Even though directed brokerage has now been banned and revenue-sharing agreements are under close regulatory scrutiny, financial advisers will play an increasingly significant role in mutual funds sales in the coming years, according to a report from Financial Research Corp. The company predicts that direct sales to investors will drop from 15% in 2004 to 10% in 2009, while adviser-assisted sales will rise from 57% to 61% during the same period, The Wall Street Journal reports.
A major factor is the impending need for advice for income distribution, as retirees will need to figure out the best way to spend their retirement savings without running out of money. The need for retirement income will also draw many investors away from mutual fund investing, John Benvenuto, director of mutual fund research at FRC, told the WSJ. "[W]hile nearly all mutual-fund firms are currently salivating over the transition of a massive amount of wealth from employer-sponsored plans to IRAs, essentially these assets are just changing hands and will begin to decline as retirees draw down their life savings," Benvenuto told the WSJ. "The result will be a rising level of redemptions, which, in some cases, will exceed the growth rate of gross sales."
FRC also predicts faster sales growth among other product types, such as exchange-traded funds, hedge funds, and separately managed accounts.