Australia’s listed investment company (LIC) industry received high levels of interest from financial planning groups and research houses as the demand for listed products grew over the past year.
“What the financial planning industry is doing is looking at [broader] products listed on the stock market, such as exchange-traded funds and LICs,” WAM Capital chairman Geoff Wilson said.
LICs were a more superior structure to managed funds as they were close-ended and had not presented conflicts of interest through paid incentives, Wilson said.
“Effectively, managed funds were attractive to advisers because of the trailing commissions and LICs have never done that,” he said.
As the Future of Financial Advice reforms abolished trailing commissions to advisers, for the first time managed funds and LICs were on a “level playing field” and therefore advisers expanded their options, he said.
“There’s a lot more interest in listed products now,” he said, adding the reforms had directly affected the higher number of LICs being bought.
Financial advisers were looking for a simple product with high liquidity, consistence performance of the market over time, good income streams and a diversified portfolio of assets.
Furthermore, research houses had been approaching LICs to either commence or build their coverage, Wilson said.
“The managed fund research houses never researched the industry, but all of a sudden in the last 12 months, because of the demand from advised clients, Morningstar, Zenith and Independent Investment Research have published LIC research,” he said.
The Association of Independently Owned Financial Advisers also embraced LICs and many planning groups’ approved product lists now included LICs.
