FOFA forces financial adviser behaviour change
A desire among financial advisers to be seen by their clients as having ultimate control over their portfolios is accelerating a drive towards core and satellite strategy approaches, according to ipac chief investment officer Jeff Rogers.
The implementation of the Future of Financial Advice reforms is leading to changing behaviour among planners to be seen as central to the investment decision-making process, he said.
"In a subtle way, they can be seen as being the overall manager of the portfolio, as opposed to just handing the money over to investment managers and making them the star," Rogers said.
Financial advisers were shifting from a small number of low-risk active mandates to index-like core funds, with a small number of high-active mandates, he said.
By taking control over the index fund core, financial advisers were performing the risk management themselves, as well as changing the core asset allocations without upsetting active managers, Rogers said.
Financial advisers want to separate the value add of managers from their risk management role, he said.
"Advisers can handle the risk management themselves by allocating to the core," he said.
That's one lever that's there for them to have some more control over investment fees, Rogers said.
They were also using it to control the amount of investment manager risk the client was exposed to, he added.
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