Much has been written about the increasing use of passive management and the challenges of active asset managers in retaining and attracting assets. Financial advisors have historically been a core audience for active management, especially mutual funds and separately managed accounts. With this as backdrop, key questions remain including to what extent are financial advisors still reliant on actively managed investments, for which types of advisors is demand for active management changing, and what can active managers do to better serve advisors?
Practical Perspectives, a leading consulting and research firm, examines advisor use of actively managed solutions. This 125-page report looks in detail at how advisors construct portfolios using active and passive strategies, the key drivers and challenges in using actively managed solutions, the factors and sources relied on when selecting actively managed investments, the active managers providing the best overall experience and capabilities, and the preferences and needs of advisors related to support they receive from active managers. The study also examines advisor preferences for active and passive management by leading equity and fixed income categories and how use may change in the foreseeable future. The report is based on proprietary research completed in July 2017 with over 575 advisors including those affiliated with RIAs, independent brokers, and wirehouse, national, and regional firms.
Key Topic Areas
Advisors Use of Actively Managed Solutions in Constructing Portfolios
· To what extent do advisors rely on actively and passively managed solutions and how has this changed in the past 12 months?
· What are the key segments of advisors using active and passive management and how do they differ?
· What are the primary reasons advisors use actively managed solutions?
· What are the major challenges for advisors in using actively managed investments?
· Which actively managed vehicles do advisors rely on most?
· How is use of active management anticipated to change in the foreseeable future?
· How do advisors perceive active vs. passive investments and is the use of ETFs and index funds strategic or tactical?
Selecting and Implementing Actively Managed Solutions
· What factors influence advisors most in selecting specific actively managed solution
Which are the most important metrics and sources advisors rely on when selecting actively managed investments?
How satisfied are advisors with the overall performance of actively managed investments?
· For which equity and fixed income asset classes do advisors prefer active over passive investments and how are these preferences likely to change going forward?
Support for Advisors Using Actively Managed Solutions
· Which active asset managers and providers offer the best overall experience and most useful support to advisors?
· Which aspects of support from active managers are most important to advisors?
· What specific elements of support from active managers – product-related support, sales support, value-add and practice management, and web-based and digital support – are of greatest importance to advisors?
· What are the most important needs of advisors for additional support to improve satisfaction with actively managed solutions?
To Order the Report
The study is available in PDF format for the subscription price of $5,350. To order the complete 125- page, 96 exhibit report or for more information, please contact: Howard Schneider, 978-590-7290 or email:
howard.schneider@practicalperspectives.com
Introduction and Methodology
Many asset managers oriented to actively managed investment strategies have been challenged in recent years by the heavy flows into passively managed funds. Headlines trumpet the success of Vanguard, BlackRock, and other firms which deliver leading passively managed solutions. Our own recent research published earlier this year suggests while the shift to passive management is clear among some types of financial advisors, many other advisors remain committed to active approaches, whether used exclusively or in combination with passive solutions. Our goal in this new report is to offer a fresh data driven view that examines financial advisor use of actively managed strategies as we look to share insights on changing demand for these solutions and how active managers can better meet advisor needs. This in-depth report combines distinct research insights with practical, consulting oriented analysis. The report is written to provide relevant and actionable information for key constituents including mutual fund companies and other active asset managers and platforms that are interested in distributing their investment strategies and solutions through financial advisors.
“Financial Advisors and Use of Actively Managed Solutions – 2017” examines advisor use of actively managed solutions, the different segments of advisors using active management, and the primary needs of advisors for additional support related to employing actively managed strategies. The analysis looks in detail at how advisors construct portfolios using active and passive strategies, the key drivers and challenges in using actively managed solutions, the factors and sources relied on when selecting actively managed investments, the active managers providing the best overall experience and capabilities, and the preferences and needs of advisors related to support they receive from active managers. The study also examines advisor preferences for active and passive management by leading equity and fixed income categories and how use may change in the foreseeable future. The report breaks out data and findings for the entire sample and for key advisor channels – Full Service, Independent, and RIA, as well as for user segments defined by the extent advisors use active and passive investments to meet client needs.
