Clients pay a price for direct equities: Davis
If planners construct direct equities portfolios by simply "regurgitating information from a broker" there will be a price to pay for clients, says Tyndall Asset Management managing director Mike Davis.
But if a planning firm has dedicated research analysts and the transactional capabilities to effectively deal in the market, they may be able to do as well as a fund manager over the long-term, he said
"In a sense, they become a pseudo fund manager," Davis said.
Clients who own portfolios constructed by planners without the necessary research and analysis will end up "getting what they pay for", he said.
"That's the difference, and if people choose to take that sort of profile, that's fine," Davis said.
In fact, he chooses to invest directly in Australian equities within his own self-managed superannuation fund (SMSF).
"If you invest in bluechips and core stocks - which I do in my [SMSF] portfolio - and create income by writing option strategies against it, theoretically over the long-term you should do OK. Empirical data shows that," Davis said.
"But if you just do that and that alone and you don't expose yourself to anything else, implicit in that of course you're taking a pretty serious risk position," he said.
The key risk for SMSF investors is not being properly diversified into other asset classes, Davis said.
"There is a need for them to go to external mangers. Clearly, that's a bit self-serving, but that's one of the areas that we intend to target through our multi-manager capability and alternative assets capability," he said.
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