From consumer to investor

The changes in the nature of the financial services market, with its privatisations and demutualisations in the last decades, the growth of compulsory superannuation and the (admittedly now-waning) Australian love affair with investment properties, have turned Australians from consumers to investors. At the same time as there is a high level of debt, there is also a high level of investment. Australians have a high percentage of direct share ownership. All employed Australians have monies in superannuation funds, and these in turn are invested in managed funds. Life insurance also contributes to funds under management. In 2003, Australia had the fourth largest funds market in the world. Apart from Japan, Australia has the largest hedge funds market in the Asia Pacific. In 2006, the retail wealth management industry increased by 20.2 per cent to $498.6 billion, and it has been estimated that in recent years investors put $5 billion into high-yield debentures. The forecast for 2015 is $2.3 trillion under management.

The Australian investment story, however, is not all positive. Asset prices and return on capital can and do decline. Fees and commissions play a large role in this. It is estimated that the fees charged by retail funds may deplete superannuation savings by as much as 20 per cent. Couple figures like this with the history of investment scheme collapses in Australia and investors clearly have cause for concern.