Among the key questions addressed in this report are:
· What are advisors preferred approaches to portfolio construction and to what extent do they rely on active and passive solutions?
· How has overall advisor use of actively managed solutions shifted in the past year and which types of advisors are most committed to active management?
· What are the key reasons advisors employ actively managed strategies and what are the main challenges in using these solutions?
· How do advisors anticipate their overall use of active management may change in the next 12 to 24 months?
· Is the decision to use passive strategies a strategic or tactical decision?
· What factors have most influence on selecting the specific actively managed strategies advisors use?
· What key metrics do advisors focus on most often in selecting actively managed solutions?
· How satisfied are advisors overall with the performance of active investments?
· For which equity and fixed income categories do advisors prefer active management and how may this change in the foreseeable future?
· What providers of actively managed solutions offer the best overall experience and support to advisors?
· What aspects of several dimensions of support provided by active managers – product-related support, sales support, value-add and practice management support, and web-based and digital support – are of most importance?
· What changes and enhancements could most improve advisor satisfaction with actively managed solutions and providers?
This report is based on input from a randomly selected cross-section of advisors across key channels. In June 2017, advisors were asked to participate in a proprietary online survey regarding portfolio construction and the products they use. More than 575 advisors provided responses that form the basis for this report. Advisors did not receive any compensation for participation in the survey.
Table of Contents
Section I: Executive Summary
Section II: Introduction and Methodology
Section III: Advisors Use of Actively Managed Investments in Constructing Portfolios
A. How do advisors typically construct portfolios?
B. To what extent do advisors rely on actively managed solutions?
C. How has advisor use of actively managed solutions changed in the past 12 months?
D. What factors drive advisors to use actively managed solutions?
E. What are the key challenges for advisors in using actively managed solutions?
F. How do advisors anticipate changing their use of actively managed solutions going forward?
G. How do advisors perceive actively managed solutions relative to passively managed investments?
H. Is the use of passively managed solutions a strategic or tactical decision for advisors?
Section IV: Selecting and Implementing Actively Managed Solutions
A. What factors influence advisors when selecting specific actively managed solutions?
B. What key metrics do advisors rely on when selecting actively managed solutions?
C. How satisfied are advisors with the overall performance of actively managed solutions?
D. What sources do advisors rely on most often when selecting actively managed solutions?
E. For which equity categories do advisors prefer to use actively managed solutions and how is use expected to change in the next 12 to 24 months?
F. For which fixed income categories do advisors prefer to use actively managed solutions and how is use expected to change in the next 12 to 24 months?
Section V: Support for Advisors Using Actively Managed Solutions
A. How important to advisors are various aspects of support offered by providers of actively managed solutions?
B. Which specific providers of actively managed solutions offer the most positive overall experience and useful support to advisors?
C. What aspects of product related support are most important to advisors?
D. What aspects of sales support are most important to advisors?
E. What aspects of value-add and practice management support are most important to advisors?
F. What aspects of web-based or digital support are most important to advisors?
G. What changes or enhancements would have most impact on advisor satisfaction with actively managed investments?
H. In their own words, what is the most important thing providers of actively managed solutions can do to better satisfy advisors?
