Planner intentions for 2009 revealed

The asset classes touted to be the ‘next big things’ over recent years appear to have lost much of their attraction, according to research from CoreData.

The research, which gauged the anticipated asset allocation of financial planners in 2009, showed a move away from asset classes such as emerging market equities, private equity and alternative investments. Instead, planners across the spectrum are signalling a return to more traditional portfolio allocations, consisting largely of Australian equities and, to a lesser extent, international equities. Fixed interest investments and cash will also continue to be popular categories next year.

Advisers with more than $90 million of funds under advice (FUA) — approximately 13 per cent of the advisers surveyed — are likely to allocate less to both Australian and international equities than advisers with less than $90 million in FUA. Advisers with more than $90 million in FUA will have slightly higher allocations to hedge fund investments, cash, unlisted property and alternative investments. They will also continue to allocate significantly more to direct securities, making around double the direct investments of planners with less than $90 million under advice.

Planners with $30 million and under of FUA (or 41.9 per cent of those surveyed) signalled the highest allocation to listed property, indicating an allocation of around 6 per cent of client funds, compared to 3.78 per cent likely to come from their counterparts with $90 million or more under advice.

Private equity — which was increasing in popularity prior to the downturn — is likely to see less than 1 per cent of planners’ client allocations next year. Similarly, emerging market equities are likely to see only between 3 and 5 per cent of fund allocations, while alternative investments are likely to attract investments of up to 2.5 per cent of a client’s total allocation.

“By and large, advisers are locked into Australian equities come wind, rain or shine, given the asset class comprises such a significant weighting proportion of client portfolios,” CoreData’s Craig Phillips said.

“What is interesting is that advisers with higher book values and a higher probability of having [high-net-worth] clients, considering planners can’t service unlimited numbers of clients, is that this end of the market seeks to add value to clients by offering a combination of access to both managed funds and direct equities.”

Phillips said offering access to direct securities is a differentiator for advisers.

“There are some advisers who do it believing they can perform better than managed funds, while others see it as a cost saving strategy for clients, while others do so to add value to the advice they provide clients with — or a combination of all three.”