Investment management remains a vital activity for virtually all financial advisors including those affiliated with broker dealers and pure RIAs. How advisors construct portfolios is not a static activity but regularly evolves to reflect multiple factors including capital market dynamics, geopolitical and economic trends, product innovation, compliance and regulatory demands, and investor demographics and needs. Maintaining an understanding of how advisors manage portfolios is crucial to asset management firms, distributors, and other providers that rely on intermediaries to offer their products and services.
“Trends in How Advisors Construct Portfolios – Insights and Opportunities 2019” provides a deep dive into advisor usage, attitudes, and preferences regarding fundamental aspects of portfolio construction. The report examines differing topics germane to how advisors build portfolios including their decision-making process, the vehicles they tend to rely on, the sources which influence their decisions, their use of model portfolios, how usage of active vs. passive solutions is changing, and their implementation of factor-based investments. The report also looks at the support advisors believe is most important for portfolio construction and what additional capabilities and enhancements are of greatest interest. This study builds on prior research and is based on proprietary fieldwork completed in November 2019 with over 650 RIAs and BD advisors.
Key Topic Areas: Advisors and Trends in Portfolio Construction
Trends in Portfolio Construction
Using Model Portfolios
Changing Nature of Active and Passive Management
Advisors Needs for Additional Support with Portfolio Construction
To Order the Report
The study is available in PDF format for the subscription price of $5,350. To order the complete 98-page, 75 exhibit report or for more information, please contact:
Howard Schneider, 978-590-7290 or email howard.schneider@practicalperspectives.com
Introduction and Methodology“Trends in How Advisors Construct Portfolios – Insights and Opportunities 2019” provides a deep dive into advisor usage, attitudes, and preferences regarding fundamental aspects of portfolio construction. The report examines differing topics germane to how advisors build portfolios including their decision-making process, the vehicles they tend to rely on, the sources which influence their decisions, their use of model portfolios, how usage of active vs. passive solutions is changing, and their implementation of factor-based investments. The report also looks at the support advisors believe is most important for portfolio construction and what additional capabilities and enhancements are of greatest interest. This study builds on prior research conducted related to advisors and portfolio construction including a similar report published in Q4 2018.
Our analysis is intended to answer essential questions enabling product providers and distributors to make informed product line decisions. It is also focused on helping asset managers and platforms develop and execute more targeted and effective sales, communications, business development, and servicing programs that address the emerging trends in portfolio construction related to financial intermediaries.
Among the subjects addressed in this report are:
This report is based on input from a broad cross-section of advisors within key channels including Full Service (Wirehouse, Regional, and National broker-dealers), Independent broker dealers, and pure RIAs. In November 2019, advisors were asked to participate in a proprietary on-line survey regarding how advisors manage investments. Advisors were randomly solicited across all delivery channels. Input from more than 650 advisors forms the basis for the analysis in this report. Findings are presented for the overall sample and broken out by key distribution channels. In addition, analysis is offered by additional segments of advisors that illustrate meaningful differences in the ways model portfolios are built to meet client needs.
Table of Contents
Section I: Executive Summary
Section II: Introduction and Methodology
Section III: How Advisors Approach Portfolio Construction
A. How do advisors typically make portfolio construction decisions?
B. Which sources have the most significant influence on how advisors construct portfolios?
C. How confident are advisors in managing portfolios and how challenging do they expect managing portfolios will be in 2020?
