by Rob Hosking
There will be a need for more access to professional financial advice, says Russell, who hails from the United States but is currently working in Australia on superannuation issues.
"People need, during different chapters in their life, comprehensive planning assistance.
“What is changing though is a very definite move away from commission-based financial planners to fees for service.”
That is a market-driven trend both in Australia and the United States and she believes it will emerge here as well.
“There will be those who can’t afford to pay for advice and there will be a space for that.”
The recent move in Australia to open up employer-based schemes to a greater level of choice has had its difficulties, but Dawson says Russell has been applying some of the lessons learned in the United States.
In the financial area, she says, too much choice just means people put the whole thing in the “too hard” basket. “
Logically, no-one would disagree that having choice is important in our lives. But what is interesting is the emotional logic, and this is where some of the behavioural studies show that too many choices can overwhelm us and we become paralysed. We don’t’ make any decision at all.”
Learning from the US experience, she says fund managers and financial advisers need to work to create services, which make it easy for individuals to get into a diversified investment strategy, and stick to it.
“In the US we thought we could turn everybody into their own chief investment officer. But its very hard for us to keep our emotions in check and to do things like properly rebalance funds, and not chase the latest fad.”
"That approach has led to products such as lifestyle funds, which are designed to help people work out what sort of investor they are – their risk tolerance, their goals, and so forth, and then design a single solution And whether it’s a balanced or a diversified fund, you can stick with that long term and it automatically rebalances for you. It takes care of the discipline that’s required.”
The other, newer trend is towards target date funds – the investor chooses the date they wish to have the money for to retire or whatever and the fund lines up with those goals.
Rob Hosking is a Wellington-based freelance writer specialising in political, economic and IT related issues.
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