36
We would like to thank our generous sponsors: The 4 th Annual Personal Finance and Investment Symposium Presenting Cutting Edge Research in Personal Finance Tuesday 17 November 2015
P
We would like to thank our generous sponsors:
The 4th Annual
Personal Finance and Investment Symposium
Presenting Cutting Edge Research in Personal Finance
Tuesday 17 November 2015
Page 2
Welcome Message from Professor Mark Brimble and Dr Rakesh Gupta
Welcome to the 4th Annual Personal Finance and Investment Symposium organised by the Department of Accounting, Finance and Economics at Griffith University. We are proud to be hosting this event for the fourth time. This symposium is a milestone in the development of the academe in Australia and seeks to highlight the role that it can play in supporting the development of the financial planning profession. Considered as the first of its kind in Australia, we hope it will continue for many years to come.
An exciting program has been put together with academics and practitioners from around the nation participating. It is notable that various industry and professional body representatives are participating in the 2015 Symposium. This collaboration is critical given the professionalisation agenda being pursued by industry. Indeed, the academic engagement in this agenda must increase as it will be critical to informing practice and the development of the industry.
It is also fitting that the event incorporates a meeting of the Financial Planning Academics Forum (FPAF). The FPAF came into existence with the aim of bringing academics involved in the teaching and research of financial planning together to collaborate and provide a vehicle for the academic voice to be participate in the industry. The FPAF has endorsed the event and has supported its development. Indeed many of the presenters are FPAF members. We encourage all involved in the symposium to attend the FPAF meeting and engage in its activities.
The event is also supported by a number of sponsors which have made the event possible. The AMP Horizons Academy, Financial Planning Association of Australia (FPA) are our primary sponsors. We thank all our sponsors for their support, input and participation in the event – it is highly valued and appreciated.
We hope you enjoy the Symposium and get a lot out of it personally and professionally.
Professor Mark Brimble Dr Rakesh Gupta Griffith Business School Griffith Business School Griffith University Griffith University
Time Item Speaker Venue
8.00-9.00 Registration The Ship Inn
9.00-9.05 Welcome Dr Rakesh Gupta/Professor Mark Brimble
The Ship Inn
9.05-9.15 Opening Address Professor Linda Trenberth The Ship Inn
9.15-10.00 Keynote Address: Dr Deen Sanders The Ship Inn
10.00-10.30 Morning tea
10.30-12.15 Concurrent Session 1 (a): Financial Literacy
Chair: Dr Parmendra Sharma
S07_3.01
Concurrent Session 1 (b): Finance and Investment
Chair: Dr John Fan
S07_2.17
Concurrent Session 1 (c): Real-estate Investments
Chair: Dr Katherine Hunt
S02_6.38
12.15-13.15 Lunch
13.15-14.00 Concurrent Session 2 (a): Investments
Chair: Professor Eduardo Roca S07_3.01
Concurrent Session 2 (b): Personal Finance
Chair: Dr Suman Neupane
S07_2.17
14.00-15.30 Concurrent Session 3 (a): Investments 2
Chair: Assoc. Professor Robert Bianchi
S07_3.01
Concurrent Session 3 (b): Financial Planning Industry
Chair: Dr Neda Todorva
S07_2.17
Concurrent Session 3 (c): Ethics and Governance
Chair: Dr Bin Li
S02_6.38
15.30-15.45 Afternoon tea
15.45-16.45 Panel Session:
Chair: Professor Michael Drew Panel: Dr Deen Sanders Mr Mark Rantal Ms Belinda Robinson Ms Amelia Constantinidis Ms Sharon Taylor
The Ship Inn
16.45-17.00 Closing address Professor Adam Shoemaker The Ship Inn
17.00-17.10 Wrap up Dr Rakesh Gupta/Professor Mark Brimble
The Ship Inn
17.10-18.00 Post conference networking opportunity
Post conference dinner will be held at The Shore restaurant
Day Program
Tuesday 17 November 2015
Concurrent Sessions 1 10:30am to 12:15pm 1A: Financial Literacy S07_3.01
Time Chair: Ms Kirsten MacDonald 10.30-10.45 Robert Bianchi Retirement Outcomes of
Indigenous Australian Workers
Robert J. Bianchi, Michael E. Drew, Adam N. Walk and Osei K. Wiafe
10.45-11.05 Levon Blue
Financial Literacy Education in an Indigenous Community: Exploring relevance, development and praxis
Levon Blue, Mark Brimble and Peter Grootenboer
11.55-11.25 Laura de Zwaan An Examination of the Financial Literacy Levels of University Students
Laura de Zwaan, Chrisann Palm, Toni Chardon
11.25-11.45 Kerry Bodle Financial Literacy of Indigenous Small Business Owners: Does the Franchise Model provide superior support?
