Planners’ cautious New Year

Financial planners are ending 2010 in reasonable shape, but are feeling uncertain about their prospects for the New Year, according to the latest research conducted by Wealth Insights.

The research, contained within the Wealth Insights Adviser Sentiment Snapshot for December, has revealed a financial planning community feeling far less optimistic than was the case when it closed out 2009.

The key factors influencing adviser sentiment appear to have been the uncertainty surrounding the Government’s Future of Financial Advice (FOFA) reforms and the waves of bad economic news emanating out of the US and Europe.

Wealth Insights managing director Vanessa McMahon (pictured) said that for established planners with large books of existing clients, the outlook remained okay — but newer planners seeking to build businesses were faced with a considerable challenge.

She said that even well established planners had noted the manner in which the negative economic news coming out of the US and Europe was serving to undermine confidence among their clients, and was therefore giving rise to more conservative ‘wait and see’ strategies.

McMahon said it was hardly surprising that allocations to cash remained high.

What the Wealth Insights data reveals is that while Australian financial planners entered 2010 on a wave of optimism driven by rapidly improving markets, it declined rapidly through the first four months of the year as markets deteriorated and has recovered only modestly since then.

However, McMahon pointed out that financial planners were exercising caution rather than giving way to doom and gloom. She pointed to their responses to the question of whether, in their role as a financial planner, times were good or bad.

The responses to that question showed a pick-up from those recorded in May with 40 per cent of respondents suggesting things would be ‘good’ or ‘very good’ — compared to 33 per cent in May. Perhaps, more importantly, only 11 per cent of those surveyed thought things would be ‘bad’ or ‘very bad’ — compared to 19 per cent in May.

While planners may be cautious as they enter 2010, the Wealth Insights research reveals that they are vastly more optimistic than they were at the depths of the global financial crisis and throughout the first six months of last year.

McMahon said that the reality for many planners was that with clients still feeling uncertain, many were simply treading water rather than swimming ahead.

She predicted that it would be the tenor of the broader economic news that determined planners’ fortunes as they moved into 2011.