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Equity income still the biggest challenge for advisers

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We all know that 2/3 of financial advisers include direct shares in their advice. That’s why the industry is facing a mighty challenge, as many key stocks are trading at record high prices, fuelled by yield hunters chasing income for retiree clients. Interest rates are at all time lows and heading even lower – so it’s little wonder that we are seeing a wave of new ASX listed products (including mFunds) specifically aiming for an income focus and with reduced levels of equity risk.

Of course, many of these new products confound traditional investment thinking and have left “traditional” financial advisers by the wayside. Financial planners are typically a dynamic and aspirational bunch – and there are huge numbers of advisers now fighting back and increasing their usage of ASX listed products (typically with greatly expanded dealer group support around direct investments).

As I travel around the country delivering the popular ASX Listed Products Accreditation Course (LPAC) “face to face” classes, I am privileged to meet and work with literally 100’s of financial advisers each year.

Over the last couple of years we’ve trained advisers in all capital cities and regional centres like Wagga, Warnambool, Hervey Bay, Newcastle, Gold Coast, Canberra, Bunbury, Barossa Valley, and Cairns.

Across these areas and across dealer groups like AMP, Hillross, Securitor, Count, from the IOOF stable and myriad boutique advisers, I see key common themes emerging:

·         Most financial advisers use ASX listed shares in client portfolios – that doesn’t mean they profess to be an investment guru, simply that they can help clients reduce costs and become more tax efficient using shares in a blended portfolio;

·         Once a practice transitions to include ASX listed shares, they have a client base that expects a continued emphasis on costs and taxes, and which is often far more receptive to including other ASX listed products in their portfolios compared to traditional managed funds;


·         That’s leading the growth in the launch of new LICs (like the Perennial Wealth Builder) and ASX listed managed funds (like the new Magellan offering);

·         Hybrids are a vexed topic for most advisers – overly complex and perceived as risky – and this opens the door for model hybrid portfolios from credible providers like Bell Potter and Lonsec;

·         ETFs are growing rapidly in popularity with a growth in “thematic” ETFs such as equity income products;

·         Absolute return and “Dynamic Asset Allocation” products are the big story for the times, with products like the Schoders Real Return fund (available via the ASX mFund platform) proving highly popular with advisers and clients alike.

That sounds great, doesn’t it? Yes – except for the additional time and cost which this explosion of product imposes on practice cost structures and business systems.

So it’s little wonder that platform providers are reaching out to advisers with new tools and functionality, including access to a wide range of model portfolios built with ASX listed shares. That can be via revamped traditional platforms with or without SMA functionality, through to MDA platforms provided by the likes of managedaccounts.com.au .

That is a great advance and will help advisers use these simple share portfolios with scale and efficiency.

But the real challenge remains – how to use the new range of risk managed equity income products to boost certainty and reduce risk?

That’s the key theme of the LPAC June Short Course “Financial Planning Strategies for Risky Times” for which IFA and InvestorDaily are exclusive media partners: http://www.lpaconline.com.au/short-course

We’ve handpicked the best product and service providers to look in detail at the opportunities to meet client needs in the equity and income space, including Montgomery Investments, Joseph Palmer and Sons, Bell Potter, APN Property Group, Schroders (Real Return Fund), BetaShares, CBA, and David Heather from managedaccounts.com.au .

Early bird registrations are open till 20 May at $85pp, with the LPAC Short Course being held in Sydney CBD (9 June), Melbourne CBD (10 June) and Brisbane CBD (11 June).

Tony Rumble PhD

CEO, LPAC Online