Funds fail to meet needs
Fund managers and financial planners are not servicing high net worth clients ef-fectively and fail to meet their needs according to a Melbourne planner and portfo-lio manager.
Fund managers and financial planners are not servicing high net worth clients ef-fectively and fail to meet their needs according to a Melbourne planner and portfo-lio manager.
First Samuel Limited managing director Anthony Starkins says a trend is begin-ning in which investors with $500,000 or more are turning away from managed funds and were looking towards individual tailored and managed portfolios.
Starkins says managed funds can not meet the unique tax position of individual cli-ents while direct share portfolios offered by stockbrokers ignore the client's total financial situation.
"Tax is the biggest issue for high net worth clients and there is no way to avoid that with managed funds. They cannot provide the taxation flexibility or satisfy the li-quidity or long term investment needs of high worth individuals."
"Non-discretionary direct shares portfolios offered by stockbrokers also constrain wealth creation because the advice ignores critical information about the client's total financial circumstances," Starkins says.
He emphasises the business will not use upfront or trailing commissions and would adopt a strict fee for service based on assets under management.
"Competitive pressure is changing the fee for service concept because the commis-sion structure is not sustainable. The relationship between client and planner is fi-duciary and commissions are a breach of that," he says.
The growth in the need for individual managed portfolios, Starkins says, is be-coming apparent as investors see the high net worth segment of the market is not adequately serviced.
"Managed fund providers are happy with the harvest that is available and there is no incentive to change."
"Our focus is those with significant investments in managed funds and we are pro-viding some competition to those funds. When people become aware that this por-tion of the market is not covered well they will seek people like us," Starkins says.
AUTHOR
Jason Spits
Recommended for you
After seven years at the company, Iress’ chief technology officer for wealth management APAC, Anthony Gerrits, has departed as the firm commences a search process to fill the role.
With advice firms thinking about scaling up in 2025, research has detailed the main avenues financial advisers say they have used for successful recruitment.
The board of Insignia Financial has reached a decision regarding the possible acquisition of the firm by US private equity giant Bain Capital.
Six of the seven listed financial advice licensees have reported positive share price growth in 2024, with AMP and Insignia successfully reversing earlier losses.
