“And the last thing that we do, in particular, is managing corporate actions, which can be hard, so we provide a service that does that at scale, and it’s a real value-add for advisers. Coupled with that, performance and tax reporting as well. We have a service that helps you track your parcels of shares. You might buy BHP five times and sell it twice; we help you minimise your tax obligations by doing that in the most sensible way – which parcels you bought and sold.
“It helps with a headache, which is corporate actions, for advisers and end clients; and secondly it helps demonstrate value, so I can sit there with a report and say, I’ve not only helped you minimise your tax, but – hopefully – your stocks are up this year and here’s a good report that shows what we’ve bought and sold and what the net result is overall.”
There is an obvious risk in any value proposition that centres on the planner holding himself or herself out as the expert stock picker or investment guru: equity markets will inevitably, at some point in future, decline.
Keary says there is a danger in “advising on or recommending equities that they do not necessarily have the back- ground research or background information to provide advice on”.
“What they need is access to model portfolios from their dealer group, potentially,” Keary says.
“They need access to market information, they need to understand how direct equities work and what are the drivers of share prices, and to be able to articulate what those companies are and do, to take that forward.
“We can provide them with some research, if they need it, we can provide them with execution services, we provide them with protection strategies and gearing strategies – so we have a protected lending product as well as a self-funding instalment warrant for leverage – and we give then access to a specialist who can help them in respect to queries from their clients.
“We’re absolutely committed to that. We think it’s a fundamental component of our strategy. We believe we need to be a leader, with respect to thought leader- ship; we think education is basically a multi-layered approach. We have to help educate advisers; we have to give advisers the tools to be able to educate their clients; and we also need to be able to look at emerging trends and help advisers with those opportunities.”
Keary says Westpac has “just produced a group-wide booklet on self- managed super funds, which really is a commitment to that ongoing education around saying, here are the various opportunities with respect to self-managed super funds, and here are some of the different products and services that can all hang together”.
“Ultimately it turns out to be a financial commitment, in terms of marketing dollars, people,” he says.
“We have an obligation to educate the market, given our brand. But we also believe that the way for a client or an adviser to take a product or service is to help them understand why it’s good for them, why it’s good for the client, how it fits in a portfolio, and what are the drivers. So we’re pretty committed to that.” Keary says the trend towards using
direct equities is clear, and established. But he says it’s less clear that it marks the beginning of the end for managed funds.
“I don’t think we’re there yet,” he says.
“People say,‘Are clients moving out of managed funds into direct equities?’ I think time will tell in respect to that. I certainly think that the clients are looking for more and more transparency, and that’s driving growth in direct equities, and also exchange-traded funds.
“Is it impacting the managed funds sector? I think it’s really too early to say at the moment.”
Keary says that clearly, ETFs are catching on among financial planners. He regards direct equities – stocks – and exchange-traded funds as a homogeneous group.
“ I know others do not. But the reason I do is because ultimately, [an ETF is] a listed vehicle,” he says.
“It’s transparent, it’s liquid, and it’s providing very transparent information. It’s pretty easy to see how it all hangs together.
“I’m a big believer that you can use ETFs as part of portfolio construction. For your alpha you can look at tilting with different direct equities, and also using self-funding instalment warrants, in conjunction with ETFs as well. If you look at the spectrum, they’ve all got a role to play and it’s just a question of how you construct your portfolio. So you have your ETFs, you have your single-stock direct equities, you have self-funding instalment warrants and you can therefore construct a portfolio that is dependent on the risk profile of the customer – in a pretty cost-effective manner, I must say.” Selvarajah says the popularity of direct investment over managed invest-
ments might be cyclical. “As soon as there is another bull run,
people have short memories and will revert back to structured products and managed funds,” he says.
But even so, once the benefits of investing directly have been experienced, planners and clients may find it difficult to go back. That’s why moves by the Australian Securities Exchange (ASX) to allow managed funds to be traded via the AQUA platform may be very appealing.
“It will allow you to transact a man- aged fund that is listed, through a broker,” Selvarajah says.
