Macquarie Bank survey on investment intentions

We know what you have told us about your investment intentions - mortgages and credit cards to be paid-off first and fresh investments in shares and real estate last. Here is an alternate take from Macquarie Securities and Investment Trends.

Note that while it is phrased in terms of what "clients" will do it is actually a survey of client advisors.

Financial planning clients cashed up and looking to invest in capital protected products, according to latest research

· Planners estimate over $58 billion in excess cash has been built up across their client base over the last year

· The mix of investments recommended is evolving:

o 35 per cent of planners intend to increase their use of direct equities over the next 12 months

o 59 per cent of planners intend to use structured products in the year ahead

o 87 per cent of planners intend to invest new client money into at least one alternative investment in the next 12 months, with $17.1 billion expected to be invested in alternatives over the next year.


SYDNEY 10 February 2009 – Cashed up but cautious clients are looking to invest in growth assets this year and are showing an increasing demand for capital protected solutions. These are some of the findings of new planner research launched today titled the Macquarie/Investment Trends Alternative Investments: Planner Report, which aimed to understand how advisers’ appetite for different products has changed as a result of market volatility.

Mark Johnston, Principal of Investment Trends, said the comprehensive survey of 650 financial advisers conducted in November 2008 found that $58 billion in excess cash had been built up over the last year across the planning industry’s clients. Despite continued volatility in share markets and interest rates falling to historically low levels, planners are beginning to cautiously look to invest this cash, and are looking for higher growth opportunities.

“Planners reported that many clients are shell-shocked and are cautious about making new investments in the current volatile market. This reflects the classic investment conundrum where money flows into investments following good performance when prices are high, but dries up following poor performance when prices are lower, often resulting in clients missing out on the full extent of the market upswing.”


However, advisers have clear views on what will trigger their clients into a move back to growth investments:

1. Economic stability/recovery


2. Rise in confidence


3. Stock market recovery


4. Reduction in volatility


5. Positive media coverage


6. Planners advice:


7. Already happening


The current extreme market environment has also prompted changes in the mix of investments and the types of products being recommended. Thirty five per cent of planners intended to increase their use of direct equities over the coming year, while only seven percent are planning to decrease their use. Similarly, structured products are a growth area with 29 per cent intending to increase their use of capital protected products versus only nine percent planning a decrease.

Kurt Jeston, Division Director in Macquarie Securities Group, said the report provides an invaluable insight into planners’ attitudes towards alternative investments after a tumultuous year in investment markets.

“Ongoing market volatility means planners are looking for investment solutions that allow them to weather the storm during these more turbulent times. In particular, they are looking to offer their clients exposure to investments offering higher growth potential, however they have also highlighted their shift in appetite towards more transparent and simple structures. These findings also reflect what we’re seeing in our business, with increased demand for alternative investments - and capital protected products in particular - expected this year compared to 2008,” he said.

Eighty-seven per cent of planners surveyed intended to invest new client money into at least one alternative investment in the next 12 months, with 59 per cent of planners intending to use structured products. Ten per cent of these planners are newcomers to the category. In total, $17.1 billion is expected to be directed into alternative investments in the year ahead. Alternative investments were defined as assets or product structures that were not considered ‘mainstream’.

Mr Jeston said the report shows that financial planners are adjusting their investment strategies to respond to global market volatility. “We’re working with a number of planners who are keen to give their clients access to equities following recent market falls, but are concerned about ongoing volatility. So we’re developing investment solutions in conjunction with these advisers that provide this exposure for their clients but with features that help to mitigate the risks in the current market,” he said. “This will include the release of a number of new innovative solutions over the coming months.”

In addition to protecting their clients’ capital, half of the planners surveyed cited diversification as a key reason to use alternatives, while 36 per cent were attracted to the longer term investment horizon.

Planners are hesitant about their performance expectations for the year ahead with an average expected sharemarket return of eight per cent (plus dividends). Despite expectations of moderate performance, planners are generally optimistic, not expecting volatile conditions to have a significant impact on their own business. While most planners are concerned about the challenging economic environment, the chart below shows 82 per cent said they had lost only a few or no clients since the downturn began, with profits expected to be down an average of eight per cent this financial year.


Maccquarie continues to rank highly among planners for alternative investments, with 35 per cent of planners identifying Macquarie as excellent or outstanding for alternatives.

About Macquarie Securities Group (MSG)

MSG offers a range of specialised investment, trading and risk management solutions to wholesale and retail customers in Australia, Asia, United States, Europe, Latin America and South Africa. MSG also operates the no. 1 equities research house in Australia[i], Macquarie Research Equities, and conducts the Bank’s global securities lending and equity finance activities.

MSG recognises that investors’ individual circumstances are unique and their investment requirements evolve through changing environments. As a result, MSG consults with financial intermediaries on an ongoing basis to deliver tailored solutions relevant to their clients’ needs.

MSG was formed in April 2008 following the merger of the Equity Markets Group (excluding the Funds Product Division) and the Macquarie Securities Division of Macquarie Capital.

About Investment Trends

Investment Trends is a leading supplier of decision support research to the Australian retail investment industry. Investment Trends’ clients include the regulators, all of the top five Australian banks, the top ten investment platform providers, the top five online brokers, the top seven margin lending providers, the top five contracts for difference providers, as well as leading fund managers, dealer groups, planning software providers and many other industry participants.

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