Research houses back in favour
Paul Resnik
While some financial advisers have targeted research houses in the hunt for scalps following the high profile collapses of ‘investment grade’ companies such as Basis Capital, the way fund managers view them has improved considerably in the past 12 months.
Money Management’s 2008 Rating the Raters Survey has revealed fund managers currently hold research houses in higher regard than they did this time last year, with the full report featured in the current edition of Money Management.
In the 2007 survey, fund managers delivered a blow to research houses, with a large number labelling their work and delivery as average.
The results of this year’s survey are more positive, with Lonsec maintaining its industry leading position for the fourth year in a row.
Following close behind it in a tied position were Mercer and Morningstar, both receiving mostly positive ratings.
Standard & Poor’s and van Eyk Research, the other researchers covered in the report, can also be commended for receiving good results in certain categories.
However, during the past 12 months research houses have fallen into disrepute with advisers for giving investment grade ratings to companies that later collapsed.
As previously reported by Money Management, some advisers are threatening legal action, as they claim to have recommended particular investments based on the assessments provided by research houses.
However, in commenting on the results of this year’s survey, research houses have reminded advisers that ratings reports are designed to provide only a platform to better decision-making.
Using his company’s research reports as an example, Morningstar head of advice and research Anthony Serhan said the ‘Morningstar Recommendation’ was a starting point and that advisers must read the full report to understand the strategy and its associated risks.
“We really make an effort to put some colour around this in our reports so advisers have a better chance of working out whether or not a fund will be a fit for a particular client,” he said.
“It is also important to understand that the Morningstar Recommendation should be used to assist with product selection after you have made a decision to allocate to a particular asset class and not before.”
Industry commentator Paul Resnik believes planners are liable for their recommendations, not the researchers.
“Basically, the planners are liable — they can outsource the research but they can’t outsource the obligation,” he said.
Recommended for you
ASIC has permanently banned a former Perth adviser after he made “materially misleading” statements to induce investors.
The Financial Services and Credit Panel has made a written order to a relevant provider after it gave advice regarding non-concessional contributions.
With wealth management M&A appetite only growing stronger, Business Health has outlined the major considerations for buyers and sellers to prevent unintended misalignment between the parties.
Industry body SIAA has said the falling number of financial advisers in Australia is a key issue impacting the attractiveness and investor participation of both public and private markets.
