Have term deposits lost their appeal?

Friday 21 February 2014

Article by Mozo

When then global financial crisis (GFC) made fiscal uncertainty the norm in 2008, term deposits became more than just a way to balance an investment portfolio.

Have term deposits lost their appeal

However, by the time 2012 rolled around the so called wall of cash seemed impenetrable with term deposits one of the most popular products in the market, a refuge for investors burned in the stock market crash.

But with rates seemingly locked in at record lows it would appear the lustre has worn off the traditional term deposit.

In 2012 there were upwards of 10 million term deposit accounts in Australia worth a total of $725 billion. According to Investment Trends research, financial planners were putting 8 per cent of new client money into term deposits in October 2010.

This more than doubled to 17 per cent in November 2011 when there was a lot of volatility and investment fear and peaked in late 2012, with financial planners putting a fifth of new client money into term deposits. 

But now stabilised markets and investor confidence is returning. Interest rates are at record lows, and we see declining enthusiasm for term deposits. There has been a gradual shift towards investing in growth assets as investors are more readily inclined to put their feet back in the water.

In August 2013, financial planners were putting only 11 per cent of new client money into term deposits, Investment Trends August 2013 Adviser Product and Marketing Needs report showed.

"Because investors were more bullish and they had greater market return expectations, advisers just started putting more money into growth assets," Investment Trends senior analyst Recep Peker said.

"What's happened is because confidence came back in 2013 and investors were generally less concerned about the situation in the share markets, planners are putting more money into growth assets as they reduce term deposits."

For investors still focussed on the security of cash investments there are still reasonable returns to be had, you just have to know where to look. Luckily, Mozo helps you compare savings account and term deposits in one easy place.

Compare today's top term deposits

Back to top