Financial adviser education is the next challenge for the Australian listed investment company (LICs) market segment, as significant interest is providing an opportunity for growth, an industry chairman said.
“There are a small group of advisers that are big believers in LICs but in the broad spectrum of advisers, it has always been managed funds,” Wilson Asset Management (WAM) Capital chairman Geoff Wilson told InvestorDaily.
“It’s a brave new world for someone who hasn’t played in that space. Therefore, the challenge for LICs is to communicate effectively with the adviser network.”
Australia currently has about 60 LICs listed on the Australian Securities Exchange with a value of about $16.4 billion.
The sector could easily double in number and size over the next decade but would be dependent on advisers’ understanding of the LIC structure, Wilson said.
“That’s the major challenge and the LICs industry is aware of that so it’s working on putting together performance tables that can show funds on a like-for-like basis and after tax performance indices to measure against,” he said.
As advisers are not familiar with the structure of LICs, the questions Wilson is receiving from advisers comes down to the process and how stocks are picked.
“It’s very much like researching a managed fund and how they manage the money is what advisers and research houses are focused on,” he said.
“Advisers need to get their head around the structural strength of LICs in that it is closed ended and are not impacted like managed funds are by redemptions.”
The industry needs to work together to deliver strategies to support financial advisers and make it easier for them to compare one LIC against another, he said.
