Financial Services Royal Commission - double backflip with a twist.

Finally facing the inevitable, both the banking sector and the Prime Minister came to the conclusion that having at least some semblance of control over the outcome was better than none. Certainly better than seeing a couple of government MPs crossing the floor with a proposal for a banking inquiry which would have been far more extensive than both the industry and the government would have liked. You could argue, as Andrew Main did on Peter Switzer's website earlier this week, that there was little point in having a Royal Commission when most people already know what the problem is. However, the political reality was that the problem was not going away, and the banks in particular would much prefer the process now under the current government, than in the future under a potential Labour government .

Hence the reference to the "least worst option" - facing the reality that fighting the inevitable was not working, and was certainly not improving the general perception of a government on the back foot. Backflips - even double ones with a twist - are preferable to outright defeat.

Royal Commissions are dangerous, so understandably the government has announced one with a limited number (13) of terms of reference, and only allowed 12 months and $75 million for the as yet unnamed members of the commission to return their findings. In reality given that it is now December, and the Christmas break is coming up, that probably means only 10 months, or a change in holiday arrangements for those involved.

However the government has scored at least a partial win (the twist) by broadly including any "financial services entity" and by capturing the superannuation industry specifically - and we would guess the industry superannuation sector in particular, which to a degree still restricts members' entitlement to freedom of choice, and has persistently refused to accept independent directors or trustees in line with the governance requirements that apply to listed corporations. Given the importance of the superannuation system to the future financial well-being of so many Australians, this surely is long overdue.

From "Hedge Clippings" point of view it will also be interesting to see if the vertical distribution structure of financial products (managed funds) through bank owned product issuers, platforms and financial advisors, also comes under the Commission's microscope.

Of course announcing an inquiry, or a Royal Commission for that matter, does not necessarily lead to an outcome. It's worth thinking back to the Rudd/Gillard Government's "Henry Review of Australia's Future Tax System" which was not only hobbled by not allowing it to consider either the GST, imposing tax and superannuation payments to retirees over 60 years of age, or already announced personal income tax changes. Ken Henry's report made 138 specific recommendations, many of which we suspect have either been quietly buried, or remain "under consideration".

INSYNC GLOBAL TITANS FUND

Attached is our most recently updated Fund Review on the Insync Global Titans Fund.

We would like to highlight the following:

• The Global Titans Fund invests in a concentrated portfolio of 15-30 stocks, targeting exceptional, large cap global companies with a strong focus on dividend growth and downside protection.

• Portfolio selection is driven by a core strategy of investing in companies with sustainable growth in dividends, high returns on capital, positive free cash flows and strong balance sheets.

• Emphasis on limiting downside risk is through extensive company research, the ability to hold cash and long protective index put options.

For further details on the Fund, please do not hesitate to contact us.

Australian Fund Monitors

ATTACHED FILESAFM Fund Review - October 2017 (pdf format)