Transforming finance – when investors create the rules

3 min read

The investment industry is changing, driven by investors taking a greater interest in their finances.

Based on current trends, investors will see a future with better technology, more support and coaching from advisers and more transparent investment products. Many people may already be enjoying a closer involvement with their investments, so what does this mean?

The increasing involvement of investors in understanding and managing their finances is no surprise to industry experts.

Kathy Vincent, General Manager Platforms, Investments & Operations, BT, says: “Recent regulatory and public scrutiny has actually driven a higher degree of engagement from investors.”

Jessica Brady, financial adviser and co-founder of Fox and Hare, says that compared with five years ago today’s investors are “much more socially aware”.

“They’ve got access to a huge amount of information and they’re technologically native,” Brady says.

This increasing involvement has meant a number of developments:

Demand for transparency

Firstly, investors want to know what’s in their investments. We are operating in a world where even the origins of the coffee at your local barista are on display and investment products where you can see exactly what you have are increasingly popular, according to Zac Leman, Head of Managed Accounts at BT.

“There has been increasing interest and investment in listed structures like ETFs, as well as managed portfolios,” Leman says.

Sustainability matters

It’s not enough to know what’s in your investments and many investors are also considering whether their investments match their values. There’s a range of questions that come from looking at this. Are the companies in your portfolio ethical? How are social responsibility issues, like the environment, factored into your investments? Is it fair to make money from a company if you disagree with their activities?

The last was a question faced by Jessica Brady when one of her clients discovered a company within her portfolio she had actively been protesting against. Her investments were changed to meet her values.

Ethical and socially responsible investments are likely to continue to grow on this demand. Meaghan Victor, Head of SPDR ETFs, Australia and Singapore, State Street Global Advisors, says: “There’s even been some advice practices looking for a socially responsible version of the ASX200 for investors to use.”

Improvements in ethical and socially responsible investments, along with better understanding of them means investors are expecting more. Oliver Hesketh, partner, Sydney Consulting and Lead, Wealth Management Segment, NMG Consulting, says: “I think the prevailing view is that you don’t have to give up on long term returns, in fact, these should be enhanced over the long term when you use these investments.”

Smart technology

The second area that is developing off the back of investor interest is better, more sophisticated technology so that investors can see what is happening, as it happens.

BT’s Vincent says, “We have seen increasing numbers of investors using our applications, with 70 per cent of all investor logins being made on handheld devices on an average three times a week.”

At the same time, the apps are supporting a traditionally human service – that of financial advisers with investors, and even enhancing it.

Meaghan Victor says: “Technology has shifted the balance and redirected effort and efficiency to the client. It is allowing a focus back on the client.” It is also offering an additional way for investors to hear from their advisers, in a meaningful way to them, and choose how actively they want to be consulted on changes to their investments.

Following on from this, investors are also starting to find, and expect, coaching and support as part of the overall service they receive from their financial advisers. Brady says: “Advisers should be celebrating milestones or keeping investors on track with their goals”. It’s a welcome move for investors, crucial to creating trust and creating a safe place to ask for answers and help.

If the trends play out, it’s starting to look like a renaissance for investors and the investment industry. As with any other part of life, such as using a doctor or visiting a mechanic, investment management and financial advice are services to support life needs and activities. Investors are starting to recognise this too, and should feel confident in demanding and finding the best outcomes for their money.

This article was prepared by BT, a part of Westpac Banking Corporation ABN 33 007 457 141, AFSL and Australian Credit Licence 233714. This information is current as at 18 October 2019.  This article provides an overview or summary only and it should not be considered a comprehensive statement on any matter or relied upon as such.  It does not take into account your personal objectives, financial situation or needs and so you should consider its appropriateness, having regard to these factors before acting on it. This information may contain material provided by third parties derived from sources believed to be accurate at its issue date. No company in the Westpac Group accepts any responsibility for the accuracy or completeness of, or endorses any such material. Except where contrary to law, we intend by this notice to exclude liability for this material.