D. What do advisors consider the most significant investment challenges to be in the next 12 to 24 months?
E. How widespread is the use of fee-based solutions relative to use of brokerage platforms?
F. How is advisors use different investment solutions expected to change in the coming year?
G. Which factors have the most influence on the specific investment solutions advisors use?
H. How reliant are advisors on factor-based or rules-based investments in constructing portfolios?
I. How do advisors perceive factor-based investments?
J. How do advisors expect their use of factor-based investments will change in the next 12 months?
Section IV: Advisors Use of Model Portfolios
A. How do advisors use model portfolios to guide investment decisions and how reliant are they on these solutions?
B. To what extent do advisors customize models they use within their practice?
C. What types of model portfolios are most commonly used by advisors?
D. How many different models and model providers do advisors typically employ?
E. How widespread is advisors use of model portfolios with clients?
F. What do advisors consider the main benefits of using model portfolios?
G. How do advisors expect to change their overall use of model portfolios in the next 12 months?
Section V: Advisors Embrace of Active and Passive Investing
A. How oriented are advisors to using active and passive investments in constructing portfolios?
B. How is advisors use of active and passive investments likely to evolve in the coming year?
C. Which types of advisors are more likely to use active and passive management?
D. For which equity categories do advisors prefer to use passive versus active management?
E. For which fixed income categories do advisors prefer to use passive versus active management?
F. What perceptions do advisor have regarding the relative benefits of using passive versus actively managed investments?
Section VI: Needs and Support for Portfolio Construction
A. What forms of support from product providers related to portfolio construction are most important to advisors?
B. To what extent do advisors need support for key portfolio construction activities?
C. What enhancements would most benefit advisor’s ability to construct portfolios?
D. In their own words, what are advisors most significant need regarding additional support for portfolio construction?
Section VII: Profile and Characteristics of Advisors
Section VIII: Implications and Outlook
List of Exhibits
Exhibit 1: How Advisors Typically Make Investment Decisions
Exhibit 2: How Advisors Typically Make Investment Decisions by Channel
Exhibit 3: Sources Influencing Advisors Investment Decisions
Exhibit 4: Sources with Significant Influence on Advisors Investment Decisions by Channel
Exhibit 5: Confidence in Managing Assets in Next 12 to 24 Months
Exhibit 6: Very Confident in Managing Assets in Next 12 to 24 Months by Channel
Exhibit 7: Extent Advisors Perceive Challenges in Managing Portfolios in 2020
Exhibit 8: Extent Advisors Perceive Challenges in Managing Portfolios in 2020 by Channel
Exhibit 9: Most Significant Investment Challenges in Next 12 to 24 Months
Exhibit 10: Most Significant Investment Challenges in Next 12 to 24 Months by Channel
Exhibit 11: Reliance on Fee-Based vs. Brokerage Platforms
Exhibit 12: Significant Reliance on Fee-Based Platforms vs. Brokerage Platforms by Channel
Exhibit 13: Expected Change in Use of Investment Vehicles in Constructing Portfolios
Exhibit 14: Expected Increase in Use of Investment Vehicles in Constructing Portfolios by Channel
Exhibit 15: Factors with Significant Influence on Advisors Decision to Use Specific Investments
Exhibit 16: Factors with Significant Influence on Advisors Decision to Use Specific Investments by Channel
Exhibit 17: Reliance on Factor-Based Investments
Exhibit 18: Reliance on Factor-Based Investments by Channel
Exhibit 19: Perception of Factor-Based Investments
Exhibit 20: Perception of Factor-Based Investments by Channel
Exhibit 21: Expected Change in Use of Factor-Based Investments in Next 12 Months
Exhibit 22: Expected Change in Use of Factor-Based Investments in Next 12 Months by Channel
Exhibit 23: Advisors Use of Model Portfolios in Managing Investments
Exhibit 24: Advisors Use of Model Portfolios in Managing Investments by Channel
Exhibit 25: Advisors Reliance on Model Portfolios
Exhibit 26: Advisors Reliance on Model Portfolios by Channel
Exhibit 27: Extent Advisors Customize Model Portfolios
Exhibit 28: Extent Advisors Customize Model Portfolios by Channel
Exhibit 29: Reliance on Model Portfolios by Extent Customize Models
Exhibit 30: Sources of Model Portfolios by Extent Customize Models
Exhibit 31: Types of Model Portfolios Used by Advisors
