‘Growth’ and ‘defensive’ labels don’t tell advisers what they need to know

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Lonsec releases Super Asset Allocation Comparison tool

Financial advisers must have a thorough understanding of where superannuation products allocate funds rather than relying on labels to make recommendations, according to leading research house Lonsec.

There has been a long-running debate on how certain asset types should be categorised, with investment managers and super funds often having different stances on which assets to include in an investment option and the proportion of members’ funds that should be allocated to them.

The challenge for advisers is that two super funds might offer a ‘balanced’ option, each with significantly different asset allocations leading to diverging retirement outcomes. Failing to understand an investment option’s actual asset allocation can also mean there is a risk that the option does not meet the licensee’s policies and guidelines, resulting in potential non-compliance.

“Super funds use labels like ‘growth’ or ‘defensive’ to characterise an investment option’s asset allocation, but often these don’t tell the full story,” said Lonsec CEO Charlie Haynes.

“Understanding the underlying asset allocation, how it aligns to a client’s risk profile and how it compares to peers is essential for financial advisers who have a duty to act in their clients’ best interests.”

To assist advisers in navigating the asset allocation question, Lonsec has launched the Super Asset Allocation Comparison tool, which enables users to compare asset allocations across individual investment options. The tool is powered by SuperRatings and based on the most in-depth survey of Australia’s superannuation product market.

The Super Asset Allocation Comparison tool allows users to compare the asset allocations of up to five fund options and benchmark them against Lonsec’s own strategic and dynamic asset allocations. The tool is available via iRate – Lonsec’s market leading investment research platform – and is designed to give advisers a clear view of where funds are allocated and whether it is the right fit for their client.

“It’s not our job to tell advisers which asset allocation is most suitable for their clients, but we can make sure they have access to all the information they need to make a fully informed recommendation,” said Mr Haynes.

With comprehensive research and data across investment and super products, Lonsec is uniquely positioned to help advisers navigate the best interest landscape.

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