A new Aite Group report shows that nearly 60% of advisors across all industry segments voiced a strong preference for advisor-directed asset management, either on a discretionary or non-discretionary basis, with “rep as portfolio manager” and “rep as advisor” the clear standouts over separately managed accounts and mutual fund advisory.
“Clearly, advisors crave more control in the asset-management process,” according to Aite Group, a financial services research and consulting firm based in Boston, in its Nov. 3 report, “Managing Wealth: Advisor Perspectives on Investment Products and Fee Business.”
Conducted in March, the Aite Group’s online survey of 440 U.S. financial advisors got responses from a range of advisory firms, including independent registered investment advisors and wirehouse and other self-clearing broker-dealers.
“Rep as portfolio manager,” defined as the management of client assets by the financial advisor on a discretionary basis, “is without a doubt the asset-management style most sought after by financial advisors,” according to Aite report authors Alois Pirker and Sophie Schmitt.
“Rep as advisor” non-discretionary advisory accounts currently comprise 36% of fee-based assets compared with 27% “rep as portfolio manager” advisor-directed fee-based assets, the report shows.
Market Volatility Drives Desire
Advisors’ desire for control has become especially apparent during the extreme volatility the markets have experienced in 2012, Pirker and Schmitt said.
“Advisors seem to be dissatisfied with traditional asset-management methods like separately managed accounts (SMAs), which give them little influence on the management process,” the authors wrote in their conclusion. “Their hands must have felt tied as they were not able to take immediate action when markets showed a great level of volatility, particularly given that they compete with independent RIAs—which are nimble, small firms at which advisors are more often than not the portfolio managers of client assets.”
Further, while many regulatory changes have not been finalized, the spirit behind them is already affecting the way advisors do business, Pirker and Schmitt said.