Advisors Expect to Increase Use of Active Strategies

Fact-Based Trends From Cogent Reports™    

Following a period in which advisor-controlled assets have been gradually shifting toward lower-fee, passively managed investment strategies, advisors still see an important role for active management. In fact, according to Cogent’s Advisor Brandscape, when advisors were asked to anticipate how their use of 15 specific asset classes would change, more advisors plan to increase their use of actively managed than passively managed equities over the next six months. This finding signals that advisors may be looking to diversify their clients’ portfolios, as more of clients’ core holdings have shifted to passive products. As expected, advisors in the broker/dealer channels are fueling the anticipated gains in actively managed strategies, while interest in active equities among RIAs is much weaker.

In addition, as advisors seek growth, four in ten (41%) plan to increase their allocations to emerging markets. Advisors’ growing interest in emerging markets represents a shift from last year, when only one-quarter of advisors said they plan to increase their investments in this area. Notably, interest in this category is primarily being driven by advisors in the National and Regional channels. Continue reading

Targeting Fee-Based Advisors

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New forces are converging that could dramatically alter the advisor landscape in the coming years. As the ranks of financial advisors shrink, fee-based advisors represent an expanding segment signaling a trend savvy asset managers should act on. In fact, predominantly fee-based advisors (those earning at least three-quarters of their total compensation from asset-based fees) now comprise four in 10 financial advisors.

This segment of advisors doesn’t just include RIAs (33%), but is equally as likely to include advisors in the Independent (33%) channel with the National channel a close third (29%). Predominantly fee-based advisors represent an attractive target, managing relatively larger books of business ($152 million, on average) compared with just $71 million for commission-based advisors. Furthermore, predominantly fee-based advisors report relatively higher allocations to mutual fund and ETF products. Continue reading

Established ETF Players Outshine New Entrants in Emerging Smart Beta Category

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While historical market leaders iShares and Vanguard continue to top the list in advisor trust, well-known active managers relatively new to the ETF market—including Franklin Templeton, J.P. Morgan and Oppenheimer—rank among the 10 most trusted brands for the first time this year. Meanwhile, Fidelity ranks fifth in brand trust for the second year in a row, indicating there is market opportunity to extend trusted brands into new product categories (see the 10 most trusted ETF providers here).

That said, while these well-known active managers have a lot of potential to build upon their credibility as mutual fund providers, particularly in areas of perceived expertise, these firms still have their work cut out for them to realize their full potential in the ETF category. Continue reading

Readying for the Future

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An Excerpt from the 2016 Advisor Brandscape Report

Times are increasingly tough for those who make a living by providing others with financial advice. Public figures such as Elizabeth Warren, Suze Orman and John Oliver are blatantly challenging the value that financial advisors provide for the fees and commissions they receive, going so far as to paint advisors as villains who deceitfully take money from their clients to support their own financial interests. In addition, recent actions by the Department of Labor have made the word “fiduciary” a part of the common vernacular, calling into question the very foundation of the advisor-client relationship.

Market volatility, a prolonged period of low interest rates, the upcoming presidential election and unprecedented world events such as Brexit are heightening investors’ anxieties, leaving investors with little idea of where to turn or who to trust. Yet the need for financial advice has never been greater. Advisors are now staking their claim—and their futures—on their role on providing holistic financial planning, moving from the old-school role of a broker placing orders to a trusted partner with unique objectivity and insight. The advisor community is holding fast to the belief that this approach will continue to add more value than automated robo-advisor services that, by definition, will never completely fulfill the need for human interaction. Continue reading

ETFs Growing at Expense of Individual Securities

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ETFs Growing

The proportion of advisors selling ETFs has reached a new high at 77%, up from 68% in 2014. Fee-sensitive RIAs are among the groups most likely to be selling ETFs (85%), yet ETF use has increased significantly among advisors in the National and Regional channels, bringing their adoption levels in-line with their RIA counterparts. Increasing reliance on ETFs appears to be coming largely at the expense of individual securities, particularly in the RIA channel. Meanwhile, advisors continue to commit the largest percentage of their clients’ portfolios to mutual funds (35%).

