Research released by Goldman Sachs Asset Management (GSAM) in January grabbed headlines because it purported to show an “alarming” fall in the proportion of investors who rely on financial advisers to make investment decisions.
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But the 600 investors surveyed came from a group of 2000 direct share investors – so the lack of reliance on investment advisers wasn’t as disturbing as it first looked.
But the research also uncovered strong latent demand among share investors to learn more about other asset classes – particularly fixed interest and bonds.
The head of third-party distribution for GSAM, Jessica Jones, says the research revealed very low levels of investment in fixed income, which was “a great concern to us at GSAM, because we believe fixed income should be a core part of people’s portfolios”.
“It acts as a natural counterbalance to the volatility that we see in equities, and it has a huge range of diversification benefits,” she says.
“To not have any, or very little…intention to allocate to fixed income is worrying.”
“But on a positive note…many investors are keen to learn more about fixed-income investment – 45 per cent of investors said they are keen to learn about fixed income,” Jones says.
“This shows a great opportunity for advisers here in Australia to provide more investment solutions or more education
in this field.”
The director of education and fixed income research for FIIG, Elizabeth Moran (pictured), says many investors are already familiar with holding direct investments, principally equities.
As more investors, including self-managed super funds (SMSFs), seek to develop or maintain the defensive component of their portfolios, a direct holding in bonds inevitably will come onto trustees’ radars.
Financial planners need to be ready to address investors’ questions.
Moran says a common misconception about bonds is that “there’s only one type of bond, being a fixed-rate bond, and it’s only good in certain types of markets”.
“But there are other types of bonds – floating-rate notes and inflation-linked bonds – and they work differently in different markets, so I think that’s one of the big ones,” she says.
“And a lot of that misconception comes from talking about US Treasuries. They’re typically fixed-rate, and a lot of the misconceptions come from reporting along those lines.”
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