Foundations of Managed Funds and Investment Markets – Part 2

Limitations and Considerations of Managed Funds

While managed funds provide many benefits, they are not without drawbacks or limitations. Advisers must be cognizant of these factors to manage client expectations and to choose the right products. Key considerations include:

• Fees and Costs: All managed funds charge fees, and these can vary widely. Common fees include an annual management fee (expressed as a percentage of assets, also known as the expense ratio or management expense ratio, MER) and sometimes performance fees (especially in hedge funds or certain active funds). There can also be entry or exit fees, although these are less common nowadays for retail funds (many have eliminated upfront sales loads, especially after regulatory changes like the Future of Financial Advice (FoFA) reforms in Australia which banned conflicted remuneration). High fees can erode returns significantly over long periods. In fact, ASIC notes that managed funds can sometimes have the highest fees of any investment products, particularly if you layer fund fees on top of advisor or platform fees. Advisers should always assess whether a fund’s fee is justified by its strategy and performance. The rise of low-cost index funds and ETFs has put pressure on fees industry-wide, but many specialty or active funds still charge 1-2% per annum or more. It’s crucial to ensure clients understand what they’re paying for and that cheaper (or more cost-effective) alternatives are considered where appropriate, in line with best-interest duty.
• Lack of Control: When investing in a managed fund, the investor cedes control over individual investment decisions to the fund manager. This means the fund manager decides which securities to buy or sell and when to do so. For clients who like to tailor portfolios or avoid certain investments (for example, someone might not want any fossil fuel stocks for ethical reasons), a generic managed fund might not accommodate that preference unless it’s a specifically curated ethical fund. Some investors also struggle with the notion that they cannot directly influence the investment process – for instance, a client might question a fund manager’s choices or underperformance but has no direct recourse except to withdraw the investment. In contrast, with a self-directed portfolio or an SMSF, an individual can exercise full control (though that comes with its own risks). Thus, the trade-off for convenience and professional management is the loss of personal control and customization in the portfolio.
• Liquidity Constraints: While most funds allow redemptions, as discussed, they can’t always be converted to cash immediately in all circumstances. An investor cannot typically cash out of an unlisted managed fund at 3pm on a given day and get the money instantly – there’s a process (often getting the price at close of business and receiving funds a few days later). In extreme market conditions or with certain asset types, there may be delays or suspension of withdrawals. For example, if a fund holds illiquid assets like property or private equity, redemptions might be limited to monthly or quarterly windows, or temporarily frozen to avoid fire-sales. Even open-end funds investing in listed securities can be vulnerable to liquidity issues if markets are disrupted. ETFs solve some timing liquidity issues by trading on exchange, but even ETFs can trade at a discount if the underlying market is stressed or closed (for instance, an international ETF trading in Australian hours when the overseas market is shut may see price gaps). Advisers should ensure that the liquidity profile of a fund matches the client’s potential need for cash. A common best practice is to use highly liquid funds for core and critical capital (emergency funds would usually not be in a managed fund at all, but in cash) and to use funds with any gating provisions only for long-term allocations where the client can tolerate some liquidity restriction.
• Market Risk and No Guarantees: Managed funds do not eliminate market risk. If the assets the fund holds decline in value, the fund’s unit price will fall, and investors will incur losses. Diversification helps soften the blow of any single investment loss, but in a broad market downturn (say a global recession that sinks most stock markets), an equity fund will still drop significantly. Some investors might mistakenly think that because a fund is professionally managed, it might not lose money – but this is not true. Barring certain capital-protected or structured products (which come with their own costs and conditions), the investor in a managed fund bears the investment risk. During the Global Financial Crisis, for example, even diversified balanced funds saw significant declines because multiple asset classes fell in unison. It’s important to communicate that there are no guaranteed returns (unless explicitly stated as in some capital guaranteed funds, which are rare and usually guarantee only the principal or a minimum return with caveats). Even bond funds can lose value if interest rates rise or issuers default.
• Performance Variability and Active Risk: If the fund is actively managed, there is a risk that the manager underperforms the market benchmark. Statistics over long periods have shown that a large proportion of active funds fail to beat their index counterparts after fees. While advisers will seek out quality fund managers with good track records, past performance is not always indicative of future results. There’s also manager risk – the chance that a star fund manager could leave the fund or that the management team makes poor decisions. For active funds, one must consider whether the potential to outperform (alpha) justifies the additional fee and risk of underperformance relative to a cheaper index approach. For passive funds, tracking error (how well they replicate the index) and index composition changes are considerations, albeit typically minor.
• Tax Implications: Managed funds have some tax conveniences, but also some tax drawbacks. In Australia, when a managed unit trust distributes income (interest, dividends, or realized capital gains) to unitholders, those distributions are taxable in the hands of investors (with some potential tax credits, like franking credits on Australian share dividends, passed through). Investors have no control on the timing of these capital gain realizations – for example, if the fund sold some stocks at a profit, it may distribute a capital gain this year which investors have to pay tax on, even if they didn’t sell their fund units. In contrast, an individual investor controlling their own portfolio can decide when to sell holdings and manage the timing of gains. Also, when investing in a managed fund, one can sometimes inherit unrealized gains that eventually will be distributed and taxed. That said, these issues can be managed or are often minor compared to the benefits, but for high-net-worth clients especially, tax efficiency of funds (e.g., whether the fund is managed with after-tax outcomes in mind) can be an important consideration. Some jurisdictions offer tax-managed funds or exchange-traded funds which tend to be more tax-efficient (in the US, ETFs have a mechanism to reduce capital gain distributions, but in Australia the tax differences between ETFs and traditional funds are not large for plain equity funds).
• Potential for Complexity and Misunderstanding: With the proliferation of managed funds and new structures, some products can be complex (for instance, hedge funds with performance fees and complex strategies, or structured funds with embedded derivatives). Clients may not always understand what they’re investing in if it’s an opaque strategy. This underlines the importance of advisers performing due diligence and being able to clearly explain the product. There’s also the risk of over-diversification or owning too many funds that overlap. If a client holds 10 different Australian equity funds, they likely have created a quasi-index but are paying multiple sets of fees. Simplicity can be lost if one is not careful; a plethora of managed funds in a portfolio might lead to confusion and difficulty in monitoring.