Section VI: Profile of Survey Respondents
Section VII: Implications and Outlook
List of Exhibits
Exhibit 1: Advisors Preferred Approach to Portfolio Construction
Exhibit 2: Advisors Preferred Approach to Portfolio Construction by Channel
Exhibit 3: Advisors Preferred Approach to Portfolio Construction by Use of Active Management
Exhibit 4: Reliance on Actively Managed and Passively Managed Investments
Exhibit 5: Reliance on Actively Managed and Passively Managed Investments by Channel
Exhibit 6: Percent of Total Assets in Actively Managed Solutions
Exhibit 7: Percent of Total Assets in Actively Managed Solutions by Channel
Exhibit 8: Percent of Total Assets in Actively Managed Solutions by Use of Active Management
Exhibit 9: Extent Advisors Use Different Investment Vehicles
Exhibit 10: Significant Advisor Use of Different Investment Vehicles by Channel
Exhibit 11: Significant Advisor Use of Different Investment Vehicles by Use of Active Management
Exhibit 12: Change in Overall Use of Actively Managed Solutions in Past 12 Months
Exhibit 13: Change in Overall Use of Actively Managed Solutions in Past 12 Months by Channel
Exhibit 14: Change in Overall Use of Actively Managed Solutions in Past 12 Months by Use of Active Management
Exhibit 15: Change in Key Aspects of Use of Actively Managed Solutions in Past 12 Months
Exhibit 16: Increase in Key Aspects of Use of Actively Managed Solutions in Past 12 Months by Channel
Exhibit 17: Increase in Key Aspects of Use of Actively Managed Solutions in Past 12 Months by Use of Active Management
Exhibit 18: Key Reasons Advisors Use Actively Managed Solutions.......... Exhibit 19: Key Reasons Advisors Use Actively Managed Solutions by Channel
Exhibit 20: Key Reasons Advisors Use Actively Managed Solutions by Use of Active Management
Exhibit 21: Key Challenges for Advisors Using Actively Managed Solutions
Exhibit 22: Key Challenges for Advisors Using Actively Managed Solutions by Channel
Exhibit 23: Key Challenges for Advisors Using Actively Managed Solutions by Use of Active Management
Exhibit 24: Expected Change in Overall Use of Actively Managed Solutions in Next 12 to 24 Months
Exhibit 25: Expected Change in Overall Use of Actively Managed Solutions in Next 12 to 24 Months by Channel
Exhibit 26: Expected Change in Overall Use of Actively Managed Solutions in Next 12 to 24 Months by Use of Active Management
Exhibit 27: Agreement/Disagreement with Aspects of Using Active and Passive Investments
Exhibit 28: Agreement with Aspects of Using Active and Passive Investments by Channel
Exhibit 29: Agreement with Aspects of Using Active and Passive Investments by Use of Active Management
Exhibit 30: Tactical or Strategic Decision in Use of Passive Investments
Exhibit 31: Tactical or Strategic Decision in Use of Passive Investments by Channel
Exhibit 32: Tactical or Strategic Decision in Use of Passive Investments by Use of Active Management
Exhibit 33: Factors Influencing Advisor Selection of Actively Managed Solutions
Exhibit 34: Significant Factors Influencing Advisor Selection of Actively Managed Solutions by Channel
Exhibit 35: Significant Factors Influencing Advisor Selection of Actively Managed Solutions by Use of Active Management
Exhibit 36: Key Metrics in Selecting Actively Managed Solutions
Exhibit 37: Key Metrics in Selecting Actively Managed Solutions by Channel
Exhibit 38: Key Metrics in Selecting Actively Managed Solutions by Use of Active Management
Exhibit 39: Satisfaction with Overall Performance of Actively Managed Solutions
Exhibit 40: Satisfaction with Overall Performance of Actively Managed Solutions by Channel
Exhibit 41: Satisfaction with Overall Performance of Actively Managed Solutions by Use of Active Management
Exhibit 42: Sources Advisors Rely on in Selecting Actively Managed Solutions
Exhibit 43: Sources Advisors Rely on in Selecting Actively Managed Solutions by Channel
Exhibit 44: Sources Advisors Rely on in Selecting Actively Managed Solutions by Use of Active Management
Exhibit 45: Reliance on Third-Party Ratings or Independent Evaluations
Exhibit 46: Reliance on Third-Party Ratings or Independent Evaluations by Channel
Exhibit 47: Reliance on Third-Party Ratings or Independent Evaluations by Use of Active Management
Exhibit 48: Preference for Active vs. Passive Solutions by Equity Category
Exhibit 49: Preference for Active vs. Passive Solutions by Equity Category- Full Service
