Top five challenges facing financial advisers around the world
By International Adviser, 14 Oct 16
Financial advisers name the challenges facing the future of their businesses, from poor market performance and a challenging regulatory environment, according to a survey by Natixis Global Asset Management, which questioned 2,550 advisers across 15 countries.
Natixis highlight that advisers know that they cannot rely on past methods to meet investment goals given low yields, high correlations and volatility.
In the past 12 months alone, advisers have had to navigate three unique market events – China’s Black Monday in August 2015, the stock market plunge in January 2016 and the surprise vote in favour of the Brexit in June 2016 – which come after years of abnormally low volatility for policy-driven markets.
Seven in ten say they believe they will need to replace traditional diversification and portfolio construction techniques with new approaches to achieve desired results.
Even more (73%) believe that a stock and bond portfolio is no longer enough to pursue returns and manage risk.
Passive
Passive investments such as index funds have gained considerable market share in the advisory world over recent years.
Advisers have clear reasons for turning to passive strategies:
- Effective tool for managing expenses (66%). This is an important consideration for advisors as they respond to increased fee pressure.
- A tool for accessing efficient asset classes (57%) freeing up resources to direct into those asset classes.
- Lower fees (62%)
- Less risk – six in ten individuals believe that passive investments are less risky and believe that they will offer better downside protection.
Liquid alternatives
Liquid alternatives have also gained broad acceptance, says Natixis, with 58% of advisers worldwide and 75% in the US saying they use liquid alternatives in client portfolios.
Most frequently, advisers who use liquid alternatives report that they incorporate real estate investments in client portfolios (60%), but the field has expanded greatly and a large number of advisers are implementing more sophisticated strategies such as multi-alternatives (46%), global tactical asset allocation (43%) and long-short equities (42%).
The 42% of advisers who say they do not implement liquid alternatives reflect the complexities of the alternatives marketplace. Almost half of these advisors (47%) say they believe liquid alternatives are risky.
Some (43%) say these strategies are too difficult to explain to clients, highlighting the need for deeper education for both clients and advisors.
ESG
Despite more than three-quarters (78%) of individuals say that it’s important to invest in companies that are ethically run, advisers have reservations on environmental, social and governance (ESG) investing.
More than six in ten say they do not believe that these strategies have a long enough track record expressing doubts about the efficacy of ESG.
Almost six in ten claim ESG strategies do not mitigate governance and social risks, and 66% do not believe ESG will be a standard practice for advisors in the next five years.
Tags: Natixis
