The fall in share markets over the past year could affect retail super funds worse than industry funds, according to Zurich Financial Services Australia chief executive David Smith.
"Poor performance of retail funds could drive investors to do-it-yourself and industry funds," Smith said.
He also said the Government guarantee on bank deposits has reduced the demand for cash managed trusts, which could potentially lead to a rationalisation in this area.
Smith made the comments yesterday at Zurich's annual media briefing in Sydney.
In these volatile markets, he said financial advisers should seek to re-engage with their clients.
"This is the time for financial advisers to highlight to their clients to think beyond the current financial pressures and continue to look for long-term strategies," he said.
"It is time for advisers to really help investors assess their plans and portfolios, to cool their attitude to risk, and to not panic."
Smith was mildly positive on the outlook for next year and said the share markets are showing early signs of a recovery, which could suggest panic is subsiding.
Zurich expects Australia to avoid a recession, but sees the unemployment rate rising as high as seven per cent in the next 12 months. Unemployment stood at 4.3 per cent in October 2008.
The financial industry is already in a recession, according to Zurich director of investments Matthew Drennan. But he expects the consolidation that is currently taking place to create opportunities for the survivors.
"Companies that make it through this and have quality assets are really going to perform as we move through 2009 and as we see some growth recovery in 2010," Drennan said.
