Aussie advisers still ignorant of Asia

Australian advisers routinely ignore Asian markets when constructing portfolios for clients and remain resistant to change despite the growth potential.

Jonathan Wu, an associate director and head of distribution and operations at Premium China Funds Management, puts this down to a combination of inertia and ignorance.

“The Western world is still coming to grips with the ongoing crises which continue to hamper growth and most importantly confidence,” he told Professional Planner Online.

“As I talk to advisers right around the country, they seem to be moving back into their shell, not knowing what to do, if anything at all.

“One peer in the funds-management industry shared an analogy with me stating that advisers in general, since the GFC, have failed to provide advice to their clients. I tend to agree with him, and why is that?

“The simple fact of the matter is that clients have been so fearful of the next market crash that when they see their financial advisers for a review, they say that they are so scared, so ‘please put me in cash’, and to that the adviser responds ‘OK’.

“My colleagues and I fail to see the advice being given here. Are advisers – of which I am one also – just too scared to make a decision?

“And furthermore, does that lead into the lack of desire to learn about anything new and be ignorant about opportunities that have been born of a crisis such as one we are living through now?

“Will cash really provide a long-term net return that requires a financial planner?”

Wu says his efforts to educate advisers and the public since 2004 has encountered “continuous and consistent resistance to changing the way portfolios are built”.

“What is there not to like about Asia? We don’t believe ignorance is a reason to not consider the region. There are some simple analogies that advisers should start with when looking at the region,” he says.

David Urquhart, a portfolio manager on the Fidelity Asia Fund, recently concluded on this website that: “Even after the rise during the first quarter, it is still a very enticing time to be buying Asian equities. Attractive investment opportunities continue to be available in countries as diverse as Korea, Thailand and China.”

Wu adds that Asia, excluding Japan, has growth rates that are higher on trend than any other region.

“As we have always communicated to the public, we don’t believe that in the short term GDP growth will correlate to share market returns because a developing economy is very complex and will go through cycles, but in the long term, we believe it will pay off,” he argues.

“Also, when we look at company leverage, which was the catalyst for the 2007/08 GFC kicking off, Asia has significantly less debt compared to their earnings base, especially against their peers in the US corporate market.”

Of particular irritation to Wu is what he calls the corporate government ghost – the issue, as he describes it, of advisers and researchers using the perception of second-rate corporate governance as an excuse not to allocate to Asia in any meaningful way.

“Year on year, Asia’s corporate governance improves and, as well as this, the management of funds in Asia needs to be active, and some managers have proven themselves as successful, and this will only improve moving into the future,” he says.

“Advisers need to truly wake up and up-skill themselves in Asia, both from a cultural perspective as well as an investment one.

“From equities, property to fixed interest, they need to understand the investment opportunities that are there for the long-term future.”