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Alternative, Tactical Allocations on the Rise, Curian Survey Finds

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Curian Capital is out with its annual survey of advisors’ attitudes about the future and, little surprise, most mentioned alternative investment and tactical allocation strategies as keys to client success in a still-turbulent global economy.

The Jackson National Life-owned managed account provider surveyed 1,009 independent financial advisors representing 150 broker-dealers with an average $36 million in assets under management.

Similar to findings in 2010, the survey found that advisors’ outlook on the global economy is split nearly evenly—34% of respondents believe the economic crisis will get better in the near future, 32% believe the economic crisis will be long term and 34% were unsure. This “striking disparity” among advisors is likely to cause a significantly fractured approach to portfolio management strategies in the year ahead, according to the survey.

“Government spending topped the list of advisors’ perceived threats to their clients’ retirement accounts, at 35%, followed closely by market volatility at 31%,” Curian said in a statement. “In 2010, advisors said that not generating enough income to last through retirement was the biggest threat to their clients’ retirement plans; however, this year, 82% of respondents reported that they have the adequate income-generating investment products to meet their clients’ retirement needs.”

Other key findings include:

• Nearly two-thirds of the advisors say that they have begun using more tactical asset allocation strategies to mitigate economic volatility, and more than half of respondents report they are using more alternative investing strategies.

• As a result of market volatility, nearly 4 out of 5 advisors report an increase in their clients’ demands for more conservative investments; in addition, 72% say their clients have an increased demand for guaranteed income features, 55% report an increase in demand for more tactical asset allocation, and 47% report an increase in demand for alternative investments.

• Nearly 80% of advisors using alternative asset classes report that their primary goal for including them is to diversify and further stabilize portfolio returns.

• 61% of advisors report that they plan to increase their use of alternative asset classes this year. Currently, 63% of advisors say their existing allocation to alternative asset classes (as a percentage of AUM) is 10% or less, while only 3% of advisors have 25% or more allocated to alternatives.

• The majority of respondents (38%) said that their main concern about using alternatives is that they are illiquid or less liquid in nature.

“Advisors are expected to wear two hats in managing their practices – both as financial advisors and as business owners – and they are becoming more sophisticated in what they expect from product providers,” Mark Schoenbeck, senior vice president of marketing for Curian, told AdvisorOne. “The survey makes it clear that advisors aren’t going to use a product unless it’s available to them in a user-friendly way, with functional online components and high-quality materials. And they also expect a high level of expertise and guidance to help them along the way. It’s up to product providers to continue to develop platforms that allow advisors do their jobs efficiently.”

The importance of streamlined wealth management systems is reflected in advisors’ goals for the coming year, the report adds. More than half of advisors cite improved efficiency and overall time management as their primary goal for 2012, while acquiring new clients remains a top objective.


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