Planners seek simplicity in client investment products

Financial planners are actively investing client funds in growth assets and are making greater use of passive and index strategies while demanding more information and marketing support from fund managers.

These moves are counter to general investor sentiment, according to Investment Trends, which has found that planners are moving away from cash investments have reduced client cash holdings by about 40 per cent in the past two years.

Investment Trends surveyed 768 financial planners in September of last year examining asset allocation trends and found that planners had invested only 15 per cent of new client inflows into cash products, down from 31 per cent in 2012 and now at the lowest level since the end of 2010.

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Investment Trends Senior Analyst Recep Peker said the majority of new inflows were going to actively managed funds and were at 37 per cent close, while 19 per cent of new inflows were being allocated to passive and index strategies.

Peker said the inflows to passive and index strategies were at the highest since 2010 with recent statistics released by State Street Global Advisers stating the exchange traded fund sector had passed $15 billion in funds under management.

"We're currently going through an interesting period where the average investor's capital gain expectations from domestic equity markets is deteriorating, but at the same time there are many more who are seeking growth in their portfolios, perhaps because of suppressed yields," Peker said.

"Planners are addressing this need by targeting growth through diversification, with an increased preference for simpler products and passive strategies."

The Investment Trends research found that planners had moved client cash holding from a high of $78 billion in 2012 to $47 billion in 2014 and were demanding more information from fund managers about different investment classes and products.

According to the research nearly three quarters of planners were requesting more information than they currently receive, up from 58 per cent in 2012 and 39 per cent in 2013.

"Planners want to make the most of the current increase in demand for financial advice from Australians, and one way of doing so is to have access to tools and collateral that help them effectively get clients on board," Peker said.

"Right now, financial planners are after simple stories to tell their clients - they want fund managers to help them form a view on where the economy is headed and how to use their funds in the current economic environment."




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