trends in the financial advisory profession: key ......trends in the financial advisory profession:...

Trends in the Financial

Advisory Profession:

Key Implications for the

Investment Management Industry

Webinar

presented by

Bob Veres and Bob Huebscher

The Questions We Sought to Answer

• Which trends are becoming increasing prevalent among

investment advisors?

• How advisors are implementing tactical asset allocation with

different client segments?

• Which asset classes they're most likely to increase – and

decrease – in their clients' portfolios in the coming months?

• Which kinds of products – mutual funds, ETFs, SMAs,

alternative assets, commodities – they're likely to recommend

for middle income, mass affluent, and high net worth clients?

• What kinds of information advisors are looking for from

investment companies to aid in their due diligence efforts?

• What investment companies need to do to address the

evolving needs of advisors and their clients?

2

Target Audience

• Firms

• Mutual fund companies

• ETF sponsors

• Other manufacturers of investment products

• Individuals

• Directors of marketing

• Directors of research

• Directors of product development

• Sales Managers

• Salespeople and Wholesalers

3

Below $25 million

150 - 22.39%

$25-$49.9 million

115 - 17.16%

$50-$99.9 million

135 - 20.15%

$100-$249.9 million

164 - 24.48%

$250-$499.9 million

51 - 7.61%

$500-$999.9 million

30 - 4.48%

$1 billion+

25 - 3.73%

Chart 1: Firm Sizes Represented

in the Sample Population

• Survey sample provided

broad representation into

in all areas of the

traditional AUM

segmentation spectrum.

• Note that 25 respondents

work with firms with more

than $1 billion under

management.

4

Who Were the Advisors Who Provided Research Data?

Chart 1

• Survey participants also

work with a broad

spectrum of clients.

Results and analysis

offers insight along the

other traditional way to

segment advisors.

• Note the representation

of advisors who serve

ultra-high net worth

clients.

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Chart 2 6.90%

30.20%

14.90%

48.00%

Middle Income$0-$500,000

HNW$1 million - $4.9 million

Ultra- HNW$5 million+

Mass Affluent$500,001- $999,999

48.00%

6.90%

14.90%

30.20%

Chart 2: Breakdown of who the sample participants

serve as clients.

40%

35%

30%

25%

20%

15%

10%

5%

Newcomers(1-5 years)

Emerging(6-11 years)

Experienced(11-20 years)

Veteran(20+ years)

Chart 3: Advisor Experience Levels in the Sample Population

91

108

269 279 • The respondents

can also be

segregated

according to their

experience levels.

• Most had more than

10 years of

experience in the

advisory profession.

6


Chart 3

• Segmenting by

business model, we

find that dually –

registered advisors

are most likely to

work with middle-

income clients.

• Fee-only advisors

provide access to

the wealthier

clients.

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Percentage of advisors who serve each client type, by

business model

Chart 4

Key Findings

• Overall 83% of the advisors in the sample reported that

they were planning to make tactical shifts to client

portfolios.

• This trend was strong across all categories, but was

strongest among advisors who work with the wealthiest

clients.

• Similar movement toward actively managed funds,

including unconstrained funds.

• Advisors are diversifying into commodities, real estate

and other alternative asset classes.

• Certain products, including TDFs, SMAs and black-swan

funds are not gaining popularity.

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• One response:

take direct

tactical action.

• Almost 40% of

advisors plan to

raise allocations

to U.S. Large

Cap, U.S. Value

and Emerging

Market Equities.

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Percent of respondents who plan to raise/lower allocations to

various equity investments. Different advisors chose different parts

of the portfolio to make their opportunistic tactical adjustments.

Portfolio Changes Chart 1

Portfolio Changes Chart 1: Percent of respondents who plan to raise/lower allocations to various equity investments.

0.00%

10.00%

20.00%

30.00%

40.00%

50.00%

60.00%

70.00%

80.00%

Increase

Decrease

No change

Emerging MarketEquities

Non-US Developed Market Equities

US GrowthUS ValueUS Small CapUS Large Cap

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Portfolio Changes Chart 6: Percent of respondents who plan to raise/lower allocations to various fixe d- income investme nt s.

