Facing the likelihood of a prolonged low interest rate environment, financial services companies need to provide greater clarity around the real investment status of their fixed income products, according to Melbourne-based consultant, John Wiseman.
Wiseman has argued that greater clarity is needed around which “fixed income” products are defensive and which might actually represent growth product.
He suggests this could start to be achieved by professional indemnity (PI) insurers clarifying which fixed income products on a licensee’s approved product list (APL) fit the profiling of a ‘defensive’ product and which should be deemed growth assets.
Wiseman is also arguing that the Australian Securities and Investments Commission (ASIC) should insist that product proviers make much clearer and in simple terminology whether products are growth or defensive.
Further, he suggests that licensees should embark on a thorough investigation and review of all fixed income products on their APLs, and advise their authorised representatives where the products should sit and fit in the risk profile.
“The AFSL holder would be well advised to start and introduce at their PD [professional development] days extensive training in this area as it is well documented that not just with planners but many in the industry (let alone the clients) have very little knowledge / understanding of this asset class,” Wiseman said.
“With low interest rates predicted to be the norm for an extended period of time, something has to be done now,” Wiseman said.
