The role of the financial adviser has changed dramatically in recent years due to the proliferation of investment products and downward pressure on fees.

To set themselves apart in this new landscape, financial advisers are increasingly employing low-cost passive investment products alongside the expertise of discretionary fund managers as they seek to meet or exceed the long-term goals of their clients.

In a recent CoreShares-hosted webinar, local wealth managers noted that shifting client demands have prompted financial advisers to adapt.

Partly due to the relatively low returns from the South African market in recent years, clients have become more fee-sensitive, and are looking for outperformance with reduced costs.

In response, financial advisers are increasingly incorporating passive investment strategies – including exchange-traded funds (ETFs) – and discretionary fund management services into client portfolios.

The passive component reduces overall portfolio costs, improves diversification, and enhances both the predictability of returns as well as transparency.

On the other hand, the actively managed component is aimed at delivering above-market returns. Due to the wide range of investment products and stocks in the market today, and how difficult it is to beat the market, financial advisers are increasingly leaving the active manager selection process in the hands of specialised discretionary fund managers.

This promotes efficiencies and means financial advisers can focus their efforts on providing sound advice and on keeping their clients invested through the cycle so that they remain aligned to their long-term financial goals.

Debra Slabber, Business Development Manager at Morningstar Investment Management, said on the webinar that the firm’s research shows that clients look for advisers who can help them reach their financial goals, who have the relevant skills and knowledge, and who communicate and explain financial concepts well and in an understandable manner.

Morningstar’s research also shows that it is important for advisers to ensure that expectations are aligned and clearly communicated upfront, meaning goal setting is an essential undertaking.

To achieve those goals, advisers have a critical role to play in encouraging investors to ‘stay the course’ – to remain invested – and to avoid making impulsive decisions when market conditions change. This means that ongoing communication is an important responsibility for the modern financial adviser, particularly when markets move lower.

The role of passive strategies

Michelle Noth, Client Coverage Executive at CoreShares Asset Management, noted that in the five years to end-June 2020, 95% of active managers underperformed the S&P SA 50 Index after fees. Since only 5% of managers beat the benchmark, wealth managers need to carefully select the managers they work with.

This also means that it makes sense for investors to use passive products in the core of their portfolios to deliver market-related returns in a low-cost manner. ETFs and other passive strategies can be blended with an actively managed component in an effort to boost returns.

Passive strategies deliver more predictable returns, and importantly, they help to keep clients invested, particularly through turbulent market conditions. As an example, many investors sold their equity holdings during the sharp downturn in early 2020 – and then missed out on the strong recovery rally that followed.

We invite you to watch this on-demand webinar to explore these concepts further:

Featuring Overview


Michelle Noth

Michelle joined CoreShares in May 2019 as the Client Coverage Executive. Prior to this, she spent 13 years working in the Financial Services sector in London, where she specialised in ETFs and passive investment solutions (working at iShares and BNP Paribas among others). Michelle graduated with Honours in Business Science from the University of Cape Town in 2004, majoring in Finance and Financial Accounting. Later, she was admitted as a CFA Charterholder in 2010. Michelle is passionate about serving clients and creating cost-effective investment solutions that consistently achieve the best possible returns.

Debra Slabber

Morningstar Investment Management
Debra Slabber, portfolio specialist at Morningstar Investment Management South Africa, is responsible for the institutional business relationships and portfolio management within the South African business. Debra works closely with the global investment team to bring best practice investment ideas to the South African business and its clients. Prior to joining Morningstar, she spent four years at PSG Asset Management as a senior fund specialist, predominantly responsible for growing the business in the greater Gauteng region. She started her career at Standard Bank, fulfilling various roles including a financial analyst within personal markets and financial manager of unsecured lending products. She later moved across the business to Corporate and Investment Banking and spent three and a half years as a product controller for the interest rate trading and structured derivatives desks. Debra has been involved as a lecturer for MBA students at Milpark Business School. She holds a BCom, with a major in investment management, and a BCom (Hons) in financial management from the University of Pretoria. She is a Chartered Financial Analyst (CFA®) and has 12 years’ experience in the financial services industry.

The changing role of the modern financial advisor: Tools and Tips

Learning outcomes:

  • Learn how IFAs can improve their client’s bottom line and bring more certainty to retirement planning by including passive allocations
  • Unpack the changing role of the modern financial advisor
  • Hear from peers during a panel debate and then join us for a live Q&A discussion afterwards

Your Passport to Passive is a series of exclusive webinars which take an in-depth look at the pros and cons of passive investing. We unpack what it really means and debunk old myths using real world examples, so you can properly understand all the benefits of this investment strategy. It’s a must for IFAs, fund buyers and portfolio managers alike.

Read more about and access the recordings of the other three webinars in the series:

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