Exhibit 32: Types of Model Portfolios Used by Advisors by Channel
Exhibit 33: Types of Model Portfolios Used by Advisors by Extent Customize Models
Exhibit 34: Number of Different Model Portfolios Used
Exhibit 35: Number of Different Model Portfolios Used by Channel
Exhibit 36: Number of Different Model Portfolios Used by Extent Customize Models
Exhibit 37: Number of Different Model Portfolio Providers Used
Exhibit 38: Number of Different Model Portfolio Providers Used by Channel
Exhibit 39: Number of Different Model Portfolio Providers Used by Extent Customize Models
Exhibit 40: Use of Model Portfolios with Clients
Exhibit 41: Use of Model Portfolios with Clients by Channel
Exhibit 42: Use of Model Portfolios with Clients by Extent Customize Models
Exhibit 43: Main Benefits of Using Model Portfolios
Exhibit 44: Main Benefits of Using Model Portfolios by Channel
Exhibit 45: Main Benefits of Using Model Portfolios by Extent Customize Models
Exhibit 46: Expected Change to Use of Model Portfolios in Next 12 Months
Exhibit 47: Expected Change to Use of Model Portfolios in Next 12 Months by Full Service Channel Advisors
Exhibit 48: Expected Change to Use of Model Portfolios in Next 12 Months by Independent Channel Advisors
Exhibit 49: Expected Change to Use of Model Portfolios in Next 12 Months by RIAs
Exhibit 50: Expected Increase in Use of Model Portfolios in Next 12 Months by Extent Customize Models
Exhibit 51: Advisors Use of Actively Managed vs. Passively Managed Investments
Exhibit 52: Advisors Use of Actively Managed vs. Passively Managed Investments by Channel
Exhibit 53: Expected Change in Relative Use of Active and Passive Investments in Next 12 Months
Exhibit 54: Expected Change in Relative Use of Active and Passive Investments in Next Year by Channel
Exhibit 55: Preference for Active vs. Passive Management in Key Equity Categories
Exhibit 56: Preference for Active Management in Key Equity Categories by Full Service Channel Advisors
Exhibit 57: Preference for Active Management in Key Equity Categories by Independent Channel Advisors
Exhibit 58: Preference for Active Management in Key Equity Categories by RIAs
Exhibit 59: Preference for Active vs. Passive Management in Key Fixed Income Categories
Exhibit 60: Preference for Active vs. Passive Management in Key Fixed Income Categories by Full Service Channel Advisors
Exhibit 61: Preference for Active vs. Passive Management in Key Fixed Income Categories by Independent Channel Advisors
Exhibit 62: Preference for Active vs. Passive Management in Key Fixed Income Categories by RIAs
Exhibit 63: Agree/Disagree with Statements Regarding Use of Active and Passive Investments
Exhibit 64: Agree with Statements Regarding Use of Active and Passive Investments by Channel
Exhibit 65: Support from Product Providers Most Important to Advisors for Portfolio Construction
Exhibit 66: Support from Product Providers Most Important to Advisors for Portfolio Construction by Channel
Exhibit 67: Interest in Support for Key Portfolio Construction Activities
Exhibit 68: Significant Need for Support with Key Portfolio Construction Activities by Channel
Exhibit 69: Advisors Desired Enhancements to Improve Ability to Construct Portfolios
Exhibit 70: Advisors Desired Enhancements to Improve Ability to Construct Portfolios by Channel
Exhibit 71: Profile of Respondents by Key Characteristics
Exhibit 72: Channel Affiliation by Extent Models Customized
Exhibit 73: Tenure by Extent Models Customized
Exhibit 74: Structure by Extent Models Customized
Exhibit 75: AUM by Extent Models Customized
“Trends in How Advisors Construct Portfolios – Insights and Opportunities 2019” provides a deep dive into advisor usage, attitudes, and preferences regarding fundamental aspects of portfolio construction. The report examines differing topics germane to how advisors build portfolios including their decision-making process, the vehicles they tend to rely on, the sources which influence their decisions, their use of model portfolios, how usage of active vs. passive solutions is changing, and their implementation of factor-based investments. The report also looks at the support advisors believe is most important for portfolio construction and what additional capabilities and enhancements are of greatest interest. This study builds on prior research and is based on proprietary fieldwork completed in November 2019 with over 650 RIAs and BD advisors.
Key Topic Areas: Advisors and Trends in Portfolio Construction
Trends in Portfolio Construction
- How confident are advisors in managing portfolios and what key challenges do they expect to face in 2020?
- How is advisors use of various vehicles such as ETFs and mutual funds expected to change going forward?
