Continued frustration at the dismal returns for their clients from term deposits and cash accounts has many financial advisers looking for alternatives
For Adam Forsberg of Forsberg Financial the solution came in the form of corporate bonds.
“For many of our clients in their 50s and 60s, certainty of income is a priority, but with term deposits rates barely keeping pace with inflation we needed a solution that provided better returns, without a huge leap in risk,” he said.
“Traditionally they have been hard to access and difficult to manage but FIIG has been able to build an offering that allows us to offer them on equal footing with other asset classes.
“And when you do a comparison with term deposits it becomes a pretty easy decision for us and our clients. I’ve even got a couple of institutional clients moving a good portion of their term deposits in a portfolio over to bonds.”
Mr Forsberg started with FIIG nearly 12 months ago after learning he could invest relatively small amounts on behalf of clients.
“The returns are obviously superior to term deposits, but being able to invest relatively small amounts and the presence of a strong secondary market provides the flexibility and liquidity that our clients expect,” he said.
“FIIG’s research capabilities were also a big bonus and have been integral to identifying bonds that meet my clients’ needs in terms of getting the risk and return balance right.”
The ease of FIIG’s online client onboarding process was also an important factor in switching clients from term deposits to bonds.
“The whole process is done online in a few days and once it is set up, the trading, account management and reporting functions are all done professionally and seamlessly,” he said.
“We encourage our clients to go direct as it is cheaper and cleaner and provides a high level of transparency.”
Once a client has been on boarded, Mr Forsberg will often send the research team a list of requirements for a client and rely on FIIG to come up with a range of options.
“I will set out what I need and then they will send me a suggested portfolio. We then go through, pick and choose, and determine exactly what the client wants. It is a very straight forward process that works.”
Adam has more 15 years experience in the finance industry and together with his partner Ian Yeates, has built Forsberg Financial into a well respected independent financial planning and advisory firm. Forsberg Financial operates as an authorised representative of Sentinel Private Wealth Pty Ltd (AFSL 344762).
Forsberg Financial provides a range of services including investment advisory, tax planning, SMSF management, insurance and estate planning. Clients range from retired high net worth individuals already in retirement to people in the accumulation phase or transitioning to retirement.
He believes education is the most important part of encouraging clients to allocate part of their portfolio to bonds.
“If there is any resistance, it is often down to a lack of understanding. That is why we are very proactive in walking clients through the investment process. I will take the portfolio to them showing who the issuers are, maturity dates, security type and yields. Once we show them exactly how it works they get comfortable with it pretty quickly,” he said.
Adam believes the certainty of income was the major benefit of bonds for clients for whom yield was an important factor.
“Dividends can be cut at any time at the discretion of the company, if you are relying on these dividends to pay the bills it can be quite a shock,” he said. “Bonds are the part of your portfolio that tell you without doubt how much you will receive on that investment for the year.”
Mr Forsberg believes the benefits of direct access to bonds and the transparency it provides was only starting to be understood by the financial planning community.
“Improved access to corporate bonds has been the biggest change to the sector over the last decade. FIIG’s retail option, direct access, and therefore the ability for people with smaller balances to get in has suddenly put them front and centre for a lot of advisors.”
To contact Forsberg Financial phone (02) 8223 6500.