On March 3 and 5, 2020, S&P Dow Jones Indices hosted its 10th Annual Australian Indexing & ETF Masterclass series in Melbourne and Sydney. The events saw over 200 financial advisers come together in a week that, until the week after, had been the most volatile for financial markets since the stock market rout of 1987. That advisers were willing to spend four hours on their professional development at a time when many clients would have needed reassurance to “stay the course” with their current portfolios, or to make any changes, is an extremely positive sign, particularly when so much of the content and discussion revolved around the client.
The delegates to our masterclass had the privilege of hearing Michael Jones, a U.S.-based financial adviser, share his thoughts on the experience that advisers in the U.S. underwent as they transitioned from a brokerage model (i.e., commission-based revenue) to a fee-based model, most commonly AUM related. Michael was a captivating speaker and eloquently described that transition, along with the benefits that accrued not only to clients, but also to financial advisers. The key benefit was that now advisers and clients had aligned interests to grow AUM. The Australian experience has been somewhat different, and Michael was at pains to point out that the U.S. experience was not a template for Australia, but that there may be some valuable learnings for the financial advice industry here in this country.
Due to increasing interest in environmental, social, and governance (ESG), our 2020 masterclass included a session on S&P DJI’s approach to this theme. Priscilla Luk, Managing Director & Head of Asia Pacific, Global Research & Design at S&P DJI, presented from Hong Kong via Skype and provided background on why investors around the globe should consider integrating ESG themes into their investment portfolios. Priscilla also addressed the international growth of ESG assets and why ESG data is so vital to successfully accomplish ESG integration.
“Masterclass Week” always provides an opportunity to hear directly from a large number of financial advisers, and in particular their “what keeps me awake at night” concerns. Apart from the conversations with advisers at the events, we also set a cracking pace to meet advisers in their offices during the week. Michael Jones was a participant at these meetings in Melbourne and Sydney, but also this year in Toowoomba, Queensland.
The overarching theme emerging from these meetings is that advisers are continuing to work through the implications for their businesses, and ultimately their clients, in the aftermath of the recommendations, as well as the heightened compliance requirements from the Hayne Royal Commission. These themes include the hard intellectual work of determining a firm’s value proposition to clients in a meaningful manner. This may include a focus on “asset gathering” and outsourcing “asset allocation” and “asset management” to third-party partners. Alternatively, it may include building their own model portfolios of ETFs, or even building bespoke blends of ETFs and direct equities and managed funds.
“Masterclass Week” is also the time of year for the release of our SPIVA® Australia Year-End 2019 Scorecard. As in previous scorecards, the results show that it remains difficult for active managers to outperform their respective index benchmarks across most asset classes, with the exception of the Australian Equity Mid- and Small-Cap fund category. This result, however, was not persistent over the five-year period.
If you wish to learn more about the masterclass, or have a discussion around SPIVA, please email or phone me: firstname.lastname@example.org, +61 (0)2 9255 9869.The posts on this blog are opinions, not advice. Please read our Disclaimers.