Fund managers should be doing more to improve financial planners’ understanding of fixed interest as an asset class, according to Peter Dorrian, head of global wealth management for PIMCO (pictured, left).
Dorrian says planners have only an average understanding of the asset class, and if the knowledge gap is not addressed they could be putting clients at risk.
“They’ll incur hefty break fees when cash needs to be accessed early…and it also means they’re potentially missing out on higher returns in a rising interest rate environment,” Dorrian says.
A survey by PIMCO highlights a need for greater education, as 50 per cent of advisers classified term deposits as cash.
“At the adviser level, there has been a surge in term deposits,” Dorrian says.
“There is a role for term deposits in your portfolios but advisers need to remember it’s not cash. So there needs to be a level of understanding of how fixed income markets work from product providers.”
PIMCO sponsors an advisers’ roadshow, “Advisers Big Day Out”, which aims to narrow the knowledge gap by delivering its programme to regional and capital cities around Australia. Advisers who participate are made aware of the benefits and risks of investing in fixed-income securities, with the aim of eliminating any misconceptions.
The website rethinkyourdefence.com.au has also been providing educational tutorials and guides on the fixed interest market.
“Education in schools will also allow the public to start thinking about the markets at an earlier age,” Dorrian says.
