More Advisors Are Using Fewer Asset Managers To Build Client Portfolios, Cerulli Says

Friday, July 08, 2011 05:23
More Advisors Are Using Fewer Asset Managers To Build Client Portfolios, Cerulli Says

Tags: asset management | portfolio construction

Before the credit crunch, most advisors drew on products from more than five asset managers when building client portfolios. Now, the majority of the industry is picking from a much smaller universe.

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A new report from Cerulli on "Advisor Portfolio Construction Dynamics" reveals that consolidation on the buy side and new technological improvements have radically streamlined the pool of funds that advisors use.


In 2008, Cerulli says, 63% of the industry used six or more managers. Now, 57% use five or fewer.


Part of that shift represents the concentration of assets among the survivors of the upheavals of 2008 and 2009.


But Cerulli also notes cost and risk as factors --  concentrating a client's wealth in a few fund complexes can be a cheaper solution for commission-based advisors, while reducing the number of funds you work with is somewhat paradoxically seen as lowering the odds that one will implode.


All in all, RIAs tend to have about 40% of their client assets in their primary provider's products. This reflects both the prevalence of ETFs and other indexed products and the increased conviction with which RIAs view their favored vendors.


In terms of technique, the lion's share of broker-dealer reps would classify their style as "strategic allocation with a tactical overlay." 


Most RIAs are split between that somewhat nimble approach to portfolio design, pure strategic allocation, and what Cerulli captivatingly calls "other."






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