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Planners’ use of listed investments reach the highest level recorded

23 May 2013
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With planner and investor concern levels dropping to their lowest point for over three years in February, both planner and investor appetite for growth assets bounced back, according to a new report released in April from leading wealth researcher Investment Trends.

The March 2013 Planner Direct Equities and SMA Report is an in-depth study of Australian financial planners and their attitude towards direct equities and SMAs. The study is based on a survey of 526 financial planners concluded in March 2013.

“We have been tracking both planner and investor concern levels since the depths of the GFC, and saw both hit their lowest points in February,” said Investment Trends Senior Analyst Recep Peker. “This ignited the appetite for growth assets among both groups.”

The return of planners’ confidence is visible through their actions. The flows to cash and term deposit investments saw their biggest drop in the six months to March 2013, with 20% of new client funds (down from 31% in September 2012) invested in them.

In March planners were investing 24% of new client money in direct listed investments (including shares, ETFs, REITs, LICs SMAs and IMAs), up from 19% in September 2012.

“This is the highest level we have ever observed, and planners expect this to continue growing,” said Peker. “Planners expect client flows to listed investments to hit 32% by 2016.”

Flows to managed funds, which had been on the decline since 2010, also rebounded, with a 16% rise in usage (41% to 47% of new client money).

Direct listed investments are now at their highest ever proportion of planners’ allocation to growth assets. In October 2010, for every dollar invested in direct listed investments, $2.24 was invested in managed funds. This is now down to $1.99, and planners expect that, by 2016, there will be just $1.42 invested in managed funds for every dollar in direct listed investments.

Compliance risk has surged as a barrier to further direct equities use
However, the anticipated growth in the use of direct equities still faces some potential barriers. Notably, compliance risk has increased as a factor that prevents planners from using direct equities (more), with 41% up from 26% citing it.

“Compliance risk has surged to the forefront predominantly because those with little or no usage of direct equities turning their attention to this space again after their sojourn with cash,” said Peker. “In addition to this, the key barriers for the broader planner community is now “too much work”, and also high platform fees, though only 18% cite the latter.”

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