Prepared For: definition, IFSA Conference 2005 By: Linda McAvenna Dissecting the investor psyche: what motivates our clients

2 Setting the scene An Australia-wide Snapshot in 2005 Managed Investments in vs 2004 – trends in the marketplace Dissecting the investor psyche Financial Advice in 2005 What have we learned Agenda

Setting the Scene

4 This research is aimed at assisting IFSA members in identifying what motivates managed investment (managed fund and superannuation) customers With a view to: –encouraging higher participation in managed investments [funds and superannuation] –improving investor sentiment –building a more confident investor base –educating and engaging the target market Purpose of the research

An Australia-wide Snapshot in 2005 [General Population Survey]

6 An Australia-wide Snapshot in 2005 General Population telephone survey n=802 –A representative sample across Australia –To determine incidence of managed fund and superannuation investors, and –Usage of financial advisers across the Australian community nationally Fieldwork conducted in July 2005

7 Current investments Q1. Do you currently have any of the following investments either in your own name, in joint names or as part of an investment club? Base: General Population n=802 Higher among: Empty Nesters 32% H’hold income $130k +36% Use Fin Adviser 37%

8 Currently use a financial adviser Q7. Do you currently use the services of a financial adviser or planner? Base: General Population n=802 Based on a representative sample of Australian adults

9 Likelihood of using a financial adviser over the next 12 months Q16A/26. In the next 12 months, would you say that you are… Base: Do not currently of a financial adviser n=602 Based on Australian adults who do not currently use a financial adviser Mean Score /4 2.0

10 Financial advice in 2006? Base: General Population n=802 Q7. Do you currently use the services of a financial adviser or planner? Q16a. In the next 12 months, would you say that you are…

Managed Investments in 2005 [Investor Sample]

12 Investor sample composition n=592 with managed investments…n=592 with managed investments… –n=354 with $25k plus in managed funds –n=238 with $25k plus superannuation (but no managed funds) Total n=592 investors with managed funds and/or superannuation Fieldwork conducted in July 2005

13 Main issues currently influencing investment decisions Q1. From your perspective, what are the top three issues currently facing the investment markets that are affecting your investment decisions? Base: All investors n=592

14 Current investments Q1. Do you currently have any of the following investments either in your own name, in joint names or as part of an investment club? Base: All investors 2005 n=592

15 Perceived performance of investment options over past 12 months Q2. Overall, how well would you say each of the following investment options has been performing over the last year? Please use a scale of 0 to 10 where 0 represents extremely poorly and 10 represents extremely well. Base: All investors 2005 n=592

16 Q2. Overall, how well would you say each of the following investment options has been performing over the last year? Please use a scale of 0 to 10 where 0 represents extremely poorly and 10 represents extremely well. Base: All investors 2005 n= ‘Top 2’ (9,10) % Perceived performance of investment options by whether currently use financial adviser 32

Managed Investments Key Choice Factors Importance vs. Performance in 2005

18 1.I trust my money is safe 2.Delivers on promise 3.Long term returns on investment (more than 5 years) 4.Fees and charges 5.Reputation of investment operator / fund manager 6.Transparency in all aspects of operations 7.Risk associated with the investment 8.Experts make the decisions 9.Tax effectiveness 10.Ease of accessing your money 11.Ease of moving money / funds between products 12.No stress 13.Advice / recommendation from financial adviser / planner 14.Ethically / socially responsible 15.Range of product options available 16.Short –term return on investment (2-5 years) 17.Awards or star ratings 18.Level of minimum investment Managed Investments in 2005 Key Choice Factors* * Derived from qualitative investor research conducted in 2004 on behalf of IFSA

19 Q9How important are each of the following factors to you when considering whether or not to invest in managed investments (managed funds / unit trusts and superannuation funds). Please rate each of the factors on a scale from 0 to 10 Q10How satisfied are you with the performance of your managed investments (managed funds / unit trusts and superannuation funds) in relation to each factor listed below. Again, please rate each factor on a scale from 0 to 10

