Speaking to InvestorDaily, Contango Microcap Ltd national distribution manager Boyd Peters pointed to a “structural revolution in the wealth management industry”.
“SMSFs and high-net-wealth investors prefer to invest directly in blue-chip equities, [listed investment companies] and ETFs over managed funds,” Mr Peters said.
‘Traditional’ fund managers may still be giants by size, he said, but added that they are losing market share and looking to remain desirable to higher-end investors.
“I have not seen such a structural shift in financial planner behaviour since the 1990s when master trusts and wraps gained widespread acceptance,” Mr Peters said.
Self-directed investors prefer direct equities to unit trusts, and “the wealthier you are the more you prefer them”, he said.
Unit trusts are regarded by many SMSF investors as “another costly, tax-inefficient layer that underperforms the higher returns they believe they can get elsewhere”, Mr Peters said.
The trend of fund managers offering listed investment companies will continue, he predicted, noting that “it is conceivable that financial adviser offices/groups could one day create and issue their own LIC with specially designed asset allocations and dividend policies”.
A blend of a unit trust and a LIC model could be the solution.
“With individual adviser groups managing hundreds of millions and in some instances billions of dollars for thousands of clients, creating a $100 million LIC that invests in blue-chip Australian equities is imaginable,” Mr Peters said.
