Planners see growth appetite bounce back

With investment concern levels dropping to their lowest point in over three years, new data shows both planner and investor appetite for growth assets has bounced back.

A new report by Investment Trends, which was carried out in partnership with Money Management, found the flows to cash and term deposit investments recorded their biggest drop in the last six months, with 20 per cent of new client funds being invested in them — down from 31 per cent in September 2012.

The March 2013 Planner Direct Equities and SMA Report studies found almost a quarter of new client money is going towards direct listed investments such as exchange-traded funds (ETFs), shares, real estate investment trusts and separately managed accounts - a significant increase from the September 2012 quarter.

"This is the highest level we have ever observed, and planners expect this to continue growing," said Investment Trends senior analyst Recep Peker.

"Planners expect client flows to listed investments to hit 32 per cent by 2016."

The report surveyed 526 financial planners, measuring their attitudes towards direct equities and separately managed accounts (SMAs).

Direct listed investments are now at their highest-ever proportion of planners' allocation to growth assets, Peker said.

However, the renewed appetite for growth and direct investments could hurt the flows going to traditional managed funds.

Flows to managed funds - which had been declining since 2010 — also rebounded with a 16 per cent rise in usage.

In October 2010, for every dollar invested in direct listed investments, $2.24 was invested in managed funds. This is now down to $1.99, and planners expect that by 2016 there will be just $1.42 invested in managed funds for every dollar in direct listed investments.

That is not to say that the anticipated growth in the use of direct equities would not face some potential barriers.

Compliance risk has become one of the biggest factors that prevent planners from using direct equities, with 41 per cent — up from 26 per cent — citing it.

"Compliance risk has surged to the forefront predominantly because those with little or no usage of direct equities are turning their attention to this space again after their sojourn with cash," said Peker. "In addition to this, the key barriers for the broader planner community are now ‘too much work', and also high platform fees, though only 18 per cent cite the latter."

The latest data published by Investment Trends aligns with previous reports pointing to the looming demise of the so-called "cash wall" and the ever-growing ETF market.

Wealth Insights published a report earlier this year pointing out that an increasing number of planners - whose positive sentiment has reached the highest levels since the global financial crisis — are jumping back into the markets, despite a cautious outlook.