20 Key Choice Factors Importance vs. Performance in 2005 Performance Importance Average I trust my money is safe 2.Delivers on promise 3.Long term returns on investment (more than 5 years) 4.Fees and charges 5.Reputation of investment operator / fund manager 6.Transparency in all aspects of operations 7.Risk associated with the investment 8.Experts make the decisions 9.Tax effectiveness 10.Ease of accessing your money 11.Ease of moving money / funds between products 12.No stress 13.Advice / recommendation from financial adviser / planner 14.Ethically / socially responsible 15.Range of product options available 16.Short –term return on investment (2-5 years) 17.Awards or star ratings 18.Level of minimum interest

21 Perceived performance of managed investments by whether currently use financial adviser Currently use Financial adviser / Planner Yes (n=336) score / 10 No (n=246) score / 10 I trust my money is safe Reputation of investment operator / fund manager No stress Ease of accessing your money Level of minimum investment Tax effectiveness Ease of moving money / funds between products Range of product options available Experts make the decisions Advice / recommendation from financial adviser / planner Delivers on promise Risk associated with the investment Transparency in all aspects of operations Ethically / socially responsible Long term returns on investment (more than 5 years) * Fees and charges Short-term return on investment (2-5 years) Awards or star ratings * 10+ yrs

2005 vs 2004 Trends in the Marketplace

23 Perceived performance of investment options over past 12 months Q2. Overall, how well would you say each of the following investment options has been performing over the last year? Please use a scale of 0 to 10 where 0 represents extremely poorly and 10 represents extremely well. Base: All investors 2005 n= n=600 * 2005 only ‘Top 2’ (9,10) %

24 Importance of Key Choice Factors 2005 vs Mean Score / I trust my money is safe  0.3 Delivers on promise Long term returns on investment (more than 5 years) *  0.3 Fees and charges  0.4 Reputation of investment operator / fund manager  0.1 Transparency in all aspects of operations  0.1 Tax effectiveness  0.2 Experts make the decisions  0.1 Risk associated with the investment  0.1 Ease of accessing your money  0.3 Ethically / socially responsible Advice / recommendation from financial adviser / planner  0.1 No stress  0.7 Ease of moving money / funds between products  0.3 Range of product options available  0.3 Short-term return on investment (2-5 years  0.6 Awards or star ratings  0.7 Level of minimum investment  0.9 * 10+ yrs

25 Performance of Key Choice Factors 2005 vs Mean Score / I trust my money is safe Delivers on promise Long term returns on investment (more than 5 years) *  0.2 Fees and charges  0.5 Reputation of investment operator / fund manager  0.1 Transparency in all aspects of operations Tax effectiveness  0.1 Experts make the decisions Risk associated with the investment Ease of accessing your money  0.1 Ethically / socially responsible  0.1 Advice / recommendation from financial adviser / planner  0.2 No stress  0.3 Ease of moving money / funds between products  0.1 Range of product options available Short-term return on investment (2-5 years  0.1 Awards or star ratings  0.4 Level of minimum investment  0.1 * 10+ yrs

26 Key Trends 2005 vs Importance vs. Performance Performance Importance Average I trust my money is safe 2.Delivers on promise 3.Long term returns on investment (more than 5 years) 4.Fees and charges 5.Reputation of investment operator / fund manager 6.Transparency in all aspects of operations 7.Risk associated with the investment 8.Experts make the decisions 9.Tax effectiveness 10.Ease of accessing your money 11.Ease of moving money / funds between products 12.No stress 13.Advice / recommendation from financial adviser / planner 14.Ethically / socially responsible 15.Range of product options available 16.Short –term return on investment (2-5 years) 17.Awards or star ratings 18.Level of minimum interest

Dissecting the Investor Psyche [Investor Segmentation]

28 Dissecting the investor psyche - Investor Segmentation Confident - DIY It’s All Too Hard Cruising – Not Engaged Confident – Needs Support Stressed – Needs Support

29 Confident DIY19% Predominantly male Wide investment portfolio including direct shares, managed funds, superannuation and investment property Most likely to have direct shares and investment property 3 in 5 have $100K+ invested in superannuation Optimistic about their financial future Clear financial goals Actively plan their finances Knowledgeable about financial matters in general Less likely to use a financial adviser (than some other investor segments)

30 Confident – Needs Support23% Most likely to have managed funds 3 in 4 have $100K + invested in superannuation Have clear financial goals Optimistic about their financial future Inclined to be over 50 years Actively plan their finances By far the most likely investor segment to use a financial adviser