- How does portfolio construction differ across channels including RIAs, Independent BD advisors, and Full Service advisors?
Using Model Portfolios
- How widespread is advisors use of model portfolios and what sources do they rely on for creating models?
- What types of models are most commonly used and to what extent do advisors customize models?
- What do advisors consider the main benefits of using model portfolios and how is use expected to change in the next year?
Changing Nature of Active and Passive Management
- To what extent do advisors remain committed to active management and for which equity/fixed income categories is active management preferred?
- How is use of active vs. passive strategies expected to change and which types of advisors prefer active vs. passive?
- How does factor-based investing fit into portfolio construction and how might use of these solutions change in 2020?
Advisors Needs for Additional Support with Portfolio Construction
- What types of additional support for portfolio construction do advisors want from providers and platforms?
- What specific functionality for portfolio construction is desired most by advisors?
- In their own words, what are advisors most important needs for assistance in building portfolios and managing assets?
To Order the Report
The study is available in PDF format for the subscription price of $5,350. To order the complete 98-page, 75 exhibit report or for more information, please contact:
Howard Schneider, 978-590-7290 or email howard.schneider@practicalperspectives.com
Introduction and Methodology“Trends in How Advisors Construct Portfolios – Insights and Opportunities 2019” provides a deep dive into advisor usage, attitudes, and preferences regarding fundamental aspects of portfolio construction. The report examines differing topics germane to how advisors build portfolios including their decision-making process, the vehicles they tend to rely on, the sources which influence their decisions, their use of model portfolios, how usage of active vs. passive solutions is changing, and their implementation of factor-based investments. The report also looks at the support advisors believe is most important for portfolio construction and what additional capabilities and enhancements are of greatest interest. This study builds on prior research conducted related to advisors and portfolio construction including a similar report published in Q4 2018.
Our analysis is intended to answer essential questions enabling product providers and distributors to make informed product line decisions. It is also focused on helping asset managers and platforms develop and execute more targeted and effective sales, communications, business development, and servicing programs that address the emerging trends in portfolio construction related to financial intermediaries.
Among the subjects addressed in this report are:
- How hands-on are advisors in making investment decisions?
- What sources influence how advisors make investment decisions?
- Which factors are of greatest importance in selecting the investments advisors rely on most?
- How do advisors use model portfolios to impact investment decisions?
- What types of model portfolios do advisors rely on and what sources do advisors turn to for models?
- What types of models are most prevalent and to what extent do advisors customize models?
- What are the key benefits of using model portfolios?
- Which investment vehicles do advisors use most typically to construct portfolios?
- To what extent do advisors use fee-based solutions relative to brokerage platforms?
- How do advisors differ in their use of actively managed versus passively managed investments and how broadly do they use each type of solution?
- How is advisor usage of actively managed versus passively managed solutions changing?
- For which investment categories do advisors prefer to use passively managed solutions relative to actively managed solutions?
- What do advisors perceive as the key challenges in managing assets going forward and how challenging is 2020 likely to be for investing?
- How confident are advisors in their ability to manage portfolios?
- To what extent do advisors use factor-based or rules based investments and how might that change in the next 12 months?
- How do advisors perceive factor-based investments relative to other asset classes?
- What forms of support from product providers are most important to how advisors build portfolios?
- What are advisors most significant needs regarding additional support for portfolio construction?
- In their own words, what do advisors perceive as key challenges and needs related to portfolio construction?
This report is based on input from a broad cross-section of advisors within key channels including Full Service (Wirehouse, Regional, and National broker-dealers), Independent broker dealers, and pure RIAs. In November 2019, advisors were asked to participate in a proprietary on-line survey regarding how advisors manage investments. Advisors were randomly solicited across all delivery channels. Input from more than 650 advisors forms the basis for the analysis in this report. Findings are presented for the overall sample and broken out by key distribution channels. In addition, analysis is offered by additional segments of advisors that illustrate meaningful differences in the ways model portfolios are built to meet client needs.
Table of Contents
Section I: Executive Summary
Section II: Introduction and Methodology
Section III: How Advisors Approach Portfolio Construction
A. How do advisors typically make portfolio construction decisions?
B. Which sources have the most significant influence on how advisors construct portfolios?
C. How confident are advisors in managing portfolios and how challenging do they expect managing portfolios will be in 2020?
