Financial planners hold more in cash and term deposits

Financial planners have continued to steer clear of growth assets while more than doubling their portfolio allocation to term deposits in the past year.

That's according to the 'Investment Trends 2011 Adviser Product Needs Report' which found that 966 financial planners surveyed in October and November 2011 invested 28 per cent of client inflows in cash and term deposits - up from 16 per cent on 2010 results. Flows into term deposits more than doubled from 8 per cent of new money to 17 per cent.

"Excluding dividends, over half of planners now say that their highest priority when choosing where to invest client cash and fixed income allocations is safety from capital loss," said Investment Trends senior analyst Recep Peker.

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Cash is still considered a safeguard against the adverse Australian market, with financial planners now expecting the value of the All Ordinaries to increase by just over 8 per cent over 2012, compared to 10 per cent for 2011 and 14 per cent for 2010.

Despite this outlook, the report found that financial planners remain far more optimistic than investors, with market return expectations for planners around 5 per cent compared to 3 per cent for clients.

Where a client's 'excess cash' would normally be invested in growth assets, financial planners estimated investors now hold a combined $3.9 million in excess cash - up 22 per cent from the prior year.

According to the survey, 58 per cent of financial advisers said investment of excess cash would likely be triggered by growing confidence in economic recovery.




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