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Adviser interest in active funds grows amid volatile market conditions

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1 May 2023 by Jessica Penny, Independent Financial Adviser

Article link: https://www.ifa.com.au/news/32717-adviser-interest-in-active-funds-grows-amid-volatile-market-conditions

Adviser Ratings’ latest report has found that advisers plan on riding out recent market volatility with an “eclectic mix of investment vehicles”.

In particular, the Australian Financial Advice Landscape 2023, based on responses from 1,388 registered financial advisers and practice owners, revealed an increasing appetite for active funds, while interest in passive funds waned.

Namely, according to the data, more than a quarter of financial advisers plan to use active funds in the future in light of the current conditions. Specifically, 54 per cent of the surveyed respondents said they plan to use active funds, while 27 per cent plan to up their usage.

Reflecting the broad sentiment for passive funds, the Adviser Ratings report showed that less advisers plan to increase their allocation to passive funds in 2023, but also that passive investments remain a constant in advisers’ recommendations.

ETFs, however, proved particularly popular among advisers, with findings suggesting that as many as 41 per cent of advisers plan to dabble in ETFs this year, compared to 35 per cent last year.

As for managed funds and accounts, the data suggested that 59 per cent of advisers plan to invest in managed funds this year compared to 57 per cent last year, while 16 per cent plan to increase their allocation to this vehicle.

Custom managed funds also saw an uptick in interest with almost a quarter (22 per cent) of advisers admitting they plan to increase their allocation in 2023, compared to just 17 per cent last year.

Similarly, off-the-shelf managed accounts garnered similar interest with almost a third (32 per cent) of advisers noting they plan to increase their usage.

Moreover, Adviser Ratings reported an increase in advisers’ interest in ESG, with 36 per cent of advisers reporting that they plan to use ESG aligned funds in 2023, while 37 per cent revealed they plan to put more client money towards social and environmentally conscious investments, up 4 percentage points on last year.

The number of those that have not used ESG or plan not to, decreased from 38 per cent in 2022 to 26 per cent this year.

Looking also at listed investment companies (LICs) and other listed funds, Adviser Ratings showed LICs have lost relevance among advisers with the number of those who planned to use them dropping from 71 per cent last year to 61 per cent this year.

Other listed funds followed the downward trend, dropping from 81 per cent to 70 per cent.

The Adviser Ratings report also revealed the perception of advice is changing, with almost one in five Australians willing to pay up to $5,000 to see an adviser. This represented the largest increase, with the number of Australians willing to spend between $2,500 and $5,000 jumping from just 4 per cent in 2021 to 19 per cent in 2022.

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