The Markets January 22, 2018

Advisers Warming Up to Smart Beta

However, while 79% of U.S. advisers are aware of smart beta, only 36% are very familiar.

Reported by

Advisers are beginning to embrace smart beta strategies, but 47% of advisers in the U.S. say they do not know enough about the tactic, FTSE Russell found in a survey. Seventy-nine percent of U.S. advisers say they are aware of smart beta, but just 36% say they are very familiar.

Among 53% of U.S. advisers who have used smart beta, most prefer tactical applications (30%) over strategic (26%)—but 44% use it for both. Advisers also say they view smart beta as a complement to active management (67%). They say they use smart beta to generate alpha (cited by 37%), to improve diversification (33%) and protect against the downside (30%).

Survey respondents prefer exchange-traded funds (68%) over mutual funds (41%) when employing smart beta and most commonly seek out large-cap U.S. exposure (62%). Of the existing smart beta investment approaches used, value (36%), equal weight (36%) and dividend yield strategies (35%) are used most frequently by U.S. advisers. Forty percent of U.S. advisers say they expect their usage of smart beta will increase. When assessing smart beta products, U.S. advisers first consider long-term performance (58%) and then cost (53%).

“A lack of information and knowledge about smart beta is a major reason for advisers not using smart beta strategies,” FTSE Russell says in its report. “Among those not using smart beta strategies, the reasons provided by U.K. advisers indicate skepticism about smart beta strategies’ value or benefit, while the main reasons provided by U.S. and Canadian advisers are indicative of information gaps. This underscores the continuing need from smart beta index providers like FTSE Russell to educate market participants about the wide array of smart beta products available to investors.”

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When asked by they do not use smart beta, 47% of U.S. advisers say they do not know enough about them. Thirty-four percent say they can achieve smart beta objectives with their own portfolio management, 21% do not think that back testing shows that these strategies offer enough, and 21% do not think they are worth the extra fees.

FTSE Russell conducted the survey with the help of Greenwald & Associates last September and October among 256 financial advisers, 92 of whom were in the U.S. The report, “Smart Beta: 2018 Survey Findings From U.S., Canadian and U.K. Financial Advisors,” can be downloaded here.
Products January 19, 2018

Vestwell Integrates Morningstar 3(21) Fiduciary Services to Platform

Financial advisers can help plan sponsors address their fiduciary responsibilities while creating their own investment product lineup from menus of funds on which Morningstar has performed due diligence.

Reported by

Vestwell, a digital retirement platform, announced it will be offering a select list of investment options under Morningstar Investment Management LLC’s 3(21) fiduciary services program to Vestwell clients.

Vestwell provides a platform that automates and digitizes the client recordkeeping and administrative experience so that advisers and plan sponsors can focus on developing a retirement plan that best suits their employees. The integration of Morningstar Investment Management services seeks to benefit financial advisers and plan sponsors by enabling them to address their fiduciary responsibilities while creating their own investment product lineup from menus of funds on which Morningstar has performed due diligence.

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Advisers will have access to a list of investments curated by Morningstar that cover various asset classes and fund types, all of which follow strict guidelines centered on management, style and performance consistency, with an eye on expenses. The maintained list is embedded into the Vestwell platform, allowing advisers and plan sponsors to serve participants across various workforce demographics.

“We’re delighted to integrate Morningstar Investment Management’s 3(21) fiduciary services program, which complements our offering and provides advisers with a diverse, highly customizable set of retirement solutions for their clients,” says Aaron Schumm, founder and CEO, Vestwell.

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