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Legg Mason survey: Adviser clients want plans over performance

Promoted by  Australians value structure and planning most highly in their relationship with their advisers, according to new Legg Mason research.

The Legg Mason Global Investment Survey, which polled over 4,200 investors in 20 key markets, including 200 Australians, asked investors for the top benefits of working with a financial adviser. It revealed that planning for a comfortable lifestyle in retirement was one of the most important priorities for Australia’s ageing investor population. Some 59% of respondents said creating a formal financial plan to achieve their goals was the best thing about working with their adviser. Globally, investors nominated the opportunity for better investment performance as their top benefit, with 59% saying this was the best thing about working with an adviser.

Opportunity for advisers to add value

Despite several years of healthy returns and strong economic growth, Australians are significantly less confident about their progress against their investment goals than their global counterparts. Only half of Australian respondents said they thought they would be able to maintain their current lifestyle later in life, while 75% of global investors thought they would be able to achieve this primary goal. Given the relatively low numbers of high net worth investors using an adviser in Australia – just 27% compared to 36% globally – this would seem to indicate advisers have an important role to play in building up investor confidence. Through setting investors on a stable path to financial independence, by creating a clear plan and achievable goals, advisers could surely help put skittish Australian investors’ minds at ease.

What investors want

Australian investors nominated good judgement and skilful management of the portfolio as some of the other aspects they look for when working with a financial planner. Some 46% of investors said avoiding costly mistakes they might make on their own was a key benefit of working with an adviser. A further 43% valued having someone to manage their entire portfolio, while 37% thought the opportunity for better investment performance was a top benefit. The focus toward avoiding mistakes was also evident when Australians were asked what kind of issues they thought could derail their investment progress. Some 36% of Australian respondents were still fearful of another global market correction, while 32% said their biggest concern was not saving enough for retirement. A further 32% were concerned with outliving their retirement funds.

It seems that while investors are concerned about the possibility of significant drawdowns on their portfolio, they are also equally worried about being too conservative and outliving their savings. Working with an adviser could no doubt reassure some of these investors that a balance between the two can be achieved.

Attitudes to risk changing

The majority of Australian investors currently define themselves as a conservative bunch. Overall, 77% of Australians described themselves as somewhat or very conservative in their risk tolerance, compared to the global average of 59%.

At the same time, Australians’ conservative attitudes are not necessarily yielding them the outcomes they want in their investments. Survey respondents expected an average 8.6% annual return on their investments, but were currently getting closer to 6.6%, indicating a ‘reality gap’ of 2% between actual and expected returns. This may be a contributing factor to Australians becoming more open to investment products beyond the traditional conservative options of cash and fixed income. When asked if they were more risk averse now than 12 months ago, only 59% of Australian investors agreed with this statement, compared to 63% globally. What’s more, 10% of Australian respondents strongly disagreed with the statement compared to 5% globally, suggesting Australians are moving towards a higher risk tolerance compared to the rest of the world.

This is an interesting trend to note for advisers when approaching portfolio construction conversations with clients. As the nerves of the post-GFC years recede, and longevity risk associated with increased life expectancy in retirement is factored in, investors are starting to be more open to including more risk in their allocations in exchange for better capital growth and income.

Important Information

The information in this document is of a general nature only and is not intended to be, and is not, a complete or definitive statement of matters described in it. It has not been prepared to take into account the investment objectives, financial objectives or particular needs of any particular person. Legg Mason Asset Management Australia Limited (ABN 76 004 835 849 AFSL 240827) does not guarantee any rate of return or the return of capital invested. Past performance is not necessarily indicative of future performance.

Investments are subject to risks, including, but not limited to, possible delays in payments and loss of income or capital invested.

These opinions are subject to change without notice and do not constitute investment advice or recommendations.

Legg Mason survey: Adviser clients want plans over performance

Promoted by  Legg Mason

Australians value structure and planning most highly in their relationship with their advisers, according to new Legg Mason research.

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