Market turmoil has spurred investors appetite for advice, and nowhere can this be seen more clearly than in mutual funds sold through brokerages or financial planners, according to Strategic Insight.
Sales of long-term mutual funds through brokers and financial advisers sharply moved away from commission-based services to a fee-for-advice wrap model, particularly in the tumultuous fourth quarter. For all of 2008, 27% of all sales through intermediaries were in fund wrap or fee-based advisory programs, up from 24% in 2007. And in the fourth quarter, that surged to 30%.
In addition, Strategic Insight found, sales of mutual fund class A, or other no-load share classes, which are favored by fee-based advisers, accounted for 62% of new fund sales via intermediaries in 2008, up from 56% in 2007.
Advice in the mutual fund business is increasingly provided through fee-based accounts, said Strategic Insight Research Analyst Dennis Bowden. The market turbulence of the past year has only increased mutual fund shareholders need for more structured financial advice.
Loren Fox, senior research analyst at Strategic Insight, added: The financial services industry continues to move toward a culture of advice and relationships, often packaged with an assembled portfolio of investments. And the retirement of Baby Boomers, who will need more customized counseling on income-in-retirement, will only accelerate these trends.