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SHIP INN CONFERENCE CENTRE, GRIFFITH UNIVERSITY, SOUTHBANK, BRISBANE

Personal Finance and Investment Symposium31 OCTOBER, 2013

GRIFFITH BUSINESS SCHOOL • PERSONAL FINANCE AND INVESTMENT CONFERENCE

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THURSDAY 31ST OCTOBER

TIME ITEM SPEAKER VENUE

8:00-8:45 Registration Ship Inn

8:45-8:50 Welcome Assoc Prof Mark Brimble S07 2.02

8:50-9:00 Opening address Prof Grahame Cuskelly, Dean Academic, GBS

S07 2.02

9:00-10:00 Keynote : The rise and rise of financial planning Steve Helmich S07 2.02

10:00-10:15 Launch Mark Rantall CFP®

10:15-10:30 Morning tea Ship Inn

10:45-12noon Concurrent sessions 1 (a): Financial Education 11. Toni Chardon , How confident are people in

understanding basic taxation and superannuation issues and does this align with their actual understanding?

2. Sue Wright, Leigh Wood and Nidal Danoun, The need to improve financial literacy

3. Mark Brimble and Levon Blue, Reframing the expectations of financial literacy education: Bringing back the reality

Chair: Brett Freudenberg S07 2.16

Concurrent sessions 1 (b): Applied Finance 11. Andrew Ainsworth and Adrian Lee, The Influence

of Individual Investors on Ex-Dividend Day Returns2. Hai Yen Pham, Richard Chung, Eduardo Roca,

Ben-Hsien Bao, Firm Efficiency and Expected Stock Returns in Australia

3. Sophia Bian & Victor Wong, Diversification Benefits of SRI

Chair: Eduardo Roca S07 2.18

Concurrent sessions 1 (c): Personal Finance 11. Simone Kelly, Gender Differences in the Use of

Professional Stock broking and advisory Services2. Andrew Worthington and Tracey West,

Personal Attributes and Financial Risk-Taking in Australia

3. Elise Nisbet, Influence of the structure of the Board on the performance and governance of the Australian Superannuation funds?

Chair: Rakesh Gupta S07 2.19

12:00-13:00 Lunch Ship Inn

13:00-14:30 Concurrent sessions 2 (a): Financial Planning1. Philippa Baker, Mark Brimble and Brett

Fruedenberg, Trust me: Professionalising Financial Planning in Australia

2. Julie Knutsen, To coach or not to coach: the question for future and good financial advisers

3. Kingsley Fong and Jing Yi Han, Premium Financial Planning Service

Chair: John Teale S07_2.16

Concurrent sessions 2 (b): Applied Finance 21. Lujer Santacruz, Asset Allocation: an Analysis of

Theory and Practice in the Australian Investment Management Industry

2. Tian Yuan, Rakesh Gupta and Eduardo Roca, The International Diversification Benefits with the ADRs – Evidence from the BRICs

3. Sudharsan Reddy Paramati, Rakesh Gupta and Eduardo Roca, Economic Integration, Global Financial Crisis and Stock Markets’ Interdependence

Chair: Andrew Worthington

S07_2.18

PROGRAM AT A GLANCE>>>

GRIFFITH BUSINESS SCHOOL • PERSONAL FINANCE AND INVESTMENT CONFERENCE GRIFFITH BUSINESS SCHOOL • PERSONAL FINANCE AND INVESTMENT CONFERENCE

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Concurrent sessions 2 (c): Personal Finance 21. Dianne Johnson - Its on the house! The potential for

home equity to keep the wolf away from the door in later retirement.

2. Schumann Rafizadeh Drivers of Superannuation Fund Selection

3. Sanja Ajzerle, Mark Brimble and Brett Freudenberg A (W)hole in the Financial Budget: Budgeting’s influence on the effective use of credit card debt in Australia

Chair: Julie Knutsen S07_2.19

14:30-15:15 Panel Session: “Is the Future Super”Panel Members:1 – Ian Chester-Master CFP®2 – Prof Michael Drew3 – Chris Humphrey4 - Mark Rantall CFP®5 - Bernie Ripoll MP

Moderator: Assoc Prof Robert Bianchi

S07 2.02

15:15-15:30 Afternoon tea S07 2.02

15:30-16:45 Concurrent sessions 3 (a): Financial Education 21. Sigitas Karpavicius, Sarath Delpachitra and Pham

Van Dai, Financial Literacy of South Australian Students: Impact of Confidence, Money Attitude, and Risk Preference

2. John Teale, Developing financial planning undergraduates’ lifelong learning skills

3. Tania Driver, Mark Brimble and Brett Freudenberg, Footloose & Carefree?: An analysis of the current understanding of the reasons behind Australians’ insurance decision making

Chair: Sue Wright S07_2.16

Concurrent sessions 3 (b): Retirement and Superannuation1. John Burnett, Ken Davis, Carsten Murawski, Roger

Wilkins and Nicholas Wilkinson, Measuring retirement saving adequacy in Australia

2. Robert J. Bianchi, Michael E. Drew, Scott N. Pappas, Rene Tetteroo, Bulls, Bears and Stress Betas

3. Jeremy Cooper, Aaron Minney and Philip Sainsbury, Meeting the financial needs for retirees: a layering model to building retirement income portfolios

Chair: Rakesh Gupta S07_2.18

Concurrent sessions 3 (c): Applied Finance 31. Nirodha Jayawardena, Informational Relatedness

among High frequency Foreign Currencies Data: An Analysis of Noisy and Asynchronous Financial Data

