When Volatility Is Positive

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Sentiment toward the Investment Environment Is More Volatile among Ready-to-act Investors … and That Is Good News for the Financial Services Industry

While volatility is generally not well received in the money management industry, in the case of investor sentiment, volatility signals a level of engagement from investors who are likely to make an investment move in the near future. This increase in engagement makes it easier for asset managers and distributors to connect with these ready-to-act investors, who are closely monitoring the impact of both political and financial market events.

Volatile investor sentiment also represents an opportunity for asset managers and distributors to reach an already engaged audience at a time when many firms are facing the challenges of record-low trust levels, decreasing brand awareness and low brand differentiation among affluent investors. Put simply, conducting any type of outreach with an engaged client or prospect is comparatively easier than getting the attention of someone who is focused elsewhere. The key lies in knowing how to harness the power of investor engagement to bring in new business.

In order to gauge investor sentiment and monitor important changes over time, Cogent includes a series of questions in our monthly Cogent Beat Investor survey. Respondents are asked to identify how they feel “right now” about the current investment environment. Later in that same survey, we identify the investors who are planning to open an investment account in the next three months, letting us isolate investors who are “ready to act.” When comparing investor sentiment during the 2016 presidential election cycle—perhaps one of the most unpredictable periods in recent US history—among ready-to-act investors and investors who don’t plan to open an investment account in the near future, some interesting findings popped.

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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

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