Looking ahead, advisors expect to increase their allocations to ETFs over the next two years, while trimming back their use of mutual funds and individual securities. These marketplace dynamics are causing more asset managers to respond to advisors’ appetite for ETFs with an expanding array of products including smart beta and active offerings. The greatest proportion of advisors (38%) plan to increase their allocations to US equities, a trend which of late has tended to benefit passive managers. Yet in a reversal from last year, more advisors now expect to increase rather than decrease their reliance on US fixed income. These shifting dynamics represent an opportunity for active and passive managers to demonstrate their unique value. Continue reading

Brand Tune-up: Calculating the Strength and Momentum of Your Firm’s Most Valuable Asset

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Brand Tune-Up

Any good mechanic will tell you that until they look “under the hood,” they can’t give you a review of a car or diagnose a problem. Your spouse or coworker may have strong opinions about what is causing an engine noise, but you want the advice from a professional you trust to properly evaluate the problem. Determining the health of your brand requires that same “under the hood” approach—just switch out engine parts and oil with a complex and formidable mountain of data to analyze.

Many factors play into what makes one brand more successful than another. Nearly any brand can get an NPS™ score to determine customer loyalty, just as any car owners can check their own oil, but you need information on awareness, consideration, impression, wallet share, client affluence and household penetration to get the full picture. And marketing and distribution executives in the financial industry want to see this information in an easy and digestible way. Continue reading

Top-of-Mind Firms Among Advisors Seeking Active Managers

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American Funds, Franklin and BlackRock Have Top Advisor Mind Share as “Active Managers”


Recent fund flows reveal a competitive environment that has become increasingly favorable for passive investment strategies. That said, according to this year’s Advisor Brandscape® report, advisors continue to invest the majority of client assets in actively-managed investments (69%). With all of these actively managed dollars up for grabs, which firms are advisors most likely to consider? Continue reading

Advisor ETF Use Surges

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Advisor ETF Use SurgesReflecting advisors’ heightened fee sensitivity and increasing use of passive management, this year the proportion of advisors who report selling ETFs is at an all-time high. Three-quarters (76%) of advisors now report selling ETFs, a significant increase compared with 68% of advisors in 2014. This increase was driven by a significant uptick in use among both RIAs and Bank advisors. ETF adoption remains highest among RIAs and National wirehouse advisors, while RIAs are the only channel with a higher proportion of advisors selling ETFs (93%) than mutual funds (86%). In addition, average allocations to ETFs have risen 29% over the past year, from 11% to 14%.

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Shake-up in Brand Metrics that Drive Mutual Fund Consideration

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Advisor_Shake_UpsFollowing several years of improving impressions, this year mutual fund brand favorability ratings have plateaued. In fact, relatively few firms see changes in their scores, with the exception of two firms that suffered high-profile portfolio manager turnover, and the handful of providers that were well-positioned to benefit at the firms’ expense.

Following this turbulent period, there has been a significant shake-up in the branding elements that drive consideration. Trust is now the most important attribute for mutual fund managers to convey, followed by providing information that guides advisors’ investment decisions. Continue reading

Innovation: Ready or Not, Here It Comes

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AB_Blog_ImageThe market is strong, investors are confident, and short of a big, fat Greek economic disaster, it looks like smooth sailing ahead for financial advisors, right? Well, yes and no.

On the one hand, fewer investors are standing on the sidelines and there’s a lot more money in our economy available to invest, presumably with the help of an advisor. On the other hand, rapidly advancing technology, shifting marketplace dynamics and an array of new investment products are forcing advisors (and asset managers) to reevaluate their current business practices, and more fundamentally, to consider their relevance moving forward. Continue reading