In essence, the limitations of managed funds revolve around cost, control, and the realities of market risk. These are not reasons to avoid funds altogether – rather, they are factors to weigh when selecting a fund and constructing a portfolio. A competent adviser will navigate these by selecting high-quality funds (with reasonable fees), aligning fund choice with client needs (e.g., using low-cost index funds where appropriate, or a well-justified active fund where it adds value), and fully informing clients of the trade-offs. For example, if recommending a global infrastructure fund, the adviser should mention that while it provides access to big projects worldwide (pro), it may have limited liquidity or higher fees (con), and ensure the client is comfortable with that in the context of their goals.

Managed Funds in Client Portfolios – Application of Concepts

One of the primary responsibilities of financial planners is to design and manage investment portfolios that suit their clients’ objectives, time horizons, and risk tolerances. Managed funds and similar pooled investment products are the building blocks of many such portfolios, especially for retail clients and those with moderate investable assets. This section explores how managed funds fit within client portfolios and best practices for their use.

Asset Allocation: Decades of research in portfolio management (e.g., Modern Portfolio Theory) have shown that asset allocation – the decision of how much to invest in asset classes like equities, bonds, property, and cash – is a key driver of a portfolio’s risk and return characteristics. Advisers often start by determining an appropriate asset allocation for a client (based on their goals and risk profile), and then use managed funds to implement each portion of that allocation. For instance, consider a balanced growth-oriented investor whose target is 60% growth assets (equities, property) and 40% defensive assets (bonds, cash). The adviser might choose an Australian equity fund, an international equity fund, a listed property fund, a domestic fixed-income fund, and a cash or short-term money market fund to represent those slices of the pie. Each managed fund fills a role: together they create a diversified whole that one fund alone could not achieve (unless a multi-asset fund is chosen to do it all in one). Using managed funds in this way allows precise calibration of exposure. If the client’s circumstances change or markets shift, the adviser can rebalance the portfolio by moving money between the funds (for example, selling some of the equity fund units and buying more bond fund units if equities have grown to 70% of the portfolio due to a market rally, to bring it back to target).

Portfolio Diversification and Risk Management: Managed funds contribute to diversification on several levels. First, as discussed, each fund is itself diversified in its holdings. Second, by combining funds of different types, an adviser can achieve cross-asset diversification. For example, equity and bond returns often offset each other (when stock markets fall, bonds might do well as investors seek safety, and vice versa). Thus, holding an equity fund and a bond fund together can smooth overall portfolio volatility. The same is true for mixing in other assets; property or infrastructure funds may provide steady income and not move in perfect tandem with equities. International funds add geographic diversification beyond Australia, which reduces reliance on the domestic economy. A client portfolio that employs managed funds as components can be fine-tuned to address various risks – equity market risk, interest rate risk, currency risk (by perhaps choosing hedged or unhedged international funds depending on the strategy), and so forth. Moreover, because managed funds are overseen by professionals, the adviser can also take comfort that within each fund, risk management techniques are employed (e.g., position limits, sector constraints, or currency hedging in international funds if mandated).

