Dealer groups tightening APLs

Dealer groups are increasingly tightening down their Approved Product Lists (APLs) and creating their so-called ‘best picks’, according to AMP Capital Investors head of retail distribution Ben Harrop (pictured).

Harrop said term deposits offered by banks had been very successful since the global financial crisis, and that dealer groups had started to think about new ways to shape their APLs to make them more attractive to spooked investors.

“Dealer groups will still have a range of products on their APL, but they’re now saying there will be a core offering which will be around their model portfolios,” Harrop said.

Harrop believes financial planners have embraced the new trend, which he said was due to multiple layers of scrutiny applied to funds.

Many dealer groups have their in-house research capabilities as well as ratings provided by research houses, which created at least two layers of filtering, according to Harrop.

“This is a change just from overly expansive APLs. People have been breaking them down, consolidating them down to be much more manageable,” he said.

However, Harrop said appearing on more top lists than usual could often backfire on fund managers.

“If there is the same Aussie equity manager on every list because they’re the same top pick from every researcher – all of the sudden you go from $2 billion to $10 billion – it’s going to be hard to return alpha.”

“To date it hasn’t been the case because the beauty about this is that in this industry research houses have different views and factors they take into consideration,” Harrop added.