Kerry Bodle, Lorelle Frazer, Scott Weaven and Mark Brimble
11.45-12.15 Questions and answers for 1A: Financial Literacy
1B: Finance and Investment S07_2.17
Time Chair: Dr John Fan 10.30-10.55 Dianne Johnson Attracting high
performance graduates, and blazing a trail for women in financial planning
Dianne Johnson, Mark Brimble, Ric Zanetti
10.55-11.20 Lujer Santacruz Financial Planning Value Proposition
Mark Brimble, Lujer Santacruz, David Corby and Dianne Johnson
10.30-10.55 Xi Yang Li International diversification and information transmission using entropy
Xi Yang Li, Rakesh Gupta and Tarlok Singh
11.45-12.15 Questions and answers for 1B: Finance and Investment
Concurrent Sessions 1
Tuesday 17 November 2015
1C: Real Estate Investments S02_6.38
Time Chair: Dr Katherine Hunt
10.30-10.55 Nirodha I. Jayawardena
What is the best time to trade? Evidence for the Australian stock market
Nirodha I. Jayawardena, Akihiro Omura, Bin Li
10.55-11.20 Sudharshan Reddy Paramati
The Symbiotic Relationship between Banking and Real Estate Markets: International Evidence
Sudharshan Reddy Paramati, Eduardo Roca, and Victor Wong
11.45-12.15 Dianne Johnson Plan B: New housing equity withdrawal options for Australian retirees
Dianne Johnson, Mark Brimble, Andrew Worthington
11.45-12.15 Questions and answers for 1C: Real Estate Investments
Tuesday 17 November 2015
1:15pm to 2.00pm
2A: Investments S07_3.01
Time Chair: Professor Eduardo Roca
13.15-13.30 Di Mo The Macroeconomic Determinants of Commodity Futures Prices: the Evidence from China and India
Di Mo, Rakesh Gupta, Tarlok Singh
13.30-13.45 Kejia Yan The Dynamic correlation analysis for the Stock Markets of the US and China
Kejia Yan, Rakesh Gupta, Victor Wong
13.45-14.00 Peta Tilse Sophisticated investors Peta Tilse
Questions and answers for 2A: Investments
2B: Personal Finance S07_2.17
Time Chair: Dr Suman Neupane
13.15-13.30 Michael Kerry
The costs, benefits and trade-offs associated with professionalising the Australian Financial Planning industry
Adrian Raftery, Campbell Heggen, Michael Kerry and Harman Singh
13.30-13.45 Campbell Heggen
‘Relevant’ Training and Education Standards of Financial Advisors in Australia: Views from Practice
Adrian Raftery, Campbell Heggen, Michael Kerry
13.45-14.00 Suzanne Wagland
Can a link be established between ultimate success in the CFP® Certification. Program and any specific demographic factor of the participant?
Sharon Taylor, Suzanne Wagland
Questions and answers for 2B: Personal Finance
Concurrent Sessions 2
Tuesday 17 November 2015
2:00pm to 3:30pm
3A: Investments 2 S07_3.01 Time Chair: Associate Professor Robert Bianchi
14.00-14.20 Priyantha Mudalige Individual and Institutional Trading Volume around Firm-Specific Announcements
Priyantha Mudalige, Petko S. Kalev, Huu Nhan Duong
14.20-14.40 Richard Chung Does CEO Incentive Compensation Predict Future Firm Returns? Evidence from Australia
Hai Yen Pham, Richard Chung, Eduardo Roca, and Ben-Hsien Bao
14.40-15.00 Katherine Hunt The impact of borrower characteristics on the effectiveness of loan regulation
Katherine Hunt
15.00-15.30 Questions and answers for 3A: Investments 2
3B: Financial Planning Industry S07_2.17
Time Chair: Dr Neda Todorva
14.00-14.20 Julie Knutsen
The Benefits of Financial Coaching in the Professional Financial Planning Relationship.
Julie Knutsen, Make Brimble, Robyn Cameron
14.20-14.40 Angelique Mclnnes
Examining the Legitimacy of the Current ‘Authorised Representative’ Licensing Model
Angelique McInnes and Abdullahi D. Ahmed
14.40-15.00 Michael Perkins Transition Professionals: An Emerging Model for Financial Planning
Michael John Perkins
15.00-15.30 Questions and answers for 3B: Financial Planning Industry
Concurrent Sessions 3
Tuesday 17 November 2015
3C: Ethics and Governance S02_6.38
Time Chair: Dr Bin Li
14.00-14.20 Sudharshan Reddy Paramati
The role of economic freedom and governance indicators on stock market interdependence
Sudharshan Reddy Paramati, Rakesh Gupta and Eduardo Roca
14.20-14.40 Jamie Forster
What does it mean to be financially excluded in Australia?
Jamie Forster, Mark Brimble, Katherine Hunt
14.40-15.00 Michelle Cull
Characteristics of Trust in Personal Financial Planning
Michelle Cull and Terry Sloan
15.00-15.30 Questions and answers for 3C: Ethics and Governance
Tuesday 17 November 2015
Page 7
Concurrent Sessions 1 1A: Financial Literacy
Retirement Outcomes of Indigenous Australian Workers
Authors: Robert Bianchi, Michael Drew, Adam walk and Osei Wiafe
This study examines the retirement adequacy of Indigenous Australian workers. By accessing current Indigenous Australian demographic and employment data, we construct a 40 year saving profile of the typical Indigenous worker and compare these with the average non-indigenous Australian. We also compare the retirement outcomes of males and females in both cohorts. The findings reveal that the retirement outcomes of Indigenous workers are approximately 30% lower than the average non-indigenous worker. We show that the gender gap in retirement outcomes is wider for non-indigenous workers than the indigenous cohort. Overall, the indigenous female reports the lowest retirement outcomes, and as expected, the non-indigenous male reports the highest levels of retirement adequacy. We also report that non-indigenous female workers report commensurate retirement outcomes as Indigenous males. Our results show that the plight of the Indigenous male is similar to non-Indigenous females (with no career breaks) in retirement adequacy terms. These differences in retirement outcomes can be attributed to the current earnings gap between the four cohorts at the commencement of their careers. These simulation results suggest that the different in current earnings of these four cohorts plays an important role in retirement adequacy.
Abstracts
Tuesday 17 November 2015
Page 8
Financial literacy education in an Indigenous Community: Exploring relevance, development and praxis
Authors: Levon Blue, Mark Brimble & Peter Grootenboer
Countries around the world, both developed and emerging, agree that financial literacy is critical, with the current economic climate having led to an opportune moment for teaching financial literacy. With a global spotlight on financial literacy education (FLE) as the pathway to improved personal finances, financial independence, and ultimately financial wellbeing (OECD, 2005) especially for financially vulnerable individuals including those living on low incomes (who are often the target of community run FLE programs). With such high expectations or outcomes associated with FLE (such as achieving financial wellbeing), this presentation reports the findings from Blue’s PhD study exploring the FLE practices in a First Nation community in Canada, a Community that she is a member of.
