Jason Entwistle

As part of HUB24’s commitment to deliver innovative solutions that empower advisers to meet the needs of clients throughout their wealth accumulation and retirement journey, the HUB24 Discover offer has been launched, to complement the existing Core and Choice offers and is now available on HUB24 Invest, Super and Pension.

Demographical trends such as the intergenerational wealth transfer and ageing population are providing opportunities for advisers to evolve their advice proposition to meet the needs of early-stage wealth accumulators, later stage retirees or clients with less complex needs.

HUB24’s Director of Strategic Development, Jason Entwistle said Discover strengthens HUB24’s competitive position and supports further growth by giving advisers access to an investment solution purpose-built for client segments with simple investment needs. HUB24 Discover encompasses a range of passive, active and ESG managed portfolios from leading portfolio managers including AZ Sestante, Betashares, Blackrock iShares, Elston, Lonsec, Morningstar, Vanguard, and Zenith.

“We’re excited to be launching our new HUB24 Discover solution. Discover complements our existing Core and Choice offers and expands our reach, providing a unique solution for advised clients seeking simplicity and affordability in their investment options – whether they’re starting out on their advice journey with their first portfolio or entering the drawdown phase.

“What’s great about Discover is the quality of the investment managers delivering a streamlined list of managed portfolios coupled with our award-winning platform features, and a competitive simplified fee structure. It’s also truly portable so as their clients’ needs evolve, advisers can easily transition them across to our Core and Choice offers with minimal unintended or costly insurance or tax consequences.”

Designed in conjunction with portfolio managers, HUB24 Discover is a cost-effective platform and investment solution, providing a streamlined selection of managed portfolios.

Elston Asset Management’s Head of Adviser Services, Mark Smith said: “We’re excited to be working with HUB24 in launching their new Discover offer, a cost-effective and complementary solution to our existing managed portfolios available via HUB24.

“The Discover offer opens up new opportunities for advisers to engage with clients on their investment journey and leverages our existing infrastructure and our ten-year track record of supporting advisers and their clients through our HUB24 managed portfolio solutions.”

Lonsec Investment Services Chief Investment Officer, Nathan Lim said: “We’re pleased to be a foundation managed account provider for HUB24 Discover. We’ve used our deep research and portfolio construction skills to build five portfolios that will meet the needs of both large and small investors. We look forward to bringing these portfolios to our adviser network and their clients.”

Vanguard Australia’s Head of Financial Adviser Services, Balaji Gopal said: “The ability to offer Vanguard’s Diversified Managed Account Strategies through HUB24’s new Discover platform simply means more choice of high-quality investment solutions for financial advisers and their clients.

“Providing low-cost, instant exposure to over 16,000 securities through a range of asset classes, our Diversified Managed Account Strategies harness Vanguard’s global portfolio management expertise and proven strategic asset allocation approach.”

Chantal Giles, Head of Wealth at BlackRock Australasia said: “BlackRock is excited to see the addition of its Enhanced Strategic Model Portfolios and ESG Model Portfolios to HUB24’s Discover menu options. These low-cost diversified investment solutions are key examples of how BlackRock can deliver quality portfolio construction guidance to help advisers build better portfolios for their end clients. Ultimately, it gives everyday Australians access to institutional-quality portfolios that best meet their desired investment goals.”

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Balaji Gopal

Vanguard has launched its 22^nd annual Index Chart plotting the performance of major asset classes over the last 30 years, affirming that despite significant downturns, markets typically trend upwards over time.

Over the last 30 years, Australian shares on average have returned 9.2% per annum despite market events such as Russia’s invasion of Ukraine in 2022, the COVID-19 outbreak in 2019, and the Great Financial Crisis in 2007. 

This financial year, Australian shares returned 14.8%, a marked improvement on the previous year when the same asset class returned -7.4%.

All other asset classes in FY23 also saw positive returns, a reversal since FY22 when all returns were in negative territory.

The best performing asset class this year was U.S. shares, returning 23.5% in the period between 1 July 2022 to 30 June 2023. Last year, U.S. shares returned -2.4%.

Australian bonds also made a notable recovery, recording 1.2% this year compared to -10.5% in FY22.

Conversely, cash was the best performing asset class last year with 0.1%. This year, cash was the second lowest returning asset class with 2.9%.

“Vanguard’s annual Index Chart puts into perspective the importance of approaching investing with a long-term mindset,” said Balaji Gopal, Head of Financial Adviser Services at Vanguard Australia.

“While investors shouldn’t rely on past performance, 30 years of market history has proved that the impact of geopolitical, economic and social events on performance is usually short-lived, and markets will typically recover and rise over time.

“Looking back over the last few decades, bear markets on average last only 0.9 years and are generally followed by a bull market, averaging 6.5 years. Investors who stay invested through downturns are therefore best poised to benefit when markets inevitably bounce back”.

