Advisors Picky About Product Providers

Market Strategies International recently published its sixth annual Advisor Brandscape report, finding that although advisors reported improved brand impressions for many product providers, they’re still working with only a select few.

Meredith Lloyd Rice, a senior director for MSI’s syndicated division, said the favorable views could be attributed at least in part to stronger market performance.

“We’re seeing increases [in brand impressions] across the board for a lot of providers, but the interesting thing is even though the impression scores are rising across the board, we’re still seeing a relatively more narrow list of firms rising to the top,” Rice told ThinkAdvisor on Monday.

She added that advisors were “concentrating more on the primary provider now, working with fewer providers. It’s interesting because a lot of firms are benefiting from the strong market performance, but at the same time I think with the rise in performance, now there might not be as much focus on cobbling together the absolute best-in-class provider in every asset class. It’s going to be a little more concentrated in some of the bigger firms.”

The most important criteria for mutual fund providers, “probably not surprisingly,” Rice said, “is having a distinctive company investment philosophy and also having strong long-term and consistent performance.” However, advisors are also concerned with what MSI calls “table stakes”: financial stability, integrity and honesty. “If a firm doesn’t perform well on those attributes, it’s a potential risk,” Rice said.

Furthermore, although not all advisors take advantage of the value add programs their providers offer, those programs were most likely to enhance loyalty to a firm among those who do, Rice said.

The Advisor Brandscape report aims to provide insight into advisors’ evolving needs, including perceptions of product providers.

The report also tracks how advisors use different asset classes and found they are gravitating toward less traditional asset classes and strategies to look for higher yield, Rice said. “They anticipated increasing their exposure to non-U.S. equities, emerging markets and alternative investments, and dialing back their exposure to U.S. fixed income and cash over the next two years. I think that’s attributable to the current continued low interest rate environment.”

Advisors are increasingly using managed money solutions, according to the report, but Rice noted that that there’s a disconnect between advisors who want to use those solutions to make more time for their clients, but don’t want to hand over too much control.

“The interesting challenge there is there’s a bit of a disconnect in terms of advisors really relying on the money managed solutions to free them up to spend more time focusing on clients and to scale their practices, but at the same time they have the same expectation in terms of wholesaler visits and contact and communication from the providers that they’re working with,” she said. “Not all of them like the restrictions that their firm may be placing on them to only work with firms on the recommended list.”