With the ASX last week announcing that it is allowing bond ETFs to trade on the market, financial planners have the last basic building block in place to recommend portfolios that are completely listed covering all major asset classes. Previously listed portfolios were limited to equities (local and global of varying strategies) and commodities. With the inclusion of bond ETFs on the ASX that may result in many financial advisers abandoning master trust and wrap platforms, whereby they used managed funds for their fixed interest exposure, to the more transparent and lower cost listed portfolios.
With the movement to fee-for-service by the financial planning industry, thanks to the Future of Financial Advice (FOFA) reforms that kick off in July, ETFs are bound to be a very popular investment vehicle by financial planners so we will undoubtedly see further cost cutting by the platforms and further consolidation as the smaller platforms struggle to stay profitable.
This change of rules by the ASX is way overdue and whilst this initial move into bond ETFs is a small step…underlying bonds must come from only two Australian bond indices (UBS Composite or S&P Australian Fixed Interest)…its bound to start a significant change in behaviour in the financial planning and investment platform industries.