Since the early 2000s, the LIC industry in Australia has experienced significant transformations. Listed Investment Companies (LICs), once considered a mainstay for conservative investors, now face a distinctly different financial environment. The rise of technology, evolving advice models, and the surge in popularity of alternatives, such as ETFs, have reshaped how people invest and interact with financial services. In response, the LIC sector has shifted towards consolidation and diversification.
According to the ASX Investment Products Report (November 2024), the number of LICs listed on the ASX has declined from a peak of 115 in 2019 to 85 in November 2024 – a reduction of 30 over six years. Despite this drop in listings, the report shows that total market capitalisation has remained stable. This indicates a trend towards mergers and restructures rather than a loss in value.
For established LICs such as Flagship Investments, these shifts present both new challenges and unique opportunities. Let’s take a closer look at how the industry has evolved over time.
Technology Has Changed the Game
Since the early 2000s, digital innovation has dramatically changed the way Australians invest. In the past, investors relied on printed research, stockbrokers, or word-of-mouth referrals to make decisions. Today, real-time market data, mobile trading apps, and various online platforms have placed powerful tools directly in the hands of everyday investors.
As a result, self-directed investing has gone from niche to mainstream. More Australians are choosing to manage their own portfolios, with less reliance on intermediaries and a stronger preference for transparency, accessibility, and control.
This shift in behaviour has led to a clear disintermediation of traditional distribution channels. Dealer networks and financial advisers are no longer the sole gatekeepers to investment products (more on that below).
Direct-to-investor platforms such as CommSec, nabtrade, SelfWealth, and Stake now allow investors to buy and sell securities, research opportunities, and access managed investments without going through traditional advisers. Social investing communities like HotCopper and content-driven sites like Livewire Markets further influence decision-making outside traditional channels.
Furthermore, artificial intelligence (AI) has accelerated this shift towards self-directed, technology-driven investing. AI-powered tools are improving how investment decisions are analysed and executed. For example, robo-advisory services are rapidly gaining traction in Australia, offering low-cost, automated financial advice that scales access for everyday investors.
The Growing Role of ETFs and What They Don’t Offer
The aforementioned technologies and AI advancements are empowering more investors while nudging preferences toward exchange-traded funds (ETFs). EFTs are a type of pooled investment that trades like a share and typically tracks an index.
According to the ASX Australian Investor Study 2023, ETFs were the fastest-growing asset held, rising from 16% to 20% of Australian investors holding at least one ETF on the ASX. This underscores why ETFs are so popular: they’re low-cost, transparent, and easy to access, especially appealing in a tech-driven era where convenience and efficiency matter.
Still, ETFs aren’t a one-size-fits-all solution. LICs continue to hold strategic value for certain investor needs. Unlike passive ETFs, LICs offer active management, enabling portfolio managers to adjust allocations based on market cycles or opportunities. They often provide consistent income through fully franked dividends and access to specialised sectors or niche strategies that ETFs don’t cover. For income-focused or strategy-driven investors, LICs’ disciplined long-term focus can deliver value that complements ETF holdings.
The Role of the Financial Adviser Has Evolved
The introduction of the Future of Financial Advice (FOFA) reforms in 2013 marked a turning point for the financial advice industry. By eliminating commissions on listed investment products and requiring more transparent disclosure, FOFA aimed to increase transparency and remove conflicts of interest. While this improved trust between advisers and clients, it also reshaped adviser incentives and preferences.
Without commissions, advisers had less motivation to recommend LICs and instead gravitated toward lower-maintenance options such as ETFs and managed accounts. These products are often simpler to explain, easier to integrate into platforms, and require less ongoing administration. This raises an important question for the LIC industry: how do we meaningfully connect with investors in this new environment?
The answer may lie in focusing on what makes LICs stand out. Many offer the stability of a closed-ended structure, allowing portfolio managers to invest with a long-term view without the pressure of daily fund inflows and outflows. Their ability to deliver consistent dividends, often supported by profit reserves, appeals to income-focused investors seeking reliability. Coupled with active management that can adapt to market conditions, LICs remain a valuable option for those who appreciate a steady, disciplined approach to building wealth.
How Modern LICs Engage the Next Generation of Investors
Younger investors expect speed, clarity, and control, and modern LICs must meet those expectations to stay relevant. Accessibility means mobile-friendly reporting and easy online account links; transparency means clear, frequent updates on holdings, fees and dividend policy; digital communication means using short-form content, webinars and social channels to explain strategy rather than sell it.
LICs can leverage straightforward quarterly reports, a concise performance dashboard, an investor newsletter, and targeted social posts to demystify their approach. Educational content, such as short explainer videos, plain-language FAQs and live Q&A sessions, builds trust faster than sales copy. These tactics reflect the behaviours documented in the ASX Australian Investor Study 2023, and broader research on millennial and Gen-Z investor habits. They let quality LICs convert interest into long-term investors without diluting their investment discipline.
The Future for LICs: Opportunity in Change
The future favours LICs that double down on what they do best: disciplined, active management and predictable income strategies. Rather than chasing every distribution channel, strong LICs should lead with education, consistent performance and transparent capital management (dividend policy, buybacks).
This is an opportunity, not a scramble to reinvent, for managers who can show repeatable decision-making and responsible governance. For Flagship, this means emphasising our proven long-term track records, robust risk controls, and how our closed-end structure enables thoughtful positioning throughout market cycles. Investors who look beyond short-term trends will find that we remain well-suited to goals like steady income, tax-efficient returns and access to specialist expertise.
The Way Forward
Change in distribution, technology and investor preference doesn’t erase proven investment tools – it elevates the importance of clarity, access and performance. Understanding these market forces helps investors choose the right mix of passive and active vehicles for their goals.
To gain deeper insights into how Listed Investment Companies (LICs) can enhance your investment strategy, please reach out to our team to learn more.
