Meredith Lloyd Rice

About Meredith Lloyd Rice

Meredith Lloyd Rice is a vice president in Market Strategies' Syndicated Research division. She manages the firm’s syndicated research products focused on the financial advisor market and is the lead author of the Advisor Brandscape® report. She has more than 15 years of experience managing research initiatives in the wealth management industry and has explored a wide range of business issues on the client and supplier side. Prior to joining Market Strategies, Meredith was an associate VP at Chatham Partners where she oversaw a team of researchers and managed the overall design, analysis and interpretation of large-scale studies for institutional financial services clients. Meredith earned an MBA from Thunderbird School of Global Management and a bachelor’s degree from Colgate University. She is a former collegiate rower who now gets her exercise chasing after her 2-year-old daughter and Clumber Spaniel.

If Opportunity Doesn’t Knock, Build a Door

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Despite new challenges in the financial services landscape, changing market dynamics offer new opportunities for those willing to adapt.

The economy is strong, with record low unemployment and robust market performance. Furthermore, the Dow topped 26,000 for the first time in January. However, rising trade tensions, divisiveness and political uncertainty are causing many investors to question when the bottom will fall out. For active managers, many of which lost share to index funds during this period of stability, the question arises, could there be a silver lining?

At first glance, the competitive environment appears inhospitable to firms lacking the scale to compete on price. Vanguard and iShares have amassed record inflows over the past year, pressuring competitors to lower their expense ratios. We’ve also seen increased M&A activity among mid-sized managers seeking global scale and broader distribution for their products as broker-dealers constrict the number of managers on their platforms. Continue reading

Despite an Uncertain Fate, DOL Fiduciary Rule Leaves Its Mark

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A Shift Toward Level Compensation for Commission Products Is Likely to Shape the Future Product Landscape

While the regulators in Washington, DC, continue to kick the can down the road, there’s no doubt that the DOL fiduciary rule is prompting changes in advisors’ practices. As previously reported, advisors are moving further toward fee-based compensation, and predominantly fee-based advisors and RIAs are the only advisor segments that are growing.

Recent research with variable annuity (VA) producers further supports the trend of changing compensation models. Nearly half (44%) of VA producers agree that their firm is encouraging a level compensation structure that does not vary with the particular investment recommended. This proportion climbs to more than half in the National and Bank channels (56% and 57%, respectively). As a result, advisors expect to allocate fewer new dollars to VAs going forward, with one-third of advisors looking instead to the best interest contract exemption for commission products.

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Active Managers Make Inroads with Fee-based Advisors

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Fee-based advisors are one of the few advisor segments that is growing, which has led to a shift toward low-cost, passively managed investments. This shift is being felt across the industry, leading many to believe that active management as we know it is on its way out. However, the data in this year’s Advisor Brandscape® don’t fully support these findings, as low-fee providers known for their passively managed investments are not the only firms topping advisors’ consideration set. In fact, this year’s report shows a resurgence for particular active managers.

American Funds, PIMCO and T. Rowe Price are three active managers gaining ground with fee-based advisors, having successfully weathered downturns in the past by maintaining a strong, consistent brand identity. American Funds earns the strongest associations of any provider with “is a company I trust,” “consistent performance” and “is a leader in equities.” PIMCO enjoys a strong advantage in “is a leader in fixed income.” While Vanguard remains the undisputed leader in “good value for the money,” American Funds and T. Rowe Price rank second and third, respectively, both having improved their ratings over the past two years. Continue reading

Advisor Reliance on Fee-based Comp Prompts Changes in Distribution Strategies

Fact-Based Trends from Cogent Reports™    

Advisor Reliance on Fee-based Compensation Prompts Changes in Distribution Strategies

The fee-based advisor segment is one of the only advisor segments that is growing, causing ripple effects on advisors’ product preferences. In Q1 of this year, four in ten (43%) advisors said they are predominantly fee-based (deriving at least 75% of their total compensation from asset-based fees). Most notably, nearly half (48%) of National wirehouse advisors report they are now predominantly fee-based, a significant increase from just over one-third (39%) last year. As National wirehouse advisors’ compensation models begin to more closely resemble RIAs’, we observe a corresponding decline in National wirehouse advisors’ allocations to actively managed investments, from 73% in 2015 to 67% this year.

