Over the past five years, packaged portfolios, managed accounts that are put together by broker-dealer home offices, have performed better than advisor-driven or open portfolios, according to new research from Cerulli Associates.
The report, “Managed Accounts 2015: Battle for Discretion,” posits that’s because the accounts stay invested in the markets through pullbacks and recoveries.
“The home office is more removed from the daily concerns of clients, and as a result can maintain the resolve to stay invested while advisors feel pressure from their clients, and themselves, to act to avoid short-term losses,” Frederick Pickering, a research analyst at Cerulli, said in a statement.
Packaged portfolios outperformed advisor-driven portfolios by 3.15 percentage points over the five-year period ending in 2014, and outperformed hybrid portfolios by 2.96 points. The report acknowledged that those numbers might look insignificant, but ”if the outperformance is projected onto the AUM of an advisor’s entire practice, it can amount to hundreds of thousands of dollars of ‘lost’ production revenues.”
“We believe the outperformance is primarily driven by qualified home-office teams dedicating their time to asset allocation, manager selection, and staying invested in the market during downturns,” he added. “Home-office teams are more quantitative in their approach to manager selection and are not as swayed by qualitative factors such as fund company’s reputation or wholesaler relationships.”