This study was undertaken, in the financially excluded Community located on a First Nation reservation, about one year after a generic FLE train-the-trainer workshop failed to gain traction in the Community. The reasons why this training approach were not successful, the relevance of FLE in the Community, and the FLE needs of the Community were explored with Community members (during both group and individual interviews were conducted, during a meeting with Chief and Council, and at two Community events). Findings from this study of reveal what aspects of FLE are relevant in the Community, the need for site based education development and the importance of a praxis1 approach to FLE.
These findings may be useful to consider when examining FLE strategies being implemented by governments, schools and community organisations (including organisation working with individuals living on low incomes). Especially since there is concern about the effectiveness and appropriateness of the plethora of programs on offer in Australia (Worthington, 2013). Lastly, we argue that further research is needed to guide a more socially, culturally and ethically responsible approach to FLE.
1 Praxis is the moral, ethical and caring aspect of teaching (Grootenboer, 2013)
Abstracts
Tuesday 17 November 2015
Page 9
An Examination of the Financial Literacy Levels of University Students
Authors: Laura de Zwaan, Chrisann Palm, Toni Chardon
Abstract: Financial Literacy levels in Australia are low, particularly so in people under 25 (ANZ, 2015). Most financial literacy studies are focused on either adults or high school age, with very few targeting the section of the population on the cusp of both. Using an online survey, we gathered data on university students’ subjective and objective levels of financial literacy. Preliminary findings show university students are unable to apply simple skills such as savings calculations, despite ranking their understanding as high. We further investigate relationships with demographic variables and provide a current overview of their level of financial literacy.
Abstracts
Tuesday 17 November 2015
Page 10
Financial Literacy of Indigenous small business Owners: Does the franchise model provide superior support? Authors: Kerry Bodle, Lorelle Frazer, Scott Weaven and Mark Brimble
Indigenous Australians are significantly underrepresented in small business. Of the 2.1 million small businesses in Australia, less than 1 percent are Indigenous-owned (ABS 2015, Hunter 2014). Closing this ‘entrepreneurship gap’ is part of the reform of narrowing the existing socio-economic gap that exists between Indigenous and non-Indigenous Australians (Morrison et al. 2014).
A study of Indigenous small business in Australia (ATO, 2009) found that financial literacy2 was a key element for success by Indigenous entrepreneurs. Research has shown financial illiteracy to be a widespread issue with many in society not adequately managing their financial affairs or building wealth in preparation for retirement (Lusardi & Mitchell, 2013, Taylor & Wagland, 2011, Atkinson and Messy, 2012). This has been shown to impact on all demographic elements of society, but particularly the economically and socially disadvantaged, the under-educated, and indigenous and minority groups. There has, however been little research, into the financial literacy of small business operators, a key source of wealth generation in the Australian economy.
Recent research which examined the personal and business barriers faced by Indigenous operators revealed that business success was related to the adoption of thorough business practices, including the maintenance of sound financial accounts (Morrison et al. 2014). Over the past decade there has been increased concern about the level of financial literacy of Australians including Indigenous people. To address these deficiencies a number of interest groups have developed financial literacy programs, such as ASICs MoneySmart, ANZs Safe Plus and MoneyBusiness, which is targeted at Indigenous people. However, few programs exist that specifically target the financial literacy skills of Indigenous business owners.
Abstracts
Tuesday 17 November 2015
Page 11
Concurrent Sessions 1 1B: Finance and Investment
International diversification and information transmission using entropy
Authors: Xi Yang Li, Rakesh Gupta and Tarlok Singh
It has the significant implications not only for financial economic theory but also practical asset management that whether the worldwide stock markets are interacted. Theatrically, stock prices are not able to predict through public data and information if the efficient market hypothesis holds in any of its version. However, if the co-integration relationships between two or more stock markets exist, it thus violates the EMH as one market includes information of others that helps to forecast future price movement. From the practical standpoint, stock market co-integration indicates the implication for investors. In the portfolio diversification theory, investors need to diversify their assets that are not perfectly correlated. The advantage of diversification is limited when there is a positive relationship between different markets and losses in one market are difficult to compensate by others. Therefore, stock market co-integration provides an effective way to hedge the risk. It is perceived that international financial markets relationships come with several benefits. For instance, they have the implications of economic policies. Furthermore, it leads to market development, pose various risks, the effective price discovery economic progress. Economists therefore always keep eye on the progress of interdependence among worldwide financial markets for both policy and market participants’ implications.
In such condition, there is a growing body of research papers have dealt with equity market linkages during recent years. Several statistical measures have been introduced in the literature. These include such concept as autocorrelation, correlation function and probability distribution. However, measuring linkages lies at the heart of many statistical problems. First, although the correlation coefficient is widely employed, it is not completely satisfactory to measure the dependence between random variables as it provides limited information about their dependence structure. Second, they measure only linear relations. Third, all they determine is whether two time series have correlated movement. They however do not provide any directional information about the cause and effect. Nowadays, economy has become an active research area for physicists. They have been investigated stock market using statistical-physics methods such as spin-glass models, multifractals, information theory, etc. In this connection the name econophysics has been coined to denote this new hybrid field on the border between statistical physic and quantitative finance. Recently, it has been pointed out that transfer entropy is a useful instrument in quantifying statistical coherence between time evolving statistical system, which measures the dependency in time between two variables and nots the directionally of information flow.
