Planners shifting away from benchmark hugging managers
Financial planners have moved away from mainstream broad cap managers who have clustered around the benchmark and are opting to use specialist managers to generate returns and income according to Hyperion Asset Management managing director Tim Samway.
According to Samway there has been a shift in planner thinking since the introduction of the Future of Financial Advice (FOFA) reforms where planners are becoming more critical of the cost of investments compared to the returns they are generating.
He said planners are no longer using high alpha managers who tend to cluster around benchmarks but are instead looking at exchange traded funds (ETF) or direct equities combined with specialist funds from smaller managers.
"Planners are becoming worried when they see broad cap managers all on the same side of the market and are moving away from them and looking at funds that can offer differentiated investments," Samway said.
"I have heard this repeated in dozens of meetings with boutique and large scale practices, including those aligned with institutions."
Samway said that since FOFA planners have developed a greater inbuilt attitude around the interests of clients and have moved away from inhouse products.
He said planners were looking at products which demonstrated they had thought about the client's needs and interests and were examining how funds blend and how they are protecting investment capital.
"Managers have taken the safety route and planners want quality assets that provide growth which is why they are looking at vanilla investments such as ETFs combined with specialist active managers."
Recommended for you
ASIC has released the results of its first adviser exam to be held in 2025, with 241 candidates attempting the test.
Quarterly Wealth Data analysis has uncovered positive improvements in financial adviser numbers compared with losses in the prior corresponding period.
Holding portfolios that are too complex or personalised can be a detractor for acquirers of financial advice firms as they require too much effort to maintain post-acquisition.
As the financial advice profession continues to wait on further DBFO legislation, industry commentators have encouraged advisers to act now in driving practice efficiency.
