The age of technology has brought massive change to many facets of everyday living, in ways that previous generations could only have dreamed of. Even though the benefits have been many, the evolution should perhaps come with a caveat: in the wrong hands or used in the wrong way, technology has the potential to cause more problems than it fixes.
Take the health industry for instance. An international survey by health insur- ance provider Bupa found that four in five Australians use the Internet for health information, while half of those are using the information to make a self-diagnosis. It’s leading to a two-fold problem. At one extreme, people are presenting at their GP’s surgery panick- ing, convinced their tension headache is a brain tumour. At the other extreme, people with life-threatening conditions are putting off a visit because, based on their Internet research, they believe their issue is not serious. The ramifications are mind-boggling.
The potential misuse of the power of technology is an important point to con- sider in the financial planning industry, too, where giant leaps have been made in financial planners’ capabilities over recent years through the use of technology. Team this fact with increased demand by investors for lower costs and more transparency post-GFC, then overlay it all with the forthcoming Future of Financial Advice (FoFA) reforms, and the result is a heady mix indeed.
And while the devastating effects of the GFC were a potent reminder of the important balance between risk and return, a new trend away from managed funds and towards direct investing, made simple by new technology, may be creating unwarranted and unacceptable risk in some portfolios.
Contributions towards retail man- aged funds (RMF) have continued to decline in recent months, with data from Morningstar showing $2 billion in net outflows in the March quarter, bringing the cumulative total of net outflows to $15 billion in the 12 months to March 31, 2011. The wholesale managed funds (WMF) industry is not faring any bet- ter, with $1.6 billion negative net flows during the March quarter and the total industry size falling by 1.1 per cent over the year.
Meanwhile, low-cost alternatives, such as exchange-traded funds (ETFs), continue on their meteoric rise in popularity. According to Morningstar, total funds under management in the ETF market in Australia has increased by almost 38 per cent in the 12 months to March 31, 2011 alone. As of March 2011, there were seven managers offering 47 different ETFs, accounting for $5325 million of locally sourced assets.
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