Advisors Eye Alternatives, Question Buy-and-Hold Approach
In the wake of market uncertainty, low interest rates and difficult economic conditions, financial advisors are looking for alternative investment options to balance client portfolios.
According to the 2012 Natixis Global Asset Management U.S. Advisor survey, the global financial crisis and uncertain market recovery has accelerated interest in alternative investing.
According to the survey, released Wednesday, 49% of advisors are uncertain that the traditional 60/40 allocation between stocks and bonds is still relevant, and 23% said the traditional approach isn’t close to meeting the needs of investors in contemporary markets.
Thirty-eight percent of advisors that have been in business for more than 15 years no longer believe that the traditional 60/40 allocation is the best way to pursue returns and manage risk. Advisors were twice as likely to say that new approaches are needed compared to those who favor the status quo (46% vs. 22%).
Advisors are also questioning a long-term buy and hold strategy. According to the study, 77% of clients question this strategy.
This reconsideration of traditional buy-and-hold strategies varies in accordance with the wealth of investors, according to the study. Only 40% of advisors catering primarily to mass-market clients question the merits of traditional buy-and-hold strategies; this figure rises to 59% for advisors who primarily serve affluent or emerging high-net-worth clients.
Advisors who have adapted to difficult market conditions are growing their businesses. Sixty percent of advisors believe that their businesses are sufficiently diversified to succeed in uncertain market conditions. Fifty-four percent said that market volatility has enabled them to capture assets from competitors and 46% of advisors say that market conditions had helped them expand their businesses over the past three years.
As markets continue to slowly improve, investors are struggling to find a balance between increasing returns and asset conservation. Eighty percent of advisors say their clients are “torn” between seeking increased returns and the need to keep their investments safe. But according to the survey, 58% of advisors say a majority of their clients place an increasing priority on asset growth over protecting principal and 33% say most of their clients are eager to make up for past losses, even if it means taking on more risk.