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Tuesday, November 20, 2007

Study Takes a Look at Advisers' Mutual Fund Usage

Reported by Armie Margaret Lee

For fund firms who already have deep relationships with national broker-dealers, new figures from Reuters' AdvicePoint unit suggests an opportunity for such firms to increase assets by convincing the b-ds to use less individual stocks. As for smaller and newer fund shops who don't have relationships with the national b-ds, the data indicate an opportunity to gain market share by focusing on wealth managers.

The numbers are included in a soon-to-be published study conducted for AdvicePoint by Financial Research Corp. alum Chris Brown, who's now principal of Sway Research.

The study found that mutual funds are used by 99 percent of advisers in national broker-dealers and 84 percent in wealth management firms. Meanwhile, the percentage of advisers in independent/regional b-ds and RIAs using mutual funds stand at 96 percent and 90 percent, respectively.

Across all channels, the average allocation to mutual funds stands at 40 percent, followed by individual stocks (16 percent) and SMAs (10 percent).

Among the four channels, the one with the highest allocation to mutual funds is the RIA channel, with 48 percent. Independent and regional b-ds allocate 41 percent on the average; national b-ds, 29 percent and wealth managers, 28 percent.

National b-ds have the highest allocation to individual stocks among the four channels (21 percent), followed by RIAs (17 percent), independent/regional b-ds (10 percent) and wealth managers (4 percent).

Scott Parry
Reuters AdvicePoint
General Manager
The data is part of a broader study that is set to be published next month, said Scott Parry, general manager of Reuters AdvicePoint, which recently debuted its Web site. The study took into account responses from 1,100 advisers.

Advisers were also asked to list the top five fund families they work with, as well as the top five ETF providers and annuity providers.

The AdvicePoint Web site features a database containing information on thousands of advisers, which investors can search by criteria including state, metro area, language spoken and specialty. Investors can likewise look up advisers by the fund family they use.  

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