The Markets July 21, 2011

Clients Need More Info on Global Investing

Investors who work with a financial adviser are more likely than those who don’t to think of global investing as an important strategy for diversification, according to a recent survey from The Hartford.
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The survey found there is confusion about the differences between global and emerging markets (EM) investing.Sixty-two percent of investors who work with a financial adviser said global investing is an important way to diversify their portfolio, versus only 31% of those who do not work with a financial adviser. However, 27% of those who work with an adviser are unsure if global investing is important for diversification.  

According to The Hartford, while the majority of investors who work with an adviser think global investing is important, less than half practice what they preach:  

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  • Only 46% own global or international mutual funds 
  • More than one-quarter aren’t sure if they own global or international mutual funds 
  • Only 42% own mutual funds that invest in EM 
  • Thirty-seven percent aren’t sure if they hold mutual funds that invest in EM 

The survey also found investors who work with an adviser don’t understand their own global investments. When asked which global asset classes they hold in their portfolio, 57% indicated they don’t know. Many investors are not considering EM investments. Fifty-eight percent of those who work with an adviser do not own mutual funds that invest in emerging markets. The top three reasons they avoid emerging markets are:  

  • EM is too risky (38%) 
  • I don’t understand EM (38%) 
  • Developed markets are less risky (22%)  

Investors who work with an adviser and who own mutual funds that invest in emerging markets say the top three reasons are:  

  • EM can help diversify my portfolio (80%) 
  • EM is growing faster than developed markets (43%) 
  • EM is a growing percentage of global GDP (38%)   

Overall, 92% of investors who work with an adviser are happy with the international investments they hold today. However, only 40% of the group working with a financial adviser said their adviser has discussed global diversification with them; 49% haven’t discussed global diversification, and 11% weren’t sure.   

Eighty-one percent of them would be “very” or “somewhat” receptive to a global diversification discussion with their financial adviser.  

Products July 21, 2011

SPARK Creates Data Standards for Participant Fee Disclosure

The SPARK Institute has released a draft of data standards for investment product providers and recordkeepers to help them fulfill their part of the upcoming fee disclosure rules.
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SPARK’s draft suggests ways in which providers and recordkeepers can electronically share investment related information that retirement plan sponsors must disclose to participants under new fee disclosure rules. According to Larry Goldbrum, SPARK General Counsel, the standards were developed primarily for use by non-registered investment product providers (e.g., bank collective investment funds, non-registered “fund of funds,” separately managed accounts and annuities) because no standards or mechanism currently exist for investment providers to transmit the required information to plan sponsors and their record keepers. 

“Our members who are recordkeepers recognized that plan sponsors will need significant help in collecting and reporting the data on potentially thousands of non-registered investment options and that gathering the information must be done electronically in order to be reliable, timely and cost effective,” said Goldbrum.     

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Although developed primarily for sharing information on non-registered funds, the data standards can, to a limited extent, accommodate certain registered investment products (i.e., mutual funds), but are not intended to be the primary means for sharing information for such funds.  

The document, “Data Layouts for Investment Related Retirement Plan Participant Disclosures,” is posted on The SPARK Institute Web site at http://www.sparkinstitute.org/comments-and-materials.php. SPARK is requesting comments and feedback from everyone in the retirement plan community, including non-registered investment product providers, recordkeepers and plan sponsors so that the final version of the data standards meets the needs of as many affected parties as possible. Comments are due by August 4 and should be submitted to participant_disclosure_questions@sparkinstitute.org.


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