2. Richard Chung, Scott Fung, and Jayendu Patel, Alpha-Beta-Churn of Equity Picks by Institutional Investors and the Robust Superiority of Hedge Funds

3. Tony Virtue,Higher Standards Better Results

Chair: Sarath Delpachitra S07_2.19

16:45-17:00 Launch 2 Closing AddressEvaluation

Chair: Prof Michael Powell, PVC Griffith Business School

S07 2.02

17:00 – 18:30 Drinks and canapés All Ship Inn


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2ND PERSONAL FINANCE AND INVESTMENT SYMPOSIUM

Welcome to Griffith University and the 2nd Personal Finance and Investment Symposium. The Griffith Business School is proud to host this event for the second time and what we hope will be many more in the years to come. An exciting program has been put together with academics from around the nation participating. It is also notable that various industry and professional body representatives are participating in the symposium, including Steve Helmich, the current Chair of the Financial Planning Standards Board. This collaboration is critical to the pursuit of professionalisation. Indeed, the academic engagement in this agenda must increase as it will be critical to informing practice and the development of the industry. As a result, this symposium is becoming an important part of the development of the financial planning academe in Australia and it seeks to highlight the role that the academy can play in supporting the development of the financial planning profession.

It is also fitting that the event incorporates a meeting of the Financial Planning Academics Forum (FPAF). The FPAF came into existence four years ago with the aim of bringing together academics involved in the teaching and research of financial planning to collaborate and provide a vehicle for the academic voice to participate in the industry. Four years on we have developed strong relationships across the academy and with industry, professional associations and the regulators in pursuit of our goals.

The event is also supported by a number of sponsors which have made the event possible. Our sincere thanks go to AMP, Financial Planning Association of Australia, Flinders University, Virtue and Partners and the Griffith Business School. We thank these sponsors for their continued support, input into and participation in the event – it is highly valued and appreciated.

We hope you enjoy the event and get a lot out of it personally and professionally.

Mark Brimble, Rakesh Gupta, Eduardo Roca, Sarath Delpachitra and Renata Steenland

Organising Committee

SPONSORED BY

SUPPORTED BY


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>>>Steve Helmich has 40 years experience in Financial Services, the last 17 heading up Advice businesses across AMP with his current role being Director, Advice & Client Solutions. In this role he oversees the operation of AMP Financial Planning, Hillross Financial Services, Arrive Wealth Management and AMP Horizons Financial Planning Academy.

Steve was the Chairman of the Financial Planning Association from August 2002 to November 2004 & in November 2007, the FPA Board awarded Steve ‘Life Membership’ thus recognising his significant contribution and ongoing active role in the industry.

In September 2009, Steve was appointed as Trustee & Chair of Future2 (the foundation of the Australian Financial Planning Association).

Steve has been a Director of the global Financial Planning Standards Board (FPSB) since 2010 and currently holds the position of Chairperson of the FPSB.

Steve has completed a Diploma of Financial Planning, the Securities Institute Certificate course and Diploma, Associateship and Senior Fellowship of the Insurance Institute.

KEYNOTE 1: The rise and rise of financial planningSTEVE HELMICHThursday 9:15-10:15 Ship Inn Function Room, S07 2.02

STEVE HELMICH


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Thursday 10:45-12:00noon — S07_2.16 CHAIR: BRETT FREUDENBERG

How confident are people in understanding basic taxation and superannuation issues and does this align with their actual understanding?

One of the main aims of increasing the overall financial literacy of populations is creating an environment where consumers have the knowledge, skills and confidence to protect them from financial risk. Although building confidence is an important goal, it is but one aspect of a comprehensive financial literacy education program. This is because research suggests there is often a gap between people’s self assessed level of confidence and their actual skills or knowledge in particular financial areas. In submissions made by ASIC in their National Financial Literacy Strategy they state that “studies have shown a significant mismatch between what people say they know and what they do know”. It is important when measuring financial literacy of populations and also when designing financial literacy education programs that areas where people have low levels of confidence or where there is a gap between levels of confidence and actual understanding are identified.

The 2011 Australian National Financial Literacy Strategy outlines the importance of having sound financial literacy skills due to “changes in demography, and increased consumer responsibility for superannuation decisions and retirement incomes”. It is argued therefore that sound literacy skills in basic taxation and superannuation issues should be incorporated into financial literacy programs and measurements of levels of financial literacy. Basic taxation issues (and to a lesser extent superannuation) have to date, largely been excluded from both the measurement and education aspects of financial capability in both Australia and overseas.

This paper explores outcomes of an Australian survey of tax literacy and will specifically report on levels of confidence in relation to tax and superannuation issues. Further, the paper will report which aspects of basic tax and superannuation issues have large gaps between people’s level of confidence in understanding and their actual levels of understanding. The paper will argue that these aspects should be incorporated into future financial literacy education strategies.

CONCURRENT SESSIONS 1 (a): Financial Education 1

TONI CHARDON


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TONI CHARDON

Thursday 10:45-12:00noon — S07_2.16

CONCURRENT SESSIONS 1 (a): Financial Education 1CHAIR: BRETT FREUDENBERG

SUE WRIGHT, NIDAL DANOUN, PETER MORDAUNT, LEIGH WOOD

The need to improve financial literacy

This paper describes various approaches to consumer protection regarding financial choices of products and services in the Australian financial system: regulations, professional associations, and consumer education. It elaborates on the third approach, discussing some programs offered an Australian university at the cutting-edge of investor education in this field. Different groups of consumers need different versions of such programs, in cost and time effective manners, due to the many changes to legislation facing them on an on-going basis.

