Financial Planning, Investments

Outsourcing clients’ investment selection on the rise

Outsourcing clients’ investment selection on the rise

Financial planners are losing faith in the domestic stock market and increasingly outsourcing the investment selection process for clients, the latest analysis from research firm Investment Trends has revealed.

According to the “2019 Adviser Product and Marketing Needs Report”, financial planners expected local shares to deliver capital gains of 1.4 per cent over the next 12 months, down from 4.6 per cent in  anticipated in 2018

Investment Trends analyst Viola Wang said: “Uncertain macro conditions at home and abroad have dented financial planners’ confidence in delivering the appropriate level of risk-adjusted investment returns for their clients.”

“Geopolitical risk and share market volatility are the top and growing concerns among planners, with many also keeping an eye on global debt levels and the Australian economy.

“There is a trend among planners to move from being investment pickers to asset allocators, and more are being nudged in this direction in the post-royal commission environment.

“Once asset allocation is determined, close to half now say they are no longer involved in picking the individual investments.”

The report, based on a survey conducted in July of 815 financial planners, revealed more planners were choosing to outsource the investment selection process, rather than be directly involved in selecting investments for their clients’ portfolios.

It showed planners were increasingly using model portfolios, managed accounts and multi-manager funds, with the proportion of those directly involved in selecting investments falling to 53 per cent from 56 per cent over the past year.

“More planners are choosing to outsource investment selection to focus their time and effort in areas they believe they can deliver more value to clients,” Wang noted.

“Our research shows outsourcers perform better in key business metrics compared to those who do not – they typically have significantly larger client books and advise on higher levels of new client inflows.”

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