Indie channels to hold 38% of assets by 2016: Cerulli

The report notes that “while many advisors desire a pure fee-only business, more often reality dictates a mix of fee and commission relationships. A legacy of commission business creates a familiarity with certain products, provides revenue in the form of trails, and breeds dependency on BD support.”

The report also notes advisors’ use of exchange-traded funds has boosted their asset growth. ETFs’ year-over-year asset growth outpacing their 5-year average, increasing an impressive 57.5% due to market appreciation and expanding advisor adoption.

While advisors’ use of alternatives has also grown in recent years, Cerulli notes that “many advisors are still reluctant to implement them in their portfolios.”

Alternatives, Cerulli says, “are often associated with high risk, and many advisors fear that they will lose clients if alternative investments in their portfolios perform poorly.” The Boston-based firm goes on to say that “many advisors lack thorough understanding of how alternatives fit within a portfolio and how they will perform in different market environments.” However, “when used appropriately, alternatives can provide protection to downside risk, although they typically do not yield high returns in bull markets.”

The report also notes that while variable annuity sales have persisted at IBDs and banks “where a culture of transactional business is the norm,” many broker-dealers are looking to grow their fee-based business, “which has hampered but not eliminated the use of annuities.”