Listed investments gain narrow planner popularity

By Michael Bailey

CLIENT demand is driving the increasing popularity of listed investments among advisers, with 83 per cent now using them in client portfolios, according to a new survey.

AC Nielsen surveyed 791 advisers and other financial planning personnel in January on behalf of the Australian Stock Exchange (ASX), and found that 56 per cent had increased their usage of listed investments over the preceding 12 months.

However, planners have not ventured far beyond the two most traditional forms of listed investment — listed property trusts, which appeared on 79 per cent of respondents’ recommended lists and featured in 67 per cent of their client’s portfolios, and direct Australian shares, where the corresponding figures were 68 per cent and 71 per cent.

There is a big gap to the next most popular listed investment, listed investment companies, which featured on 46 per cent of recommended lists, but only ended up in 34 per cent of portfolios.

Other listed investments in use were convertible notes (45 per cent of lists and 35 per cent of portfolios), infrastructure funds (35 per cent and 24 per cent), listed corporate bonds (30 per cent and 21 per cent), and exchange-traded funds, which despite the hype surrounding their arrival in Australia three years ago appear on just 13 per cent of recommended lists and 6 per cent of respondents’ client portfolios.

Commenting on the continuing domination of listed property trusts and direct shares, the ASX said: “The challenge is twofold — to educate dealer groups to have other listed investments included on the approved list and to educate financial planners in how to use them in clients’ portfolios.”

Client demand was a driving force for 74 per cent of planners using listed investments, their tax effectiveness inspired 53 per cent, while risk-profiling and diversification also prompted about half of respondents to use listed investments.

Of those planners who did not use listed investments, the deterrent for 48 per cent was lacking a licence to recommend such products to clients. The absence of listed investments from their dealer group’s approved list stopped 30 per cent of non-users, while 21 per cent said they preferred to refer their clients to ‘the experts’ in direct equities and the like.

The labour-intensive administration of listed investments was the next most significant deterrent.