Testimonial - Phil Clinton - Newell Palmer Securities

How financial planners use ASX-listed products to grow client wealth

Phil Clinton of boutique adviser group Newell Palmer Securities Pty Ltd has been advising clients on ASX listed products for over 20 years. The ability to control capital gains tax implications and tailor portfolios to meet specific client objectives are, in Phil's opinion, major benefits of going direct."Using direct shares may mean more work for both adviser and client, but there can be significant rewards.For example, many high net worth clients want to include listed investment products, such as shares, in their portfolios and being able to advise on these products enables you as an adviser to access this market segment."

Phil also cautions that listed investments are not suitable for all circumstances and for all clients."I recommend listed investments only if there is a clear benefit to the client and if the client accepts the risks and additional work involved in managing a direct share portfolio.Clients who prefer a 'set and forget' type of investment are not suited to direct securities."

When implementing a direct share portfolio for a client, Phil uses a broker to assist in the selection of securities."Based on the client assessment, the broker recommends a portfolio which is tailored to the client's investment objectives.I then review the recommended portfolio together with my client, at which point we may make some agreed changes. The final portfolio is then implemented via the broker."

For advisers that are seeking to advise on shares and other direct, listed products, Phil offers the following 10-point plan:

1.   Firstly, check to see if your dealer group or principal has appropriate licensing to enable you to advise on listed investments, such as shares, listed property trusts, hybrid securities.

2.   Attend education courses and seminars such as those offered by ASX, SIA and FPA.These are essential to acquiring a good base of knowledge of markets and products. You should be confident that you understand how these securities work and how they can be used to add value to your clients.

3.   Even if your current dealer doesn't allow you to advise on shares and other listed securities, you should educate yourself about these investments for your own career progress.Remember you may not always stay with your current dealer and in the future, you may want to service high net worth clients that have a high tendency to invest in listed securities.

4.   Be aware of your own limitations - don't advise on products you don't understand.

5.   Identify the type of broker of you want.Do you need a broker that will offer advice and assist you to develop customised portfolios for individual investors?Or, are you looking for execution and research services only? If you are just starting to advise on shares and other listed securities, you may want to consider working with a full service or advice broker .

6.   Always be aware of the risks associated with "going direct".For example, direct share portfolios are often more concentrated (less diversified) than a corresponding managed equity fund.As such, this increases a client's investment risk.

7.   Also be aware of 'share tips'.Ensure that neither yourself, nor your clients are swayed by the "hot tip of the day".Any buy or sell recommendation must be considered in light of the overall portfolio - this is to avoid making decisions that could counteract the portfolio goals as set and agreed by yourself and your client.

8.   Stay abreast of market news, particularly corporate actions, as unlike managed funds your clients with direct share portfolios must act on each corporate action for which they have a shareholding.This exposes you, as an adviser, to more work as it is necessary to consider the implications of a specific corporate action for each individual client that holds the stock.

9.   It is possible to reduce your workload by using a broker that offers model portfolios.The broker will monitor company announcements and corporate actions for stocks included in the model portfolios.The broker will also notify their clients of any corporate actions and recommended changes to the portfolios.

10. Finally, it is important to remember that , listed investments are not suited to all clients.It is imperative that your client:

a.   Understands the additional risks and work involved in managing a direct share portfolio; and

b.   Accepts, and is comfortable with the potential volatility of a direct investment - that is, that an individual share or security may rise or fall by a considerable amount over a short period of time.