Financial advisors are increasingly turning towards alternative investments and tactical asset allocations in response to market turbulence, according to a survey released by Curian Capital.
The survey, titled 2012 Outlook for Advisor Priorities, also found that the technology capabilities offered by product vendors had a dramatic impact on whether an advisor used that product. An “overwhelming” majority of the advisors polled said that they prefer more more sophisticated and high-quality platforms.
The survey elicited responses from advisors in four main areas: economic outlook; product selection and investment strategies; platforms and education; and practice management.
Advisors’ outlook on the global economy is split evenly three ways: 34% of respondents believe the economic crisis will get better in the near future; 32% believe the crisis will be long term, and 34% were unsure. This indicates that advisors will have a fractured approach to portfolio management strategies in the year ahead.
The survey also found that government spending topped the list of advisors’ perceived threats to their clients’ retirement accounts at 35%, followed closely by market volatility at 31%.
Nearly two-thirds of advisors say that they have begun using more tactical asset allocation strategies to help mitigate market volatility, and more than half of respondents report they have begun using more alternative investing strategies. More than 60% of advisors also plan to increase their use of alternatives over the next year. Nearly 80% of those already using alternatives say their primary goal is to diversify and stabilize portfolio returns.
“As advisors shift to alternative asset classes in an effort to offset the fluctuating market, product providers must follow suit,” said Chris Rosato, senior vice president of strategic development for Curian in a statement. “The survey shows that advisors are seeking ways to manage risk and address volatility in their clients’ portfolios, and are increasingly moving toward solutions that allow for lower correlated assets and better diversification.”
An overwhelming majority, or 76%, of respondents said that the quality of the online resources offered by a solution provider has an impact on the usage of their products.
To meet this need, product providers must continue to develop effective digital platforms and resources that assist advisors in improving efficiencies and managing the asset allocation process. The survey also found that the majority of advisors, 69%, say they rely on financial services companies for information on investing strategies, while only 5% of advisors depend on social media.
This is the fifth such survey conducted annually by Curian, polling more than 1,000 independent financial advisors appointed to sell Curian products.
Tommy Fernandez writes for Money Management Executive.