In light of these trends, asset managers that have historically been more focused on commissioned advisors must now work to strengthen relationships with fee-based producers. Product providers are responding by adding new share classes and commission schedules in addition to promoting the value of active management in particular asset classes. Firms are also ramping up their engagement with gatekeepers at large brokers/dealers as industry observers anticipate a shift toward more fee-based managed account programs. Continue reading

Adapting to the New Normal

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Ready or not, the DOL fiduciary rule is here and changing everything. While many product providers and distributors have been preparing for months, the financial advisors they
rely upon are now beginning to feel the effects. Many advisors are regretfully watching their choice of available products constrict as their brokers/dealers eliminate certain products, asset managers and share classes. At the same time, advisors are facing higher hurdles in the form of additional disclosure and product justification, making their job of providing investment advice increasingly challenging.

While the industry’s heightened focus on fees is creating a windfall for passive managers, advisors are boosting their reliance on managed money or model portfolio solutions, effectively distancing the direct link between asset managers and advisors selling their products. This, in turn, is impacting the role of the wholesaler, shifting expectations from that of a product spokesperson to a technical industry expert. Continue reading

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

Are Financial Wholesalers Going the Way of the Dinosaur?

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As technology becomes a bigger part of how financial advisors do their job, the need for external wholesalers is diminishing—at least in the traditional sense. To stay ahead of this trend, asset managers need to evaluate how well their current sales and marketing strategies meet the needs of advisors, as well as ways to leverage technology and tweak their distribution strategy to ride this impending wave of change.

Key things asset managers need to know:

  • Advisors have less time. Advisors are taking on more responsibility, enduring higher levels of scrutiny regarding how they service customers and utilizing more tools to help facilitate how they do their job. These factors have pushed a full 25% of advisors to decrease the number of wholesaler meetings that they accept. This presents the first challenge: In-person meetings have historically been a very important part of forging and maintaining strong relationships with advisors, so how do asset managers dial down the personal side of selling without putting the stability of the relationship at risk?
  • Technology is leading the way. You hear and read it everywhere. Email is the most effective and most desired form of communication, but the obvious issue is how to stand out among the hundreds of emails that land in the advisor’s mailbox. The second challenge: Email only works if the recipient is already engaged or open to being engaged. Adding another layer, if you are going to rely on email you better be sure the advisor you are trying to connect with actually prefers email. There is a whole subset that prefers social media to email. You can see in this article and video that email is not the way to engage these advisors.

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New Forces Dramatically Impact Financial Advisors

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The Future of the Financial Advisor Cogent Reports

Regardless of the uncertain fate of the DOL fiduciary ruling, one thing is certain: it unleashed new forces that will dramatically impact financial planning and advice for years to come. With many advisory firms and product manufacturers far down the road in adapting their strategies and communicating these changes to clients, it would be shortsighted for firms to fully reverse course now.

We already see advisors changing their business practices. As advisors move further toward fee-based compensation, predominantly fee-based advisors and RIAs are the only advisor segments that are growing. As a result, we’re seeing advisor-controlled assets gradually shifting toward lower-fee investment products. Compounding the challenge for asset managers, advisors are becoming less receptive to traditional wholesaler outreach and are instead seeking more personalized, on-demand support. Continue reading

Ranks of Fee-Based Advisors Expected to Swell

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Despite the uncertain fate of the Department of Labor fiduciary rule, we already see advisors changing their business practices. According to Cogent’s The Future of the Financial Advisor™ report, advisors earning at least three-quarters of their total compensation from asset-based fees could comprise half (49%) of all financial advisors by the end of 2017, up from 38% presently. This shift toward fee-based compensation is primarily being driven by advisors in the National, Regional and Independent channels. 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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