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Advisers more bearish than clients

This year is the first time financial advisers have been less optimistic than retail investors, with advisers only anticipating capital gains of 1.3% over the next 12 months from local shares.

That's according to the latest data from Investment Trends which shows advisers remain bearish, despite the All Ords having rebounded by over 30% since the March sell-off.

"At the start of the COVID-19 lockdown, financial planners' capital gain expectations dipped below zero temporarily but had since recovered slightly. 2020 is the first time we observe planners being less optimistic than retail investors in their outlook for domestic stocks," Investment Trends research director Recep Peker said.

Surveying advisers, Investment Trends found 63% of advisers have most often told clients to maintain a longer term view, yet are more likely to advise clients to investment in cash and reduce market exposure.

"Despite their bearish sentiment, planners aim to achieve the best outcomes for their clients - both in the short and long term horizon. To meet their top priorities of diversification (66%), liquidity (38%) and capital growth (37%), planners most often intend to expand their product set and prioritise high quality asset managers," Peker said.

It comes as advisers struggle to generate income for their retiree clients in the low interest rate environment, according to 66% of those surveyed. Increasingly, mitigating market risk and educating retirees on their finances are also becoming difficult.

Advisers are more likely to favour flexible products, especially with the ability to access funds when required (56%) and alter income levels (53%), Investment Trends said.

The twin headwinds of low yields and heightened market volatility have made retirement planning more challenging than ever, Peker said.

"While planners already use a range of retirement income strategies to effectively serve their retiree clients (with income bucketing and a goals-based approach most often used), they still demand more help from product providers," he said.

"To effectively help planners and their retiree clients navigate this low yield environment, it is also essential that product providers satisfy their strong desire for flexibility."

Read more: Investment TrendsRecep Peker
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