Planners urged to be expansive
Financial planners need to start looking outside term deposits for returns for their clients as funding sources for banks increase, according to Lonsec head of ratings for alternatives and income funds, Michael Elsworth.
Speaking at the Lonsec 2011 roadshow in Melbourne, Elsworth said the improving securitisation market and the development of an Australian covered bonds market would soon become another funding source for the banks, and term deposit rates would decline as a result.
“Don’t expect these term deposit rates to become a permanent feature of the landscape,” Elsworth said.
Elsworth said there were signs of life in the securitisation market, and the Government was intent on developing a covered bonds market in Australia.
The global wholesale markets were also still open to Australian banks, adding another source of funding, he added.
“If you have your clients’ money in term deposits, while they’ve been a fantastic investment, it’s time to start looking further afield,” Elsworth said.
Elsworth said advisers looking to invest in fixed income needed to do detailed research into the risk of the fund, as well as the type of client it was best suited for, before they moved their client’s funds out of term deposits.
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