Use of Passive vs Active Funds: In portfolio construction, advisers face the choice of using index (passive) funds or active funds (or a combination). Passive funds, including many ETFs, aim to replicate market benchmarks and generally offer lower costs. Active funds seek to outperform through skill but come with higher fees and the risk of underperformance. Best practice often involves using passive funds for efficient market exposures where cost is crucial and active advantage is hard to consistently attain (for example, large-cap US equity might be a case where an index fund is a simple and effective choice), and reserving active funds for areas where skilled managers have a better chance to add value (perhaps in less efficient markets like emerging markets, small caps, or certain bond categories). In Australia, many advisers have adopted a core-satellite approach: using low-cost index funds or ETFs as the “core” of the portfolio to get broad market exposure, and then adding a few “satellite” active funds in areas where they have high conviction in a manager’s ability to outperform or to provide specialized exposure (like a long/short fund or a sector-specific fund). This approach balances cost and opportunity for alpha. Regardless, an adviser should ensure that any active fund included is researched thoroughly and that its role (e.g., outperforming a particular benchmark or providing downside protection) aligns with the client’s needs.

Incorporating Superannuation: For Australian clients, their superannuation investments are often a big piece of their overall portfolio. Advisers must integrate super with non-super investments when giving holistic advice. For instance, a client might have a superannuation account invested in a “Balanced” option with a major industry fund, plus some extra investments in a family trust or brokerage account outside super. The adviser should look at the asset allocation of the super fund (often provided in statements, e.g., 70% growth assets, 30% defensive) and then consider the external portfolio in conjunction to avoid unintended overweighting. If the industry super fund is well diversified, the adviser might decide to tilt the outside investments to areas the super fund underweights (for example, the super fund might have little in international small-cap stocks or certain alternatives, so the adviser could add a managed fund in that category outside). Alternatively, some clients choose to use a self-managed super fund (SMSF) or a wrap platform for super where the adviser can essentially use the same managed funds inside super as outside, giving full consistency. The key is ensuring that across all of a client’s money – in super (which might not be accessible until retirement) and outside (for medium-term goals or accessible funds) – the strategy is cohesive and risk-adjusted.

Rebalancing and Maintenance: Over time, as markets move, the proportions invested in each fund will change. One of the advantages of using managed funds is that rebalancing can be done relatively easily by buying or selling units of those funds. Many platforms allow automated rebalancing or at least provide tools to see current vs target allocation. Best practice is to review a portfolio at least annually (if not more frequently) and rebalance to keep the risk profile aligned with the client’s plan. For example, if equities have performed very well and a client’s 60/40 balanced portfolio drifts to 70/30, the adviser would recommend selling some equity fund units and reallocating to bonds or cash funds to get back to 60/40. This disciplined approach often leads to selling high and buying low (i.e., taking profits from winners and topping up losers), which can enhance long-term returns and manage risk. Managed funds typically make this process straightforward since partial units can be sold (unlike selling, say, an investment property where you can’t sell a fraction easily, or a single bond where lot sizes matter).

Matching Products to Client Objectives: Different funds can map to different goals. If a client has a goal of generating income for a pension, an adviser might lean towards including high-dividend equity funds, income-oriented managed funds (like bond income funds, or perhaps a managed fund that specifically focuses on dividend stocks or infrastructure assets that pay distributions). For a younger client focused on growth, the adviser might choose more growth-oriented funds (e.g., a global technology fund or small-cap fund as a satellite to boost long-term growth potential). For capital preservation, advisers might choose very conservative funds like capital stable funds or even capital guaranteed products if available, to ensure security of principal. Managed funds also allow tailoring to ethical or personal preferences: if a client values sustainability, the adviser can select ESG-focused funds or those that exclude certain industries (sustainable investing options have proliferated, as we’ll address in trends). Thus, the vast universe of managed funds means an adviser can usually find a product to fit almost any specific requirement or theme, but with that comes the need for careful research to pick quality options out of the many.

