Managers issued warning over fund inflow prospects

Inflows to managed funds are expected to grow at between 5 and 10 per cent a year over the next two to three years, according to a new KPMG report into the wealth management industry.

KPMG interviewed chief executives and chief financial officers of wealth management groups in Australia, who on average expected their businesses to grow at 10 per cent a year.

But KPMG has issued a warning.

“Clearly, while almost all wealth managers expect to grow their own business at a greater rate than the overall market, they won’t all be winners,” the report says.

KPMG partner Brian Greig says no manager predicted inflows being in excess of 10 per cent.

“The fund managers saw boutiques as a threat and while they will not demolish the bank-owned wealth managers, they know there will be losses,” he says.

While the funds management industry has boomed on compulsory super, KPMG says baby boomers are reaching the post-retirement wealth consumption phase. The report says customers will be making a separate decision at retirement as to their future investment strategy.

“It will not automatically be to remain with their existing superannuation provider and this will be the major challenge for wealth managers,” the report says.

Wealth managers will also be facing smarter investors, who will want tailored personal advice and value for the fees they are charged.

“Increasingly sophisticated investors are requiring better service delivery and if this is not available from major players, they are likely to migrate to independent advisers and boutiques,” the report says.

“Considering on average it costs five times as much to attract a new customer as it does to retain one, there’s clearly a need for wealth managers to find the right balance.”