0.00%

10.00%

20.00%

30.00%

40.00%

50.00%

60.00%

70.00%

Increase

Decrease

No change

Muni BondsUS Treasuries

Fixed-Rate BondsNon-US Developed

Market BondsEmerging

Market BondsCash

Percent of respondents who plan to raise/lower allocations to various

fixed-income investments. This trend was apparent in the fixed-income

world as well.


• Tactical Activists

see opportunity in

Emerging Market

Bonds, Munis and

Foreign Bonds,

and reducing

exposure to

Treasuries and

Cash.

• The size of the

sigment appears to

be consistent at

30-40%.

10

11

0.00%

10.00%

20.00%

30.00%

40.00%

50.00%

60.00%

70.00%

80.00%

90.00%

Increase

Decrease

No change

Portfolio Changes Chart 2: Percent of respondents who plan to raise/lower allocations to various actively managed investments.

UnconstrainedActive Managers

FundamentalIndexing

Actively-ManagedETFs

Actively-ManagedStrategies in General

AbsoluteReturn Funds

Long-ShortFunds

Percent of respondents who plan to raise/lower allocations to various

actively managed investments


• A significant

number of advisors

– roughly a third –

plan to incorporate

tactical input into

portfolio

construction and

raise their

allocations to more

actively-managed

and/or

unconstrained

funds.

• The trend to “delegate”

tactical portfolio activities

is robust across all

segments.

• A third of advisors –

”Tactical Delegators” –

are addressing the

downside risk issue by

delegating tactical

activities to the funds

they select, rather than

making the tactical

judgments themselves.

12

Breakdown of advisors who plan to change their allocations to

go-anywhere funds, by client demographics

Portfolio Changes Chart 2B

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Portfolio Changes Chart 4: Percent of respondents who plan to raise/lower their allocations to real

estate, futures and MLPs.

Increase

Decrease

No change

0.00%

10.00%

20.00%

30.00%

40.00%

50.00%

60.00%

70.00%

80.00%

Real Estate Managed Futures MLPs


real estate, futures and MLPs


• The segment of

advisors is

raising

exposure to

real managed

futures and

MLP

investments.

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Portfolio Changes Chart 7: Percent of respondents who plan to raise/lower their

allocations to various annuity investments.

Increase

Decrease

No change

0.00%

10.00%

20.00%

30.00%

40.00%

50.00%

60.00%

70.00%

80.00%

90.00%

Fixed ImmediateAnnuities

Fixed DeferredAnnuities

Variable Annuities Equity-IndexedAnnuities


various annuity investments


• The

diversification

trend is raising

interest in

variable

annuities.

Key Themes

• Advisors overall are looking for ways to reduce downside

risk in client portfolios.

• Each of these changes – a greater tactical orientation,

moving to less-constrained fund management,

broadening portfolio allocation, adding annuities--

represents a different method for dampening volatility.

• In addition, advisors appear to be dramatically evolving

the criteria by which they select investments. (One of the

key findings: the Morningstar star rating ranked dead last

among selection criteria.)

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Conclusions

• In the current environment, marketing executives can (and

should) segment advisors by their downside risk strategy.

• Advisors who are still looking for a downside-risk-

management strategy have essentially four broad options

that are being pioneered by their peers.

• The preferred risk-management strategy also seems to be

influenced by the types of clients advisors are working with.

• The most successful marketing and new product

development initiatives will segment the advisor community

and talk to the particular strategies they are adopting.

• The new investment selection criteria has implications for

how funds/ETFs/annuities can most effectively be

positioned, and helps clarify what information advisors are

looking for today.

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Purchasing Our Report

• 65-page PDF with detailed analysis of our findings

• 50-slide PPT presentation with all charts and figures

• Intended audience:

• Mutual funds, ETFs and other manufacturers of

investment products for the advisory channel

• Sales teams, product managers, marketers, strategic

planners and C-level executives

Call 781-376-0050

OR

email [email protected]

17

mailto:[email protected]

trends in the financial advisory profession: key ......trends in the financial advisory profession:...

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