Planners accept the inevitable

Australian financial advisers appear to have shrugged off at least some of the gloom that saw sentiment descend to lower levels between April and August this year.

The latest Wealth Insights adviser sentiment snapshot for September has seen sentiment returning to levels similar to those recorded at the close of last year, but still well below the peak achieved in late January and early February and less than half that recorded at the peak of the market in February 2008.

The new Wealth Insights data, released exclusively to Money Management, appears to reflect planners’ acceptance of the realities flowing from the Federal Election and a growing confidence in their ability to adapt to a new fee-for-service environment.

The degree to which planners are accepting the inevitability of the move to fee-for-service has also been reflected in data compiled by Colonial First State (CFS) from flows into its FirstChoice platform.

Announcing last week that FirstChoice had grown to become the largest platform in the space, CFS chief executive Brian Bissaker also pointed to data indicating that fewer planners were utilising those elements of the platform delivering commissions.

He said the flow to what was regarded as the fee-for-service options now stood at around 60 per cent.

Wealth Insights managing director Vanessa McMahon said the data around the flows on the FirstChoice platform tended to confirm the feedback provided by planners during focus groups conducted by Wealth Insights.

She said planners had accepted the inevitability of the need to shift to a fee-for-service model and were adjusting their commercial models accordingly.

McMahon said the focus groups had also revealed the degree to which planners were conscious of the pressure on fees and were acting to keep them contained.

“But they recognise that there are only two areas they can act on fees — platforms and the management expense ratio [MER],” she said.

“There has not been a lot of relief with respect to platform costs, so the focus has been on MER,” McMahon said. “That explains recent adviser preference for indexed funds, exchange traded funds and direct shares.

“Putting aside the performance of indexed funds, the recent preference exhibited by planners has also had a lot to do with fees,” she said.