LEVON BLUE AND MARK BRIMBLE

Reframing the expectations of financial literacy education: Bringing back the reality

The main aim of financial literacy education (FLE) is to increase financial literacy thus improving the overall financial well-being of individuals (OECD, 2005). Whether FLE can achieve this desired outcome has caused a division in the academic community, with some asserting its importance and other vehemently arguing against it. In this paper, we identify the importance of FLE including the reasons for and against FLE and the concerns raised. We suggest that before taking sides in the debate, it must first be established what FLE can realistically achieve.

This paper also argues that an individual’s ability to critically evaluate the financial decisions they are faced with is lacking from current FLE models. We then discuss the need for individuals to become critical when evaluating both simple and complex financial decisions.

We find that financial literacy is not simply a case of having the right skills and attitude to apply the knowledge. Instead we acknowledge that an individual applying FLE in their decision making must: 1) have the ability to apply the knowledge, 2) be critical of the knowledge/advice by deciding if it is appropriate for their situation and 3) recognize when the financial decision is something to act on with or without independent professional financial advice. Finally, we conclude that the realistic expectations of FLE are: to enable an individual to confidently and competently make simple financial decisions; and to recognise when a financial decision is too complex to make without seeking financial advice.


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>>> HAI YEN PHAM, RICHARD CHUNG, EDUARDO ROCA, BEN-HSIEN BAO

Firm Efficiency and Expected Stock Returns in Australia

This paper investigates the relation between improvement in firm efficiency and subsequent stock returns. We employ a stochastic frontier analysis (SFA) to evaluate firm efficiency for a large panel of non-financial companies in Australian securities market from January 1990 to October 2012. Firm efficiency is estimated by comparing a benchmark Tobin’s Q of a hypothetical value-maximizing firm to firm’s actual Tobin’s Q. The results show that over the period of Jan 1990-Oct 2012, estimated efficiency score of the average firm is around 61.5% and it has improved 3% per year in terms of percentage change in efficiency. We find that an equal-weighted (value-weighted) portfolio of high improvement in efficiency stocks outperforms a portfolio of low improvement in efficiency stocks by an average 12% (7%) per annum during the sample period. In cross-sectional analysis, improvement in efficiency helps explain variation in average stock returns even after controlling for known risk factors such as size, book to market, market liquidity, industry concentration and seasonality effect.

ANDREW AINSWORTH, ADRIAN D. LEE

The Influence of Individual Investors on Ex-Dividend Day Returns

This study documents that individual investors increase buy-initiated trades prior to ex-dividend days and increase sell-initiated trades after the ex-day. Institutions supply liquidity to individual investors by increasing their use of sell limit orders in the cum-dividend period and increasing their usage of buy limit orders in the ex-dividend period. Stocks that experience higher net purchases from individual investors operating through discount brokers in the cum-dividend period have lower ex-day returns in the order of 25 basis points. This difference is as large as 44 basis points for high yield securities. This contrasts with the average excess ex-day return of 24 basis points. The results indicate that individual investors play an influential role in ex-dividend pricing.

CHAIR: EDUARDO ROCA

CONCURRENT SESSIONS 1 (b): Applied Finance 1

Thursday 10:45-12:00noon — S07_2.18


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CHAIR: EDUARDO ROCA

CONCURRENT SESSIONS 1 (b): Applied Finance 1CHAIR: EDUARDO ROCA

An Examination of the Diversification Benefits of Australian SRI in a Portfolio Context

This paper examines the diversification benefits of Socially Responsible Investment (SRI) in a portfolio context. SRIs have been documented with lower volatility, while not sacrificing returns as compared to mainstream shares. Two portfolios are formed from an Australian investors’ perspective using daily data from 1994 to 2012 and are compared against each other; one portfolio consisting of SRI with mainstream shares and bonds and another without SRI. The results confirm the benefits of SRI in a portfolio with a higher efficient frontier and the SRI portfolio obtained higher risk-adjusted return with lower value-at-risk. The findings are useful to SRI investors and fund managers who have interest in diversifying their portfolios into SRI.

SOPHIA X.N. BIAN AND VICTOR S.H. WONG

Thursday 10:45-12:00noon — S07_2.18


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>>> >>>Gender Differences in the Use of Professional Stock broking and advisory Services.

Significant advances have been made in removing the glass ceiling in females being employee in executive positions in Australia’s largest companies. In addition women are starting to find more representation in Australian board rooms. However, there is little evidence on how a move to equality in the work force translates to active personal wealth creation. In addition epidemiology studies show women are divorcing in their 40s and 50s and many remain single there-after. This has lead to wealth accumulation being more an individual rather than a family pursuit. Recent studies have shown that women are more risk adverse than men. US based research also shows that women accept less risk than their male counterparts, after controlling for factors such as age, education, wealth and experiences.

This research focuses on women’s use of advisory brokers as a proxy for their active use investment markets as a wealth creation tool. The male use of advisory broking services serves as a cross-sectional and temporal control. I also examine whether the nature of female investments differs significantly from that of male investors. The types of vehicles used as part of the wealth creation process are also examined. Brokers were also asked to rate the degree of change in investment behavior post the global financial crisis.

