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Personal investments market to grow 4.4% p.a. over 15 years
The personal investments market is under recognised and market providers need to understand the opportunities in the sector to remain competitive and gain market share, according to Rice Warner.
In an analysis, the research house said there were three forces that would have the biggest impact on the $2.85 trillion personal investments market as it was headed to grow at 4.4% per annum over the next 15 years.
The first force was superannuation legislation as individuals considered their overall financial position and future financial needs, including both super and non-super investments as a holistic position.
The analysis said recent legislative changes had reduced the flow of savings to super products, especially from wealthier investors.
The second was product development as Rice Warner expected exchange traded funds (ETFs), enhanced index funds, and environmental, social and governance (ESG) factors to have a large impact on the market.
The third force was governance and technology with landmark changes such as the Future of Financial Advice and the upcoming Design and Distribution Obligations shaping the governance space.
“As these changes come into effect, we expect continued scrutiny of the provision of financial advice and the remuneration models used within the sector, as well as governance pressure on the financial services industry, particularly in respect of product design,” it said.
“More generally, there is a heightened sense of community expectation in relation to the governance standards that investors expect their investment managers and providers to live up to.”
On technology, Rice Warner said consumers and investors were accustomed to sophisticated and convenient service delivery via web and mobile applications.
“The drive for efficiency and competitive advantage coupled with the continued expansion of internet and mobile functionality has seen ongoing innovation both in products and services, leading to a demand for more accessible, transparent and low-cost products,” the analysis said.
“We anticipate that market participants with a focus on these products can expect to see a larger market share, with newer, younger participants favouring these products.”
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The future of superannuation policy remains uncertain, with further reforms potentially on the horizon as the Albanese government seeks to curb the use of superannuation as a bequest vehicle.
Superannuation funds will have two options for charging fees for the advice provided by the new class of adviser.
The proposed reforms have been described as a key step towards delivering better products and retirement experiences for members, with many noting financial advice remains the “urgent missing piece” of the puzzle.
APRA’s latest data has revealed that superannuation funds spent $1.3 billion on advice fees, with the vast majority sent to external financial advisers.
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