When the Options Industry Council (OIC) set out to see how their new online education program for advisors was doing, and how to tweak it to make it more useful, little did they know that the survey results would point out “stark differences” in how advisors approach their clients, manage money and even the types of clients that they like to work with, says Gina McFadden, president of the Chicago-based, exchange-funded non-profit group.
Are you an “enthusiast,” or an “avoider?”
The “OIC Financial Advisor Engagement Study,” findings divide advisors into three categories: “enthusiasts,” who use options strategies in their clients’ portfolios, “avoiders,” who do not, and “hybrids,” who share many of the enthusiast’s characteristics but may not be using the strategies extensively, says Eric Cott, director of the OIC’s education program for advisors, including the advisor portal on the Council’s Web site, www.OptionsEducation.org/advisor.
The advisor survey found that those who use options in their investment strategies are a cut above advisors who don’t. This cuts across age, years in the profession and whether the professional is a broker or investment advisor. “Enthusiasts” are “holistic” in client relationships, “client focused,” and tend to favor “solutions over products,” refer to “specific strategies and goals for their clients…,” and “seemed more knowledgeable about many different investment products, not just options.” They also tend to “embrace empowered, educated clients” who and have “extensive product knowledge.” This finding correlates with data derived from a different set of surveys the OIC conducts, once every five years, of investors–a new one is planned for this year.
“Avoiders” tended to focus in one investing area of expertise, such as “fixed income” or “oil and gas,” for their clients, are “business focused,” rather than “client focused,” and use mutual funds for clients’ portfolios, according to the survey. Rather than share knowledge with clients, as “enthusiasts” tend to, “avoiders” see themselves as “gatekeepers of information and knowledge.”
The trend in the investor surveys finds “options investors” to be, “more affluent than non-options investors,” McFadden notes, adding, “these are clients you want to have.” They tend to own more diverse types of securities and assets, trade more often, and be better educated about investing.
The OIC, founded in 1992 as an educational resource for investors and advisors, is funded by the OCC and seven options exchanges, soon to be eight options exchanges when BATS goes live on February 26, says Cott.
Comments? Please send them to firstname.lastname@example.org. Kate McBride is editor in chief of Wealth Manager and a member of The Committee for the Fiduciary Standard.