T.Rowe Price's Cassandra Crowe

While managers will never advertise or publicly declare a bad rating for one of their funds, there is acknowledgement from investment and research houses alike that negative fund ratings can be just as valuable as positive ones.

According to trillion dollar global asset manager T. Rowe Price, any input they get – good or bad – from researchers is considered valuable information.

Speaking on a panel at the Professional Planner 2020 Digital Researcher Forum, T. Rowe Price’s head of consultants in Australia and New Zealand, Cassandra Crowe, said when the firm gets constructive views from researchers they “have to accept them”.

“I think the saying comes to mind that feedback is a gift,” Crowe said. “We have such high regard for the research firms, we wouldn’t be going through the process if we didn’t value the experience.”

Crowe was joined on the panel by Bronwen Moncrieff, general manager at researcher Zenith Investment Partners and Matt Olsen, head of research and retirement at IOOF. In an earlier session Deloitte’s Deen Sanders argued that research houses should extend their purview beyond the funds that pay to be rated. Moncrieff said that even if a manager doesn’t get rated there was information to be gleaned.

“To get to Deen’s point about ‘if you have five funds that you have a rating on, what about all the ones that you haven’t got a rating on?’ we would have that ‘screened out’ rating so there’s just as much value in that and our opinion on why we aren’t going to rate something,” Moncrieff argued.

The approach from Zenith, she explained, was “not to rate everything”. There’s just as much value for Zenith, she said, in a ‘recommended’ rating as there is in a ‘not rated’ mark because it indicated that the researcher has had a look and made the decision to not go ahead with a formal rating.

“And sure, there will be managers and funds we want to rate and perhaps for commercial reasons the manager doesn’t want to go ahead with that and we’ll be very clear on that about specifying that as well,” Moncrieff continued. “So there’d be a rating category say ‘OK we’ve asked the manager and they have declined’. So there is information in that as well.”

Funds may also choose to ignore or hide a poor rating, but Moncrieff pointed out that the rating still is still there for all to see. “Its on our website so there’s no escaping it,” she said.

Asked whether she thinks advisers understand the protocols behind the research house process, Moncrieff said it was clear from Zenith’s perspective. “We’ll spell it out, it’s on our website and not hidden away in six-point font in a disclaimer,” she said.

 

Where researchers can provide extra value to advisers and the industry is through education. It’s an area Zenith is “passionate” about, Moncrieff said. “We’re very much aligned with our clients in providing that across the board.”

According to Crowe, education pieces from researchers are “absolutely” helpful in getting information out to clients.

“Education naturally lends itself to a research house, there’s huge opportunity in that space,” Crowe said. “Research is all about education at the end of the day.”

Tahn Sharpe is a Sydney-based financial services journalist with a background in financial planning. He writes on advice, superannuation, investment, banking and insurance issues, is a certified SMSF Adviser and holds an Advanced Diploma of Financial Planning. Contact at [email protected]
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