Advice in a world of increasing client expectations and involvement

The investor of today and tomorrow is looking for more from their investments and has greater expectations on how they are supported.

Finance industry insiders are seeing a move towards a more transparent and dynamic world of finance, with change driven by investor needs and demands. There is a definite shift in expectations from investors who want greater transparency and involvement in decision making.

Anecdotally, the investment industry has seen a distinct change in how investors are approaching their finances. “Five years ago, we would present a strategy and clients would pretty much just take the recommendation. Now they are a lot more involved in the decision,” says James Meade, Partner, Evidentia Group.

Jessica Brady, Financial Adviser and Co-Founder of Fox and Hare, has seen the same pattern in her business. “Clients are much more socially aware. They’ve got access to a huge amount of information and they’re technologically native,” she says.

This greater interest is also playing out in the numbers. For example, Kathy Vincent, General Manager Platforms, Investments & Operations, BT, has seen increasing uptake of the applications available to investors at BT, with more than 16,000 investor logins per week and an increased activity when markets are going up. Ms Vincent views the current Australian environment as having had an influence.

“Recent regulatory and public scrutiny has actually driven a higher degree of engagement from investors.” Ms Vincent says. 

Better education, technology and interest hasn’t lessened the need for financial service and support however. “Investors want to gain the best possible outcomes from their wealth strategies, but doing that in a trusted environment is key. The fundamentals haven’t changed for the investor,” says Meaghan Victor, Head of SPDR ETFs, Australia and Singapore, State Street Global Advisors. She views the future as technology with a human overlay, allowing advisers to focus on an investor’s individual situation with the support of experts behind them.

Ms Brady agrees with this view, suggesting that communicating with investors in a meaningful way is important. She also views coaching and support as an evolving feature for advice practices, celebrating milestones and keeping clients on track with their goals when their spending patterns change.

Continuing the theme of transparency, many investors are considering what is inside their investments and whether it fits their values. The concept of an environmental, sustainability, governance (ESG) overlay to investments is becoming more of a concern, along with ethical investing. For example, Ms Victor has found some advice practices specifically seeking an ESG version of the ASX200 for their clients to invest in, while Ms Brady recently worked with a client to remove a particular company from their investments that they had actively been protesting against.

Investors can expect more from ESG and ethical investments today. Oliver Hesketh, Partner, Sydney Consulting and Lead, Wealth Management Segment, NMG Consulting used to see an attitude that you needed to accept lower returns to invest in line with your values such that a ‘Vice Fund’ existed in the US to invest in the opposite.

“It’s coming back the other way, 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,” says Mr Hesketh.

This is supported by the Responsible Investment Association of Australasia’s Annual Benchmark Report 2019 which found responsible investment funds are outperforming many mainstream Australian and international funds1.

Increasingly, products are appearing to fill the need to see underlying investments. Mr Hesketh has seen a drive towards listed structures, in particular ETFs, while Ms Victor has seen a growth in the options and complexity of managed accounts, which can offer greater transparency and flexibility. There is more sophistication, both in products and the needs of the investors.

In saying that, the investment world is evolving to be less product-focused and more focused on the bigger picture of lifetime financial goals. “Product is now a device to implement goals, rather than the be all and end all,” says Mr Hesketh.

The ongoing evolution of the investment industry is anticipated to be a positive for investors and the industry alike. Ms Vincent describes the ongoing changes in the industry as a “next wave with a greater degree of opportunity and sophistication.” It is a necessary renaissance for the industry and investors can and should expect more as they continue to push for change.

1. https://responsibleinvestment.org/resources/benchmark-report/

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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.