The findings from the second part of Money Management’s 2019 Rate the Raters survey, which aims to measure financial planners’ sentiment towards the major research houses, has shown that Lonsec has managed once again to demonstrate its value as a preferred provider of fund research and ratings among planners.
This year, Lonsec received recognition for the quality of its staff, model portfolio capabilities, good value for money as well as for fund and fund company and asset allocation research. Additionally, it has also earned the highest overall rating.
Further to that, the planners rated the quality of Lonsec’s consulting services on par with Morningstar and both companies were rewarded with the highest score in this category, meaning Lonsec was the sole winner in six out of 10 categories this year. By comparison, last year the planners voted in favour of Lonsec across eight categories.
This year Morningstar overtook Lonsec in the two other categories: client service and website tool and services. What is more, Morningstar also topped the chart for its corporate strength, pushing Lonsec down to the third spot.
The planners and groups which participated in the 2019’s edition of Money Management's ‘Rate the Raters’ were more willing than in prior years to share their views and rate the long-established researchers such as Lonsec, Zenith and Morningstar.
FUND AND FUND COMPANY RESEARCH
Planners once again confirmed the ability to provide immaculate fund and fund company research was the most important criterion when it came to selecting a research house.
According to the survey, all respondents participating in the survey agreed that this category was either ‘essential’, ‘very important’ or ‘important’ to them.
The interviewees also admitted their key concerns revolved around the accuracy and quality of the said research as well as how well the research houses could demonstrate their understanding of investment managers.
Also, planners expressed concerns around the methodology on which research houses based their decisions with regards to the breadth of their coverage. In particular, they stressed that some raters had a limited universe and no interest in adding new investment managers while others were highly praised for taking a different approach and including somewhat smaller managers into their research.
When it came to data, Lonsec technically won this category however it was closely followed by Zenith. Lonsec’s funds research and fund company capabilities were rated as either ‘good’ or ‘excellent’ by almost 63% of respondents. Zenith, on the other hand, was appreciated for its fund research capabilities by 62% of respondents who granted the firm either ‘good’ or ‘excellent’. This means that last year’s winner, Morningstar, has been pushed down to the third place and saw slightly over half of respondents rate its fund and fund company research as above average.
As far as this category was concerned, Morningstar managed to come out on top of the table, as more than half of its respondents rewarded the firm with either ‘good’ or ‘excellent’ rating for its client service. As a result of that, last year’s winner, Lonsec, found itself in the third spot with only 42% of planners participating in the survey saying its client service was either ‘excellent’ or ‘good’. By comparison, in 2018 Lonsec scored a combined ‘excellent’ and ‘good’ rating from 53% of participants who rated the firm.
Zenith, which landed in second place, saw a somewhat lower score even though 30% of planners, of those who participated in Money Management’s survey, rated its client service as ‘good’ and a further 16.7% described it as ‘excellent’.
This year Lonsec, which landed in third place, was followed by SQM Research which in this category earned ‘good’ and ‘excellent’ ratings from 23.1% and 15.4%, respectively, of those planners who rated the company in the study.
WEBSITE AND TOOLS
This category was voted by planners as one of the most important metrics to look at for the research houses. For planners, the website and tools category was equally important as client service, staff and value for money, with over 95% of interviewees admitting that all the four criteria were either ‘essential, ‘very important’ or ‘important’ factors in their decision-making process regarding the research houses.
This year Lonsec, which previously grabbed the gold trophy for three consecutive years across this category, was overtaken by Morningstar. Lonsec still managed to earn one of the top two ratings from 70% of the respondents, however Morningstar was rewarded with the same rating by 74% of planners who voted this year.
Following this, Zenith received above average ratings for this category from around 40% while SQM Research and Mercer saw the similar ratings granted by 38.5% and 23.1% of respondents, respectively.
In this category planners were asked to take into account factors such as the average level of professional experience among employees as well as staff turnover. Historically, this has been one of the most contentious issues for both financial planners and fund managers who rate the raters due to the high expectations both parties hold with regards to the level of competence of the research houses’ personnel.
As far as Lonsec was concerned, some planners expressed views that the company might have struggled a bit with resourcing issues earlier this year, in particular across its consulting division. However, they felt it had managed to address and overcome the majority of them.
