The August 2015 Adviser Product Needs and Marketing Needs Report, released to Investment Trends clients in October, is a comprehensive study of asset allocation trends among Australia’s financial planners, together with their views on fund managers and their communication needs. The study is based on a survey of 676 financial planners concluded in August 2015. This year’s study highlights a number of interesting trends:
Financial planners are looking for new ways to meet clients’ objectives in uncertain markets
Financial planners’ confidence in the Australian share market has fallen amidst heightened share market volatility. As at August 2015, financial planners expect domestic stocks to deliver capital gains of only 6%, on average, over the coming 12 months, down from 8% in the 2014 study.
“We’re finding global economic concerns are dampening both investors’ and professional advisers’ share market return expectations,” said Investment Trends Head of Research for Wealth Management Recep Peker. “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 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,” said Peker.
Professional fund managers are playing a greater role in client’s portfolios as planners prioritise diversification and cost effectiveness
In response to the aforementioned challenges, planners are increasingly favouring traditional unlisted managed funds and ETFs for new client inflows, and moving away from stock picking.
“This is a reflection of planners increasingly prioritising diversification and low cost when selecting investments for their clients,” said Peker. “Notably, financial planners’ usage of passive managed funds – which provide low cost access to diversification – for new client money is at record levels.”
Planners’ usage of international assets for client inflows also hit a new high, which is another outcome of the challenges faced in the domestic market. Planners invested 39% of new client investments into international assets over the last 12 months, the highest level since the inception of this study in 2008. In comparison, planners allocated 26% of new client flows into international assets in 2012.
“Financial planners have been very responsive to their clients’ needs, and have been increasing their allocation to international investments since client appetite began to return for this asset class in 2012,” said Peker.
Adviser support and communications are important drivers of fund manager satisfaction
Recent volatility has meant that performance is playing a smaller role in driving both planner selection of fund managers and planner satisfaction with their most used fund manager than in 2014. Instead, frequency of the right communications and adviser support have become greater contributors.
“Volatility and uncertainty means the role of performance in fund manager selection is diminishing, while the adviser relationship is becoming much more important,” said Peker. “Asset managers have the opportunity to understand both planners’ and clients’ emerging needs to deliver products and solutions that most holistically meet these needs.”
Vanguard takes the lead as planners’ most-used fund manager
Recent trends saw Vanguard take the lead as planners’ most-used fund manager, benefitting from record flows into index funds and recent product launches, while Magellan climbed to become equal third with Platinum.
Top fund managers by share of primary financial planner relationships are:
1. Vanguard
2. Colonial First State
3. Magellan
3. Platinum
Source: Investment Trends
