st, 2013 EN No Comments

UBS Americas wealth business posts record quarterly profit

[NEW YORK] UBS AG’s Americas wealth management group on Tuesday reported a 21 per cent jump in quarterly pre-tax profit over the prior-year period, as financial adviser productivity picked up and invested assets rose to record levels.

Second-quarter pre-tax profit at the Swiss bank’s Americas brokerage operation totaled US$258 million – accounting for roughly 24 per cent of UBS AG’s total pre-tax profit during the quarter.

“They’re continuing to invest in the Americas,” said Sophie Schmitt, senior wealth management analyst at Boston-based Aite Group, pointing to the firm’s willingness to spend to hire top advisers whose large client asset pools generate significant revenue for UBS.

“There is a lot of competition in this market, as assets are flowing from traditional wealth management providers to online brokerages and independent registered investment advisers,” Ms Schmitt said. “Firms really need to invest.”


Wednesday, July 31st, 2013 EN No Comments

AMP reduces cost of capital guarantee in North platform

AMP reduces cost of capital guarantee in North platform
Steve Burgess

AMP has reduced the cost of the capital guarantee it offers on a number of products available through its North platform and closed off the guarantee on existing funds to new clients. 

At the same time, AMP  has also added three new funds that will be the only funds available on North to new customers seeking a guarantee, while existing customers will retains access to previous guarantee options. 

The cost of the most popular guarantee option in the North funds range, the Protected Growth 10-year term, will drop from 1.8 per cent to 1.5 per cent per annum. The guarantee option is charged on top of any investment and advice charges associated with investing in the funds. 

The three new funds will invest in a blend of Australian and international equities, fixed income and cash and offer growth, balanced and moderately defensive investment options. 

AMP introduced the North guarantee in 2007 to allow investors to benefit from high markets and to protect themselves against falling markets for an additional cost. 

AMP said the North range was designed to provide a rate of investment growth in line with diversified funds that held comparable target asset allocations, but managed short-term market movements by increasing or decreasing exposure to shares based on estimated short-term market volatility. 

AMP platforms director Steve Burgess said the changes would allow North investors to manage volatility within their portfolios and access the guarantee option and remain in protected growth assets to preserve money in retirement.


Wednesday, July 31st, 2013 EN No Comments

A Shotgun Apartment for Wealth Managers

blueprintCelent, a research and advisory firm, has issued a new report on “Driving Efficiency Through Wealth Management Platforms,” written by Alexander Camargo and Isabella Fonseca.

Implementing a proper platform is no small feat, the paper emphasizes. It “requires significant resource allocation, technology investment, project management, and collaboration among various departments and with the provider,” said Fonseco, research director of Celent’s Securities and Investment Group.

Camargo, an analyst with the Securities and Investment Group, said that there is a demand especially for integration – for a platform that seamlessly combines the front, middle, and back offices.

That terminology, by the way, “front,” “middle,” and “back office,” sounds almost quaint, or at least I’m sure it would sound quaint had not custom worn down our recognition of metaphorical oddity.

A Plebeian Image 

As a quick reminder:

  • the term “front office” refers to the advisor/client relationship;
  • the “middle office” functions include analytics, the development and maintenance of models, etc.;
  • the “back office” performs those functions that clients think least about (when all is going well) – compliance, data storage and their kin.

Celent gives us a handy image, thus:



The traditional names always remind me of a shotgun apartment with just three rooms.  Such apartments are  easy to construct, accordingly inexpensive,  and valuable as starter homes for those of us who aren’t ultra high net worth. But it is such an obviously non-HNW image that I’m surprised no other nomenclature has yet come along to banish it.


Getting the platform right, for most wealth management firms, involves outsourcing. As the report observes, there are many different sorts of outsourcing which are by convention listed in four groups: business process, knowledge process, finance and accounting, and IT outsourcing.

Although some firms remain wary of the confidentiality and privacy issues raised by outsourcing, in all these varieties, especially when it involves passing information to an offshore location, necessity has proven to be the mother of accommodation.  More specifically, there is a “need to reduce costs, to keep pace with changing regulations, and continuing challenges of low product yields” – these needs have pressed managers to make increased use of outsourcing for noncore processes.

As the above diagram shows, Celent has broken up the traditional three offices into 11 functions, while retaining the shotgun-home imagery.  The platform proper consists of the sort of “noncore, but integral, business operations and processes” that can typically be outsourced.

Compliance and Client Meetings

One of the great drivers of outsourcing and technological change in the wealth management world is the quintessentially back office task of compliance. Both the U.S. and the E.U. are increasing their scrutiny of managers “around fiduciary responsibility, investment suitability, tax reporting, and anti-money laundering.”

