Advisers may need to be more active
It will get harder to see strong double digital or high single digit returns going forward forever and advisers need to be conscious that they may need to be more active to generate a good outcome, according to IOOF.
IOOF incoming chief investment officer, Dan Farmer, said while the market had been very strong for the past seven to eight years, advisers could not be complacent and except that those conditions were going to be the same for the next 10 years.
“Going forward, excess returns through active management and not necessarily being fully passive and getting the index market beta could be really important in clients’ overall outcomes,” Farmer said.
“It’s been a great period and that market is still pretty reasonable in the short-term at least but we certainly are getting fuller valuations, bond markets aren’t going to keep rallying a lot at this point, property prices are pretty full.”
Farmer noted that the strong market challenged advisers to express and demonstrate the long-term benefits of potentially paying a higher fee if they were to receive excess returns for that higher fee.
“Advisers really need to come back to the end question of ‘What is the client trying to achieve? What is the best way to get them to the outcome?’,” he said.
“From an investment perspective, it’s really on the return net of fees, so we think by spending some fees on active managers, good quality active managers, targeted use of the investment fee where active managers can generate excess return after fees, the net outcome of the clients is better even if they are paying a slightly higher fee.”
Recommended for you
Sharing his reasoning in joining the FSC board, WT Financial chief executive, Keith Cullen, believes “product and advice cannot be separated” from each other in the current environment.
The Emerge Foundation, a charity run by financial advisers and fund managers, has announced a scholarship program to help veterans transition into tertiary education.
In an open letter, Sequoia chief executive Garry Crole has hit out against shareholders “with a personal axe to grind” as he fights for his job ahead of an EGM.
The JAWG has announced it is in talks with Treasury around five “core principles” to strengthen the education standards for new entrants to the financial advice space.
