- Advisors are increasing the level of
assets under management devoted to external investment managers –
from an average of 53 percent in 2016 to 57 percent in 2018.
- Advisors reported “freeing up time in
my practice” as the leading reason they choose to outsource. Access
to institutional quality due diligence and a variety of investment
solutions were the other top drivers behind advisor
outsourcing.
- Six percent of advisors currently offer
a digital advice platform to their clients and 12 percent specified
that they plan to incorporate one within the next year or two.
FlexShares, the ETF unit of Northern Trust Asset Management,
today released its fifth biennial study on financial advisors’
views of and adoption of external investment management services.
It reveals that advisors are increasingly seeking out ways to make
their businesses more efficient through the use of third party
services and other means. First conducted in 2010, the survey
measures advisors’ attitudes toward and adoption of third party
investment managers and also tracks advisors who manage investments
in-house. This year’s survey was completed by over 500 financial
advisors from across various firm sizes and service models.
Findings show that a growing minority of advisors (43 percent)
currently employ third-party investment management solutions and
devote an increasing amount of assets to external providers.
Advisors reported outsourcing an average of 57 percent of client
assets under management (AUM) in 2018, up from 53 percent in 2016.
The key drivers behind the decision to outsource include “freeing
up time in my practice” (61 percent), “access to institutional
quality due diligence/monitoring” (47 percent) and “gaining access
to a variety of investment product strategies” (43 percent).
Advisors particularly sought out external help for more niche
strategies including alternative investments (65 percent),
emerging/frontier markets (43 percent), ESG (17 percent) and
factor-based or ‘smart beta’ investments (14 percent).
Advisors choosing to outsource either part of or all their
investment strategies are increasingly satisfied with their
decision. Satisfaction rates among advisors with external managers
have consistently increased, up from 92 percent in 2010 to 97
percent today. Sixty two percent of advisors have grown their
client base as a result of external management, and 30 percent have
realized an increase in revenue.
“As advisors adapt to a growing demand for financial planning
services and rising pressures on their bottom-line, they are
increasingly looking to employ external investment management
services and to focus on activities through which they can add the
greatest value,” said Laura Gregg, Director of Client Development
at FlexShares. “As they dedicate more client assets to outsourcing,
advisors are able to benefit by spending more focused time with
clients as well as concentrating on business development
activities.”
Although overall satisfaction rates are up, using an external
manager is not embraced by all advisors. Consistent with past
years, many respondents are hesitant to use external investment
managers because investment research remains a core part of their
firm’s value proposition. However, the data shows that this
attitude may be changing as the percentage of advisors that cite
this reason has declined over time – to 32 percent in 2018, down
from 45 percent in 2016 and 56 percent in 2014. The desire to
maintain flexibility was also cited as an important consideration
by 15 percent of non-outsourcers. The survey reveals that these
advisors still want outside help. The desire for external marketing
support (48 percent) tops the list followed by compliance (29
percent) and social media training (24 percent).
A new part of this year’s survey was an examination of the rise
of digital advice platforms and how advisors are implementing them
within their practices. While a strong majority of advisors choose
not to employ digital advice strategies, six percent of respondents
indicated that they currently utilize a digital advice platform and
12 percent plan to incorporate one within the next year or two.
Among the primary drivers for offering one are “attracting new
clients,” “increasing the range of services offered on the firm’s
platform with a lower fee,” “remaining competitive in the market,”
and “reducing costs.”
About the Survey
To conduct this year’s survey, the fifth in a series examining
advisor views on external investment management, FlexShares worked
with InvestmentNews, which fielded the electronic survey to more
than 170,000 advisors across the United States from a variety of
firm channels, sizes, and service models between February 13 and
March 3, 2018. Nearly 600 responses are included in the final
report. The sponsor was not identified in the survey.
Respondents represented the following firm types: Independent
broker-dealers (40%), RIAs (28%), hybrids (10%), insurance
broker-dealers (9%), regional broker-dealers (8%), bank/trust
companies (3%), and other financial advisory firms (1%). Of those
responding, 39% identified their firms as wealth managers, 24% as
financial planning firms, 18% as investment advisories, and 17% as
investment managers.
To download a survey infographic and the summary of results,
“The Race to Scalability 2018: Advisor Research on Investment
Management Trends,” and to register for more information, including
a an advisor benchmarking paper and a report for asset managers,
visit www.flexshares.com/outsourcing.
About FlexShares
FlexShares Exchange Traded Funds are designed to pursue specific
investment goals across both passive and active strategies.
FlexShares offers differentiated ETF strategies that can improve
and simplify the investment decision process for the long-term
investor. Follow us on Twitter @FlexSharesETFs.
About Northern Trust
Northern Trust Corporation (Nasdaq: NTRS) is a leading provider
of wealth management, asset servicing, asset management and banking
to corporations, institutions, affluent families and individuals.
Founded in Chicago in 1889, Northern Trust has offices in the
United States in 19 states and Washington, D.C., and 23
international locations in Canada, Europe, the Middle East and the
Asia-Pacific region. As of June 30, 2018, Northern Trust had assets
under custody/administration of US$10.7 trillion, and assets under
management of US$1.1 trillion. For more than 125 years, Northern
Trust has earned distinction as an industry leader for exceptional
service, financial expertise, integrity and innovation. Visit
northerntrust.com or follow us on Twitter @NorthernTrust.
Northern Trust Corporation, Head Office: 50 South La Salle
Street, Chicago, Illinois 60603 U.S.A., incorporated with limited
liability in the U.S. Global legal and regulatory information can
be found at https://www.northerntrust.com/disclosures.
Before investing, carefully consider the FlexShares
investment objectives, risks, charges and expenses. This and other
information is in the prospectus, a copy of which may be obtained
by visiting www.flexshares.com. Read the
prospectus carefully before you invest.
Foreside Fund Services, LLC, distributor.
An investment in FlexShares is subject to numerous risks,
including possible loss of principal. Fund returns may not match
the return of the respective indexes. The Funds are subject to the
following principal risks: asset class; commodity; concentration;
counterparty; currency; derivatives; dividend; emerging markets;
equity securities; fluctuation of yield; foreign securities;
geographic; income; industry concentration; inflation-protected
securities; infrastructure-related companies; interest rate /
maturity risk; issuer; large cap; management; market; market
trading; mid cap stock; MLP; momentum; natural resources; new
funds; non-diversification; passive investment; privatization;
small cap stock; tracking error; value investing; and volatility
risk. A full description of risks is in the prospectus.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20180906005171/en/
for FlexSharesMedia Contacts:Tom
Pinto212-339-7288Tom.Pinto@ntrs.comorDoug
Holt312-557-1571Doug.Holt@ntrs.comwww.flexshares.comFollow Us on
Twitter @FlexSharesETFs
Northern (NASDAQ:NTRS)
Historical Stock Chart
From Apr 2024 to May 2024
Northern (NASDAQ:NTRS)
Historical Stock Chart
From May 2023 to May 2024