FYI | May 21 2008
By Chris Shaw
Sentiment towards equity markets continues to improve as the global credit crisis fades further into the background, a national survey of financial advisors undertaken by Macquarie Equity Markets Group showing 70% of respondents expect modest to high growth from equities this year.
Within this group 58% of planners predicted equity markets would grow at between 5-10% this year, while 12% were forecasting returns of between 10-20%.
In contrast only three percent of advisors suggested clients don’t put their money into the sharemarket at present, while those who favour equities were broadly split between those favouring Australian shares (45% of respondents) and those seeing international markets (49%) as offering the best scope for good returns.
Macquarie Equity Markets Group associate director Pia Cooke notes almost 40% of advisors have clients looking to buy shares following the pullback in markets in recent months, while almost half of the advisors in the survey sees the growth potential on offer as a reason to recommend equities at present.
On the flip side, about 55% of advisors taking part in the survey reported clients see it as too early to yet consider putting additional money into equity market investments.
Ms Cooke notes a growing area of interest has been structured products, which are becoming increasingly attractive given they offer the combination of capital protection along with enhanced after tax returns. Changes to superannuation laws to allow for some forms of gearing are a big driver of this increased interest, Ms Cooke suggesting it reflects investor concerns over having enough saved for retirement as well as the opportunity to prudently leverage equity exposure to help achieve this goal.
Almost half of the advisors in the survey reported increased use of structured products for tax planning purposes, while more than 60% of advisors were prepared to recommend such products to clients with self-managed superannuation funds.
The break-down of gearing products in which clients were investing showed 61% using margin lending, 22% investing in instalment products, a similar percentage using protected equity loans and 20% investing in structured products offering capital protection. Fourteen percent of advisors report their clients don’t invest in any geared products.
In terms of allocation of funds 41% of advisors noted the major concern of clients was where to invest funds at present given the volatility in markets, while 25% of advisors noted clients were primarily concerned with having enough invested to fund their retirement needs.