“Although volatility smooths out in the long run, markets are unpredictable in the short run. The best performing asset class one year is not guaranteed to be the best the following year, and vice versa.

“Take bonds for example – last year, fixed income markets were caught in a perfect storm of surging inflation, rate hikes, and an unusual correlation with equities. This year however, return expectations for bonds have significantly improved, and yields and spreads have stabilised. Investors are again realising the diversification and income benefits bonds can provide as they begin to bounce back.

“This is why diversifying across asset classes – and making sure you have both growth (such as equities) and defensive components (such as bonds) in a portfolio – is the most effective way to mitigate market uncertainty”.

The power of indexing

Also illustrated in the chart is how an initial investment of $10,000 invested in broad Australian shares in 1993 would have grown to nearly $138,800 today, an average of 9.2% per cent return per annum. The same $10,000 in U.S. shares would have grown to $176,200, returning 10 per cent per annum.

“Investing in the broad market via index funds or ETFs can produce powerful returns for investors over time if they give their investments the opportunity to grow,” said Mr Gopal.

“Additionally, by combining a mix of asset classes and adjusting that allocation as they age, investors can balance their risk and returns at every stage of their life to achieve their financial goals – from building their wealth all the way through to preserving their savings in retirement.

“It’s the same philosophy that underpins our Vanguard Super Lifecycle offer; let the market work for you by investing broadly, diversifying, and staying the course”.

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Balaji Gopal

Vanguard has announced it will remove the $9 brokerage fee for exchange traded funds (ETF) purchases from 27 October 2022 on the Vanguard Personal Investor platform, and confirmed its plans to introduce a range of new features to the platform as part of its ongoing commitment to provide investors the best chance of investment success.

“We built the Vanguard Personal Investor platform with the aim of changing the way Australians invest, by providing access to our high-quality, low-cost investment products and promoting smart investing strategies,” said Mr Balaji Gopal, Vanguard’s Head of Personal Investor.

“Reducing costs and making investing simple with the aim of passing our investors back more of what their investment earns is in our DNA. We continue to invest in refining and enhancing our offer,” said Mr Gopal.

“Small changes in fees can make a big difference over time, and the removal of the current $9 brokerage fee for all Vanguard ETF purchases is another step in improving the investing experience with Vanguard, and demonstrating our commitment to delivering the best value we can,” said Mr Gopal.

Vanguard also outlined its plans to introduce further new features in the coming months, with work underway to extend the Auto Invest capability to ETFs, introduce Vanguard Personal Investor Kids Accounts, and add Automatic Reinvestment for ETFs to the platform service.

“Our Auto Invest feature is already available investors in our range of managed funds. Analysis shows that Vanguard investors who have adopted that automated feature are more resilient to market volatility, having made the conscious decision to contribute regularly to their investments despite the market’s spikes or dips.

“We hope that by extending this feature to our suite of ETFs, investors will be encouraged to stay the course as they build and diversify their wealth over the long-term, regardless of which investment structure they choose.”

Similar to Auto Invest for managed funds, investors will be able to set up regular investment amounts from $200 either fortnightly, monthly or quarterly, into one or a range of Vanguard ETFs. Auto Invest for ETFs will be available in the coming weeks.

“We’re excited about lowering the cost of investing while launching new features that will support investors in building their long-term wealth and we look forward to providing more specific details in due course,” said Mr Gopal.

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Balaji Gopal

Vanguard has launched its 21^st annual Index Chart plotting the performance of major asset classes over the last 30 years, as a powerful depiction of why broad diversification is crucial to long-term investment success.

This year, as markets grapple with rising interest rates, inflation and geopolitical conflicts, total returns across the board are in negative territory.

The best performing asset class in FY22 was cash with 0.1 per cent return, a title last held during the GFC when investors flocked to the relative safety of cash and high-quality fixed income products.

Conversely, the worst performing asset class was Australian listed property, returning -12.3 per cent in FY22. Notably however, Australian listed property returned 33.2 per cent the year before and was amongst the best performing asset classes.

“Vanguard’s 2022 Index Chart is perfect proof of why investors should diversify. In the last 30 years, every major asset class has had a turn at being the best performing, as well as the worst,” said Balaji Gopal, Vanguard Australia’s Head of Personal Investor.

“While bonds and equities have experienced a rare joint downturn this year, history has proven market conditions as such are only fleeting and are not expected to materially affect long-term returns.

“Investors who maintain a well-diversified portfolio with a healthy fixed income allocation will experience less volatility and be rewarded in the long run; markets will inevitably rebound and investment returns will grow again”.

Also illustrated in the chart is how an initial investment of $10,000 invested in broad Australian shares in 1992 would have grown to nearly $131,500 today, an average of 9 per cent return per annum. The same $10,000 in U.S. shares would have grown to $182,000, returning 10.2 per cent p.a.