Exhibit 50: Preference for Active vs. Passive Solutions by Equity Category - Independent
Exhibit 51: Preference for Active vs. Passive Solutions by Equity Category - RIAs
Exhibit 52: Preference for Active vs. Passive Solutions by Equity Category – Active Adherents
Exhibit 53: Preference for Active vs. Passive Solutions by Equity Category – Combination Users
Exhibit 54: Preference for Active vs. Passive Solutions by Equity Category – Passive Adherents
Exhibit 55: Expected Change in Use of Active Solutions by Equity Category
Exhibit 56: Expected Change in Use of Active Solutions by Equity Category – Full Service
Exhibit 57: Expected Change in Use of Active Solutions by Equity Category - Independent
Exhibit 58: Expected Change in Use of Active Solutions by Equity Category - RIAs
Exhibit 59: Expected Change in Use of Active Solutions by Equity Category – Active Adherents
Exhibit 60: Expected Change in Use of Active Solutions by Equity Category – Combination Users
Exhibit 61: Expected Change in Use of Active Solutions by Equity Category – Passive Adherents
Exhibit 62: Preference for Active vs. Passive Solutions by Fixed Income Category
Exhibit 63: Preference for Active vs. Passive Solutions by Fixed Income Category – Full Service
Exhibit 64: Preference for Active vs. Passive Solutions by Fixed Income Category - Independent
Exhibit 65: Preference for Active vs. Passive Solutions by Fixed Income Category - RIAs
Exhibit 66: Preference for Active vs. Passive Solutions by Fixed Income Category – Active Adherents
Exhibit 67: Preference for Active vs. Passive Solutions by Fixed Income Category – Combination Users
Exhibit 68: Preference for Active vs. Passive Solutions by Fixed Income Category – Passive Adherents
Exhibit 69: Expected Change in Use of Active Solutions by Fixed Income Category
Exhibit 70: Expected Change in Use of Active Solutions by Fixed Income Category – Full Service
Exhibit 71: Expected Change in Use of Active Solutions by Fixed Income Category - Independent
Exhibit 72: Expected Change in Use of Active Solutions by Fixed Income Category - RIAs
Exhibit 73: Expected Change in Use of Active Solutions by Fixed Income Category – Active Adherents
Exhibit 74: Expected Change in Use of Active Solutions by Fixed Income Category – Combination Users
Exhibit 75: Expected Change in Use of Active Solutions by Fixed Income Category – Passive Adherents
Exhibit 76: Most Important Aspects of Support for Actively Managed Solutions
Exhibit 77: Very Important Aspects of Support for Actively Managed Solutions by Channel
Exhibit 78: Very Important Aspects of Support for Actively Managed Solutions by Use of Active Management
Exhibit 79: Providers of Actively Managed Solutions Rated as Offering Most Positive Overall Experience and Useful Support
Exhibit 80: Providers of Actively Managed Solutions Rated as Offering Most Positive Overall Experience and Useful Support by Channel
Exhibit 81: Aspects of Product Support Most Important to Advisors
Exhibit 82: Aspects of Product Support Most Important to Advisors by Channel
Exhibit 83: Aspects of Product Support Most Important to Advisors by Use of Active Management
Exhibit 84: Aspects of Sales Support Most Important to Advisors
Exhibit 85: Aspects of Sales Support Most Important to Advisors by Channel
Exhibit 86: Aspects of Sales Support Most Important to Advisors by Use of Active Management
Exhibit 87: Aspects of Value-Add and Practice Management Support Most Important to Advisors
Exhibit 88: Aspects of Value-Add and Practice Management Support Most Important to Advisors by Channel
Exhibit 89: Aspects of Value-Add and Practice Management Support Most Important to Advisors by Use of Active Management
Exhibit 90: Aspects of Web-Based and Digital Support Most Important to Advisors
Exhibit 91: Aspects of Web-Based and Digital Support Most Important to Advisors by Channel
Exhibit 92: Aspects of Web-Based and Digital Support Most Important to Advisors by Use of Active Management
Exhibit 93: Changes to Improve Satisfaction with Actively Managed Solutions
Exhibit 94: Changes to Improve Satisfaction with Actively Managed Solutions by Channel
Exhibit 95: Changes to Improve Satisfaction with Actively Managed Solutions by Use of Active Management
Exhibit 96: Profile of Respondents by Key Characteristics
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