Companies specialising in direct shares are in the minority at the moment, but there may be a movement that way very soon. Peter Trounce, owner of Lifeplan Financial Pty Ltd says he lost confidence in the funds management industry during the financial crisis because of frozen funds which still charged fees.
He has just joined the Omniwealth dealer group, which he says is also attuned to the direct share/property path, and will provide him with the tools to manage his clients’ portfolios.
“My approach to investing my clients funds is to use direct securities (shares, trusts and fixed interest) listed on the stock exchanges. I do use some managed funds but only for the international component and some fixed interest to get the client’s balance right,” he says.
Although the process saves clients about 1% per annum in fees, Trounce says it takes a lot of work, and that’s probably why more advisers aren’t doing it at the moment.
“…There’s more work involved. It’s very easy for an adviser to put clients into a balanced or a growth fund with a fund manager and then let it go, and many of them get quite good results.”
Direct share investment involves a lot of research on behalf of the adviser, and the ability to analyse companies. Trounce has a team of three behind him, as well as a background in accounting. He says it’s not something every adviser could do, and it’s not something many want to do.
The misunderstanding around the share market doesn’t help, he says. Many people believe it to be very risky, but it consists of many components; some areas are risky, but there are some that are quite conservative. He says fund managers tend not to identify that spectrum and “just go across the board”.
Benefits you could expect to offer your clients, according to Trounce, include:
I can target their needs better. For example, a retiree will have a larger component of Blue Chip Industrial High Yielding shares which I have returning a gross dividend of close to 10% including franking. Whereas a younger wealth accumulator will have more growth stocks.
I save my clients about 1% pa in fees which is about what fund managers charge. I also don’t use wraps or master trusts which cost an additional 0.5% to 0.9% pa.
In the longer term I am getting better results than most fund managers and getting them consistently.