Institutions Sticking With an Active Approach

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Throughout 2016 and into 2017, there has been no shortage of news coverage on the shift of assets from actively managed to passively managed investments in the wealth management industry. With the heightened focus on investment-related fees and increased skepticism over active portfolio managers’ ability to outperform the market index over the long term, many industry pundits are projecting a massive consolidation of active asset managers in the future, with only the strong and the few able to survive.

Yet at least one segment of the market continues to offer opportunity for active managers: the institutional market.

In fact, our research conducted in Q4 2016 found that institutional investors were reaffirming their commitment to actively managed strategies a maintaining or even increasing their active asset allocation levels despite the uncertain political climate during the latter half of 2016. Continue reading

DC Advisors Don’t Feel Support in Wake of DOL Fiduciary Ruling

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The Department of Labor (DOL) fiduciary ruling, despite not being fully enacted, as well as the recent calls for repeal and uncertainty regarding timing, has already altered the financial services industry substantially. Heightened fee scrutiny throughout the retirement industry is causing many DC plan providers to be on the defensive, focusing on ways to avoid the next potential pitfall. And although providers may be trying, half of DC advisors report they are not getting enough support from providers with regard to the new rules and regulations. This perceived lack of support in a time of great change will undoubtedly affect advisor perceptions of and loyalty to the providers they work with regardless of the future of the ruling. Continue reading

Lower Fees Drive Demand for ETFs in 401(k) Plans

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Driving Demand of ETFs

Plan sponsors are consolidating their investment menus to reduce cost, which should be giving DC investment managers cause for concern. Nearly two-thirds (65%) of plan sponsors point to investment fees as one of the primary factors they find most challenging to manage. Amidst the heightened attention on fees and expenses, we find increasing interest in ETFs, especially among larger plans which tend to be trend setters in the industry.

Nearly a quarter (23%) of 401(k) plans include ETFs in their investment menus today, and another 10% of plan sponsors indicate interest in adding these products going forward. Among plan sponsors who currently offer or plan to offer ETFs in the next 12 months, “lower fees” is tied with participant interest and demand as the primary driver of the appeal of these products. Close behind is the recommendation of a plan consultant or advisor, whose suggestions are likely influenced by the potential to lower the fees associated with investments in the plan. Continue reading