Retail is dead, long live retail!
There is a revolution happening in retail financial services.
Five years ago, the market was bursting at the seams with bundles of new retail investment products for financial planners to distribute to clients.
There is a revolution happening in retail financial services.
Five years ago, the market was bursting at the seams with bundles of new retail investment products for financial planners to distribute to clients.
In five short years, advisers have turned their backs on traditional retail products in droves. Financial planners no longer want the ad-ministration headaches and, at the same time, are trying to claw back ownership of their clients from fund managers.
Master trusts and their wrap account offspring are now the tool of choice for financial planners.
According to Australia's largest retail fund manager, BT Funds Man-agement, money flowing into retail funds via master trusts and wrap accounts has grown from about 20 per cent five years ago to current levels of about 70 per cent.
Industry observers, such as Paul Resnik, have been predicting the de-mise of traditional retail products for the past few years. It now appears their vision is becoming reality.
Or is it? While master trusts have come to dominate funds flowing into retail products via financial planners, something very different is happening at the other end of the market.
Direct investment by consumers, according to head of retail at BT Funds Management Rob Coombe, has grown from 10 per cent of the retail market five years ago to about 20 per cent. Direct investors are com-ing out of the woodwork due to the increasing amount of financial in-formation at their fingertips as well as the boom in discount broking by people such as Commonwealth Securities.
And this growing pool of direct investors is choosing to buy tradi-tional retail products. Coombe says there is two distinct types of direct investor.
"The first are those using savings plans. They tend to favour diver-sified growth funds," he says.
"The second is the punter. These people will try to guess the market by investing in sector funds such as an Asian or international share fund," he added.
In response to the diverging market, BT Funds Management is stepping up its push onto master trust and wrap account menus in light of huge growth in the sector.
BT will now offer almost its entire range of retail funds to master trusts and wrap accounts at reduced management fees.
The group is also experiencing strong growth in its own master trust for personal superannuation, which has been identified by BT's parent Principal as a key area of growth. Principal are renowned in the US as the premier developers of the small business superannuation mar-ket. BT hopes to create a similar financial planner driven market in Australia.
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