Headline numbers about Australian share investment usually dominate coverage of the biennial Australian Securities Exchange Share Ownership Study. But the most important trend in the 2010 study is the growing number of investors who are investing directly rather than using unlisted managed funds, and taking a more active role in the management of their portfolio.
This trend was most evident in self-managed super funds (SMSF). The proportion of SMSFs reporting investments in unlisted managed funds in the 2010 study was 16 per cent, down from 48 per cent in 2006 and 38 per cent in 2008.
Overall, the percentage of the population investing in unlisted managed funds that are not part of a superannuation fund was 13 per cent in 2010, down from 22 per cent in 2004 - a concerning trend for managed fund providers. Direct share ownership increased between 2008 and 2010.
Lower-cost listed products, such as exchange traded funds (ETF) and, to a lesser extent, listed investment companies (LIC), are becoming more popular with SMSFs, off a tiny base. Only 4 per cent of SMSFs hold ETFs and LICs, and there was a sharp decline in SMSFs holding Australian real estate investment trusts (AREIT). The proportion of SMSFs holding shares remained stable at 52 per cent between the 2008 and 2010 studies.
The use of more direct listed investments dovetails with another key survey trend - less delegation of financial decision-making by investors who had neither knowledge nor interest in the share market.
The 2010 study found only 12 per cent of current direct investors surveyed preferred to delegate the management of their investments to others, down from 23 per cent in the 2008 study. The global financial crisis has clearly encouraged more investors to learn about investing and take more control of their money.
There were conflicting findings for financial intermediaries. The percentage of survey respondents identifying a financial planner or adviser as their source of most influence increased from 16 per cent in 2008 to 21 per cent in 2010. Those identifying a full-service broker as their source of most influence increased by 1 per cent to 9 per cent. Another 11 per cent of respondents nominated the Internet as their source of most influence.
Another key trend was a shift in attitudes towards service-based relationships. The 2008 study showed more investors developing transaction-based relationships, through online brokers, and moving away from service-based relationships. The 2010 study showed some investor segments feel more comfortable with service-based relationships over transaction-based relationships.
The 2010 study, based on a survey of 2400 adults, reported that the largest current direct share-owner segment is now the 'Cautious Consulter', who is keen to become more self-reliant in investment decision-making, rather than delegate it. Investor segments in the 2008 study were mostly of similar size.
The rise of the 'Cautious Consulter' may be an opportunity and threat for financial intermediaries and managed funds providers. Financial advisers who help 'Cautious Consulters' to become more educated on investment matters, especially through online channels, and encourage them take a more active role in managing their portfolio, could develop clients who are more astute and active on investment matters.
Those financial advisers who ignore this trend - and therefore also the largest, fast-growing segment of direct share owners - risk losing these investors to online brokers and encouraging the trend from professional advice to do-it-yourself investing, and from unlisted investments to direct listed investments.
Tony Featherstone is consulting editor of the ASX Investor Update e-newsletter.
