Planners guilty of short-termism

fund-managers/financial-planners/financial-planning/funds-management/financial-planning-group/advisers/money-management/

24 September 2013
| By Mike Taylor |
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Financial planners have been guilty of the same short-termism about which they warn their clients to the detriment of gaining better investment outcomes, according to investment and asset allocation specialist Tim Farrelly. 

Speaking during a Money Management roundtable yesterday, Farrelly said the result had been that many fund managers had found themselves unable to take “big positions” because advisers were quick to dismiss them for poor performance. 

“¨Getting the financial planning group, the financial planners, to focus on the longer term rather than the shorter term is the biggest single step we could make,” he said. 

“As an example it has been very difficult for fund managers to pursue strategies which would require them to take big positions because advisers aren’t very loyal,” Farrelly said. “You get three years of rotten performance and you’re out of business. Clients are far more loyal to their planners than planners are to their product providers.”  

He said that he could not imagine that many clients had been happy with the returns they’d received over the last six or seven years “but typically, when you talk to planners and you ask them 'how many clients have you lost’, they say two or three”. 

“There’ve been hardly any clients who have fired their advisers through this process and yet they’ve had lousy returns, but if fund managers were producing those lousy returns for advisers they’d all be gone,” Farrelly said. 

“So there’s this funny piece where the planners show far less loyalty to their suppliers than their clients show to them - and I think that is one of the behaviours we need to start working on by getting to the stage where the planner community takes a longer-term view,” he said.

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