Compliance isn’t something that can be confined to the ‘compliance function’ on charts such as the above. Financial planning and investor communications must incorporate know-your-customer and risk questionnaire data. Also, trading components of the overall system have to track and report on an adjusted cost basis. Accordingly, platform vendors offer an open architecture and the underlying infrastructure managers need to integrate their systems so the “back office” compliance officers can do their job.

Separately, one great desideratum of wealth managers is a “sticky” relationship with their clients: they want to tailor their products and services to the particular client in such a way that their involvement won’t be fungible.  They have to “raise their game” in order to do this properly, says Celent, especially since clients these days have ever-improving “access to market news and portfolio information via mobile devices and alerts.”

To help with this customization, technology vendors have been adding to their software “a presentation module that sits on top of their existing front office functionalities,” with a friendly user interface that advisers can employ in client meetings.





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Tuesday, July 30th, 2013 EN No Comments

Advising Aussie’s biggest wealth transfer

Within the next 20 years, 70% of Australia’s financial assets will be held by Generations X and Y.

This is a fundamental shift for the wealth management sector, and advisers will need to adapt their offering if they expect to have a stake in the wealth of approximately nine million investors.

Currently, only around a third of the nine million Gen X and Ys, dubbed the ‘digital investors’, are getting financial advice. This is according to The Digital Investor, a report released today by Telstra. More than half of the digital investors were influenced on what planner they used by friends or family.

Friends, family and employers are also influencing what super fund the digital investors choose, with 51% relying on advice from employers and 23% relying on friends and family, when transferring to a new fund.

Author of the report, Telstra Group general manager, Rocky Scopelliti says that this provides a massive opportunity for advisers, if they can figure out how to turn current clients into advocates for their services.

“It’s quite an interesting area because it presents itself as a double-edged sword,” says Scopelliti. “On the one hand, how do you look after baby boomers and also prepare yourself to service customers that are going to be critical to you going forward.”

He says that too many wealth managers view this as ‘tomorrow’s problem’, when it should be considered ‘today’s opportunity’.

Super funds are already making the connection between the role of advocacy and how they structure their products and services. Scopelliti says one super fund manager is capitalising on the advocacy by creating a family-based super product.

There are a few other ways that advisers can appeal to the new digital investor. The most popular concept introduced in the report, was educational videos online. Scopelliti says investors are looking for more engaging material, and educational videos fit the bill.

Alert services to track investments were also considered ideal, followed by online collaboration with an expert using chat, video or voice. However, dealer groups are holding advisers back, according to the report. Advisers are increasingly frustrated with the failure of dealer groups to keep up with the technological evolution.

“We were pleasantly surprised by how well equipped advisers were – they were very well equipped when it came to technology such as smart phones, technology such as tablets and laptop computers,” says Scopelliti. “Where there probably needs some increased focus is on the software side, to have it prepared so that it can be delivered through those kinds of wireless devices.”


Monday, July 29th, 2013 EN No Comments

Champ Private Equity Seeks Buyer for Stake in Centric Wealth

Latest Headlines is home to all the latest, up to the minute news headlines from The Wall Street Journal in a streaming continuous headline experience.


Monday, July 29th, 2013 EN No Comments

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Monday, July 29th, 2013 EN No Comments

UBS in winning struggle with its past


[0] =>

Offer Price    665.38
Bid Price      632.10


–> Jubilee Life Insurance Managed Growth Fund Rates on Friday (July 13, 2012).

Offer Price 665.38
Bid Price 632.10

Copyright Business Recorder, 2012


Sunday, July 28th, 2013 EN No Comments

Many millionaires say they don’t feel rich

NEW YORK, July 28 (UPI) — Millionaires say they are not so financially comfortable they can do whatever they want, when they want to, a U.S. survey found.

UBS Wealth Management Americas surveyed 4,450 investors with $1 million or more in investable assets and found that most of them said they didn’t feel rich, the New York Post reported.

Just 30 percent of respondents said they felt wealthy — most said they won’t consider themselves wealthy until they have at least $5 million in assets.

About 80 percent of respondents said part of the reason why they do not feel wealthy is because they are offering financial assistance to their adult children, grandchildren and older parents, the survey found.

“Investors are telling us that wealth isn’t just about money. It’s about being able to do what you want to do when you want to do it,” said Emily Pachuta, head of Investor Insights, UBS Wealth Management Americas. “if you ask, ‘What is wealthy?’ we observe that it’s about having no financial constraints — holding a lot of cash, taking care of family.”


Sunday, July 28th, 2013 EN No Comments