It is time to end the blame game with respect to the role of ratings houses, fund managers and dealer groups where the global market downturn is concerned, according to the head of retail funds management at Perennial, Brian Thomas.
Thomas told a packed session at the Financial Planning Association national conference that each of the parties in the process needed to acknowledge their roles and responsibilities with respect to investment outcomes.
His comments came during a debate about the role of ratings houses which drew on the opinions of Thomas, the chief executive of dealer group PIS, Robbie Bennetts, and the chief executive of ratings house Lonsec, Grant Kennaway.
Thomas said there was a need to define the responsibilities of each of the parties so there was a clear-cut understanding of the process.
He said it was then up to each of the parties to hold each other accountable for their actions and the impact of those actions on investment outcomes.
For his part, Kennaway said there were 13,000 managed funds in Australia and it was arguable that this number was simply unnecessary.
“We don’t need that many in Australia,” he said.
Kennaway also suggested that while financial planners saw research houses as a tool, not enough of them understood how to use that tool.
He said, notwithstanding this lack of knowledge about how to use research, planners had a responsibility to deliver the best possible advice to clients.
“In that sense, advice and research go hand in hand,” Kennaway said.
However, he claimed the role of research had been complicated by the proliferation of platforms in the Australian financial services industry and, in particular, the emergence of cut-down platforms such as mini-wraps.
Kennaway said another complicating factor had been the reluctance of fund managers to provide sufficient information, particularly where after-tax returns were concerned.
Staff retention also represented a challenge for ratings houses in circumstances where they were competing in much the same market for specialist knowledge with fund managers, he said.
Kennaway said ratings represented a competitive sector within the financial services industry and that with six ratings houses in operation, it was open to financial planners to change providers if they were unhappy with the performance of particular providers.
Bennetts warned the session that dealer groups needed to be aware of the potential for disgruntled investors to pursue litigation over a single investment option, even though the broader recommended strategy has performed well.
