More understanding needed for high yield investments



Financial advisers are increasingly tempted to move into assets that are not widely understood but favoured thanks to attractive higher rates of interest on offer, Mason Stevens believe.
The firm said despite the search for yield, advisers should be better informed about the risks associated with high yield investment opportunities in the market.
It said advisers needed to consider the liquidity and market risk as well as correlation risks associated with higher yielding opportunistic investments.
Mason Stevens managing director, Thomas Bignill, said: "We see how this can be appealing in the short-term as advisers seek to meet client cashflow requirements".
Bignill noted that advisers were eager to learn more about fixed income opportunities too.
"What we are seeing is a renewed energy amongst advisers on the role that fixed income can play in asset allocation. By investing in high quality short-to-medium term bonds, fixed income can potentially facilitate the preservation of wealth," he said.
"Fixed income is a traditional asset class that fits well into client portfolios — particularly for those in pension phase. It's about consistency of income and that resonates with the end client."
Mason Stevens said to get the best out of fixed income investments, advisers should:
- Understand what you are recommending;
- Take a diversified approach to generating income; and
- Look for independence.
Recommended for you
Results are out for the latest sitting of the ASIC financial advice exam, with the pass rate falling for the second consecutive sitting.
Adviser losses for the end of June have come in 143 per cent higher than the same period last year, and bring the total June loss to over 350.
ASIC’s enforcement action is having an active start to the new financial year, banning a former Queensland financial adviser for 10 years in relation to fees for no service conduct.
ASIC has confirmed the industry funding levy for the 2024–25 financial year, and how much licensees can expect to pay.