More than half of advisers are ready to re-balance their customers’ portfolios to hold less cash as part of a swing back into equities over the next six to twelve months.
Despite the inherent difficulties in timing a return to shares or direct equities, research released by Zurich’s investment business in Australia found advisers bullish on share markets.
The nationwide survey of 200 advisers found 68 per cent had indicated a potential swing back into equities in the next six to 12 months.
Of those advisers who said they would rebalance their customers’ cash holdings, 94 per cent said they would move to growth assets.
Specifically, 40 per cent said they would move to Australian shares, 25 per cent said they would move to international shares, 19 percent said they would move to direct equities and 10 per cent said they would move to property securities.
“As the market goes through its cycle, it is likely the dependence on cash will eventually diminish. How long that cycle will be, of course, depends on timing, something we all acknowledge is notoriously hard to do,” said Patrick Noble, senior investment strategist – Zurich Investments.
While many planners would prefer to adopt a more conservative approach, the fact that the average 65 year old has at least another 20 years to live highlights the need to keep a long-term view.
According to Rice Warner, the savings gap is approximately $87,900 per person and this retirement savings shortfall is a growing concern for advisers and investors alike.
The Zurich research concludes that keeping defensive allocations remains an important consideration but getting the right mix of defensive and growth allocations is the key to meeting the retirement shortfall.
“Defensive equity or low-volatility products can avoid exposure to the highs of the market but that also means your investments won’t suffer the lows either,” said Noble.
As part of the survey, advisers who said they were not looking to reduce their customers’ cash holdings in the next six to 12 months (32 per cent of respondents) were asked what would have to happen before they would move their customers out of cash.
Not surprisingly, the top three responses mirrored investors’ concerns.
More stability and confidence in share markets topped the list, with 45 per cent of advisers saying this was required before they moved clients out of cash. 25 per cent of advisers wanted to see further interest-rate changes and 24 per cent said lower market volatility was required.
Advisers’ ability to make changes to their clients’ portfolios was largely reliant on both their clients and their own outlook for future market returns.
The majority of advisers surveyed (89 per cent) expect the Australian share-market returns over the next 12 months to be positive single-digit returns.
Only 9 per cent predicted strong double-digit returns but, to counterbalance this, only 2 per cent foresee negative growth in the Australian share market over the next 12 months.
