Advisers Prod Wealthy to Move From Index Funds to Active Management

A survey of high-net-worth and ultra-high-net-worth investors by Advisor Perspectives found that left to their own devices, about a third will park their money in index funds, the Financial Times reports. But working with an adviser, they feel more comfortable investing in an actively managed mutual fund or separately managed account; if they are working with an adviser, only 3.8% of wealthy investors’ money is in index funds.

When working with an adviser, high-net-worth investors tend to “take an active approach to investing and seek returns in excess of market benchmarks,” according to Advisor Perspectives.

“The explanation is that these are sophisticated investors,” said Robert Huebscher, the firm’s chief executive officer. “They’re smart enough to go out and buy an S&P 500 Index fund on their own. They don’t need an adviser to do that for them.”

While advisers might have reason to suggest an index fund, because the market is strong in many sectors right now, that may not be the right choice for many of their clients, Huebscher said. “I would suspect that some advisers may be avoiding index funds because the markets now are at all-time highs,” he said, “and so they’re looking at more defensive strategies.”

The staff of Money Management Executive ("MME") has prepared these capsule summaries based on reports published by the news sources to which they are attributed. Those news sources are not associated with MME, and have not prepared, sponsored, endorsed, or approved these summaries.