Australia's investment landscape is as diverse as it is dynamic, with varying levels of adoption and shifting trends among advisers and investors. Each year, research for our Financial Advice Landscape Report dives deep into a wealth of data sourced from primary channels like Adviser Ratings surveys and product platforms, alongside secondary sources, including industry data and government statistics. This comprehensive analysis paints a detailed snapshot of the current state of the Australian investment landscape.
Managed accounts, both off-the-shelf and custom, are experiencing increased adoption as seen in Figure 1 below. Off-the-shelf managed accounts are particularly favoured due to their ready-made, diversified investment solutions that appeal to a broad range of investors. Advisers are leaning towards these accounts to increase investment flows, and this trend is expected to persist. Although custom managed accounts are also gaining traction, they do not see as much incremental investment as their off-the-shelf counterparts, likely due to the additional effort required for their tailored approach.
Figure 1: Investment type by use
Source: Adviser Ratings
Listed Investment Companies (LICs) are currently the least popular investment option. They are not expected to see significant increases in investment flows, possibly due to their higher fees and perceived inflexibility compared to other investment vehicles. In contrast, Exchange Traded Funds (ETFs) are steady in popularity. ETFs, known for their low costs, liquidity, and ease of trading, are set to continue receiving allocations. More than a third of advisers plan to boost their ETF investments in the next 12 months, reflecting a strong preference for these funds.
Both active and passive funds are highly preferred by advisers. Active funds attract investors seeking the potential for higher returns through professional management, while passive funds appeal to those who prefer lower costs and predictable performance that mirrors specific indices. The balanced strategy of incorporating both active and passive funds continues to draw significant investment flows, underscoring their importance in diversified portfolios.
Managed funds, also known as mutual funds, continue to be the go-to investment option for advisers in Australia. Their appeal lies in the professional management and diversified portfolios they offer, making them a dependable and accessible choice for clients with varying investment goals. As a staple in many advisers' strategies, these funds provide the stability and expert oversight that are essential in navigating the complexities of today's market.
Future Investment Flows
As advisers strive to protect their clients' assets with a diversified mix of investments, more money has flowed into managed accounts in 2024. This trend is expected to continue, with advisers planning to increase their use of off-the-shelf managed accounts. However, ETFs will be the preferred choice for most advisers in the next 12 months, with a significant portion planning to boost their allocation, as seen below in Figure 2.
Figure 2: Planned increasing flow by type
Source: Adviser Ratings
Throughout the rest of 2024, the flows into managed accounts have accelerated, with investment consultants, research houses, and investment platforms playing crucial roles as gatekeepers for asset managers to reach advisers and licensees. Currently, there are over 100 investment consultants involved in selecting, managing, and creating investment criteria, including both off-the-shelf managed accounts and creative private label separately managed accounts. This development highlights the evolving investment landscape in Australia, where advisers and investors increasingly seek professionally managed and diversified solutions to achieve their financial goals.
For more insights, in-depth analysis, product launches, and trends, view the 2024 Australian Financial Advice Landscape Report, proudly sponsored by Lonsec and featuring special Investment Landscape chapter insights from Global X.
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