Planners up the ante on direct equities

Planners are pushing record sums of new client money into listed investments as they continue to break away from the former cash and term deposit safe haven, research shows. 

While managed funds remain planners’ vehicles of choice for half of new client flows, more than a quarter (27 per cent) are being placed in listed investments such as shares, real estate investment trusts and separately managed accounts, according to Investment Trends’ March 2014 Planner Direct Equities report.  

Listed investment flows are up 2 per cent on May last year, while flows into managed funds are up 6 per cent this year (44 per cent to 50 per cent), signaling a strong push into growth assets from planners, according to Investment Trends senior analyst Recep Peker.  

Meanwhile, the post-global financial crisis safe haven - cash and term deposits - has fallen further out of favour with planners this year, down to 16 per cent from 19 per cent in May 2013, the survey suggests.  

The shift represents a marked reversal from the situation two years ago, with just 19 per cent flowing into listed investments in 2012, compared to 26 per cent in cash and term deposits, Peker said.  

“With confidence coming back, (planners) are starting to see the benefit of using listed investments,” he told Money Management.  

“We can see that they are starting to take some of the share away from managed funds.” 

Peker said a combination of growing confidence, good capital return and client demand was driving the trend.  

But while planners signaled a desire to move further towards the listed investment sector, with expected allocations to hit 33 per cent by 2017, compliance risk remained “a major hurdle” for the sector.  

More frequent performance updates and rationales from ratings houses around their recommendations around listed investments would also help to drive further flows from planners, according to the research.  

The findings were based on surveys of around 500 financial planners.