Independent financial planning firms back in demand as investors seek specialist advice


Drew Meredith

Many investors are seeking specialist advice from boutique, independent financial planning firms in the current volatile investment environment sparked by the COVID-19 pandemic, says Drew Meredith, Partner at the financial advisory firm Wattle Partners.

“For all investors, these are deeply troubling times with the sharemarket having lost more than a quarter of its value in less than a month. They are seeing their nest eggs accumulated over many years disappear before their eyes, and they desperately want advice on what to do.

“This scenario is particularly pertinent for those investors for are nearing retirement or have just retired, and, in many instances, don’t have the option of remaining or returning to the workplace.”

Meredith is somewhat concerned that many investors falling into these near retirement or retired categories who are in large APRA-regulated funds are discovering that they often don’t know what assets they hold and, even if they do know, they don’t know what to do or where to get advice at this difficult time. The Royal Commission, whilst a positive for the industry, has resulted in thousands of financial planners exiting when their sound advice is needed most.

“The reality is it’s difficult for superannuation funds to give personalised advice with fund members running into the millions and typically directed towards websites of phone applications to answer complex question. Many have access to inexperienced help-desk people who can only offer to change investment options and are certainly not equipped to deal with major investment decisions,” says Meredith.

By contrast, boutique advisory firms can invest the time to look at clients’ total financial situation and then advise them, or at ensure they are making informed decisions, accordingly.

“In the current climate we are advising, for example, clients to examine hedging overseas shares, reducing bond duration, investing in gold, and adjusting allocations to specific countries and sectors, none of which is an option in a large pension fund for an individual member,” notes Meredith.

He says investors should remember that industry funds, in particular, are structured for the accumulation phase and have been slow to devise solutions for members who are transitioning to retirement or are in retirement.

“Industry funds have performed well in recent years in a bull market, having the capacity to use their regular Superannuation Guarantee contributions to support higher allocations to strongly performing unlisted assets.

“It has allowed these funds to fund pension payments from SG contributions, but in a bear market when members want to exit the fund or take on a lower risk option, it can come unstuck due to a lack of liquidity. In this situation funds lacking cash will be forced to sell assets which, in this market, means equities, compounding the market’s downward spiral.”

You must be logged in to post or view comments.