Advisers optimistic on equities

Financial advisers’ market outlook is optimistic with expectations of local shares to deliver capital gains of 3.5% over the next 12 months, up from 2.3% in 2020, according to Investment Trends.

Investment Trends’ latest adviser report found diversification (68% rated as a priority), capital growth (37%), and liquidity (31%) remained the top three priorities for investment selection among advisers.

Responsible investing (27%) and protection from market downturns were increasingly important for advisers. Responsible investing was the fastest growing priority area, doubling in tis importance in 2021.

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Over 40% of clients requested to buy or sell investments based on environmental issues, over the last 12 months, up from 24% in 2020. Another two-thirds of adviser said client demand was the biggest driver of environmental, social, and governance (ESG) investing.

Investment Trends also found advisers wanted to better understand the basics of responsible investments, including performance, cost, screening criteria, and the underlying mix of investments.

The research house’s research director, Kurt Mayell, said: “Advisers who are prioritising ESG investments expect to use a wider range of products or increase their use of active management. To enable the growth of ESG investing, advisers believe that product providers should put as much effort into research and data analytics as they do on new product issuance”.

The research also noted that before the design and distribution obligation (DDO) regime came into force in October, only one-third of advisers felt prepared to meet their obligations.

Advisers said they wanted support in general education on DDO and many wanted assistance on target market determination related issues, and practical implementation guidance.

“2021 was particularly prolific in terms of additional regulatory compliance burdens – best financial interest, fee consent, DDO and IDII [individual disability income insurance] among the most prominent,” said Mayell.

“In relation to DDO, there are significant opportunities for education, starting with the jargon itself. Close to four-in-five advisers rate their understanding of ‘significant dealings’ as average or below.”




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