About 3,500 financial services professionals, including 100 Australians, crammed into a Boston conference venue to catch the US-based FPA annual conference, Success Forum 2000.
According to one of the Australian delegates, Westpac Financial Services managing director Michael Migro, the highlight of the first day was Morningstar chief executive Don Phillips.
Phillips told the conference consumers will continue to seek better access to technology and better access to the performance information that relates directly to their portfolio.
Phillips said that consumers would increasingly demand what he calls the “actual” returns on their funds rather than just the published returns. He says investors rarely get information on actual returns because they move in and out of the funds during the reporting periods.
In the future, financial planners and fund managers will need to provide consumers with a customised report on the fund’s return, including tax implications, fees and actual cash flow into the fund. Consumers will want to know if the distributions are made in cash or are reinvested to make the fund look more attractive.
“These kinds of disclosures are coming soon, and they will allow investors to make comparisons along lines that matter to them,” he said.
Other information consumers will be asking for is the remuneration structure for the person managing the fund, in a manner similar to the way a chief executives salary is printed in annual reports.
Migro says the implications of Phillips message for Australian financial planners are that they must get to know the kinds of tools being used by consumers and to help tham use these tools better.
“Become familiar with the tools that your clients have access to and help them in their search for information,” he says.
“It’s a great opportunity to facilitate investors’ access to information, so don’t stand in the way of their quest but instead, help them.”
Migro also says the impact of online broking was a major topic of conversation both in and between sessions. Chip Roame from The Tiburon Group Fast told the conference the massive growth of online broking in the past few years has not affected the businesses of financial planners.
Roams says the number of online broking accounts in the grew from 1.5 million at the end of 1996 to 10.5 million accounts by the end of last year.
Roams quoted a survey by Sanford Bernstein that online investors tended to expect higher returns. For example, online investors hope to return 20 per cent over the next year, whereas offline investors hoped for the more realistic 10 per cent.
Fidelity pips UBS
Swiss financial services colossus UBS has been usurped as the world’s biggest fund manager by US-based Fidelity Investments, according to a Watson Wyatt survey published in Pensions and Investments. Fidelity’s $1074 billion under management narrowly surpassed the Swiss giant’s $1064 billion. No Australian fund made the top 10 but most of the international giants had a presence in the Australian market. After UBS, ranked in order are Kampo, Axa, Barclays, State Street, Deutsche Bank, Vanguard, Credit Suisse and Merrill Lynch at number 10.
Mutual funds soar
More than 88 million people now own mutual funds in the US, an increase of five million on last year, according to the Investment Company Institute. According to the group’s survey, nearly one in two American households now owns a mutual fund. Most American mutual fund shareholders have moderate household income, according to the survey but fund ownership tends to increase with income.
The institute’s research also found that most fund shareholders own stock funds more than bond funds, hybrid funds or money market funds. More than a third of US households own stock funds, up from 29 per cent in 1998.
To be sure, says IFG
IFG has signalled it is looking to expand its finanical planning arm beyond Ireland with the acquisition of UK-based independent financial adviser Berkeley Jacobs financial services for 12 million pounds. Following the acquisition, IFG says it will embark on a wider geographical spread in the UK and Ireland. There are only four Irish institutions IFG could look at, including Norwich Union, Friends First, Irish Public Bodies and Aberdeen Asset Managers.
Mega merger
Chase Manhattan Bank is to acquire JP Morgan in a stock swap valued at $US32.9 billion ($A59.33 billion). The merged firm, to be named J.P. Morgan Chase Co, will have funds under management of $US660 billion ($A1.2 trillion). The merged group will rank behind only Citigroup, with $US791 billion ($A1.43 trillion) in assets, and Bank of America, with 680 billion, according to The Wall Street Journal. The deal is expected to be complete early next year but is subject to approval by shareholders of both companies, as well as by US Federal and state and foreign regulatory authorities.
President-elect Barry
America’s Financial Planning Association (FPA) has elected Robert Barry as president of the association for 2002. Barry, the president of Barry Capital Management, currently serves on the FPA board of directors and was a board member with one of the group’s predecessors, the International Association for Financial Planning (IAFP). The FPA has about 29,000 members nationwide.