Avoiding Overlap and Overcomplexity: A practical tip in portfolio design is to avoid loading a client up with too many funds that essentially do the same thing. Not only can that lead to redundant fees, but it also complicates the portfolio unnecessarily. For example, holding four Australian equity managed funds might result in essentially holding the ASX 200 plus some active bets that may cancel each other out (one manager overweight banks, another underweight banks, etc., resulting collectively in something close to the index but at a higher fee). Unless there’s a specific reason (like each fund focusing on a different style or segment), it’s often better to pick one or two good funds per asset class. Simplicity aids understanding – clients should be able to easily grasp what they own and why. It also makes monitoring easier; the adviser can clearly see which funds are performing and contributing, and make changes if one is no longer suitable. This doesn’t mean portfolios should have too few holdings (that might reintroduce lack of diversification), but a balanced approach is ideal.

Ultimately, managed funds are tools. The art and science of financial advice is in how those tools are employed to build something tailored and robust for the client. By using managed funds appropriately, advisers leverage the strengths of these products – diversification, access, professional management – to deliver outcomes like growth for future needs, income for current living expenses, or capital preservation for short-term goals. Coupled with regular reviews and adjustments, a portfolio of managed funds can be kept aligned with a client’s life changes (such as approaching retirement, where an adviser might gradually shift the fund mix to more conservative options). This dynamic approach ensures that the client’s investment strategy remains sound over time and through market cycles, upholding the adviser’s duty to act in the best interests of the client.

Regulatory Environment: Australia and Global Comparisons

Regulation plays a critical role in maintaining trust in investment markets and protecting investors. Financial advisers in Australia not only need to understand domestic regulations but also benefit from awareness of how other major markets are regulated, especially when dealing with global investment products. Here we outline the regulatory framework for managed funds and financial advice in Australia, and compare it to the United Kingdom and the United States, referencing specific regulatory bodies (ASIC, FCA, SEC) and key principles.

Australia (ASIC and APRA): In Australia, the regulation of managed funds (excluding superannuation) falls primarily under the Corporations Act 2001, administered by the Australian Securities and Investments Commission (ASIC). A managed investment scheme that is offered to retail investors must be registered with ASIC and operated by a licensed Responsible Entity. The Responsible Entity (RE) is essentially the fund manager coupled with trustee obligations – it must hold an Australian Financial Services Licence (AFSL) with appropriate authorizations. The RE owes fiduciary duties to investors and must act honestly, efficiently, and fairly. Product disclosure is a cornerstone: retail funds must provide a Product Disclosure Statement (PDS) that clearly outlines the fund’s strategy, fees, risks, and other details. ASIC conducts oversight through proactive surveillance of fund operators and can take enforcement action against misconduct or misleading conduct. Notably, ASIC has the power to grant relief or modify certain provisions for funds (for example, some technical relief for specific scheme types) to ensure the regulatory environment stays practical. In recent years, reforms like the Design and Distribution Obligations (DDO) have been implemented, requiring fund issuers to identify suitable target markets for their products and distributors (including advisers) to ensure products are offered to the right consumers. This is particularly relevant in preventing, say, complex or high-risk funds being sold to inappropriate, unsophisticated investors.

For superannuation funds, as discussed, the Australian Prudential Regulation Authority (APRA) is the chief regulator. APRA’s focus is on the prudential soundness and governance of super funds – making sure they have adequate risk management, capital (where relevant), and that trustees act in members’ best interests (reinforced by the recent member outcomes and best financial interests duty regulations). APRA and ASIC coordinate at times, given ASIC oversees disclosure and advice aspects for super, while APRA oversees the fund’s operations and financial stability. Additionally, Australia has specific consumer protection and dispute resolution mechanisms: the Australian Financial Complaints Authority (AFCA) handles complaints related to super and investments, providing an ombudsman service.

Australian advisers themselves are subject to regulation: they must meet educational standards, be registered, adhere to a Code of Ethics (originally overseen by FASEA, now by Treasury/ASIC), and importantly, comply with the Best Interests Duty introduced in the FoFA reforms. This means any investment recommendation – including recommending a managed fund or super product – must be in the best interests of the client, putting the client’s interests first. Remuneration structures have been overhauled; commissions on investment products for retail clients were largely banned, eliminating many conflicts (though legacy commissions remain for older investments and insurance commissions still exist with caps). This regulatory environment pushes advisers towards a client-centric, rather than product-pushing, approach and requires that any fund recommended is appropriate and understood by the adviser (the “know your product” obligation).

