More from Chris Joye and his righteous campaign today at Livewire:
More debt LITs/LICs from foreign funds with no brand presence in Australia (CVC and Guggenheim), and which have never raised a dime from Aussie retail, cancelled as a result of Frydenberg’s inquiry into whether fund managers should be able to pay commissions of 1.5% – 3.0% to advisers to push products. The largest of the recent sub-investment-grade LITs, KKR’s product (ASX: KKC), which can also be geared 33%, has tended to trade at a discount to NTA, like 75% of closed-end debt funds do in the US (where the av. discount is 6%).
…The argument that funds should be able to pay advisers commissions of 1.5% (most commissions are actually 2-3%) to compensate advisers for time spent researching products is specious. It contradicts the purpose of the Future of Financial Advice Laws and the Royal Commission’s conclusion that advisers should not be able to capture conflicted kick-backs. And this idea that advisers are “only” earning $200 is bogus. A typical adviser with ~200 clients might convert ~25% into an LIT if their firm is pushing it. If they get a ~1.5% selling fee, they will earn a huge $22,500 commission (given $30k/client).
Most client balances will be bigger than that.
Ban ’em.