Abstracts
Tuesday 17 November 2015
Page 12
Financial Planning Value propositions
Author: Lujer Santacruz, Mark Brimble and Dianne Johnson
This presentation is an update on the previous one made at the last FPAF meeting in July about my PhD research entitled “Asset Allocation: an Analysis of Theory and Practice in the Australian Investment Management Industry”. As explained in the previous presentation, 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.
Abstracts
Tuesday 17 November 2015
Page 13
Abstracts
Attracting high performing graduates, and blazing a trail for women, in financial planning Authors: Dianne Johnson, Mark Brimble
With the rush to professionalism, financial planning businesses of all sizes are taking more interest in all aspects of their business practices, including their HR modelling for growth and innovation. With only one in five Australians receiving ongoing financial advice, opportunities for financial planning businesses are as abundant as their capacity to innovate and respond to the needs of the Australian community. Likewise, the opportunities for new entrants into the financial planning profession are exciting, prosperous and long-term. The same can also be said of the existing financial planning workforce, although there is a long way to go to bridge the gender disparity in financial planning roles and director positions in Australian financial planning firms.
Using comprehensive data from a survey of over 200 financial planning businesses, this paper will unpack the current expectations of financial planning businesses for new graduate entrants, and the state of women’s careers in financial planning, ranging from entry level positions, through to director roles.
This paper shows that across all firm sizes, there is an interest in growing staff numbers over the next five years with large firms in particular having a growing interest in graduate pathways and methods of obtaining access to a graduate talent pool. In addition, the views of respondents will be outlined regarding a potential standard graduate pathway for financial planning graduates.
In terms of expected qualifications of new entrants, almost half of respondents expect new entrant planners to have a Bachelor’s degree or above. This is of particular relevance as a baseline given the recent moves by some licensee groups, professional bodies and recommendations regarding qualifications for financial planners to be set at Bachelor degree as a minimum qualification going forward.
This paper will detail the striking lack of gender diversity in Australian financial planning businesses. Data will show that there is still a wide disparity in terms of representation of women in financial planning roles and director level roles and women are over-represented in the lower paid client service officer and paraplanner roles. The general manager position currently holds the most promise for women in senior levels, with the role being the only one in the survey that had even gender representation. This paper will explore the multifaceted reasons for gender disparity, such as unconscious bias, affinity and confirmatory bias in a traditionally male-dominated industry; historically inflexible working hours and conditions; and discretionary bonus systems. Responding to these barriers to gender balance presents a great opportunity for the industry not only in growing their female customer base, but also in reforming their culture and business models.
Attracting and keeping talent in financial planning businesses at the graduate and established levels is paramount to reducing turnover costs and maintaining long term client relationships. The next two to five years are critical for financial planning practices, which have an opportunity to plan their HR models for new and existing staff based on professional practice, transparency and sustainability.
Abstracts
Tuesday 17 November 2015
Page 14
This creates significant challenges for business owners including the key issue of human capital management for women across all role types, in a challenging business climate. Over the long-term, there will be significant opportunities for financial planning firms that are able to adapt quickly to the new business ethos and environment, and encourage more Australians to seek financial advice.
Tuesday 17 November 2015
Page 15
Concurrent Sessions 1 1C: Issues in Personal Finance
The Symbiotic Relationship Between Banking and Real Estate Markets: International Evidence
Authors: Sudarshan Reddy Paramati, Eduardo Roca, Victor Wong
It is contended that there is a symbiotic relationship between the banking and real estate markets. The good (bad) performance of the real estate market will lead the banks also to perform well (badly) which will then lead banks to provide more (less) funding to the real estate market, thus fuelling a credit-led boom (bust) in the real estate market. This claim of events was demonstrated by the recent real estate crisis in the US which led to the global finance crisis (GFC). We examine the relationship between the banking and real estate markets in a number of countries (Australia, Austria, Belgium, Canada, France, Germany, Hong Kong, Italy, Japan, Malaysia, Singapore, Spain, Switzerland, UK and US) based on co-integration, granger-causality tests and dynamic conditional correlation analysis for the periods before, during and after the GFC. We undertake analysis for each of the individual country as well as for all the countries as a group. For the countries as a group, we find a long-term relationship between the banking and real estate markets in all sub-periods in which both markets granger-cause each other in the pre-GFC and GFC periods. In the short-term, the two markets also drive each other during the full period.
However, during the GFC period, the banking, market granger caused the estate market. We find that the interaction between the bank and the real estate markets varies between countries. Austria, Belgium, Germany, Switzerland, Singapore and the US had the most co-integrated markets while Canada had the least. In the US, it was clear that both markets influenced each other significantly both in the long-term and short-term, particularly during the GFC. On the other hand, the bank market drives the real estate market in Austria, Germany, Hong Kong, Spain and Switzerland. It is only in Australia and Italy where the opposite is the case. The results of the dynamic conditional correlation analysis also confirm the close linkage of the two markets over time in all countries. Although this was fluctuating, the trend was stationary for most countries. Thus, there is a close link between the real estate and bank markets; however, the manner of linkage varies between countries and between periods. In some countries, the bank market drives the real estate market while in other countries, it is the contrary and still in others, both markets drive each other.
Abstracts
Tuesday 17 November 2015
Page 16
Plan B: New housing equity withdrawal options for Australian retirees
Authors: Dianne Johnson, Andrew Worthington, Mark Brimble
In a time of seemingly increased awareness of the need to self-fund as much retirement consumption as possible, the incidence of poverty among older Australians is still increasing. Many older Australians will face significant cash shortages in retirement, even if they own their home outright, with income pressure increasing in the later stages of retirement. The financial considerations of staying at home in later retirement are also growing increasingly complex with longer life expectancies and greater individual responsibility for financing health and aged care compounding the complexity and concern.