Data was collected via survey of Australian broking firms designed to determine the extent to which women use professional advisor services relative to their male counterparts, the nature of their investments, and the vehicles used to manage their wealth. Brokers’ responses was considered a more objective measure of wealth creation as psychological research suggest that personality type impacts satisfaction with a person’s assessment of their own actions. As with overseas research we find significant differences in investment behavior based on gender. Women who are employees make less use of self managed super funds compared with those that are self employed and with their employed and self employed male counterparts. Implications for financial marketing strategies and future research are discussed.

SIMONE KELLY

CHAIR: RAKESH GUPTA

CONCURRENT SESSIONS 1 (c): Personal Finance 1

Thursday 10:45-12:00noon — S07_2.19


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Personal Attributes and Financial Risk-Taking

Using a bootstrapped sample of respondents from the Household Income and Labour Dynamics in Australia (HILDA) survey, we employ canonical correlation analysis to examine the relationships between financial risk-taking (as measured by self-reported financial risk-taking attitude, direct share ownership, and business ownership) and age, gender, education, household structure, income and wealth. Though all three measures are good indicators, we find direct share ownership is influential in indicating of financial risk-taking as a whole, followed by self-reported risk-taking, and then business ownership. Of the personal attributes identifying financial risk-taking attitudes, the most important correlates are wealth, followed at some distance by income and then education. All are positively associated with increased financial risk-taking. Household structure, gender, and age appear relatively unimportant correlates with financial risk-taking. Overall, wealth explains more than 80 percent of the variation in financial risk-taking. Interestingly, self-reported financial risk-taking, direct share ownership, and business ownership respectively explain 74.4, 59.8 and 21.4 percept of the variation in personal attributes, suggesting that financial risk-taking in turn is also important in determining financial wellbeing, education and family structure.

TRACEY WEST, ANDREW C. WORTHINGTON

CHAIR: RAKESH GUPTA


Thursday 10:45-12:00noon — S07_2.19


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>>> >>>Influence of Board Structure on the Performance and Governance framework of Superannuation funds in Australia

Superannuation savings is often the second largest asset held by Australians, placing greater importance on its performance and governance mechanisms. Financial performance data was sourced from the Australian Prudential Regulation Authority. From a population of 200 of Australia’s largest Superannuation funds (by total Asset holding), data was sourced from Retail and Industry classified funds to form a sample of 72 From this sample, a range of observations were made, including specific structure of the Board, number of Directors, number of Independent Directors, whether the Chair position was held by an Independent director, number of women who sat on the Board and also gender of the Chair. Regression analysis and other descriptive financial statistics were utilised, producing some significant findings. The presence of Independent directors had a negative effect on performance for Retail funds, yet Independent directors who sit on Industry Boards only have a positive effect on observed performance. Operating costs had a negative effect on performance, which is consistent with previous literature. Additionally, Total Assets had a negative effect on performance, possibly due to higher management costs. Retail funds performed significantly better over the two observed periods, with the year 2012 producing better results than 2009. A determination of ‘Insider’ structure was given for Retail funds featuring a majority of Executive Directors. ‘Outsider’ was determined when a Retail Board featured a majority of Non-Executive and Independent directors. ‘Outsider’ classified Board structure for Retail Boards were better performers than ‘Insider’ classified Boards . Any The study also produced results indicating that women have a positive effect on Industry funds only, with the effect not significant for Retail funds. In light of the Cooper Review (2010) and recent debate as to the presence of Independent directors and Women on Boards, this study provides key insight into Board Structure that can assist with future policy development.

ELISE NISBET


Thursday 10:45-12:00noon — S07_2.19CHAIR: RAKESH GUPTA


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>>> PHILIPPA BAKER, MARK BRIMBLE AND BRETT FREUDENBERG

Trust me: Professionalising Financial Planning in Australia

The characteristics of professions that have been evolving over time have more recently been challenged with the growing commercialisation of business. The Australian Securities and Investments Commission (ASIC) as the corporate regulator view the professionalisation of financial planning to be of particular importance due to the sensitive and vital role a trusted financial adviser plays in an individual’s life. The need for personal advice is further supported by the expanding superannuation assets to ensure individual’s financial positions in the future, the increasing levels of complexity in managing personal financial matters, the widespread level of low financial literacy among Australians, and an aging population.

The purpose of this paper is firstly to examine what the common characteristics are in a sample of established professions and to what extent financial planning as an expanding occupation in Australia aligns with these. The analysis will then consider the current education proposal in Consultation Paper 153 Licensing: Assessment and professional development framework for financial advisers (CP 153).

The proposals for reform were critically evaluated to gain an understanding of whether their implementation would increase professionalisation for financial planning in Australia. Additionally, the adviser competence certification is assessed to determine whether its implementation would result in increased quality of advice for consumers. It is argued that the standard of these proposals is too low to remove any barriers for quality advice outcomes or to assist financial planning in transitioning to a profession, and will not adequately address the question of ‘trust’ required.

CONCURRENT SESSIONS 2 (a): Financial PlanningCHAIR: JOHN TEALEThursday 13:00-14:30 — S07_2.16


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Thursday 13:00-14:30 — S07_2.16

Premium Financial Planning Service

This paper uses a new dataset from a large financial planning firm study the effect of premium and standard financial advice service on client portfolios’ characteristics and performance. Univariate statistics show that premiums portfolios are more diversified, experience higher turnover, earn lower raw returns but better risk‐adjusted returns relative to the portfolios of standard service clients. Multivariate analyses which control for investors’ characteristics and risk factors also confirm these basic observations. Using a difference‐in‐ difference approach that controls for clients that have switched between the service types, we documented that there is no statistically significant difference in the raw returns but a statistically significant positive risk‐adjusted returns associated with engaging premium financial advice service.