D. What do advisors consider the most significant investment challenges to be in the next 12 to 24 months?
E. How widespread is the use of fee-based solutions relative to use of brokerage platforms?
F. How is advisors use different investment solutions expected to change in the coming year?
G. Which factors have the most influence on the specific investment solutions advisors use?
H. How reliant are advisors on factor-based or rules-based investments in constructing portfolios?
I. How do advisors perceive factor-based investments?
J. How do advisors expect their use of factor-based investments will change in the next 12 months?
Section IV: Advisors Use of Model Portfolios
A. How do advisors use model portfolios to guide investment decisions and how reliant are they on these solutions?
B. To what extent do advisors customize models they use within their practice?
C. What types of model portfolios are most commonly used by advisors?
D. How many different models and model providers do advisors typically employ?
E. How widespread is advisors use of model portfolios with clients?
F. What do advisors consider the main benefits of using model portfolios?
G. How do advisors expect to change their overall use of model portfolios in the next 12 months?
Section V: Advisors Embrace of Active and Passive Investing
A. How oriented are advisors to using active and passive investments in constructing portfolios?
B. How is advisors use of active and passive investments likely to evolve in the coming year?
C. Which types of advisors are more likely to use active and passive management?
D. For which equity categories do advisors prefer to use passive versus active management?
E. For which fixed income categories do advisors prefer to use passive versus active management?
F. What perceptions do advisor have regarding the relative benefits of using passive versus actively managed investments?
Section VI: Needs and Support for Portfolio Construction
A. What forms of support from product providers related to portfolio construction are most important to advisors?
B. To what extent do advisors need support for key portfolio construction activities?
C. What enhancements would most benefit advisor’s ability to construct portfolios?
D. In their own words, what are advisors most significant need regarding additional support for portfolio construction?
Section VII: Profile and Characteristics of Advisors
Section VIII: Implications and Outlook
List of Exhibits
Exhibit 1: How Advisors Typically Make Investment Decisions
Exhibit 2: How Advisors Typically Make Investment Decisions by Channel
Exhibit 3: Sources Influencing Advisors Investment Decisions
Exhibit 4: Sources with Significant Influence on Advisors Investment Decisions by Channel
Exhibit 5: Confidence in Managing Assets in Next 12 to 24 Months
Exhibit 6: Very Confident in Managing Assets in Next 12 to 24 Months by Channel
Exhibit 7: Extent Advisors Perceive Challenges in Managing Portfolios in 2020
Exhibit 8: Extent Advisors Perceive Challenges in Managing Portfolios in 2020 by Channel
Exhibit 9: Most Significant Investment Challenges in Next 12 to 24 Months
Exhibit 10: Most Significant Investment Challenges in Next 12 to 24 Months by Channel
Exhibit 11: Reliance on Fee-Based vs. Brokerage Platforms
Exhibit 12: Significant Reliance on Fee-Based Platforms vs. Brokerage Platforms by Channel
Exhibit 13: Expected Change in Use of Investment Vehicles in Constructing Portfolios
Exhibit 14: Expected Increase in Use of Investment Vehicles in Constructing Portfolios by Channel
Exhibit 15: Factors with Significant Influence on Advisors Decision to Use Specific Investments
Exhibit 16: Factors with Significant Influence on Advisors Decision to Use Specific Investments by Channel
Exhibit 17: Reliance on Factor-Based Investments
Exhibit 18: Reliance on Factor-Based Investments by Channel
Exhibit 19: Perception of Factor-Based Investments
Exhibit 20: Perception of Factor-Based Investments by Channel
Exhibit 21: Expected Change in Use of Factor-Based Investments in Next 12 Months
Exhibit 22: Expected Change in Use of Factor-Based Investments in Next 12 Months by Channel
