ASIC has released a report on the state of competition within Australia’s funds management industry.
The research, conducted by Deloitte, examined competition between fund managers “with a focus on outcomes delivered to investors in retail managed investment products”.
One of the key findings from the report was retail investors primarily access managed funds through financial advisers. In 2018 alone, 86 per cent of retail inflows came through advisers.
However, it noted that advisers and investment platforms being required to conduct due diligence by regulators has “implications” for choice and competition in funds management.
“For example, advisers may not have sufficient incentives to negotiate discounts on behalf of investors or they may be influenced by relationships with fund managers,” the report stated.
“While it is possible for advisers to recommend funds that are not available on platforms they commonly use, internal systems and processes may discourage this.”
Meanwhile, Deloitte’s research found that superannuation makes up more than half (57 per cent) of the managed funds industry by funds under management (FUM), while the remainder is made up of investor types such as retail and government.
It also reported that investors are “sensitive” to the performance of funds and economic transaction costs play a factor in investors’ decision to buy, sell and change managed funds.
Because transaction costs are “not always transparent”, this can lead to investors remaining in underperforming funds.
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