Advisors have more money than ever currently invested in mutual funds, but they are choosing to work with fewer providers overall, and increasingly concentrating more assets with their primary mutual fund provider. These and other findings are included in the 2014 annual Advisor Brandscape® report from Cogent Reports™, a division of Market Strategies International.
According to this year¡¯s report, advisors have, on average, just over $42 million invested in mutual funds, up from $36.8 million a year ago. The current average by channel ranges from $21 million among Independent planners to $124 million among RIAs. Yet, despite the rise in mutual fund assets, advisors report working with fewer fund providers: 10.1 in 2014 compared with 10.8 in 2013. In addition, the proportion of mutual fund assets being managed by advisors¡¯ primary provider has increased 18%, from 33% in 2013 to 39% in 2014.
¡°The consolidation story we were tracking for a number of years flattened out last year,¡± said Meredith Lloyd Rice, senior product director at Market Strategies and author of the report. ¡°But the trend came roaring back to life this year, especially among Wirehouse advisors and RIAs, where we saw the most significant declines in the number of fund managers being tapped along with big increases in money concentrated with a single provider.¡±
In addition to identifying all of the providers they currently use, Cogent Reports asked advisors to identify the one fund company to which they entrust the biggest share of their mutual fund dollars. DFA and American Funds enjoy the highest percentage of primary users overall. The results reveal that only two of the 44 firms covered in the report, BlackRock and PIMCO, experienced a decline over the past year in the proportion of users who consider these firms to be their primary mutual fund provider. In contrast, three firms¡ªIvy Funds, American Century Funds and Goldman Sachs¡ªexperienced significant increases during the same period, while Lord Abbett and T. Rowe Price have made notables strides compared with 2012.
¡°As advisors pare down the number of asset managers they work with, it is increasingly important for firms to focus on deepening their share of assets with current users,¡± said Rice. ¡°Advisors overall invest twice as much money with their primary fund provider compared with their secondary provider¡ªand among RIAs it¡¯s three times as much. So, if establishing a relationship is like getting on first base, becoming an advisor¡¯s primary provider is hitting a grand slam.¡±
Cogent Reports conducted an online survey with 1,437 financial advisors from February to April of 2014. In order to qualify, respondents were required to have an active book of business of at least $5 million and offer investment advice or planning services to individual investors on a fee or transactional basis. Cogent Reports set quota targets and weighted the data to be representative of the overall advisor universe using the Discovery Data Financial Services Industry database as a sample source. Market Strategies will supply the exact wording of any survey question upon request.