To coach or not to coach: the question for future and good financial advisers.

There is industry, academic and regulator agreement that quality financial advice in Australia has long-term benefits for all stakeholders. Economically, the benefits include a nation that is less reliant on social security and other government services. Financially, it can mean individuals will have improved savings and adequate insurance cover. Psychologically, the positive correlations between financial and physical and mental wellbeing are well established in the literature. In the context of the drive for better quality advice to achieve these benefits, the industry’s regulator, ASIC, and emerging research suggests that financial advisers should take on a teaching, mentoring and coaching role. This role, along with good communication and appropriate recommendations, are said to be the central elements of quality advice more likely to realise these benefits.

This study reports the results of a client survey conducted in a financial coaching-advice practice. Dimensions of financial success, guidance and direction, wealth creation strategies, educational outcomes, teaching effectiveness, communication and wellbeing are investigated to determine where the value and quality of the financial coaching-advice model arise. This provides empirical evidence to support the financial coaching-advice model and inform the current position of the regulator and future policy development.

KINGSLEY Y. L. FONG AND JING YI HAN

JULIE KNUTSEN

CONCURRENT SESSIONS 2 (a): Financial PlanningCHAIR: JOHN TEALE


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The International Diversification Benefits with the ADRs – Evidence from the BRICs

This paper aims to explore the international benefits with American Depository Receipts (ADRs) and their underlying stocks, with a particular emphasis on the BRICs emerging markets. In this thesis, the BRICs countries are viewed as a whole to represent worldwide emerging markets. Specifically, this paper attempts to address the research question that Are ADRs effective in delivering international diversification benefits? Data used to answer the first two questions will be obtained from the word’s four largest emerging markets, namely Brazil, Russia, India, and China (BRICs). The findings of this paper have important implications to both theories and practitioners. It sheds lights into the international market integration and international asset pricing theory. From a practical point of view, this is of interests to investors seeking international exposures and diversification benefits.

TIAN YUANA, RAKESH GUPTAA, EDUARDO ROCA

Asset Allocation: an Analysis of Theory and Practice in the Australian Investment Management Industry

The aim of the research is to examine any dichotomy between theory and practice of asset allocation in the Australian investment management industry. It will survey the available body of academic research on Modern Portfolio Theory from the seminal Markowitz mean-variance formulation to subsequent research strands. The research will utilise a combination of qualitative and quantitative methods to analyse awareness and usage of asset allocation theories and theory-based methods among investment management industry practitioners.

This presentation will report on the initial set of qualitative data obtained through structured interviews with practitioners in the Australian investment management industry. It describes a general picture of the asset allocation process in financial institutions In Australia. It also provides an initial understanding of the awareness and usage of asset allocation theories among practitioners as well as insights towards the design of a wider survey questionnaire that will be disseminated to the industry.

LUJER SANTACRUZ

CHAIR: ANDREW WORTHINGTON


Thursday 13:00-14:30 — S07_2.18


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SUDHARSHAN REDDY PARAMATI, RAKESH GUPTA, EDUARDO ROCA

“Economic Integration, Global Financial Crisis and Stock Markets’ Interdependence”

In this study we aim to examine to what extent economic integration between Australia and seven Asian countries have contributed for their stock market’s interdependence. Further, we investigate the impact of recent GFC on these stock markets’ short-term and long-term co-movements. Empirical findings of AGDCC GARCH show that Australian stock market correlations with Asian markets are time-varying and increasing over time. These correlations have significantly increased during GFC and reverted close to their initial levels after the GFC. The results of cointegration test reveal that Australian stock market is strongly cointegrated with Asian markets during the GFC. As the recent statistics also show that Australia’s trade and investment linkages with Asian countries are continuously growing and become stronger during the GFC. Therefore, increasing economic integration between these nations may have contributed for their stock markets’ long-term equilibrium relationship. The Granger causality test results of during-crisis show that the Australian stock market drives the China, India and South Korea and in return Australian stock market is driven by India and Singapore. This suggests that the Asian markets have only started influencing Australian stock market from GFC. Our results therefore suggest that the recent GFC has significantly increased stock markets’ interdependence in the Australasian region. The evidence also shows that increasing economic integration between Australia and Asian markets have contributed for their stock markets’ cointegration relationship. This study results have important policy and practical implications.

CHAIR: ANDREW WORTHINGTON


Thursday 13:00-14:30 — S07_2.18


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Its on the house! The potential for home equity to keep the wolf away from the door in later retirement.

Concern for the financial welfare of Australian retirees is growing with the first of Australia’s 5.5 million baby boomers having already turned 65 and government and community resources for the aged increasingly stretched. A key emerging problem is that some retirees may hold insufficient asset liquidity to finance post-retirement consumption and medical expenses, even though they still hold substantial assets in the form of housing equity, an asset in which Australians have traditionally held a substantial proportion of their wealth. There is therefore a growing need to examine how the home, as a key store of wealth and useful investment opportunity, could serve to better support retirement consumption. This paper examines the potential role that home equity can take in supporting retirement lifestyles in Australia, including the present gap in financial products and consumer awareness suited for this purpose.

