Key findings of the Investment Trends 2014 Adviser Product and Marketing Needs Report

Recep Peker

Recep Peker

The September 2014 Adviser Product Needs and Marketing Needs Report, released to Investment Trends clients in November, is a comprehensive study of asset allocation trends among Australia’s financial planners, together with their views on fund managers, investment products and researchers. The study is based on a survey of 768 financial planners concluded in September 2014. This year’s study highlights a number of interesting trends:

Planners are seeking growth through diversified and simple products

Australian investors’ outlook on Australian shares has been deteriorating since the beginning of 2014, with the typical investor expecting the share market to grow by just 3% in the next 12 months (versus 7% at the end of 2013).

But this cooling outlook has not yet deterred planners from investing in growth assets. The average financial planner invested only 15% of new client flows into cash products over the last year – the lowest level seen since the end of 2010 and significantly below the 2012 highs of 31% of new client flows.

Planners are also actively investing their clients’ excess cash holdings, with the war-chest of short-term cash held by planner clients collectively down from a high of $78 billion in 2012 to $47 billion in 2014.

“We’re currently going through an interesting period where the average investor’s capital gain expectations from domestic equity markets is deteriorating, but at the same time there are many more who are seeking growth in their portfolios, perhaps because of suppressed yields,” said Investment Trends Senior Analyst Recep Peker. “Planners are addressing this need by targeting growth through diversification, with an increased preference for simpler products and passive strategies.”

“Planners’ usage of indexing/passive investing is now at the highest level observed since we began measuring this in 2010.”

Both planners and their clients are still bullish on international assets

Planners placed a third (33%) of new client investments in international assets over the last year, up from lows of 26% just two years ago, and the highest level observed since the inception of this study in 2008.

Behind this is continued demand for international exposure from Australian investors.

Planners’ interest using single-region global investments has waned. For example, just 28% of planners say they intend to use US specific funds in the next 12 months, down from the 6-year high of 40% last year.

Instead, multi-region funds have increased even further in popularity, with 70% of planners intending to use these in the next 12 months, up from 62% in 2013 and 49% in 2012.

“The US is no longer as hot a destination as it used to be for financial planners,” said Peker. “Considering the significant gains achieved by the Dow over the past few years, it’s natural for some to feel it’s near a peak and seek to diversify their exposure.”

Planners’ communication needs from fund managers have surged

Planners have grown even more hungry for information from their fund managers in 2014, with 74% of planners saying they want more information than they are currently receiving, up from 58% saying so in 2012 and 39% in 2013.

“Planners want to make the most of the current increase in demand for financial advice from Australians, and one way of doing so is to have access to tools and collateral that help them effectively get clients on board,” said Peker. “We’ve seen planners’ demand for information and educational material increase across the range of products they use, including from fund managers.”

“Right now, financial planners are after simple stories to tell their clients – they want fund managers to help them form a view on where the economy is headed and how to use their funds in the current economic environment.”

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