ACI survey highlights importance of financial advisers

A survey undertaken by the Association of Collective Investments (ACI) has highlighted the importance of financial advisers when investors make investment decisions.

“More than half of all those surveyed are using financial advisers, as they believe in consulting a professional to plan for their future,” says Di Turpin, ACI Chief Executive.

“Advisers are consulted for investment recommendations, regular feedback on financial goals as well as investment planning in order to achieve specific investment targets.”

Some three out of every 10 unit trust investors invest through an independent broker with 2 out of 10 investing via a financial adviser from a bank or an insurance company.

The survey showed that investors have a very positive view of unit trusts as an investment vehicle, with the funds being seen as suitable for the average investor and not only sophisticated investors. Unit trusts were also viewed as a reliable long term investment and the best vehicle for diversifying portfolios.

But while the survey results have underscored the popularity of unit trusts and that knowledge about unit trusts was generally fair, Turpin says the industry still needs to do more to educate consumers on how to invest.

“The main reason for investors not owning unit trusts is a lack of knowledge – they did not know enough about the product or where or how to buy it. They also felt they had insufficient capital to invest in unit trusts.

“It is encouraging that they did not think unit trusts were too complicated or too risky or even a poor investment and there was no distrust or disinterest. Most would consider investing if they had information on unit trusts.

The most important aspects considered when investing in unit trusts are the fund’s future potential, any penalties when withdrawing money, as well as the investment risk. Of least importance was the minimum investment amount.

The survey showed that the reputation of the unit trust company is by far the key aspect when selecting funds, followed by the need to diversify investments. The quality of service and administration was also an important factor.

The main advantage of unit trusts was seen as the ease of investing – buying unit trusts and having access to capital invested. Other positives were the ability to generate income and grow capital, the flexibility to stop and start investing and the ease of selling or switching unit trusts.

More than half of unit trust investors hold their investments through one management company with a further third investing via another product structure such as an endowment or retirement annuity.

Most investors have used a mixture of regular monthly investments and lump sums or only regular monthly investments to invest. Investors surveyed keep their unit trust investments for at least three years – those who have sold during the past two years have needed their capital to meet an expense.

Investors who do not currently own any unit trusts consider possible returns as the most important aspect when thinking about investing in unit trusts. The minimum monthly investment amount, as well as the fees charged are also of importance, but less so than the possible returns.

About half of unit trust investors indicated that they have switched unit trust funds in the past – the main reason is because a financial advisor advised them to do so, or due to market conditions or their personal circumstances.

Generally, most investors review their investment portfolio at least once a year. Email and quarterly investment summaries are preferred for communication from their management company.