DI JOHNSON

SCHUMANN RAFIZADEH

CHAIR: JULIE KNUTSEN


Thursday 13:00-14:30 — S07_2.19

Drivers of Superannuation Fund Selection


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Thursday 13:00-14:30 — S07_2.19

A (W)hole in the Financial Budget: Budgeting’s influence on the effective use of credit card debt in Australia

Credit card debt has become intrinsic to the way of life for many Australians as they accepted it as part of modern day living. The purpose of this paper is to examine to what extent budgeting can influence the effective use of Australian credit card debt. The findings suggest that the most effective credit card debtors are either those who follow a written budget most of the time and those who consider they do not need a budget due to low income and expenses. Participants with the lowest effective use of credit card debt are those without a budget or those that rarely follow a written budget. These results suggest that people rarely following their written budget are more likely to incur ineffective credit card debt, and thereby leading to a decrease in their financial wealth. This would tend to suggest that a budget is important in terms of managing credit card debt effectively but provided that it is followed, and without it Australians can be faced with a hole in their financial bucket.


SANJA AJZERLE, MARK BRIMBLE AND BRETT FREUDENBERG

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>>> MARK RANTALL

Mark is the Chief Executive Officer of the Financial Planning Association of Australia (FPA) and a CERTIFIED FINANCIAL PLANNER®professional. Following a 25-year financial services career, he was appointed by the FPA Board in 2010 to lead the FPA in raising the standing of Australia’s professional financial planners.

In his first year at the FPA, Mark has achieved key constitutional changes to the FPA membership structure to focus on individual practitioners and secured more than $2 million of funding from members for a national consumer advertising initiative. In addition, Mark has spear-headed the campaign to raise awareness of the higher standards of FPA members to the Government, media and other industry stakeholders on behalf of the FPA’s 8,500 practitioner members and the 5 million clients they advise.

Prior to the FPA, Mark was involved in the creation of The NAB Academy and held the post of Dean of Advice after serving as Managing Director of Godfrey Pembroke from 2003 to 2008. In this role, Mark successfully facilitated more than 200 Godfrey Pembroke advisers to transition to a fee-for-service remuneration model.

Thursday 14:30-15:15 — Ship Inn

PANEL SESSION: Is the future Super

MIODERATOR: ASSOC PROF ROBERT BIANCHI

The panel session provides an outlook on the broader issues facing the financial services industry with an emphasis on superannuation. This session will consider the future challenges facing the financial services sector in light of the recent change of government in Canberra.


>>> MICHAEL E. DREW

Michael E. Drew is a Professor of Finance at the Griffith Business School and a Partner at Drew, Walk & Co. He received his PhD in the field of economics from the University of Queensland. Michael has written and lectured extensively about Australia’s superannuation system, default option design for defined-contribution plans and investment strategies. Michael has held Senior Executive and Trustee Committee appointments with QIC, QSuper, Wilson HTM, Ord Minnett and JB Were & Son.


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Ian is a Fellow of the Financial Planning Association and a recipient of their Distinguished Service Award and is a past Chairman of the FPA Brisbane Chapter. Ian also lectures in Personal Financial Planning at QUT as one of their “real world” lecturers.

Ian is a practising Certified Financial Planner® and an authorised representative of one26 Financial Services Group.

Ian has over 30 years experience in Financial Services; with extensive experience and knowledge in Financial Planning advice, wealth accumulation & protection, business succession and estate planning, as well as retirement planning & income strategies.

As a well respected and experienced CFP®, Ian has been called upon to present numerous public seminars, as well as commentary for the print and social media as well as radio and television programs. He has been involved in mentoring and development programs with Griffith University students.

Ian is also a family man, happily married for 28 years with three beautiful daughters. He is a Sagittarius, loves long walks on the beach…..

IAN CHESTER-MASTER CFP®,FFPA

>>> CHRIS HUMPHREY

Chris Humphrey is the principal of Chris Humphrey Private Wealth Management. Chris has a Bachelor of Commerce from UQ, is a CPA, a CPA financial adviser and an accredited specialist with SPAA (Self Managed Superannuation Fund Professionals’ Association of Australia.

Chris was born and raised in Brisbane. He completed a Bachelor of Commerce at University of Queensland at St Lucia, Brisbane. After graduating from university, Chris worked in Chartered Accounting firms where he gained tax, accounting and superannuation experience. Chris effected a career change, leaving the accounting industry and travelling overseas. He spent close to a decade abroad working for large investment banks in England, Germany and south east Asia. His focus was in equities (stocks). Chris reached the position of Vice President for Deutsche Bank prior to returning home to Brisbane.


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THE HON BERNIE RIPOLL MP

Shadow Minister for Financial Services and Superannuation, Shadow Minister for Sport, Shadow Minister Assisting the Leader for Small Business, Member for Oxley

Bernie Ripoll was first elected to the House of Representatives in 1998 and was re-elected for a sixth term at the 2013 Federal Election. Bernie was appointed to the roles of Shadow Minister for Financial Services and Superannuation, Shadow Minister for Sport and Shadow Minister Assisting the Leader for Small Business on October 18 2013.

During the period of the previous Labor Government, Bernie served as Parliamentary Secretary to the Treasurer where he assisted the Treasurer in the development and implementation of policies in relation to corporate governance and financial literacy. As Parliamentary Secretary to the Treasurer, Bernie also held responsibility for the Australian Securities and Investment Commission, the Legislative and Governance Forum for Corporations, the Housing Loans Insurance Corporation, the Australian Bureau of Statistics and the Royal Australian Mint.

Additionally, Bernie served as Parliamentary Secretary for Small Business. In this role he assisted the Minister for Small Business with the review of the effectiveness of the Franchising Code of Conduct, as well as working closely with the small business community across Australia. Before beginning his role as Parliamentary Secretary, Bernie served on a number of parliamentary committees including as Chair of the Parliamentary Joint Committee on Corporations and Financial Services.

