Volatility causes investment rethink

12-Nov-2015

By Elizabeth Somerville

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Ongoing market volatility was forcing financial planners to find new ways to meet client objectives, according to new research from Investment Trends released yesterday.

The “August 2015 Adviser Product Needs and Marketing Needs Report” found planners had lost confidence in the Australian share market and expected domestic stocks to deliver capital gains of only 6 per cent, on average, over the coming 12 months, down from 8 per cent in the 2014 study.

“We’re finding global economic concerns are dampening both investors’ and professional advisers’ share market return expectations,” Investment Trends head of wealth management research Recep Peker said.

“What’s notable about our latest study, though, is that financial planners’ return expectations are at the lowest level we’ve ever observed – even lower than during the depths of the GFC (global financial crisis) in late 2008.

“Product providers have the opportunity to help planners overcome the challenges in meeting clients’ investment objectives in this environment of volatility and low interest rates.”

As a result, advisers were increasingly favouring traditional unlisted managed funds and exchange-traded funds (ETF) for new client inflows and had moved away from stock picking, the report found.

“This is a reflection of planners increasingly prioritising diversification and low cost when selecting investments for their clients,” Peker said.

“Notably, financial planners’ usage of passive managed funds – which provide low-cost access to diversification – for new client money is at record levels.”

Planners also increasingly sought out international assets for client inflows and invested 39 per cent of new client investments into international assets over the past 12 months, which was the highest level since the inception of the study in 2008.

In 2012, only 26 per cent of new client flows were made into international assets.

Further, advisers outlined the frequency of communications and adviser support from fund managers as important drivers in determining their fund manager satisfaction, whereas performance took a smaller role due to market volatility.

To this end, Vanguard was found to be the most-used fund manager, benefiting from record flows into index funds and recent product launches, while Colonial First State was ranked second, and Magellan climbed to become equal third with Platinum.

The study was based on a survey of 676 financial planners and was conducted in August.

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