The purpose of this paper is to explore recent policy directions regarding retirement income and look at where the policy cycle is at risk of going astray by not starting to challenge and reset the heuristics that Australians hold about housing and retirement income. In addition, this paper will use data from the Household, Income, and Labour Dynamics in Australia (HILDA) Survey to examine the asset holdings of older Australians and the levels of financial stress among retirees. Analysis will also explore the factors that have impacted on wealth accumulation for current retirees and what role financial planning has had on wealth accumulation.
In building a case for new housing equity withdrawal products, the analysis considers the high levels of homeownership prevailing among older Australians and the extent to which Australian retirees are currently decumulating their housing equity, including the mechanisms retirees are currently using to access housing equity. This paper will highlight developments and research in housing supply bonds both internationally and in Australia, as well as the potential reforms in the reverse mortgage market that are gaining traction.
Overall, we illustrate the current and potential role of housing equity in Australian portfolio composition and contribute to a case for new financial product development for Australian retirees. The new products differ from existing products by being government-backed and in providing higher-quality planning for those retirees with lower net worth than those who typically engage a financial planner. The lack of financial preparedness of retirees to manage complex, expensive decisions in later retirement points to an enormous potential for financial planning business.
The paper suggests a safer, supported mechanism that enables later retirees to relieve financial stress and meet their health and aged care needs by efficiently and safely decumulating their housing equity for increased cash flow. In the context of potential new financial products that draw on housing equity and match the risk profile and needs of Australian retirees, the potential positive impact of quality financial planning, even small-scale advice, could be a game changer for retirees and financial planners. The results of this research have important implications for social policy and financial products designed to increase the financial wellbeing of retirees.
Abstracts
Tuesday 17 November 2015
Page 17
What is the best time to trade? Evidence for the Australian stock market
Authors: Nirodha I. Jayawardena, Akihiro Omura, Bin Li
We examine what the optimal time is in a typical trading day for investors to buy/sell stocks in the Australian stock market. Using intraday data (a 6-hour trading day is divided into 12 blocks) for the period 2010-2015, we identify that the prices are usually lowest during the 10-10:30am block (the time to buy) and high in the blocks after 1pm (the time to sell). Our study has important practical implications.
Abstracts
Tuesday 17 November 2015
Page 18
Concurrent Sessions 2 2A: Personal Finance
The Macroeconomic Determinants of Commodity Futures Prices: the Evidence from China and India
Authors: Di Mo, Rakesh Gupta, Tarlok Singh
With the increase in levels of globalisation and financialisation of commodity markets, the commodity prices may not only be determined by supply and demand curve. The recent fluctuations in commodity prices have been linked to the economic activities of some emerging economies. Being motivated by this, this study aims to explore the macroeconomic determinants of emerging commodity futures prices. The macroeconomic factors employed for the analysis include industrial production index, money supply, interest rate, exchange rate, and inflation rate. The analysis is based on the VAR model, and the empirical results suggest that macroeconomic variables are important indicators for determining commodity futures returns. The findings of this research are important for policy makers in terms of understanding the relationship between macroeconomic variables of domestic economy.
Abstracts
Tuesday 17 November 2015
Page 19
The Dynamic correlation analysis for the Stock Markets of the US and China
Authors: Kejia Yan, Rakesh Gupta, Victor Wong
Investors seek to diversify their investment portfolio to improve risk-adjusted return and with emerging market to take exposure to emerging market risk factors. When one diversifies into emerging market, one also exposes the portfolio to potential risks. To against the risk in the emerging market, accurate assessment of the impute variable is very impartment. One of the important variables is correlation that are changing over time and fluctuating with integration of the global markets. This research is aims to explore the difference of time-varying correlations generalised by Dynamic Conditional Correlation (DCC) GARCH model and Gaussian and Student's t Copula models among the stock markets of the US and China. DCC GARCH model have recently becoming attractive for estimation of time-varying correlations application.
Nevertheless, Copula model as a new model has been processed that does not require similarly restrictive assumptions as DCC GARCH model. Copula model is theoretically superior over in expected to estimate time-varying correlations that are more accuracies reflection of the relationship among variables. But in practice, DCC GARCH model is very easy to exercise and Copula model is much more complicated for result obtaining. We compare the difference of the strength of the correlation estimation by these two models to explore whether the DCC GARCH model should be supersede by Copula model or not. The findings suggest that the Copula model are produced better results and the dynamic correlation estimated by the DCC GARCH model is significantly different from Copula model at 5% level of significance.
Abstracts
Tuesday 17 November 2015
Page 20
Swimming outside the flags; Many Australian investors are unknowingly wandering outside retail protections. What is needed to avoid another Storm Financial disaster?
Author: Peta Tilse
The Future of Financial Advice (FoFA) reforms became mandatory on 1 July 2013 in response to the Storm Financial disaster and other advisory scandals. These reforms aimed to “improve the trust and confidence of Australian retail investors in the financial services sector and ensure the availability, accessibility and affordability of high quality financial advice.”[1] While the FoFA reforms are a leap in the right direction, a number of issues remain. In particular, there is ambiguity around the classification of consumers as wholesale, sophisticated or retail[2] investors, which directly impacts the level of disclosure required and protections available to the investor. In addition to this, the level of qualification required for accountants to sign the certificate and certify a consumer as sophisticated or wholesale raises further concern.
While ASIC has stipulated asset and income thresholds for wholesale investors, these do not necessarily translate into investment acumen to make the right decisions. Allowing an investor to have control of their certification and choice to be treated outside retail protections may be the best way to instil confidence in the practices of the financial services industry.