As a result, Lonsec’s staff were highly appreciated and the company managed to retain its top position from last year as 59% of those who participated in the survey rated its staff as ‘good’ and the further 11% of respondents said that the quality of Lonsec’s staff was ‘excellent’.
Zenith came second with 64% of respondents granting the firm a combined rating of ‘good’ or ‘excellent’ for its staff.
Morningstar ended up in the third place with less than half of respondents granting the research house with the any of the two highest ratings.
After last year saw Lonsec give up its top spot to Zenith, this year saw the arrival of Morningstar which landed on par with Lonsec on the top of the list. According to financial planning groups, consulting services offered by both groups were rated as either ‘good’ or ‘excellent’ by 44% of respondents.
At the same time, Zenith, which retained its second spot, saw only 41.7% of planners who rated the firm in the survey grant it either ‘good’ or ‘excellent’ across this category. This also represented a significant decline from the number of respondents who rated Zenith’s consulting services as above average last year (57.7%).
ASSET ALLOCATION RESEARCH
This is the category where financial planners are encouraged to focus on the resourcing, value-add and methodology employed by raters. However, only a half of respondents described this category as either ‘essential’ or ‘very important’ criterion for their preferred research house.
Although this year there was no surprise and Lonsec continued to deliver its top performance, the proportion of positive responses from planners was slightly lower. Two years ago, Lonsec managed to gather positive feedback for its asset allocation research capability from 75% of respondents while last year this number dropped to below 60% of planners who shared their opinions with Money Management and described Lonsec’s asset allocation research as such.
The 2019 Rate the Raters survey showed a further drop to 56% of positive ratings for Lonsec from planners who viewed the firm’s asset allocation research as either ‘good’ or ‘excellent’.
Following this, Zenith and Morningstar’s asset allocation research was rated by 43% and 39%, respectively, as above the average.
This category was viewed by half of the financial groups, of those who participated in our survey, as either ‘essential’ or ‘very important’ and further 34% described this category as ‘important’ in their selection process when it comes to research houses.
For Morningstar, which last year maintained its second position and saw only 67% of respondents who rated its corporate strength as either ‘good’ or ‘excellent’, this year’s figure climbed up to 80%, with 60% of respondents rating Morningstar’s corporate strength as ‘good’ and a further 20% believed it was ‘excellent’. Such a result made Morningstar an unquestionable winner in this category.
Following this, Lonsec, which won this title last year, landed in third place with only 63% of planners granting it a higher than average rating.
Zenith ended up ahead of its rival and took out the silver position with a cumulative either ‘excellent’ or ‘good’ rating being granted by 65% of respondents.
At the same time, Mercer’s corporate strength was recognised as above average by 46% of respondents, of which 15.4% rewarded its corporate strength with a ‘good’ rating and the remaining 30.7% said that its corporate strength was ‘excellent’.
The corporate strength of SQM Research, which is still less-known by planners than its long-established rivals, was appreciated by 14% of the respondents who described it as either ‘good’ or ‘excellent’.
VALUE FOR MONEY
For the fourth time in a row, financial planners decided that Lonsec offered the best value for money, a view that was consistent with the findings of the survey from the previous years.
Additionally, the company saw its combined ‘excellent’ and ‘good’ ratings go up from 60.6% last year to 67% this year. However, it was still much lower when compared with 2017 levels when 76.6% of financial planners in the study said that Lonsec offered either ‘good’ or ‘excellent’ value for money.
Zenith, which again came second, saw a similar result where 48% of respondents described its value for money as ‘good’ and another 8% said it offered ‘excellent’ value for money.
This category also saw that a relatively younger researcher, SQM Research, managed to secure a third position, ahead of Morningstar, as more than 45% of those planners who voted in the survey rated the SQM’s offering value for money as either ‘good’ or ‘excellent’.
Lonsec once again demonstrated its value as the company scored the highest rating in this category, with a slightly higher number of planners (62%) compared to last year granting the firm a combined ‘excellent’ and ‘good’ rating in this category.
Zenith again proved it was a silver medallist although the number of planners who rewarded it with an overall ‘good’ rating climbed up to 46% from 37% last year but the number of ‘excellent’ rating fell to 11.5% against 15% in 2018. This means that 58% of planners who rated Zenith in the 2019 survey were of the thought that its overall value was above average.
Morningstar again came third in this category and saw a number of users from whom the firm received an overall rating higher than average stood at approximately the same level as last year (41%).