Investment Trends’ Adviser Product and Marketing Needs Report found that in August this year financial planners expected domestic stocks to deliver capital gains of only 6 per cent on average in the coming 12 months – this is down from 8 per cent in the 2014 study, and marks the lowest expectation the researcher has observed.
“We’re finding global economic concerns are dampening both investors’ and professional advisers’ share market return expectations,” said Investment Trends’ head of research for wealth management, Recep Peker.
“What’s notable about our latest study though is that financial planners’ return expectations are the lowest level that we’ve ever observed – even lower than during the depths of the GFC in late 2008.”
Mr Peker believes product providers have an opportunity to help planners “overcome the challenges in meeting clients’ investment objectives in this environment of volatility and low interest rates”.
In response to those challenges, the survey also found that planners are increasingly favouring traditional unlisted managed funds and ETFs for new client inflows, and are moving away from stock picking.
“This is a reflection of planners increasingly prioritising diversification and low cost when selecting investments for their clients,” Mr Peker said.
“Notably, financial planners’ usage of passive managed funds – which provide low-cost access to diversification – for new client money is at record levels.”
Also hitting a new high is planners’ use of international assets for client inflows, another outcome of the challenges faced in the domestic market. Planners have invested 39 per cent of new client money into international assets in the past 12 months, the highest since at least 2008.
In 2012, planners allocated 26 per cent of new client flows into international assets, according to the report.
Recent volatility has also meant that performance is playing a smaller role in driving both planner selection of fund managers and planner satisfaction. Instead, frequency of the right communications and adviser support have become greater contributors, the report said.
“Volatility and uncertainty means the role of performance in fund manager selection is diminishing, while the adviser relationship is becoming much more important,” Mr Peker said.
“Asset managers have the opportunity to understand both planners’ and clients’ emerging needs to deliver products and solutions that most holistically meet these needs.”
The Adviser Product and Marketing Needs Report was based on a survey of 676 financial planners and was concluded in August.