Abstracts
Tuesday 17 November 2015
Page 21
Concurrent Sessions 2 2B: Personal Finance
The costs, benefits and trade-offs associated with professionalising the Australian Financial Planning industry
Authors: Adrian Raftery, Campbell Heggen, Michael Kerry and Harman Singh
Recent public scrutiny of personal advice provided by financial institutions, coupled with the two concurrent government inquiries, has renewed concerns about the professionalism of the Australian financial planning industry surrounding the relatively low minimum competence requirements that apply to advisers. This scrutiny has led to a number of proposals to lift the educational requirements of authorized representatives from national exams and tertiary qualifications through to ongoing training programs and an enhanced disclosure of the credentials of financial advisers. Drawing on survey data from a sample of 797 practicing financial advisers, this study investigates the perceived costs, benefits and trade-offs associated with the different levels of professional education requirements being proposed by regulators and industry associations compared to the minimum level of qualifications currently required by participants under Regulatory Guide (RG) 146.
Abstracts
Tuesday 17 November 2015
Page 22
‘
‘Relevant’ Training and Education Standards of Financial Advisors in Australia: Views from Practice Authors: Adrian Raftery, Campbell Heggen, Michael Kerry
Recent public scrutiny has suggested that the minimum standards required under RG 146 (ASIC, 2012a) are inadequate for the delivery of quality advice, which leads to an increased risk of consumers acting on information provided by providers who are not appropriately or professionally qualified. This scrutiny has led to a number of proposals to lift the educational requirements of financial advisors. The proposals range from national exams and tertiary qualifications through to on-the-job training in the form of a structured professional year as well as mandatory ongoing professional development requirements.
Abstracts
Tuesday 17 November 2015
Page 23
Can a link be established between ultimate success in the CFP® Certification Program and any specific demographic factor of the participant? Authors: Sharon Taylor, Susan Wagland
Quality financial advice is extremely important for clients as they manage their finances in the Australia’s complex and ever changing financial markets. The importance of good advice has been reinforced by the findings of the 2014 Financial System Inquiry and the 2015 recommendations of the Parliamentary Joint Committee on Corporations and Financial Services. Both committees’ recommendations include, increasing the minimum educational requirement for financial advisers. However, at the present time, the minimum education needed to give financial advice can be as little as four courses equivalent to 60 hours of study each, totalling three months of full time study to achieve the minimum training standards for planners as required by Regulatory Guideline 146 (Collett 2012).
The Financial Planning Association (FPA) has been leading the way in raising these standards with the introduction of the CFP® Certification Program in 1999. In 2003 the FPA announced that entry to the CFP® Certification Program from 2007 would require an undergraduate degree and this was followed on 1st July 2013 with the additional requirement that new members must hold an approved degree when applying for membership. The FPA suggests raising the educational bar will provide the ‘gold standard’ for entry for CFP® Certification Program.
This research project is the first academic Australian research which seeks to determine whether a specific demographic factor or several factors can be directly correlated to success in the CFP® Certification Program. Whilst this research focuses on the pre-existing educational background of students in the certification program other demographics will be examined for correlation including but not limited to age, gender, time in the industry and overall professional experience.
The research will concentrate on all participants having completed the CFP® Certification Program over the period 2006 to 2014. Data was taken from the completed for CFP® Certification Program entry forms and CFP® Certification Program results data base. This data was then analysed to determine impact of the pre entry education status and the other identified demographics to determine whether a correlation exists between any of the demographics and success in CFP® Certification Program results.
The results suggest certain demographics do have an impact the outcome of the CFP® Certification Program and more in depth research is warranted.
Abstracts
Tuesday 17 November 2015
Page 24
Concurrent Sessions 3 3A: Financial Planning Industry
Individual and Institutional Trading Volume around Firm-Specific Announcements
Authors: Priyantha Mudalige, Petko S. Kalev, Huu Nhan Duong
We investigate the immediate impact of firm-specific announcements on the trading volume of individual and institutional investors on the Australian Securities Exchange (ASX). Institutional investors exhibit abnormal trading volume before and after announcements. However, individual investors indicate abnormal trading volume only after announcements. Consistent with outcomes expected from a dividend washing strategy, abnormal trading volume around dividend announcements is statistically insignificant. Both individual and institutional investors’ buy volumes are higher than sell volumes before and after scheduled and unscheduled announcements. Our results add to the understanding of individual and institutional investors’ trading behaviour around firm-specific announcements in a securities market with continuous disclosure.
Abstracts
Tuesday 17 November 2015
Page 25
Does CEO Incentive Compensation Predict Future Firm Returns? Evidence from Australia Authors: Richard Chung, Hai Yen Pham, Eduardo Roca, Ben-Hsien Bao
We investigate the relationship between CEO compensation and stock returns in Australia and find evidence that firms managed by CEOs with higher incentive pay earn higher future returns. Excess incentive pay is measured as non-cash compensation in excess of the median incentive pay to peer firms in the same industry and size group. For example, we find that an equally weighted portfolio of stocks with top-quintile excess incentive pay outperforms an equally weighted portfolio of stocks with bottom-quintile excess incentive pay by an average of 10.8% per annum from 2001-2011. This finding is consistent with agency theory, which argues that incentive pay encourages CEOs to work hard and make shareholder-oriented decisions. In addition, we find that higher incentive pay induces CEOs to take more risk by investing more in research and development, particularly in research-intensive industries. Such firms would become riskier and, hence, would have higher expected stock returns.
