The open-end mutual fund will decline in its share of the investment product mix of financial advisors by more than 10% by 2009, according to a new study by Cogent Research.
Open-ended funds have long been the dominant investment product of choice by financial advisors, notes Cogent, Cambridge, Mass.
Fortified with better technology and more product options, and pressured by clients to be more productive, advisors are more readily exploring newer investment vehicles so they can better meet individual client needs, says Cogent in its new Advisor Product Forecast.
Advisors need to expand their own revenue avenues by buying and recommending investment products that provide what clients are looking for and that can be sold within the growing fee-based environment, Cogent suggests.
Advisors often find it a challenge to match more advanced products to their clients’ complex needs while explaining these complex investment vehicles to clients, Cogent says.
Cogent’s forecast includes these predictions:
Mutual funds and individual securities will continue to give up share to up-and-coming products.
Self managed accounts will be the chief beneficiaries of the continuing trend away from traditional products.
Exchange-traded fund growth is being impelled by specialized use among advisors focused on wealth management.
Variable annuities will struggle to increase market share, despite an environment that should favor their features.
Fees based on assets under management will comprise the majority of income for most advisors-and this will influence their product selection.
Cogent found that fewer than 20% of advisors expect to increase their use of open-end mutual funds and estimates that the mutual fund share of the product pie will drop from 35% to 31% by 2009. On average, advisors say they will remain loyal to 6 primary mutual fund providers.