Advice providers have critical role in volatile times

Global CEO of Vanguard Investments, Bill McNabb, told SMSF Association delegates at the 2017 National Conference that it is going to take extra care and diligence to navigate through the investment volatility and that investors will be really relying on the advice they get from advice providers.

McNabb said: “The rise in populism and the impact of 10 to 20 years of globalisation and technical revolution are changing the landscape and we really have to keep that in mind.

“I think that these forces are driving geopolitical uncertainty and we should expect more uncertainty. The downside for the investor here is that they are not going to get compensated for it. That is a tough message to take to them.”

Speaking in a question and answer format with Association chairman Andrew Gale, McNabb said on the issue of shifting trends affecting advisors: “The move to fee based has actually been a really good thing for the end client and our advisor community.

“There is a lot of transparency now around fees and more transparency in general than ever.”

McNabb added: “There has been a lot of discussion around the rise of robo advice in the US. There is going to be disruption unless you take advantage of it yourself. What we are seeing is many of the best practices try to take the best from the technology and add their own value proposition to help the client.”

McNabb also discussed the rise of ETFs and a change of mindset for investment outcomes driven by asset allocation rather than securities selection.

“Now what you see is a value proposition that is ‘let’s understand your goals much more fully and we will get you into the right asset allocation.’ Very importantly, and this is the key, we will keep you in that asset allocation, we will save you from yourself when things get tough and add discipline that will actually pay off. I call it the advisors alpha. This is where the advisors actually add tremendous value.”

Also speaking about the shift for investors to the post retirement phase, McNabb added: “Everyone talks about potential solutions but I think the answer is in more sophisticated advice around well thought strategies where you really do the math for the clients.”