*with no acquisition costs or taxes, and all income reinvested

“Accumulated returns this year compared to last have dipped, but for the broad Australian market to still on average return 9 per cent per annum (even with inflation concerns, COVID-19 and the GFC to account for) should be reassuring news for investors,” said Mr Gopal.

“It’s a good reminder amidst today’s challenging conditions that successful investing depends not on market timing or picking the winning stock, but rather on broad diversification, long-term perspective and the discipline to stay invested when things get tough”.

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Balaji Gopal

Vanguard Personal Investors have maintained investment discipline and stayed the course despite the recent share market volatility according to the newly launched Vanguard Investor Insights series.

The series provides observations dedicated to understanding what drives investment choices and outcomes, based on trends and behaviours observed through activity on Vanguard’s Personal Investor platform.

Data from the study shows that cash flows on Vanguard’s platform remained steady through volatility caused by the Ukraine crisis. While both buy and sell trades dipped in volume, cashing out activity remained at regular levels.

“It is really pleasing to see our investors tuning out the noise and staying invested in the share market despite the ongoing volatility, avoiding the most common mistake that has long-term impacts to an investment portfolio. Panic selling during a falling market guarantees that you lock in your losses and conversely, holding on to your investments puts you in good stead for when the market rebounds,” said Mr Balaji Gopal, Vanguard Australia’s Head of Personal Investor.

Reflecting previously reported observations that a large cohort of first-time investors embarked on their investment journeys during the pandemic, Vanguard’s data shows a 63 per cent rise in new account openings on Vanguard Personal Investor during the Delta lockdowns last year. Vanguard also observed a surge in existing investors adding to their investments during that same time period.^[1]

Daily inflows increased by 57 per cent between August to October compared to the pre-Delta lockdown period, with the number of investors investing daily surging by 64 per cent.

“We’re encouraged to see more investors choosing to invest with Vanguard and displaying healthy investment behaviours that will give them the best chance of growing their wealth. One of the hardest parts of investing is to actually start, so it’s great to see so many Australians making the most of a tough time and investing in their financial future,” said Mr Gopal.

Lockdown effects were most pronounced in states which had fewer prior lockdowns; 81 per cent of investors increased their investments in NSW compared to 65 per cent of investors in VIC.

Younger investors lead the way

While Delta lockdowns led to increased deposits across all age groups, investors aged 35 and under were the biggest investors with a 73 per cent increase in contributions, compared to a 55 per cent increase for 35-55 year olds and 63 per cent increase for over 55’s.

In the Omicron-induced shadow lockdown in January 2022, investors under 35 years old again increased their investing the most with a 14 per cent increase in deposits, compared to a 6 per cent increase amongst investors aged 35-55.

“Whether it’s due to having more discretionary income to invest as a result of social restrictions or the desire to participate in what was a prospering share market, younger investors really used lockdowns to invest to their advantage,” said Mr Gopal.

Female investors display discipline and diversification

The study also highlighted the difference in how men and women approach investing, with women more diversified in their investment selection and more likely to begin their investment journey sooner by depositing money into their investment accounts shortly after opening.

Female investors also on average have a higher account balance than male investors. They are also less invested in active funds and individual shares, and more invested in ethical or diversified funds.

“As research has proven, and as we’ve observed, women make for disciplined, capable investors who practice sound investment behaviours aligned to Vanguard’s principles for investment success. That is: they invest for the long term (with half as many female investors than males selling an investment in their first six months of investing), they don’t appear to try to time the market, and they’re well-diversified,” said Mr Gopal.

———

[1] Google movement data was used to estimate lockdown periods across Australia.
Pre-lockdown: 10 June – 30 June 2021
Delta lockdown: 8 August – 12 October 2021
Shadow lockdown: 1 January – 31 January 2022
Post lockdown: 1 November – 24 December 2021
Ukraine crisis-induced volatility: 28 February – 13 March

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Balaji Gopal

In a reversal from last year, SMSF trustees intend to increase their allocation to equities and decrease their allocation to cash in the current low-rate environment, according to the 2021 Vanguard/Investment Trends SMSF Investor Report launched last week.

Some 49 per cent of SMSFs who want to decrease their cash allocation cited cash as a poor investment considering record low interest rates. Forty per cent also believe they must invest outside of cash to generate a steady income stream, a concern that remains top of mind for SMSFs.

“Many SMSFs have traditionally relied on the yield generated from their investments to provide income during retirement. Unfortunately, with interest rates expected to remain low for the next year at least, cash investments are unlikely to produce the desired level of income,” said Balaji Gopal, Head of Personal Investor at Vanguard Australia.

“Instead, SMSFs are looking to invest more in equities or income yielding assets like property to make up for the shortfall”.