In this role, Bernie chaired a number of inquiries including on the franchise sector, the financial services industry (known as the Ripoll Report), the Future of Financial Advice legislation, and the collapse of Trio Capital.

Bernie is actively involved in local charity work and is the founder of the Western Corridor Community Fund, aimed at helping young people in need. He is also patron, founder and organiser of the Brisbane 2 Ipswich Challenge annual charity bike ride.

Bernie is a passionate ambassador for cycling and its benefits to the community and has been formally recognised by the Cycling Promotion Fund for his advocacy of cycling infrastructure and active transport alternatives.

Before entering Parliament, Bernie worked as an electrician, completed a Bachelor’s degree in business through the Queensland University of Technology, and served in the Air Force. He also worked as an organiser for the Queensland State Service Union, and opened a small business focussed on marketing and public relations.


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>>> DR JOHN TEALE

Developing financial planning face-to-face undergraduates’ lifelong learning skills

Financial planning requires students to have well developed lifelong learning skills. In an knowledge intensively industry, such as financial planning these skills are particularly important.

This paper uses an adaptation of the Garrison three dimensional model to demonstrate how financial planning face-to-face undergraduate students can develop lifelong learning skills. The model shows how students can be prepared for lifelong learning, teaching and learning strategies are described as is the necessity for students to conduct critical self-assessment. This is the first part of a longitudinal study to determine the effectiveness of these dimensions.

PD Program that the collaborative responsibility for student education is demonstrated, with the delivery of many of the sessions being shared between industry and academics. It will be argued that this collaborative approach is an important innovation in moulding the professionals of the future in financial planning.

Financial Literacy of South Australian Students: Impact of Confidence, Money Attitude, and Risk Preference

We use survey data on over 300 South Australian students to examine the quality and drivers of their financial literacy. The study focuses only on law and medicine/health sciences students as they are potential high-income earners in the future; thus, financial literacy is more important to them than for the rest of the population. The results show that their level of financial literacy is generally low which is consistent with the previous studies. We find that age, degree, money attitude, and risk preference do not impact the level of financial literacy. However, female students score worse, on average. Further, we test whether the respondents are overconfident about their financial literacy. We find that students who claim having sound financial management skills score better, indicating no evidence for overconfidence. At last, we report that students engaged in part-time or full-time employment as well as those claiming having sound financial management skills spend more time thinking before making a financial decision. The novel results of this paper have policy-relevant implications on the development and ongoing improvement of financial literacy education programmes.

SIGITAS KARPAVICIUS, SARATH DELPACHITRA AND PHAM VAN DAI

CONCURRENT SESSION 3 (a): Financial Education 2CHAIR: SUE WRIGHTThursday 15:30-16:45 — S07_2.16


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Footloose & Carefree?: An analysis of the current understanding of the reasons behind Australians’ insurance decision making

Worldwide people are becoming more aware of the importance of insurance. In Australia more and more individuals now insure their life, health, ability to earn income, property and business. However, insurance on its own does not prevent losses (Paradine, 1995). The essential element of any insurance product is risk transference. The risk type that can be transferred through insurance is pure risk. Pure risk refers to those situations that involve only the possibility of loss or no change in condition. Given the importance of insurance it may be somewhat surprising that there is a gap between the level of insurance that is needed with the overall level of underinsurance was estimated to be (in June 2010) $669 billion to meet the subsistence needs of families and dependants after death. While recently the size of underinsurance has decreased compared to prior surveys, there still remains a large underinsurance within Australia. Personal underinsurance expected to cost the government $1.3 billion in additional social security payments over the next decade.

Concerns over underinsurance and the complexity of insurance contracts have led to the regulation of the financial services industry in Australia moving to a regime that focuses on retail consumers and their ability to understand and compare the various terms and conditions of insurance contracts, to freeing up competition to allow the industry to be more innovative, to prohibit the use of certain terms, industry agreements and the introduction of consumer protection laws and finally, to improve the quantity and quality of information flowing to consumers (Teale, 2008; Beale, 2009). Despite these reforms, there are still levels of concern about people’s level of financial literacy and how this may influence their insurance decisions (Hogarth, 2002).

The purpose of the study is to assess the factors which influence people’s decision-making process when they consider purchasing ‘personal insurance’ products and how this contributes to underinsurance. This research will also consider what risk attitudes drive individuals’ decision making processes. This is important because as mentioned above, underinsurance and non-insurance could lead to potentially devastating consequences, both financial and non-financial, if circumstances such as death, serious illness and natural disasters were to occur. This study will contribute to the theory of decision-making and behavioural finance, practical/industry aspects of personal insurance and public policy.

This paper will outline the historical development of insurance and its importance in a contemporary Australian context. Then the paper will consider the limited scholarly research to-date that has considered the reasons why people do and do not purchase insurance products. The paper will then outline the proposed research methodology that will be adopted to address the research questions.

TANIA DRIVER, MARK BRIMBLE AND BRETT FREUDENBERG

CONCURRENT SESSION 3 (a): Financial Education 2CHAIR: SUE WRIGHTThursday 15:30-16:45 — S07_2.16


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Bulls, Bears and Stress Betas

Diversified portfolios, those that invest beyond stock and bonds, may exhibit stress-betas. That is, they can experience periodic increases in beta, making them more sensitive to equity market moves. We find that stress-betas are not just a bear market phenomenon. Diversified portfolios have experienced increased betas during bull and bear markets. At a portfolio level, increases in correlation and the ratio of portfolio volatility to market volatility cause stress-betas.

