Investment Trends research finds equity investment on the rise

At breakfast meetings in both Sydney and Melbourne, subscribers to the Institute of Managed Account Providers (IMAP) heard Investment Trends analyst Recep Peker present the findings from the Investment Trends May 2011 Planner Direct Equities and SMA reports.

Peker focused on key trends which research identified. Drawing on responses from 919 financial planners, Peker emphasised that advisers were moving strongly to portfolios built on listed investments.

According to the planners who responded to the research, 28% of new client money is being placed in listed securities, including shares, REITs, LICs, ETFs, SMAs and IMAs, an increase from 23% the previous year. More significantly, planners expect the use of direct listed securities to continue to grow.

Planners typically saw a greater number of benefits of using direct investments in 2011, increasingly citing cost effectiveness, transparency and tax-effectiveness.

While stating that the number of planners recommending SMAs grew slowly from 17% to 18%, Peker highlighted that planners who have been recommending SMAs are ramping up their use. Planners currently recommending SMAs have 16 per cent of their personally managed funds under advice (FUA) in SMAs, up from 12 per cent in May 2010. These planners expect the proportion of their FUA in SMAs to nearly double by 2014.

Toby Potter, Chair of IMAP, said that use of Managed Account structures such as SMA’s are increasingly becoming the preferred vehicle for implementation of direct portfolios because of the efficiencies they offered.

“While directly held portfolios are more widely used by higher value clients, SMAs are seen as an alternative way of giving lower-balance investors the benefits of direct shares in their portfolios” he said.

Discussion at the breakfasts focussed on the business models of planners as they moved to more robust fee models. Portfolio management services provided by advisory firms will be a key tool for advisers to differentiate themselves from generic industry funds. “A distinctive offering will be the best  counter to a likely media campaign by the Industry Funds Network against planners” said Potter.

Technology development by the platforms as well as the emergence of new providers has made this increasingly a mainstream choice for planners. Already 40% of share trades by planners are executed through the platforms.