Volatility fails to dim expectations

Vanessa McMahon

Australian financial planners remain optimistic about the outlook for their own businesses despite expecting that their clients will suffer falling investment returns.

That is the bottom line of the latest Wealth Insights Research on Adviser Sentiment, which shows that while the sub-prime crisis and the resultant market volatility have seen planners shift from the bullish position they exhibited in April 2007, they nonetheless remain broadly upbeat about their own outlook.

The data, released this month, reveals that whereas in April 2007 some 53 per cent of surveyed advisers expected good or excellent returns, that position has changed substantially in 2007-08, with 52 per cent of respondents expecting average returns and 40 per cent expecting below average returns.

However, this contrasts with their view of their own position when asked whether times are good or bad.

In 2007, more than 90 per cent of planners described things as being either good or very good, while in 2008 this number has fallen to 78 per cent, albeit that no one seems to think things are going to be very bad.

Equally interesting, more than 50 per cent of planners believe that their businesses are likely to be better or much better off over the next 12 months.

Asked whether, looking ahead, the financial planning industry as a whole would have good times or bad times over the next five years, the Wealth Insights survey revealed the surprising outcome that those advisers surveyed were more optimistic than they were a year ago.

While the response results were broadly the same, it found that 61 per cent of those surveyed believed things would be mostly good compared to 58 per cent in 2007. In both 2007 and 2008, 4 per cent of respondents believed things would be continuously good.

The managing director of Wealth Insights, Vanessa McMahon, said the data tended to confirm that in the face of uncertainty, advisers remained relatively comfortable with their industry and that current market conditions will have little adverse impact on their business.

She said she found it interesting that long-term forecasts of the financial planning industry remained virtually unchanged despite the recent market activity.

“This perhaps indicates that advisers believe the current falls are simply a market correction, and the financial planning industry will be robust over the longer-term,” McMahon said.