Research firm Lonsec has introduced new financial product ratings in the effort to help advisers optimise their product advice.
Lonsec has launched four Better Investment Outcomes (BIO) metrics – three fee BIO metrics and an ESG BIO metric.
Lonsec Fiscal Group joint chief executive Amanda Gillespie said: “We’re helping advisers on this journey by making it simpler to determine investor suitability for specific products and strategies and better identifying the appropriate and safe use of financial products.”
Lonsec’s ESG BIO metric measures the degree of environmental, social, and governance awareness practiced by the investment manager in respect to the product under review, a Lonsec-issued statement said.
According to Ms Gillespie, ESG investing aims to improve investment performance.
“There is growing evidence showing that incorporation of ESG factors into the investment process may offer investors potential performance advantages,” she said.
Lonsec’s fee BIO metrics focus on "value of money", the statement said.
“For example, higher fees can be accompanied by higher potential return or better outcomes. As such, financial advisers, and their clients, should consider ‘value of money’, not just the lowest fee, when providing financial product advice.
“By providing a forward-looking view that compares like products, lower fees should no longer be used as a sole justification for product recommendations,” said Ms Gillespie.
The product ratings are designed to support Lonsec’s existing fund ratings.
According to the statement, Lonsec intends to launch a further six BIO metrics in the second half of 2015, covering risk, return and features.
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