Abstracts
Tuesday 17 November 2015
Page 26
The impact of borrower characteristics on the effectiveness of loan regulation
Author: Katherine Hunt
Regulation for small loan products has the potential to greatly impact the most vulnerable in our society; those who rely on short term credit to meet unexpected expenses. Despite the importance of this topic, research to date has not considered the impact of trends in borrower personality characteristics on regulation effectiveness. This paper explores types of consumer and enterprise loan regulation as part of a regulatory context within which consumer and enterprise borrowers interact with credit products. This paper finds that there are trends in enterprise borrower personality characteristics which may make them more vulnerable than consumer borrowers, yet they are currently less protected by regulation. This paper finds theoretical trends in over-optimism and low self-control among small loan borrowers. In addition, this paper finds that financial literacy programs would be more effective if they included self-control as well as external financial decision making skills. Preliminary conclusions will be that an alternate approach to financial literacy and information disclosure should be considered, and that more interventionist regulation should be extended to apply not only to consumer loans, but also to enterprise loans. Future research would benefit from empirically testing the prevalence of these personality types in the target population.
Abstracts
Tuesday 17 November 2015
Page 27
Concurrent Sessions 3 3B: Financial Planning Industry
The Benefits of Financial Coaching in the Professional Financial Planning Relationship. Authors: Julie Knutsen, Mark Brimble, Robyn Cameron 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. The industry’s regulator, Australian Securities and Investment Commission (ASIC) and emerging research suggests that to improve the quality of financial advice and realise these benefits, financial advisers should take on a teaching and coaching role. Results from our survey of clients and financial planners from financial coaching, traditional and hybrid practices (which blend both traditional and financial planning and coaching) provides empirical evidence supporting the benefits of financial coaching in the professional financial advice context. These findings make an important contribution to the evolution of quality financial advice and inform the current position of the regulator and future policy development.
Abstracts
Tuesday 17 November 2015
Page 28
Examining the Legitimacy of the Current ‘Authorised Representative’ Licensing Model
Authors: Angelique McInnes, Abdullahi D. Ahmed
The purpose of this paper is to introduce Suchman’s theoretical legitimacy framework as an elementary approach to, empirically, examine the legitimacy of the current ‘authorised representative’ licensing model for individual Australian financial advisers. This is important to address the deficiency in sound scholarly literature on the inconclusive dispute of outsourcing the licensing of individual financial advisers to product-aligned licensees. Throughout this paper, the theoretical application and extension of Suchman’s legitimacy framework happens within the context of licensing individual financial advisers through product-aligned licensees. By applying legitimacy theory within the context of the ‘authorised representative’ licensing model, it becomes apparent, theoretically speaking, that the current licensing model can be perceived as illegitimate if ‘authorised representatives’ of product-aligned licensees do not comply with the Act. Its legitimacy can be challenged, if the commercial interests of product-aligned licensees are not aligned to the best interests of clients. Moreover, if outsourcing the licensing of advisers to product-aligned licensees results in deceptive sales practices and procedures to reinforce product distribution, then this puts a question mark on its legitimacy. Legitimacy will also be threatened, if the current licensing model has led to a handful of large product-aligned licensees monopolising distribution channels through vertical integration. Furthermore, should the contributions by individual leaders of product-aligned licensees to the debate surrounding the licensing of advisers only have the regard for their parochial interests aimed at protecting their product distribution channels, then outsourcing the licensing of advisers to product-aligned licensees can be perceived as illegitimate. Finally, if the distinction between independent financial advice and conflicted financial advice to achieve the objectives of the Act is not clear, then the ‘authorised representative’ licensing model may lose its legitimacy. The primary focus of this theoretical investigation of the legitimacy of the current ‘authorised representative’ licensing model integrates both legitimacy and financial planning secondary literature published from 1995 to the present day.
Abstracts
Tuesday 17 November 2015
Page 29
Transition Professionals – an emerging model for Financial Planning
Authors: Michael John Perkins, Sessional Academic, Charles Sturt University
The introduction of Best Interest Duty3 as a legislated feature of the regulation of the providers of financial advice by operation by the Corporations Act 2001 (C’wealth) means that financial planners and the businesses that employ them are forced to move from a product sale led to an advice led model for the operation of their financial planning practices. This in turn means that the accountability of financial planners now shifts from primarily an employer based relationship to primarily a client accountability driven relationship. This shift is being described as a signal that the financial planning industry is being professionalised. This paper proposes an approach to client engagement that inherently meets best interest duty, professional practice and commercial requirements for client results led practice in professional service firms including financial planning. The paper propounds the view that financial planning is seen simply as a single discipline within professional services and part of the multi-disciplinary field of private capital structuring, administration and succession. The paper describes the need for financial planners to have broader access to allied professionals and service providers who can respond to results sought by the client which are outside the capability of the planner to service directly (estate practitioners). The paper concludes that financial planning is evolving from its traditional role in mediating access by the community to the provision of financial product and services to a client advocacy based role where the adviser facilitates the achievement by the client of the service results they seek. These Best Interest Duty led changes continue to place pressure on the financial literacy needs of clients when interacting with the Australian Financial System. These impacts are called for as a subject for further research.
Abstracts
Tuesday 17 November 2015
Page 30
Concurrent Sessions 3 3C: Ethics and Governance
The role of economic freedom and governance indicators on stock market interdependence
Authors: Sudharshan Reddy Paramati, Rakesh Gupta, Eduardo Rocca
The aim of this study is to empirically investigate the impact of economic freedom, governance indicators, FDI, stock market development and trade openness on the stock market correlations of Australia and ten Asian countries (China, Hong Kong, India, Indonesia, Japan, Malaysia, Philippines, Singapore, South Korea and Thailand). For this purpose, study constructed panel data using annual data on the mentioned variables. The empirical results on economic freedom indicators show that the difference between Australia and each of Asian countries in terms of business freedom, government spending and FDI inflows have significate impact on the stock market correlations. In the same way, the results on governance indicators suggest that the difference in accountability, corruption, law and FDI inflows have considerable impact on the asset correlations. These results therefore suggest that both economic freedom and governance indicators along with FDI inflows have significant implications for the policy and practical standpoint. This study also contributes to the body of knowledge on the determinants of stock market interdependence in the Australasian region.
