Advisors’ Portfolio Control Creates Opportunity for Asset Managers
As financial advisors increasingly position themselves as holistic wealth managers, many are outsourcing investment management. But a significant share still want to manage client portfolios themselves, and that is reshaping how asset managers compete for their business.
Rep-as-portfolio-manager programs, in which advisors make investment decisions directly, remained the largest managed account program type as of the second quarter, with $4.7 trillion in assets, according to the latest Cerulli Edge—U.S. Managed Accounts Edition. Unified managed account programs, which hold multiple strategies in a single account often run by a sponsor or third party, held $4.5 trillion, and Cerulli expects them to take the lead soon.
Even so, the number of advisors who view portfolio management as their core skill remains significant.
“While outsourced investment management continues to expand, many advisors remain reluctant to relinquish portfolio discretion,” said Scott Smith, senior director at Cerulli.
That creates an opportunity for asset managers to add value beyond their products. Asked how they have responded to greater advisor discretion, 54.8% of asset managers said they created programs explaining how their products fit within a portfolio, keeping their firms top of mind as advisors build client allocations.
Advisors and home offices ranked thought leadership (78.1%), guidance on implementing investment solutions (65.6%) and practice management techniques (53.1%) as the most valuable resources asset managers can provide.
Cerulli said asset managers that act as partners offering guidance and expertise, rather than simply promoting fund performance, will be better positioned to win advisor trust.
“Asset managers should be prepared to support both discretionary advisors seeking portfolio construction resources and home offices aiming to limit advisor discretion,” Smith said. “Nimble asset managers that recognize this dual opportunity and tailor their resources accordingly will be best positioned to strengthen distribution relationships and capture growth.”