United Kingdom (FCA): The UK’s regulator for investment markets and financial advice is the Financial Conduct Authority (FCA) (with the Prudential Regulation Authority, PRA, overseeing the financial stability of certain firms like banks and large insurers). The FCA has a dual focus: regulating conduct in financial markets and protecting consumers. UK managed funds (often called “authorised funds”) operate under the framework of the Financial Services and Markets Act (FSMA) 2000 and specific FCA rules, notably the Collective Investment Schemes sourcebook (COLL) and related provisions. Funds in the UK are typically set up as OEICs (Open-Ended Investment Companies) or unit trusts, and can be UCITS (Undertakings for Collective Investment in Transferable Securities) compliant if they want broader European marketing permissions. UCITS rules impose strict investment limits and risk spreading (e.g., no more than 5-10% in a single issuer for UCITS retail funds, similar in spirit to US diversification rules) and ensure high liquidity. A key point is that UK authorised funds are highly regulated with detailed investment restrictions and oversight by the FCA. The FCA approves new funds and any significant changes, and it monitors that funds adhere to rules on asset diversification, use of leverage, and liquidity. Depositaries (independent custodians/trustees) are required to oversee UK fund managers, adding an extra layer of investor protection by supervising the manager’s activities and safeguarding assets.

The UK also led in adviser regulation reforms. In 2013, the Retail Distribution Review (RDR) banned commissions on investment products and raised qualification requirements for advisers. Now advisers charge clients via transparent fees, and must attain at least a diploma-level qualification and subscribe to ethical standards. Suitability rules in the UK require advisers to thoroughly assess client needs and recommend suitable investments, much like Australia’s best interest duty. Disclosure is extensive – clients receive documents like Key Investor Information Documents (KIIDs) for funds, similar to PDS in Australia, summarizing risks and costs.

It’s noteworthy that post-Brexit, the UK is adjusting some EU-inherited rules. But largely, the commitment to strong regulation remains, and comparisons show Australian and UK regimes share common goals: ensure funds are run by fit and proper entities, that assets are segregated and protected, and that consumers are treated fairly. Both ASIC and FCA, for example, have been focusing on issues like fund liquidity management and “closet indexing” (funds charging active fees but essentially tracking an index), intervening where necessary to protect investors.

United States (SEC): In the US, mutual funds and ETFs are regulated primarily by the Securities and Exchange Commission (SEC) under a combination of laws – the Securities Act of 1933 (for offering of fund shares), the Securities Exchange Act of 1934 (for trading and other aspects), and importantly the Investment Company Act of 1940 which is a dedicated law for investment funds. The 1940 Act imposes a comprehensive regulatory regime on registered investment companies (mutual funds, ETFs, closed-end funds). For example, it requires a high degree of transparency and disclosure – U.S. mutual funds must publish prospectuses, annual and semi-annual reports with financial statements, and regular portfolio holdings disclosures. They are subject to restrictions on leverage and transactions with affiliates, rules on custody (fund assets must be held by a custodian, typically a bank, separate from the management company, to prevent misuse), and liquidity requirements (SEC rules now require funds to limit illiquid assets to 15% of the portfolio, ensuring most assets can be converted to cash for redemptions). The 1940 Act also dictates governance – U.S. funds must have a board of directors, at least 40% of whom are independent (most funds choose a majority independent) to oversee the fund manager’s activities on behalf of shareholders.

The SEC is known as a disclosure-based regulator: its philosophy is that if investors are given full and fair information, and if fraud and unfair practices are policed, the markets can function efficiently. So the emphasis is on detailed disclosures (fees, holdings, performance, risks) and antifraud rules. There is no merit regulation (the SEC doesn’t approve a fund as “good” or not, it just ensures compliance with rules). One area where U.S. regulation differs is in the handling of investor categories: mutual funds are for the general public, whereas hedge funds and private equity (private funds) are mostly exempt from the 1940 Act if they only take qualified (high net worth) investors and thus are less regulated – relying on the assumption that sophisticated investors can fend for themselves to some extent. In contrast, Australia and the UK also have the concept of wholesale/professional investors who can access unregistered schemes or alternative funds with lighter regulation.

