Adviser and investor optimism lifts as pandemic restrictions ease

Bryce Quirk

Confidence is improving strongly as financial advisers and investors look beyond pandemic restrictions, but ongoing market volatility is likely to present short-term challenges, accordingly to the latest research from Australian superannuation and investments group Colonial First State.

Conducted by financial research consultancy, CoreData, the findings are part of the Colonial First State Advice Insights Report, which surveyed 270 mass affluent and high net worth individuals (HNWIs) as well as more than 200 financial advisers to examine investor behaviour and sentiment.

The research found that adviser sentiment lifted in the December quarter of 2021, scoring 57 out of 100 (compared to 51 in Q4 2020). This is a marked improvement from the second quarter of 2021, which shadows Australia’s trajectory out of lockdown, showing that optimism and confidence are now far higher than they have been since before 2020.

Confidence improved across all index measures including revenue expectations, business outlook, business conditions and operating conditions. Over 70 per cent of advisers expect their revenue to grow by 10 per cent or more over the next year.

CFS Chief Distribution Officer Bryce Quirk said: “The Advice Insights Report paints a picture of an industry that has held up remarkably well given the challenges over the previous couple of years.

“Adviser services are in demand which shows that many more Australians are looking for help with financial decisions. While there are challenges in the operating environment, advisers are optimistic about the opportunities for their businesses in the coming year. CFS is focused on supporting advisers by providing the tools they need to do business more efficiently and becoming easier to do business with in the future,” added Mr Quirk.

Investor expectations

The Advice Insights Report also looked at investor sentiment, which recovered strongly in the December quarter of 2021 after dips over the past couple of years during the pandemic, scoring 31 out of a maximum possible index score of 50, compared to a score of just 19 in the same quarter of 2020.

The December survey showed there was a significant turnaround in investors’ expectations for investment markets compared with the September quarter of 2021. Investors also reported higher levels of household financial security, including their ability to pay bills and pay down debt.

Savings levels in Australia have soared during the pandemic with the household savings ratio sitting at 19.8 per cent at the start of Q4 2021, up from 9.8 per cent at the beginning of Q1 2020, according to Reserve Bank of Australia figures.

There was a marginal increase in investors’ satisfaction with their existing investments and the proportion of both HNWI and mass affluent investors who planned to invest new money into existing investments increased during the quarter.

Investors’ propensity to purchase new investment products improved in the survey but remained negative with many investors remaining reluctant to commit to new investments.

“More recently, investment markets have weakened, and concerns have increased over rising inflation and interest rates. It’s likely investors’ confidence may have been shaken, but our findings suggest that investors are moving past their worries about the pandemic and lockdowns and are looking to the future again,” said Mr Quirk.

“With markets still volatile, there are opportunities for advisers to support their clients in staying focused on long-term results and proving high quality advice as investors rebuild their confidence and wait for compelling investment opportunities.”

Mr Quirk said overall, the results of the research were largely positive and put the profession in a good position for the start of this year.

“Although the outlook for investment markets is somewhat uncertain, investor and adviser sentiment is high.

“Advisers are expecting significant revenue growth over the next year and investors are poised and waiting for compelling investment opportunities. Australians have used the pandemic to boost their savings, which can be deployed when they agree with their adviser that they’re comfortable to do so,” added Mr Quirk.