Sentiment stages mild recovery

Sentiment among Australian financial advisers appears to be recovering from the initial negativity generated by the Government’s announcement of the Future of Financial Advice (FOFA) reforms — but only cautiously, according to the latest research released by Wealth Insights.

The data (the result of surveys and focus groups of financial planners conducted since the beginning of the year) reveals that sentiment has returned to levels just above those that marked the beginning of 2010, but were then eroded by declining equities markets.

The Wealth Insights Adviser Sentiment snapshot revealed the index had reached 39 points — a level not reached since February 2010, after declining rapidly from the beginning of 2008.

Managing director of Wealth Insights, Vanessa McMahon, said while advisers may have become more comfortable with the FOFA proposals, she believed it was more likely their improving sentiment was a reflection of the share market.

“Their sentiment does seem to be closely tracking the fortunes of the market,” she said. “As shares maintain upward momentum, so does adviser sentiment,” McMahon said.

She said that the research and focus groups had continued to reveal a high level of caution in the minds of both advisers and their clients.

“Investors and advisers alike are very concerned about any media reports of a possible ‘double-dip’ recession, which is keeping a lot of potential investments in cash, especially term deposits,” McMahon said.

She said many financial planners were arguing that if they could achieve a return of more than 6 per cent in a term deposit then they did not want to risk negative returns, especially in the currently volatile environment.

The Wealth Insights research pointed to the degree of uncertainty still existing in the minds of advisers with respect to their own businesses.

Asked whether, in their role as a financial planner, times were good or bad right now, 47 per cent described things as being good or very good; 45 per cent described things as being average; and 8 per cent said things were bad.

This represented a significant improvement over the same survey conducted in May 2010, when nearly 20 per cent of respondents described times as being bad or very bad and 47 per cent describing times as being average.