For financial advice, the U.S. has a somewhat split regime: Investment Advisers (including financial planners charging fees) are regulated by either the SEC or state regulators and owe fiduciary duties to clients; broker-dealers (who historically charged commissions) were under a suitability standard (a bit lower standard than fiduciary). Recent regulatory developments (like the Regulation Best Interest in 2020) have raised the bar for broker-dealers, but it’s still not a unified fiduciary rule as in Australia/UK. U.S. advisors (spelled with an “o” often if they are in the legal sense of the Advisers Act) must register and comply with rules including delivering a Form ADV (disclosure brochure) to clients describing their services, fees, and any conflicts. The cultural shift in advice in the U.S. is slower – commissions on mutual funds (like 12b-1 fees or upfront loads) have been under scrutiny but still exist in some forms, unlike in Australia/UK where they’ve been largely abolished for new business. Nonetheless, fiduciary Registered Investment Advisers (RIAs) in the U.S. do operate similarly to fee-based planners elsewhere.

Comparing Regulatory Bodies and Principles: Despite differences in structure and historical context, ASIC, the FCA, and the SEC share a common mandate: protect investors and ensure fair, orderly markets. They each:

• License and oversee investment managers and advisers (ASIC’s AFSL regime, FCA’s authorization of firms and Approved Person/SMCR regime for individuals, SEC’s registration of advisers and requirement for fund companies to register).
• Mandate disclosure and transparency: All three require prospectus/PDS documents, ongoing reporting of performance, and disclosure of conflicts or fees. The SEC, for instance, is known for very extensive mutual fund disclosures, and the FCA similarly requires clear disclosure of charges to investors.
• Impose conduct rules: Misleading or deceptive conduct, market manipulation, insider trading, etc., are illegal in all jurisdictions. Each regulator has enforcement divisions that take action against fraudulent schemes or breaches of laws.
• Set capital or prudential standards for certain entities: The FCA and ASIC require fund management companies to have sufficient financial resources (base capital) and risk management processes. The SEC requires custody of assets by independent custodians to prevent misappropriation, and has rules for fund leverage (e.g., use of derivatives must cover obligations).
• Focus on investor education and empowerment: ASIC runs Moneysmart for financial literacy; the SEC’s Office of Investor Education does similar work; the FCA has initiatives to improve consumer understanding and recently heavy focus on preventing scams and high-risk investments from reaching inappropriate audiences.

One notable global regulatory trend is the emphasis on ethical conduct and codes. For instance, many advisers worldwide adhere to professional codes like the CFA Institute Code of Ethics or CFP Board standards in addition to legal requirements. These emphasize integrity, competence, diligence, and putting client interests first. Australia’s FASEA Code (now under the single disciplinary body) aligns with these principles – requiring advisers to act with honesty, to not allow conflicts of interest to influence advice, to develop and maintain knowledge and skills (tying back to CPD), and to deliver advice in a way that is clear and in the client’s best interest. While not “regulation” in a statutory sense globally, these professional norms are an important layer of the regulatory landscape, as they guide day-to-day behavior beyond just following the letter of the law.

In conclusion, advisers operating in Australia should take comfort that the managed funds and products they recommend are within a strong regulatory framework designed to protect investors. By understanding the rules in place – whether it’s the need for a fund to have a licensed Responsible Entity, or knowing that an ETF is subject to exchange listing rules and ASIC oversight – advisers can better evaluate product quality and compliance. Moreover, being aware of global regulatory practices, such as the SEC’s stringent disclosure or the FCA’s oversight of fund liquidity, can give advisers perspective on why certain products work the way they do. For example, an Australian adviser recommending a U.S.-based ETF to a client should know that the ETF must comply with U.S. SEC rules like daily portfolio transparency (for passive ETFs) and diversification requirements, which adds confidence in the product’s integrity. Similarly, if comparing an Australian managed fund to a UCITS fund from Europe, an adviser can reassure a client that both have robust investor protections, even if details differ. Ultimately, compliance with regulation and alignment with regulatory expectations is part of providing compliant investment recommendations – an adviser must not only choose suitable products but also ensure all advice documentation and processes meet the legal standards (for instance, providing an SOA – Statement of Advice – that documents the rationale for recommendations and any remuneration, as required by ASIC). Knowledge of the regulatory environment is therefore not just academic; it directly supports the adviser’s ability to deliver advice confidently and ethically.

Emerging Trends in Funds Management

The investment landscape is continually evolving. Over the past decade, and looking ahead, several key trends have been reshaping managed funds and investment markets. Staying abreast of these trends is essential for financial planners to ensure their advice remains current and leverages new opportunities. Here we highlight some of the most significant emerging trends: the rise of Exchange-Traded Funds (ETFs), the growth of sustainable investing (ESG funds), and other notable developments like technological innovation, active vs passive convergence, and alternative assets becoming more accessible.