Networth News

Welcome to the Networth News update for Friday the 16th of September.

Financial planners favour passive investments

Financial planners have been increasingly recommending passive investments to their clients over the past four years, according to Wealth Insights. Money Management reports that there has been a fall in active strategy recommendations to clients, with double the number of advisers now placing business with Vanguard than in 2007, for example, said Wealth Insights managing director Vanessa McMahon. The market downturn following the global financial crisis was partly behind the move to passive strategies, according to Morningstar co-head of fund research Tim Murphy, who said a move to fee-for-service would also contribute to an increase in passive investments by advisers.

AIST argues for wider opt-in

While opt-in will only apply to new clients under the Government's draft Future of Financial Advice (FoFA) legislation, the proposal is too broad and open to abuse, according to the Australian Institute of Superannuation Trustees (AIST). Investor Daily reports that while AIST generally supports the FoFA reforms, it had concerns about the opt-in requirement and suggested that it apply to all clients receiving ongoing advice, with the exception of those clients who received personal advice. A fee disclosure statement should also be provided to clients on an annual basis, according to the AIST, which also said renewal notices should be supplied to all clients who are part of client books bought by another provider.

Experienced fund managers deliver goods

Fund managers who have been in their jobs longer produce better returns, according to a Standard & Poor's report. The Financial Review reports that employee retention is a critical factor in the performance of funds management businesses. The report analysed the returns of 58 investment firms and subsequently found that longer-serving fund managers outperformed their newer counterparts and were less likely to take investment risks. S&P recommended investors look into the tenure of investment fund management when looking for worthwhile Australian equity fund investments.

Rethink needed on defensive equities

Investors need to rethink the strength of traditional Australian equities following recent market volatility, according to Platypus Asset Management. Investor Daily reports that investors have to think outside the square in weighing up the value of what were once considered traditional defensive holdings. Cochlear was traditionally thought of as a defensive stock but given recent falls it was no longer the case, said Platypus Asset Management portfolio manager, Simon Bonovourie. However he said Australian banks were a good alternative given their very healthy capital levels and an increase in their credit quality.