Product complexity abandoned

Financial planners are discarding complicated investment products because their complexity is preventing them from moving their clients’ investments quickly enough to take advantage of market upswings.

The development comes at the same time as research just released shows that financial planners are dropping complex investment products and taking up simpler options instead.

Wealth Insights managing director Vanessa McMahon said research showed financial planners were abandoning complex financial products in favour of tried-and-tested products that followed cash or domestic equities.

She explained that financial planners were shifting to ‘vanilla’ products because they were unable to lift their clients’ assets out of complex products and back into the market quickly enough to take advantage of a market upswing, a view with which George Lucas, managing director of Instreet Investment, agreed.

“They have a lot more paperwork to do… so therefore, it’s a lot harder for them to switch out of equities into cash, and if they don’t have a fund manager who’s doing that for them, then it can take a lot longer to do the asset allocation,” he said.

Indy Singh, managing director of Fiducian, said the over-engineering of many products meant that financial planners were unable to retrieve the investments, and as a result, were abandoning complicated investment products.

Research house Investment Trends has also recently released research showing that the number of financial planners using simple investment products jumped by nearly 15 per cent over the last year, while the number of financial planners prioritising tax-effective structured products, and products with inbuilt gearing, has fallen by approximately 8 per cent and 3 per cent respectively. The number of planners using alternative investments has also fallen by approximately 3 per cent.