SMSFs’ appetite for growth-oriented investments is also returning because of their increasing optimism that markets will experience steady growth as economies recover from the pandemic.

More than 60 per cent of trustees surveyed said they had a positive outlook on Australian shares, and almost 50 per cent said they had a positive outlook on international shares.

This bullish sentiment is also reflected in SMSFs’ increased dividend yield expectations for the next 12 months, with their dividend yield expectations recovering to pre-pandemic levels (4.2 per cent in April 2021 vs. 4.3 per cent in April 2019, on average).

Additionally, SMSFs pursuing portfolio growth are also more willing to invest in ETFs and small cap and speculative shares in 2021 than they were in 2020.

Mr Gopal said: “The shift in asset allocation to a more aggressive stance is understandable given current market conditions, but SMSFs must consider their risk tolerance and remember the role that defensive assets, like bonds, play in a diversified portfolio before significantly altering their investments.

“Recent Vanguard research showed that investors would have to be 100 per cent allocated to equities to produce the dividends needed to support most income requirements. This significantly elevates a SMSF’s portfolio risk – buoyed up even higher if they’re invested in speculative shares that can experience large price fluctuations.

“An alternative investment strategy suited to low-yield environments is a total returns approach, where investors utilise both income and capital growth elements of their portfolio to support their spending needs”.

Strong appetite for ESG investing

SMSFs are eager to increase their allocation to ESG investments if it generates positive returns, but there exist several barriers to ESG adoption.

SMSFs’ uptake of ESG products is predominantly determined by whether or not they believe ESG investment can deliver comparable returns to incumbent products.

While the majority (54 per cent) of SMSFs surveyed believe returns from ESG investments will be similar to non-ESG investments, 22 per cent believe returns will be worse.

Almost half of SMSFs would only consider ESG investments if they offered better returns, while 39 per cent of trustees are not willing to accept potential lower returns even if the fund generates a positive social or environmental outcome.

There is also a lack of awareness among SMSFs of ESG products, with 21 per cent citing lack of knowledge as a barrier to ESG investing, and 18 per cent citing lack of tools and research to identify and compare ESG products as another.

“This year’s survey reveals that while there is certainly appetite for ESG investments, the industry still has a way to go to improve SMSFs’ awareness and understanding of such products,” said Mr Gopal.

SMSF market overview

Total SMSF assets have rebounded to an all-time high of A$787b in March 2021 following COVID-induced losses last year (A$694b in March 2020).

The total number of SMSFs also continues to grow, with some 597k SMSFs established as of March 2021, despite the annual rate of establishment at decade lows.

SMSFs trustees are also getting younger, with the average age falling from 48 to 46 years old.

“SMSFs are now no longer just the realm of older investors. Younger investors are setting up SMSFs with smaller account balances and appreciating more the investment control and return opportunities that SMSFs can offer,” said Robin Bowerman, Head of Corporate Affairs at Vanguard Australia.

However, 44 per cent of potential SMSF trustees still intend to keep their APRA regulated super fund as contributions are still paid into this account and as a back-up in case they change their mind.

SMSFs and financial advice

COVID uncertainty ignited a significant shift in SMSF attitudes towards financial advice, with more trustees willing to seek professional advice than they did before the pandemic.

This, however, has not translated into increased adoption of advice, as the number of SMSFs using financial planners continue to slide.

Positively, overall satisfaction with financial planners has increased slightly since last year from a composite score of 69 per cent to 71 per cent, particularly when it comes to tax advice or technical expertise.

“Opportunities remain for advisers to demonstrate the value they can offer SMSFs, especially in areas such as SMSF pension and contribution strategies, as well as estate planning where there exists an advice gap,” said Mr Bowerman.

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Mr Gopal’s appointment follows the return of Lori Mighton to Pennsylvania, United States following the successful launch of the Vanguard Australia’s Personal Investor offer. Ms Mighton will be taking on a newly created role within the Vanguard Group’s Enterprise Advice business.

Vanguard Australia’s Managing Director Frank Kolimago said: “Balaji is well known to many through his work leading Vanguard Australia’s Product Strategy team in long-term product planning, research, development and implementation. His deep experience in product implementation and execution strategy is the perfect mix of skills for our next Head of Personal Investor as we continue to challenge the status quo and provide Australian investors with more high value products and experiences.”

Mr Kolimago said the moves continue to signal Vanguard’s commitment to the ongoing development of talent by rotating executives through different parts of the global organisation.

“We would like to recognise the pivotal role Lori played in the building of Vanguard Personal Investor. Under her leadership, the team developed and launched an ambitious and future focussed digital offer for Australian investors. Lori has been a valued member of Vanguard Australia’s Executive Team during her three years in Australia and we wish her the very best as she returns to the United States and embarks on her new challenge in the group responsible for Vanguard’s cloud-based advice product platform,” said Mr Kolimago.

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