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Financial Planning, Investments, Portfolio Construction

Planners gloomy on domestic equities

A new report has highlighted the growing challenges financial planners are facing in relation to investment selection, with advisers becoming increasingly bearish in their outlook for domestic equities.

The “Investment Trends 2018 Adviser Product and Marketing Needs Report” found the average planner only expects to see capital gains of 4.6 per cent over the next 12 months, down from 6.5 per cent in the first quarter of 2018.

The significant decrease in sentiment was recorded prior to recent market volatility, the research noted.

Investment Trends research director Recep Peker said: “It appears many financial planners were attuned to the fragilities in the market, having realigned their return expectations downward.”

When asked what they are concerned about in relation to clients’ investments, 48 per cent of planners cited geopolitical risks, while 42 per cent admitted to being apprehensive about global debt levels. A further 41 per cent expressed concern about rising interest rates and another 41 per cent held worries about share market volatility.

“Against the backdrop of volatile markets, planners are increasingly prioritising capital preservation while delivering on their clients’ performance objectives,” Peker said.

“Capital preservation is now planners’ second most cited priority when selecting investments for their clients, behind diversification but ahead of capital growth.”

The study found the amount of new client inflows invested in cash products, including cash management accounts and term deposits, continues to fall despite planners’ pessimistic market outlook.

The research house interpreted this finding as evidence planners are achieving their clients’ investment goals through other avenues in a low interest rate environment.

“Planners continue to invest new client inflows rather than parking it in cash, but their approach to selecting investments is evolving rapidly,” Peker said.

“Once asset allocation is determined, 44 per cent of planners say they are not involved in selecting individual investments themselves, instead relying on model portfolios, multi-manager funds or managed accounts.”

Elsewhere the report found the proportion of planners who said they are very familiar with the concept of goals-based investing has risen from 56 per cent to 62 per cent in the past 12 months.

Similarly, the number who said they provide advice on responsible investing has increased significantly from 19 per cent to 34 per cent over the past two years.

The report also listed the top 40 fund manager brands, which reflect the strength of the fund manager’s brand profile relative to its peers within 10 key attributes.

The leading five are Magellan, Vanguard, Colonial First State, Challenger and Macquarie.

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