FOFA forces financial adviser behaviour change
A desire among financial advisers to be seen by their clients as having ultimate control over their portfolios is accelerating a drive towards core and satellite strategy approaches, according to ipac chief investment officer Jeff Rogers.
The implementation of the Future of Financial Advice reforms is leading to changing behaviour among planners to be seen as central to the investment decision-making process, he said.
"In a subtle way, they can be seen as being the overall manager of the portfolio, as opposed to just handing the money over to investment managers and making them the star," Rogers said.
Financial advisers were shifting from a small number of low-risk active mandates to index-like core funds, with a small number of high-active mandates, he said.
By taking control over the index fund core, financial advisers were performing the risk management themselves, as well as changing the core asset allocations without upsetting active managers, Rogers said.
Financial advisers want to separate the value add of managers from their risk management role, he said.
"Advisers can handle the risk management themselves by allocating to the core," he said.
That's one lever that's there for them to have some more control over investment fees, Rogers said.
They were also using it to control the amount of investment manager risk the client was exposed to, he added.
Recommended for you
Financial Services Minister Stephen Jones has shared further details on the second tranche of the Delivering Better Financial Outcomes reforms including modernising best interests duty and reforming Statements of Advice.
The Federal Court has found a company director guilty of operating unregistered managed investment schemes and carrying on a financial services business without holding an AFSL.
The Governance Institute has said ASIC’s governance arrangements are no longer “fit for purpose” in a time when financial markets are quickly innovating and cyber crime becomes a threat.
Compliance professionals working in financial services are facing burnout risk as higher workloads, coupled with the ever-changing regulation, place notable strain on staff.
