As DOL Fiduciary Rule Sits on Ice, Is It Thumbs Up or Thumbs Down for Advisors?

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While the Debate Continues, the Upside of the Ruling Lies With the Investor

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Whether the Department of Labor (DOL) fiduciary rule continues to be delayed, eventually takes effect or ends up being repealed, the proverbial beans have been spilled, as many advisors and their respective firms have already taken the actions needed to comply, thus proving some areas of debate true and others false.

Here are the facts: more than one-quarter (27%) of all affluent investors and over one-third (36%) of advised investors—those currently working with a financial advisor—are now familiar with the DOL fiduciary rule, which expands the definition of an investment advice fiduciary. Among those who are familiar, most (74%) have taken action in the form of talking to their financial advisors, reading about the topic online, discussing the ruling with friends and family and/or reviewing the fees paid for the investments they own. Yet, only 4% have considered changing advisors, debunking the myth that the fiduciary rule has the potential to impose heavy churn on advisors’ client base, and suggesting that there’s more than meets the eye to the investor-advisor relationship. Continue reading

Financial Advisors and Investors at Odds Over DOL Fiduciary Ruling

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The future of the DOL fiduciary ruling is anything but certain. We do know, however, that the majority of financial advisors have some concerns about the ruling, with six in ten advisors (60%) favoring repeal. Advisors employed in the broker/dealer channels—particularly the Bank channel (82%)—and commission-based advisors (72%) are most likely to support repeal. In contrast, RIAs, most of whom are predominantly fee-based and already consider themselves fiduciaries, are more likely to oppose repeal (45%) than support it (29%).

Advisors Weigh in on the DOL Fiduciary Rule

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Forces of Change in the Investor Market

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At the start of writing this year’s Investor Brandscape, the presidential campaign was in full swing, bringing to light a deep political divide spanning the country. Since then, nonstop media attention has been inflating investor anxieties, with topics such as the US election, terrorism and geopolitical events such as Brexit perpetuating investor beliefs that the future of investments is both unpredictable and largely uncontrollable.

Closer to home, the financial services industry is experiencing regulatory changes that could potentially impact more than $16 trillion of retirement assets.1 As a result, affluent American investors report deteriorating trust in the investment community and in traditional financial advisors in particular. As the saying goes, trust takes years to develop but a minute to lose. The reality is that the financial services industry is already heavily regulated, yet the DOL fiduciary ruling is fueling investor perceptions that registered investment professionals put their own needs ahead of their clients. This mistrust trickles down to distributors and product providers as well, creating the dire need for the industry to proactively communicate with frequency and consistency that investors’ interests have always come first in the advisory equation. Continue reading

Go Where the Fish Are Biting: Targeting Investors Who Are Ready to Act

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Any successful angler knows when fish get hungry and what they will bite. The same concept holds true for asset managers and distributors. By definition, affluent investors have portfolios comprising a variety of investment accounts in which their assets are held. However, the majority of affluent investors are unlikely to make an investment in the near future, seemingly content to keep their current investment portfolio unchanged for the time being.

Recognizing how critical it is for distributors and asset managers to identify and understand the subgroups of affluent Americans who are likely to make an investment purchase, we present the “ready-to-act” (RTA) investor segments. Based on purchase intent level, we’ve identified three segments of RTA investors, who are likely to do one of these in the next three months:

  1. Open an investment account
  2. Invest in a mutual fund
  3. Invest in ETF shares

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Robo-Advisors Lacking Key Human Element

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Robo Advisors Lacking Key Human Element

Everyone is talking about robo-advisors, which has caused a lot of tension among financial providers and traditional advisors, but is the popularity of these services overblown? This year, we sat down with financial advisors and affluent investors to discuss how they see the role of the advisor is changing in relation to robo-advisors. What we found is surprising—despite the perception that robo-advisors are taking over, it is clear that the actual role robo-advisors are anticipated to play is neither fully defined nor fully trusted. Investors aren’t looking to abandon their advisor relationships anytime soon.

