Managed funds ignored

Australia’s managed funds industry is lost on 60 per cent of one of its target investor groups, the baby boomers, mainly because of a lack of knowledge on the investor’s behalf, according to the latest Assirt/Wealth Insights Investor Market Trends report. The report examined the investing behaviour of 300 Australians aged between 45-65 years who have more than $50,000 in investments, apart from their home and superannuation.

Of this group, only 40 per cent invested in managed funds, with 41 per cent saying they knew virtually nothing about them.

Wealth Insights managing director Vanessa McMahon described these baby boomers as being a key group of investors who controlled a sizeable portion of the nation’s wealth, but demonstrated a fundamental lack of knowledge about managed funds.

“When asked to define managed funds, many are unable to explain what the term means,” she said.

“When asked if they perceive managed funds to be a good investment, 50 per cent simply do not know enough to even comment.”

The survey also found that investors who used a financial planner were far more likely to invest in a managed fund (60 per cent) compared to only 25 per cent of those who did not have an adviser.

McMahon said this showed advisers bridged the knowledge gap surrounding managed funds.

“Those who do not use a financial planner are not necessarily averse to managed funds — they just don’t know enough about them to invest,” she said.

“As a consequence, many opportunities await those who cater to the maturing investor market, especially the managed funds industry, which could further broaden its appeal to investors through education and easier accessibility.”

AMP director of savings and retirement Peter Nicholas acknowledged that broadening the public’s financial literacy was a key factor in improving its accessibility to these types of investments.

“The industry as a whole is continuing to look at ways of improving consumer understanding,” he said.

“The high correlation in the statistics between those investing in a managed fund and those who use a financial planner shows that advice makes a big difference.”

It’s a statement reiterated by Westpac Financial Planning head of advice Chris Davies, who suggested investor diversification began with financial planners.

“It is easier to jump to conclusions that you need to educate consumers about managed funds, but it is actually that you need to make them aware of the value of advice,” he said.

“Australians have a love affair with property .… but they need to understand that financial planners have a wide range of alternative investments to offer.”