Measuring retirement savings adequacy in Australia

We present two new metrics to assess the adequacy of retirement savings and estimate these metrics for a representative sample of the Australian population aged 40 to 64 using data from the HILDA survey. Our estimates support the widely held belief that most individuals are not ‘on track’ to achieve a comfortable standard of living in retirement, although couples appear better prepared than singles. We also estimate the relative expected contributions of the various ‘pillars’ of retirement income (compulsory superannuation contributions, voluntary superannuation contributions, the Age Pension and voluntary savings) and find that ignoring the last of these pillars is a significant omission. The metrics presented here may provide a better way to communicate adequacy to individuals, with the goal to improve saving.

CONCURRENT SESSION 3 (b): Retirement and Superannuation

ROBERT J. BIANCHI, MICHAEL E. DREW, SCOTT N. PAPPAS, RENE TETTEROONICHOLAS WILKINSON

JOHN BURNETT1, KEVIN DAVIS, CARSTEN MURAWSKI, ROGER WILKINS, NICHOLAS WILKINSON

CHAIR: RAKESH GUPTAThursday 15:30-16:45 — S07_2.18


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Meeting the financial needs for retirees: a layering model to building retirement income portfolios

With a growing number of Australian’s approaching retirement with a substantial and growing balance in their superannuation accounts, there is an increasing role for financial planners to deliver solutions that meet the specific needs of retirees. Traditional financial planning approaches, which tend to focus on risk profiles and asset allocations aimed at accumulating a pool of savings, do not necessarily meet the financial objectives of retirees. While a higher level of savings at the start of retirement is better, the ultimate objectives are the delivery of income in various stages across retirement and financial plans should be adapted to meet the more individualised needs of retirees.

There is a relatively rich vein of academic theory in this area which, although started in the early days of Modern Portfolio Theory, has been extended in recent years. This paper will highlight a model of portfolio construction for retirement income based on a strategy of layering income to target specific spending needs at different time horizons. The result is a practical approach that financial planners can implement with retiree clients to meet their spending requirements.

CONCURRENT SESSION 3 (b): Retirement and Superannuation

JEREMY COOPER, AARON MINNEY, PHILIP SAINSBURY

CHAIR: RAKESH GUPTAThursday 15:30-16:45 — S07_2.18


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Alpha-Beta-Churn of Equity Picks by Institutional Investors and the Robust Superiority of Hedge Funds

The empirical literature on investment performance suggests that only hedge funds among institutional investors have delivered consistent superior performance. We examine whether this stylized fact holds when we narrow focus to long-equity holdings. In our sample period of 1997-2006, the long-equity holdings of hedge funds can generate a significant excess return (gross alpha) of 4.1% per year, which contrasts with modest gross alphas of 0.3-1.8% per year for other six classes of institutional investors. Given realistic execution and overhead costs, only hedge funds are likely to realize net excess returns from equity picking. Among small hedge funds, those with high churn rate show significant positive alphas but those with low churn rates don’t. Greatest superiority is associated with hedge funds with both high churn rate and high deviation from benchmark weights (high active share). Compared to other institutional investors, hedge funds load negatively on an illiquidity factor, which coheres with their higher churn since the latter would imply burdensome trading costs if executed with illiquid stocks. Hedge funds, uniquely among institutional investors, display superior timing of their loading on the market risk factor, and their superior stock-picking alpha persists across the three eras in our sample period.

An Improved Algorithm for Cleaning High Frequency Data: An Analysis of Noisy and Asynchronous Foreign Currencies Data

High-frequency data are notorious for their noise and asynchrony which may bias or contaminate analysis results. In this study we develop a novel data filtering approach to simultaneously address several inherent characteristics of high-frequency data such as volatility clustering and irregular spacing) which has not received sufficient treatment in the literature. We investigate the dependences of high frequency currency data using AUD/USD, EUR/USD and JPY/USD currencies at five-minute intervals. We find the presence of vast microstructure noises and large deviations from an assumption of Gaussian returns in the original data set and then illustrate possible standardization methods to achieve normality. We find a statistically significant correlation structure and heavy tail dependences among foreign exchange rates using the SJC copula method.

RICHARD CHUNG, SCOTT FUNG, AND JAYENDU PATEL

NIRODHA I. JAYAWARDENA, JASON WEST, AND BIN LI

CHAIR: SARATH DELPACHITRA

CONCURRENT SESSION 3 (c): Applied Finance 3

Thursday 15:30-16:45 — S07_2.19


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>>>Financial Adviser Education ‘Higher Standards Better Results’

The provision of quality financial planning advice to the community is regarded by both sides of Federal Politics as a key policy objective in facilitating a stable and reliable bases for consumers to invest with confidence

This has lead to a number of legislative changes including FOFA (The Future Of Financial Advice) and Stronger Super in an attempt to strengthen the Financial Services Sector.

The presenter holds a dual role as a practicing Financial Planner and University Lecturer and will discuss the main issues facing the Profession including Licensing Standards and Adviser Education

We will consider the various weaknesses in the current system including national training registers and a uniform education standard to support the Legislative intent and achieve meaningful reform

Currently only one in five Australians receive financial planning advice from approx 15,000 active advisers

By improving academic standards and public confidence we can look to have a significant improvement with these numbers

TONY VIRTUE

CHAIR: SARATH DELPACHITRA

CONCURRENT SESSION 3 (c): Applied Finance 3

Thursday 15:30-16:45 — S07_2.19

personal finance and investment symposium · certificate course and diploma, associateship and...

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