Exhibit 23: Advisors Use of Model Portfolios in Managing Investments
Exhibit 24: Advisors Use of Model Portfolios in Managing Investments by Channel
Exhibit 25: Advisors Reliance on Model Portfolios
Exhibit 26: Advisors Reliance on Model Portfolios by Channel
Exhibit 27: Extent Advisors Customize Model Portfolios
Exhibit 28: Extent Advisors Customize Model Portfolios by Channel
Exhibit 29: Reliance on Model Portfolios by Extent Customize Models
Exhibit 30: Sources of Model Portfolios by Extent Customize Models
Exhibit 31: Types of Model Portfolios Used by Advisors
Exhibit 32: Types of Model Portfolios Used by Advisors by Channel
Exhibit 33: Types of Model Portfolios Used by Advisors by Extent Customize Models
Exhibit 34: Number of Different Model Portfolios Used
Exhibit 35: Number of Different Model Portfolios Used by Channel
Exhibit 36: Number of Different Model Portfolios Used by Extent Customize Models
Exhibit 37: Number of Different Model Portfolio Providers Used
Exhibit 38: Number of Different Model Portfolio Providers Used by Channel
Exhibit 39: Number of Different Model Portfolio Providers Used by Extent Customize Models
Exhibit 40: Use of Model Portfolios with Clients
Exhibit 41: Use of Model Portfolios with Clients by Channel
Exhibit 42: Use of Model Portfolios with Clients by Extent Customize Models
Exhibit 43: Main Benefits of Using Model Portfolios
Exhibit 44: Main Benefits of Using Model Portfolios by Channel
Exhibit 45: Main Benefits of Using Model Portfolios by Extent Customize Models
Exhibit 46: Expected Change to Use of Model Portfolios in Next 12 Months
Exhibit 47: Expected Change to Use of Model Portfolios in Next 12 Months by Full Service Channel Advisors
Exhibit 48: Expected Change to Use of Model Portfolios in Next 12 Months by Independent Channel Advisors
Exhibit 49: Expected Change to Use of Model Portfolios in Next 12 Months by RIAs
Exhibit 50: Expected Increase in Use of Model Portfolios in Next 12 Months by Extent Customize Models
Exhibit 51: Advisors Use of Actively Managed vs. Passively Managed Investments
Exhibit 52: Advisors Use of Actively Managed vs. Passively Managed Investments by Channel
Exhibit 53: Expected Change in Relative Use of Active and Passive Investments in Next 12 Months
Exhibit 54: Expected Change in Relative Use of Active and Passive Investments in Next Year by Channel
Exhibit 55: Preference for Active vs. Passive Management in Key Equity Categories
Exhibit 56: Preference for Active Management in Key Equity Categories by Full Service Channel Advisors
Exhibit 57: Preference for Active Management in Key Equity Categories by Independent Channel Advisors
Exhibit 58: Preference for Active Management in Key Equity Categories by RIAs
Exhibit 59: Preference for Active vs. Passive Management in Key Fixed Income Categories
Exhibit 60: Preference for Active vs. Passive Management in Key Fixed Income Categories by Full Service Channel Advisors
Exhibit 61: Preference for Active vs. Passive Management in Key Fixed Income Categories by Independent Channel Advisors
Exhibit 62: Preference for Active vs. Passive Management in Key Fixed Income Categories by RIAs
Exhibit 63: Agree/Disagree with Statements Regarding Use of Active and Passive Investments
Exhibit 64: Agree with Statements Regarding Use of Active and Passive Investments by Channel
Exhibit 65: Support from Product Providers Most Important to Advisors for Portfolio Construction
Exhibit 66: Support from Product Providers Most Important to Advisors for Portfolio Construction by Channel
Exhibit 67: Interest in Support for Key Portfolio Construction Activities
Exhibit 68: Significant Need for Support with Key Portfolio Construction Activities by Channel
Exhibit 69: Advisors Desired Enhancements to Improve Ability to Construct Portfolios
Exhibit 70: Advisors Desired Enhancements to Improve Ability to Construct Portfolios by Channel
Exhibit 71: Profile of Respondents by Key Characteristics
Exhibit 72: Channel Affiliation by Extent Models Customized
Exhibit 73: Tenure by Extent Models Customized
Exhibit 74: Structure by Extent Models Customized
Exhibit 75: AUM by Extent Models Customized
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