Investors endured an uncomfortable ride last year, with recession fears, the war in Ukraine, high inflation and rising interest rates among the factors making mums and dads nervous. As a result, many have changed their habits and sought the help of those with more experience.
Our research shows consumers increasingly turned to advisers, investment managers and stockbrokers to invest for them, instead of trading directly. The trend was particularly pronounced in retirees, with a 55 per cent jump in the number of survey respondents who said they used advisers or brokers.
Advisers themselves responded to the market volatility by making tactical shifts in the way they invest clients’ money. For our 2023 Australian Financial Advice Landscape Report, we asked your industry colleagues how they plan to invest this year. Here’s what they said.
Changing preferences
As advisers make the most of newer choices on the investment menu, custom managed funds are likely to be the recipient of greater flows this year. More than one-in-five advisers plan to increase their use of the tailored vehicles in 2023, which offer the benefits of traditional managed funds with more flexibility. Similarly, advisers plan to slightly increase their use of managed accounts (off the shelf), with only a small proportion decreasing their allocation to the portfolios.
Meanwhile, nothing has tempered advisers’ appetite for responsible investment, with more than a third of advisers directing more client money to ESG this year. Only a quarter of advisers don’t invest, or plan to invest, in ESG at all. We expect advisers to become increasingly discerning about their ESG vehicles of choice as the corporate watchdog continues its crackdown on ‘greenwashing’ funds.
Chart 1 – Custom managed funds
Chart 2 – Managed accounts (off the shelf)
Chart 3 – ESG
Source: Adviser Ratings - 2023 Australian Financial Advice Landscape Report
While exchange-traded funds have long been a favourite for advisers, we haven’t seen quite the same enthusiasm for the passive vehicles we saw at the start of last year. Just over one-in-three advisers are putting more money into ETFs, compared with 38 per cent a year earlier. Having said that, the vast majority of advisers (78 per cent) say they use ETFs, which makes them the third most utilised vehicle, behind active and passive funds, our survey shows.
Chart 4 – ETFs
Source: Adviser Ratings - 2023 Australian Financial Advice Landscape Report
Advisers have also become a little cooler on traditional managed funds. Just shy of one-in-five plan to put more money into the funds, while almost the same proportion plans to reduce their allocation. One explanation could be the expanding range of options available to advisers, particularly those allowing them to adopt a more bespoke approach.
Chart 5 – Managed funds
Source: Adviser Ratings - 2023 Australian Financial Advice Landscape Report
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