Advisors' top concern for the quarter was portfolio management, according to the survey.

Financial advisors polled by Fidelity Investments ranked portfolio management as their chief focus in the first quarter, and as part of this focus, they wanted to better understand how to allocate between domestic and international investments.

In fact, for the first time since it began surveying advisors, Fidelity said international markets ranked as one of their top five themes.

Advisors were concerned by political instability in various regions, economic uncertainty in Europe and the effect of the rising dollar on non-U.S. equities and treasuries.

Fidelity’s first quarter Advisor Investment Pulse found that market volatility, interest rates, and fixed income and yield took the third, fourth and fifth spots as advisors’ top-of-mind themes.

Interest rates were advisor’s top concern in Fidelity’s fourth-quarter survey.

The first quarter’s five themes together help explain advisors’ focus on portfolio management and asset allocation, Fidelity said in a statement.

“In a volatile market environment, one of the biggest challenges for advisors is how to help clients diversify their portfolio effectively without taking on undue risk,” Scott Couto, president of Fidelity Financial Advisor Solutions, said in a statement.

“What we’re hearing is that advisors are trying to leverage multiple asset classes to strike a balance between risk and reward. Their clients want to keep some peace of mind with fairly low-risk investments while potentially increasing returns.”

Cuoto said advisors continued to look overseas to help clients diversify their portfolios, even as the outlook for domestic equities was strong and the economy continued to benefit from the decline in oil prices. He noted that historically, a low correlation existed between international and U.S. stock performance.

“As economies stabilize and recoveries continue, some regions, sectors and companies may present a surprising potential for upside growth,” Couto said. “The rest of the world may be more complicated, but opportunities are emerging and advisors should position their clients to take advantage.”

Overseas Opportunities

Fidelity laid out several reasons why advisors might be encouraged to help their clients navigate international markets.

For one, investment opportunities have increased with globalization. Three-quarters of the world’s publicly traded companies are now located outside the U.S., including many sector leaders. Fidelity said advisors may need to look at overseas markets in order to take advantage of the opportunity set and to tap into the potential of these sector leaders. As well, it said, international markets may offer better dividend yields than U.S. equities.

Another reason to look at international markets, according to Fidelity, is that many of the world’s fastest growing economies are outside the U.S. Consider gross domestic product. The American economy comprised 33% of global GDP in 2001, but only 23% in 2013.

In some instances, other economies have grown more rapidly than the U.S. because their populations are younger and their markets less mature.

Finally, in countries where political or economic uncertainty dominate news headlines, some opportunities may be undermined by lower valuations as investors shy away.

Fidelity said a portfolio management team that can capitalize on valuation anomalies and price divergences through active allocation adjustments may be able to generate better outcomes.

Moreover, active managers with access to global research can help advisors improve portfolio outcomes by making active asset allocation adjustments within a risk-controlled framework.

As an example, Fidelity said bond markets, unlike equities, were typically more affected by local factors, and as a result, bond yields, returns and therefore risk exposure could diverge significantly from country to country.

An active manager of a global balanced strategy could help an advisor take advantage of opportunities to diversify against these risks, thereby improving the portfolio’s risk-return profile.

— Check out Are You a Contrarian or Part of the Herd? on ThinkAdvisor.