Advisers urged to manage investors’ ‘pie in the sky’ expectations

Financial advisers have a role to play in helping investors manage their expectations as they target ‘pie in the sky’ returns of 8.9% per year. 

In a webcast with Schroders, head of fixed income and multi-asset Simon Doyle, said investors were being over-optimistic with their return expectations. 

The firm surveyed 1,000 Australians as part of its Global Investor Study and found they were targeting average annual total returns of 8.9% a year over the next five years. They were also targeting 7.8% in annual income. While these figures were down from last year, Doyle said they were still too high. 

“The downward direction of travel is worth noting as average annual total returns are down from 10.9% last year. But expectations of 8.9% over the next five years is extremely optimistic, even pie in the sky. 

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“Our challenge is to help investors to manage their expectations, there is a role for advisers and fund managers to manage these expectations to realistic levels so that people are not making poor investment choices trying to chase those expectations. 

“Advice has become even more important given the uncertainty in the markets nowadays.” 

Some 47% of respondents said they already received advice from a financial adviser, above the 42% average globally.  

Average Australian expectations were lower than global expectations, however, with the average global investor expecting total returns of 10.9% over the next five years. The highest expectations came from investors in the United States who expected total returns of 13.1%.