Investment Trends releases its 2017 Adviser Product and Marketing Needs Report

From

Peker Recep

Leading research firm Investment Trends has released its 2017 Adviser Product and Marketing Needs Report, an in-depth study of key asset allocation trends among Australia’s financial planners, as well as their views of fund managers and various investment products.

The study, now in its tenth year, is based on a survey of 459 financial planners concluded in August 2017. This year’s study highlights a number of important trends.

Key highlights from the Investment Trends 2017 Adviser Product and Marketing Needs Report:

  • The increasing sensitivity of Australian investors to geopolitical events presents a challenge for financial planners
  • More planners intend to prioritise capital growth and low cost when selecting investments in 2018
  • Planners are taking a more goal-oriented approach in their advice delivery. AMP Capital has a head start in the goals-based investing space

The increasing sensitivity of Australian investors to geopolitical events presents a challenge for financial planners

Investors’ desire to increase their domestic equities exposure has waned in recent years. The net intention to invest in Australian shares (proportion intending to increase their exposure less those intending to decrease their exposure) has been lower in the last year than any other 12-month period since Investment Trends began tracking this in 2011.

Over the same period, the net intention to increase overseas exposure has been erratic, with geopolitical events (e.g. Brexit, new White House administration and potential military conflict) generating increasingly wide swings between wanting to invest, and not wanting to invest.

In addition, investor return expectations for Australian equities remains decoupled from market performance. Although the Australian stock market recorded healthy gains in the last two years, the average investor’s forward looking 12-month capital gain expectations ranged between just +1% and +5% over the same period.

“Clients are more aware of geopolitical events than ever before, and this is affecting their investment sentiment,” said Recep Peker, Research Director at Investment Trends. “As a result, planners increasingly seek proactive content to aid in reassuring clients, aligning expectations and keeping them on track with their financial goals.”

More planners intend to prioritise capital growth and low cost when selecting investments in 2018

Despite their bearish sentiment, the low yield environment is pushing even more investors to seek material capital growth in their portfolios. One in four investors say their focus will be on maximising capital growth when selecting investments in the year ahead, a noteworthy increase from the previous study (23%, up from 18% in 2016).

The investment objectives of financial planners have moved in line with their clients’ needs, with the proportion saying capital growth will be a top priority increasing from 48% to 56% in the last 12 months. The persistent challenging investment environment has also prompted many to consider product cost, with 44% saying low cost is a priority (up from 39%).

“To be considered, investment products typically not seen as low cost must demonstrate value to planners and their clients in other ways,” said Peker. “For example, the adoption of managed accounts has seen strong growth as more planners choose them for the efficiency benefits offered over investing in direct shares and traditional managed funds.”

Planners are taking a more goal-oriented approach in their advice delivery. AMP Capital has a head start in the goals-based investing space

The 2018 Investment Trends Financial Advice Report revealed a growing appetite for financial advice, with the number of potential planner clients doubling from 2013. While virtually all potential clients expect planners to help with their financial goals, over half also expect involvement and assistance with their personal and lifestyle goals.

“It is vital for planners to create a clear link between their clients’ goals and the advice they provide,” said Peker. “Our analysis reveals that the planners with the most satisfied clients are often those who are successful in creating congruity between the client’s investments and their goals.”

Moving forward, planners intend to become more goal-oriented in their advice, with many agreeing it will create deeper client engagement. However, goals-based investing is still in its early days, with 87% of planners citing challenges in the provision of this advice.

“To establish a strong standing in the goals-based investing space, it is critical for product providers to support planners in these early days,” said Peker. “AMP Capital leads in being seen as the market leader for goals-based investing, but the field is wide open with over half of planners unable to nominate any provider as best.”

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