Speaking on an ifa roundtable, Eugene Ardino, CEO of dealer group Lifespan Financial, said it’s essential to discuss these shifts after investors have experienced a period of exceptional returns.
“You need to be informing them that downturns are part of the process. Some advisers historically have been afraid to have those conversations, and that could be a really big mistake,” Mr Ardino cautioned.
“Reassurance is important, but I think preparation and education are important too. Some advisers are better at that and as a result, they have fewer clients that are stressed or ringing up complaining.”
While the conversations advisers have with their clients about volatility in global markets can be difficult, it is also important to highlight how diversification can benefit them.
Mr Ardino noted that global and domestic equities do not always correlate. “If global equities tank, it’s unlikely that Aussie equities don’t do poorly as well. But if Aussie equities have a bad year, it doesn’t really influence global equities.”
“So yes, there are risks. But if you’re going to be in equities, you probably should have some global in there. It means investors can diversify their portfolio and gain access to investment opportunities that aren’t available in the local market.”
Carlo Queddeng from Providence Wealth Advisory Group agreed. “You’ve got certainly a lot more sectors to choose from. For example, with technology, you don’t have as much here locally versus what you have offshore. The currency can also be a benefit,” he said.
“Normally in a recession, the Aussie dollar doesn’t perform as well. Offshore currencies like [the] US… can provide some level of protection.”
Brendan Vade, an independent financial adviser at Lorica Partners, said global equities are essential as the Australian market is far too limited for a truly diversified portfolio.
“There’s too many important drivers of the economy that you miss out on by staying domestic. Some of our clients have got up to 70 per cent of their equity allocation in global markets at this point.”
The global equities roundtable which also boasts Macquarie’s division director and investment specialist, Luis Sarmiento, is available here.