What Investors Are Saying about Robo-Advisors

While investors may test the waters with robo-advisory services, there is still a strong need for human interaction. As we traveled the country talking to investors, we consistently heard this sentiment:

“I like the idea of robo but there’s something to be said also just for the personal contact….almost like a psychologist, just to reassure.” –An investor in San Francisco

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ETF Growth Encompasses Multiple Markets

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It’s no secret that ETF use is up. In fact, a multitude of industry forces are fueling the growth in the ETF category, and the momentum is only poised to continue. Not only in one market, either. ETF use is reaching new levels among advisors, affluent investors, DC plan sponsors and both US and international institutional investors. While this is great news for top ETF providers, many smaller providers are nipping at their heels. The influx of growth will bring in new players and new challenges that providers will need to be aware of in order to survive and prosper.

In nearly all of our Cogent Wealth studies, we ask respondents about ETFs, which gives us a unique perspective on the category. We have gathered ETF-related findings from five of our most popular reports to provide a broader understanding as to why this category is experiencing such steady, and at times, extraordinary growth.

The following are the most important factors in what industry leaders will need to consider to continue to stay informed and be able to pivot when needed.

Focus on Fees

Across all sectors of the financial services industry, there is clear evidence of increasing pressure on product providers to reduce the fees associated with their investment offerings. In addition, the recent Department of Labor (DOL) fiduciary ruling is pressuring product providers and advisory firms to defend their fee structures and offer lower-cost options to clients whenever possible. Upon examining our data, it’s clear that this heightened focus on costs and fee transparency is strengthening the appeal of ETF products across all markets. Continue reading

LinkedIn Is Key to a Successful Social Media Strategy

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LinkedIn Key to Successful Social Media Strategy

Advisors and Affluent Investors Look to LinkedIn

Thirteen years after LinkedIn launched, twelve years after Facebook made its first friends and ten years after Twitter went live, social media is no longer viewed simply as an easy means of reaching and courting affluent investors and tech-savvy producers. Increasingly, asset managers and product providers are realizing they need to do more than merely set up a virtual storefront. That is, they need to develop a social media strategy, analyze connections and figure out how to work their followers effectively to stay top-of-mind. Recent findings from Cogent Reports™ highlight the critical role that LinkedIn plays for both financial advisors and affluent investors.

Advisors

Among advisors, YouTube, LinkedIn and Facebook are the top three social media platforms most commonly used across all channels. That said, when we asked advisors to identify their primary platform for business and financial news and information, LinkedIn claims a commanding advantage at 60%, far above Twitter (16%) and Facebook (13%), with YouTube barely registering (4%). So for advisors, it is the quality of information they find on LinkedIn that differentiates this platform, not the quantity. Continue reading

The Future of Financial Planning and Advice

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Many forces are converging that could dramatically impact market expectations for financial planning and advice. Advances in technology, tightening fiduciary regulations and new expectations from the Millennial and Baby Boomer generations are raising the standard of investment advice and causing financial advisors, advice providers and product manufacturers to significantly adapt their strategies.

Advances in Technology

Both advisors and investors have an increasing number of sophisticated technology-based tools at their disposal to aid in making investment decisions. In fact, 33% of advisors currently offer digital investment advice to their clients through their firm’s proprietary platform and 30% of affluent investors are currently using robo-advisors.

Tightening Regulations

The DOL fiduciary rule is imposing fiduciary status on all registered representatives when providing investment recommendations and enforcing new regulations on investment advice in retirement accounts. While some are fighting these rules, others are already adapting, and distributors and providers would be wise to be proactive in adjusting their business models appropriately. Continue reading

Expanding Investor Marketing Reach (Infographic)

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Capturing the attention of affluent investors is not an easy endeavor given the non-stop marketing and news feeds they receive not only from financial services providers but across multiple sectors. What’s more, among the 12 distributors tracked monthly by Cogent Reports, just a few select firms were able to capture a significant share of voice in 2015 across a wide range of touches. How can firms expand their marketing reach and create strategies to boost brand consideration?

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Cracking the Code on Heavy Traders

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Cracking The Code on Heavy Traders

Think you know about Heavy Traders? Think again.

While Heavy Traders, affluent investors who make 10+ trades per month, only represent about 5% of the affluent population, they are an investor segment worth the time, attention and resources of distributors and asset managers’. For years, it has been assumed that Heavy Traders:

  1. Are self-directed investors
  2. Do not use investment advice
  3. Invest only individual securities

But our research tells us otherwise. Read on to learn about key profile characteristics of Heavy Traders and why the above statements are misperceptions of this small but important segment.

Who Exactly Are Heavy Traders? 

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