Planners are the flavour of the month

Global demand for financial advice is surging as the world grapples with the fallout from the coronavirus. For example, deVere Group, an international consultancy, saw the number of new client inquiries for financial advice lift 24% in April.

“Suddenly, unexpectedly, many have realised that they didn’t have sufficient money behind them, they didn’t have contingency plans,” says chief executive Nigel Green. “This, as they know, could have consequences for the lifestyles and life opportunities of themselves and loved ones and, for those in business, for the long-term sustainability of their firm.”

Green suggests the focus has now shifted from “I should have” to “I need to have”. “This most unusual situation has dramatically underscored that no one really knows what is around the corner. Now more than ever people are seeking to be as financially prepared as they can for any eventuality.”

According to a deVere poll of existing and prospective clients, 52% prefer face-to-face advice while 42% like video-call platforms like Zoom. Only 6% of respondents want advice over the phone.

“But video communication is only 10% behind [face to face], which is quite something as it is a new platform for most people,” says Green. “It underscores that increasingly people want bespoke financial advice combined with innovative technology.”

He adds that most new clients are seeking advice on savings plans, investments, foreign exchange, pensions, and tax and retirement planning.

Six out of 10 experts say now is not a good time to buy property, according to research from comparison site Finder. It asked property experts and economists how much they expect prices to drop by 2021, considering the effects of the coronavirus pandemic.

Among the capital cities, Hobart is expected to see the sharpest average price drop of 10.5% by 2021, with Sydney a close second at 10.2%.

Darwin and Melbourne are next with drops of 9.5% and 9.2% respectively, while Brisbane, Perth and Adelaide all have forecast drops of around 8%.

Canberra is expected to weather the storm best, with a forecast drop of only 6.4%.

Graham Cooke, insights editor at Finder, says with increasing unemployment and growing economic uncertainty, house prices will slide over the rest of the year. “Both house hunter and seller demand has weakened in the last month [April] as Australians hunker down to help stop the spread of coronavirus,” he says. “It’s not just the experts – we’ve also seen consumer sentiment about whether it is a good time to buy drop from a peak of 60% in July 2019 to just 42% in April.”

Global demand for ESG (sustainable) investing is holding strong amid the coronavirus pandemic. Morningstar research found that sustainable funds received inflows of $70.8 billion through the first quarter of 2020, compared with outflows of $384.7 billion across the overall fund universe.

Sustainable fund assets under management now stand at $1.3 trillion, down 13% from $1.5 trillion at the end of 2019.

Europe continues to lead the way, boasting 81% of global sustainable assets. Yet interest in sustainable investing is growing elsewhere. Inflows in the US reached $16.3 billion in the first quarter, far more than the previous record set in 2019’s fourth quarter.

Australasia, meanwhile, saw inflows of $495 million through the first quarter, evenly split between active and passive investment strategies.

With interest rates at all-time lows, income investors have to take greater risks. They now have to generate income through capital gains made by growth assets such as corporate bonds and shares.

“As interest rates have come down over the past decade, we’ve had to change the way that we look at income – it’s become quite driven by growth assets,” says Angela Ashton, director at Evergreen Consultants. “Having the central part of a portfolio with respect to income production in growth assets like property or shares introduces a lot more risk, unfortunately for clients, but that’s the way you need to generate income today.”

Financial planner Jamie Nemtsas, from Wattle Partners, proposes that high-income investors take a “totalreturn-oriented” approach.

“High income is generally more risky and ‘sustainable growth’ looks less so at the moment, if you think in terms of total return (capital appreciation plus income). You might be looking at a regional building company in NSW that has got a strong dividend, on paper; but it’s going to be far better to hold something like Google that has got a massive audience, low cost of capital, great balance sheet, and you’re sacrificing some kind of regular income for a very, very strong company.”

Here the investor “harvests” the capital gains and re-injects them into an income-producing bucket.

“With a growth story like CSL, you can sell portions of that holding for years and keep putting [the proceeds] into cash. Then you have another stock – it might be Amcor – that is trading sideways price-wise but it’s generating income,” says Nemtsas.