Planners should consider expanding into exchange-traded funds (ETF) and stronger model portfolios to deliver more value to clients, because they did not add value through stock selection.
A Commonwealth Bank of Australia report showed the top five stocks dealer groups recommended to clients were: BHP Billiton, CBA, Westpac, Australia and New Zealand Banking Group (ANZ) and National Australia Bank (NAB).
But these stocks were also the top five holdings of retail investors who bought shares directly using CBA’s brokerage platform CommSec.
“With FOFA [Future of Financial Advice ] coming we think advisers will need to do more to add value, and do a little more for clients’ portfolios than what clients’ normally do themselves,” Core Equity general manager Pete Steel said.
“We don’t preach investment philosophy, but we do think advisers need to take advantage of ETFs. ETFs offer an easy way to get cost efficient exposure to different markets such as emerging markets.”
“Planners also need to get tools that help them understand risk around portfolios and integrate that within the advice process.”
“We think advisers should also think about getting access to better research, and getting comfortable with better model portfolios.”
Core Equity Services is a division of CBA. Around 700 dealer groups use its Core Trading Platform to buy share for clients.
The CommSec unit has 1.6 million clients, including director investors and self-managed superannuation funds.