31 Stressed - Needs Support20% Similar to ‘Confident – Needs Support’ investors in that they: –Do try to actively plan their finances –and do have clear financial goals 1 in 2 have $100K + invested in superannuation But are… –less optimistic financially –more stressed about financial matters A higher incidence of under 40 year olds More noticeable amongst females More likely to use a financial adviser (than some other investor segments)

32 Cruising – Not Engaged21% Most have direct shares 2 in 3 have $100K + invested in superannuation Not particularly optimistic about their financial future but… –not stressed about it either Don’t consider themselves experts in financial matters but… –would not pay anyone to manage their financial affairs. More likely to be over 50 years As with the ‘Confident – DIY’ –Predominantly male –Less likely to use a financial adviser

33 It’s All Too Hard17% Least likely to have managed funds 1 in 3 have $100K + invested in superannuation Believe financial planning takes up too much time – prefer to spend their time on something else Don’t enjoy making financial decisions Claim to be lazy when it comes to managing their finances Agree they don’t pay enough attention to their finances Females most likely to be in this segment A younger (under 40) skew

Financial Advice in 2005 [Investor Sample]

35 Currently use a financial adviser Q13. Do you currently use the services of a financial adviser or planner? Base: Investors n=592 Based on Managed Investment customers

36 Use of a financial adviser – by investor segment Q13. Do you currently use the services of a financial adviser or planner? Base: Investors n=592

37 Frequency of contact with financial adviser Q17. How frequently does your financial adviser/planner initiate face-to-face contact with you? Would it be … Q18. And how often does your financial adviser/planner initiate other types of contact with you, for example, by telephone, fax, or letter? Would it be… Base: Currently use a financial adviser n=336

38 Satisfaction with financial adviser Q21a. How satisfied would you say you’ve been with your personal experience with financial advisers/planners? Base: Currently use a financial adviser n=336 Mean Score /

39 Reliance on financial adviser Base: Currently use a financial adviser n=336 Mean Score / Q22. Which one of the following statements BEST applies to you?

40 Value of current adviser Q25. I would now like you to consider the value you place on your financial adviser or planner. I am going to read out some more statements. Using the same 0 to 10 scale, where 10 means you ‘strongly agree’ and 0 means you ‘strongly disagree’, please tell me whether you agree or disagree with each statement as they relate to you. You may give any score between 0 and 10.

41 Value of current Financial Adviser / Planner As a result of using a financial planner or adviser I … Base: Currently use a financial adviser n=336

42 Value of current Financial Adviser / Planner cont. As a result of using a financial planner or adviser I … Base: Currently use a financial adviser n=336

43 Likelihood of using a financial adviser over the next 12 months Q26. In the next 12 months, would you say that you are… Base: Do not currently use a financial adviser Investors n=256 Investors who do not currently use a financial adviser Mean Score /4 1.95

44 Financial Advice in 2006? Base: Investors n=592 Q26. In the next 12 months, would you say that you are… Q13. Do you currently use the services of a financial adviser or planner?

What have we learned

46 Investor sentiment 2005 vs Over the past 12 months managed funds are perceived to have performed slightly better than superannuation or investment property, though not as well as direct shares Compared with 2004, satisfaction with managed investments (funds and superannuation) has shown a marked increase, (as has satisfaction with direct shares), though not surprisingly, satisfaction with property investment has slumped In 2005, managed investment customers appear to be … –‘less stressed’ than they were 12 months ago –less concerned about fees and charges –less concerned about the short-term (2-5 years) return on managed investments –less concerned about awards or star ratings –less concerned about the levels of minimum investments However, the biggest ‘gap’ in terms of importance vs. performance relates to ‘fees and charges’ which suggests that investors feel that more improvements can be made in this area

47 The value of financial advice Nearly 1 in 4 Australian adults currently uses a financial adviser or planner, and this is set to rise in 2006 Amongst adults with managed investments, the figure is significantly higher at close to 6 in 10 – this figure is also likely to increase in 2006 Satisfaction with financial advisers/planners is highest amongst investors who have a face-to-face meeting with their adviser/planner at least every six months Investors who currently use a financial adviser/planner are more satisfied with the performance of managed funds and superannuation over the past year (than investors who do not currently use one) And most importantly… Satisfaction with managed investments, across all 18 identified managed investment key choice drivers, is noticeably higher amongst investors who currently use a financial adviser/planner

Thank you