ASX highlights benefits of financial advice

Over 68% of advised investors made changes to the portfolio in light of the COVID-19 pandemic, compared to just over half of other investors, according to the Australian Securities Exchange (ASX).

In a report into Australian investors conducted in January and then again in May 2020, the ASX said advised investors had been “particularly active” during the period.

They were more likely than other investors to invest spare cash in the three months to May 2020 and increase their allocation to Australian direct shares. In contrast, non-advised clients were more likely than advised ones to have switched their investments to cash or increased cash weightings and to have increased allocations to international shares.

“Advised investors have been particularly active in responding to the pandemic, with 68% making changes to their portfolios, compared to 52% of other investors. They have also been more likely to invest all their spare cash (26% versus 16%) and increase their allocation to Australian direct shares (23% versus 16%),” it said.

Investors also highlighted the benefits of their adviser with 84% saying their adviser had been ‘helpful’ in managing the impact of COVID-19. Some 41% went further and said they were ‘extremely’ or ‘very’ helpful during the period.

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In light of this, there was interest from those who were not currently receiving advice with 17% of non-advised investors saying they would be more likely to consult an adviser in the future and 63% were ‘open’ to receiving advice.

“There is still scope for professional advisers and investment educators to help investors further improve their skills. While a growing number have come to appreciate the benefits of diversification, many still have portfolios concentrated in a few asset types,” the report said.

“A significant number of investors have also become more likely to seek advice after COVID-19. And while many still believe advice is only for those with large amount to invest, 63% of Australians remain open to receiving advice in the future.”

Younger investors

The ASX also found younger ‘next generation’ investors, those aged 18 to 24, were keen to use a financial adviser.

Despite their low investment volume, 36% said they would use a financial adviser to access a wider range of investments and 37% saying they would use one as they lacked confidence.

“Hungry for knowledge and aware of their relative lack of investing experience, members of the next generation show a relatively high degree of willingness to seek advice, with 36% saying that they would use an adviser to access a wider range of investments, while 37% say they would use an adviser because they don’t feel comfortable making investment decisions on their own,” the ASX said.

“However, many are held back by a lack of knowledge about how to find a suitable adviser, together with the perception that they don’t yet have enough capital to justify seeking advice.”

More than 5,000 people were surveyed by the ASX in January while a further 500 investors and self-managed superannuation fund trustees were surveyed in May to assess their activity during the pandemic.

Earlier this year, a survey by Fidelity found receiving financial advice had reduced investors’ money worries with some 52% of unadvised people worrying about money on a daily or weekly basis versus just 36% of those who received advice.