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Mid-tier dealers warm to direct investments

Some licensees are increasingly encouraging advisers to go direct as client demand wanes for “black-box managed funds”, says the founder of the ASX Listed Product Accreditation Course (LPAC).

Speaking to ifa, LPAC founder and former finance academic Dr Tony Rumble said the trend to move away from direct investment, evident since the global financial crisis, is now reversing, with licensees and controllers of approved product lists changing their tune.

“The mid-tier dealer groups are getting involved with direct equities and investments,” Dr Rumble said. “Partly I think this is because they are trying to reduce costs in the portfolio but also this is client-led – clients can better understand the bricks and mortar of a CBA or Woollies or Telstra than a black-box managed fund.”

Dr Rumble said a mixture of underperformance by managed fund providers as well as cost savings are also a factor driving the “move towards control and transparency”.

He also rejected the notion that advisers can outsource investment entirely, saying clients expect a greater role for their adviser than just relationship management.

“Clients want advisers that are hands-on and that can actively control their portfolios and help them find equity income,” Dr Rumble said. “It’s not enough to just outsource to an external ETF or managed fund that does it all on their behalf.”

He said a greater number of advisers are seeking to become specialised in hybrids, initial public offerings and complex products off the back of client questions and demand.

At the same time, he said advisers recommending direct investments should not be expected to “go the whole hog” and that they can partner with credible research and education providers.