Data & Research March 16, 2011

Not Enough Advisers Use Fiduciary Status as Selling Point

Half (51%) of advisers agree that having a fiduciary standard is an “extremely” or “very” big differentiator when attracting new clients, according to ByAllAccounts, Inc., an account aggregation firm.
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A ByAllAccounts survey of 250 advisers also found that 27% are not mentioning fiduciary responsibility in their marketing materials. ByAllAccounts says these advisers are missing a growth opportunity in the high-net worth market.

“Fiduciary responsibility is about putting your clients’ interests first,” said Cynthia Stephens, vice president of marketing at ByAllAccounts. “Our research shows that reporting and advising on all of a client’s assets is one of the top three things two-thirds of advisers say is indicative of putting their clients’ interests first.”

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Nearly 90% of advisers surveyed believe they are acting as a fiduciary on behalf of their clients. Among this percentage:

  • Forty-two percent view 100% of their clients’ total assets on a regular basis, including accounts that are held-away, such as 401(k)s
  • Fifty-three percent said they feel it is important to provide advice on retirement funds to put their clients’ best interests first;
  • In order to develop a full view of their clients’ life goals and financial situation 72% develop a financial plan; 69% have their client fill out a questionnaire; 54% use an investment policy statement; and 45% use account aggregation to gather all of their assets for reporting purposes.

 

The Markets March 16, 2011

Emerging Markets ‘Clear Leader’ in Asset Class Selection

More than three-quarters of retirement plan sponsors have emerging markets equities in their investment lineups or are considering adding them, according to a Grant Thornton survey.
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The survey by Grant Thornton LLP, Drinker Biddle & Reath LLP, and Plan Sponsor Advisors LLC labeled the emerging markets equities the “clear leader” among asset classes, with 77% of sponsors already including the class or considering it. Real estate investment options followed with 53%, global bonds 48%, TIPS 39% and socially responsive 27%, with commodities rounding out the responses at 20%.

The report cautioned sponsors to make certain whether a real estate-related investment is structured as a REIT or actually holds physical real estate. “They are two very different investment strategies and could have significant implications for your participants,” the study commented. “With investments in physical real estate, participants may be unable to access their money temporarily and may be placed in a queue with other investors waiting for their investments to be liquidated.”

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Whenever plan sponsors are adding new investment choices, Grant Thornton says there are three key questions that should be addressed:

1. Does it provide a diversification benefit?

2. Does it provide an enhanced return profile — essentially, are the expected returns greater within the new asset class than others already available?

3. What does this addition do to the overall portfolio architecture — how many options, what kind of potential overlap, too many “accumulation” strategies vs. balancing accumulation and de-accumulation options?

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