Abstracts
Tuesday 17 November 2015
Page 31
What does it mean to be financially excluded in Australia?
Authors: Jamie Forster, Mark Brimble, Katherine Hunt
Financial exclusion has been identified as in increasing social issue and policy challenge in Western countries. As a phenomenon, it has historically been defined by reference to whether or not an individual has one of three basic financial products. This rudimentary measure fails to explore the conceptual foundations of financial exclusion making measurement unreliable and presenting a challenge for targeted and appropriate policy responses. The purpose of the study is to gain an understanding of the multidimensional nature of financial exclusion based on the perceptions of specific stakeholders in order to enhance understanding of the dimension of financial exclusion in Australia and to develop a framework for measuring the extent and severity of financial exclusion in Australia.
Abstracts
Tuesday 17 November 2015
Page 32
Characteristics of Trust in Personal Financial Planning
Authors: Michelle Cull, Terry Sloan
This research identifies characteristics of trust unique to the context of personal financial planning. The study utilised both quantitative and qualitative research methods of data collected in the form of questionnaires and interviews of financial planning clients in Australia. The questionnaires and interviews assisted in understanding the development of trust in personal financial planning and provided specific empirical examples to complement theoretical studies on trust in different contexts. Affective characteristics of trust in personal financial planning were found to be essential to the client-adviser relationship and the research demonstrated that increased legislation along with the behavioural and technical competency of advisers can build consumer trust in financial advice. Furthermore, the research indicates that conflicts of interest and dissatisfying events can put client trust at risk in an environment where transparency and minimum educational qualifications are not properly regulated.
The results provide empirical evidence to support the introduction of a Best Interests Duty as part of the federal government’s Future of Financial Advice reform to improve trust in personal financial planning. In addition, the results provide guidance to those providing financial advice with regards to the skills and factors that build and maintain trust with clients. This may lead some advisers to engage in additional training or education programs to improve specific skills, or to reconsider the way they interact with clients.
Abstracts
Tuesday 17 November 2015
Page 33
Contact Information for PFIS and FPAF Staff
Professor Mark Brimble Email: [email protected]
Dr Rakesh Gupta Email: [email protected] Associate Professor Robert Bianchi Email: [email protected] Ms Sian Jones Email: [email protected]
Ms Sharon Taylor Email: [email protected] Mr Martin Hovey Email: [email protected]
Contact Information for Finance and Financial Planning Academics
Professor Mark Brimble Email: [email protected]
Dr Alexandr Akimov Email: [email protected] Associate Professor Robert Bianchi Email: [email protected] Dr Graham Bornholt Email: [email protected]
Associate Professor Richard Chung Email: [email protected] Dr John Fan Email: [email protected] Dr Rakesh Gupta Email: [email protected]
Dr Katherine Hunt Email: [email protected] Ms Julie Knutsen Email: [email protected] Dr Bin Li Email: [email protected]
Dr Benjamin Liu Email: [email protected] Ms Kirsten MacDonald Email: [email protected]
Dr Mirela Malin Email: [email protected] Dr Suman Neupane Email: [email protected] Professor Eduardo Roca Email: [email protected]
Dr Parmendra Sharma Email: [email protected] Dr Neda Todorova Email: [email protected] Ms Anna Webb Email: [email protected]
Dr Victor Wong Email: [email protected] Professor Andrew Worthington Email: [email protected]
For further details regarding any or all members of The Department of Accounting, Finance and Economics please visit the Griffith Experts website at https://www.griffith.edu.au/business-government/griffith-business-school/departments/department-accounting-finance-economics/staff
Tuesday 17 November 2015
Page 34
FINANCIAL PLANNING RESEARCH JOURNAL Call for papers
Second Edition of the Financial Planning Research Journal
With an ever more complex financial system, an increasing emphasis on self-funded retirement for Australians, the increasing size of the Australia’s managed funds pool, and persistent evidence of financial illiteracy, the importance of financial planning is clear. The financial planning profession however, lacks an academic platform for discourse on the issues of individual’s personal financial planning and wealth management that can debate issues of practice and policy, and bring rigor, independence and evidence to the discussion. Currently there are no journals that fit into this niche providing a forum for dissemination of research in the specific area of personal finance and investments in the Australian context.
The Financial Planning Research Journal (FPRJ) aims to publish high quality, original, scholarly peer reviewed articles from a wide variety of personal finance, investment and taxation disciplines. These include, but are not restricted to, economics, finance, management, accounting, marketing, taxation, behavioural finance, financial literacy, financial education and law that are of interest to the practice and policy of financial planning in Australia.
FPRJ is the research journal of the Financial Planning Association of Australia and is published by the Griffith Business School, Griffith University, Australia. JPFI publishes two issues a year – in March and in September with approximately six papers in each issue.
The FPRJ Editorial Board welcomes original, applied and topical articles on matters of interest to the financial advice community across Australia, New Zealand and Asia that will inform the practice and/or policy of the profession. Articles will be submitted to a double-blind review process and may be returned to authors with suggestions/comments for consideration and revision. The Editors will consult with authors as closely as possible about changes.
Authors should submit complete papers that do not exceed 5,000 words not including title page, abstract, tables, figures, charts, footnotes and reference list. The word count must be stated on title page. Papers should be original works that are not under review at another journal. Submit your manuscript to FPRJ. [email protected].
Authors are advised that if submitted papers are accepted for publication in FPRJ, then the authors will be required to complete a copyright assignment form and provide a 600 word synopsis of the paper for publication in Financial Planner Magazine.
Visit our website at www.griffith.edu.au/financial-planning-research-journal for further information.
