When RIAs Pick Funds, Investing Transparency is King
Reported by Neil Anderson, Managing Editor
When RIAs pick mutual funds, the number one thing that they're looking for is investing clarity.
That's the key takeaway from survey results released yesterday by Scottish asset management giant Aberdeen Asset Management [profile]. Aberdeen, whose U.S. mutual fund business is based in Philadelphia, surveyed 201 RIA attendees at the giant Schwab IMPACT Conference last month in Washington, D.C.
59 percent of RIAs agreed that clarity of the PM's investment philosophy and strategy is the key factor in recommending a mutual fund, well ahead of performance history (19 percent), rankings (10 percent), PM tenure (8 percent) and brand (3 percent). Yet at the same time, 67 percent of the RIAs surveyed said that investment products are getting more complicated and thus more difficult for clients to understand, though the same percentage thought the increasing sophistication of funds is helpful to clients.
"Simple, open and honest communication from the fund manager is of utmost importance to advisors when determining which funds to invest in on behalf of clients," stated Mickey Janvier, head of wealth management, Americas for Aberdeen. "Many fund managers continue to undervalue the importance of clear and concise communication with advisors about how portfolios are invested. These managers will have a difficult time remaining relevant in an environment where transparency is king."
Company Press Release
When Selecting Mutual Funds, Clarity Regarding Investment Philosophy and Strategy Ranks Most Important to Advisors, Finds Aberdeen Survey
PHILADELPHIA, Dec. 4, 2013 -- According to a survey of more than 200 Registered Investment Advisors (RIAs) conducted by Aberdeen Asset Management, while historical returns, rankings, manager tenure and brand name are considered when evaluating mutual funds, the leading factor underlying a decision to recommended one fund over another is clarity regarding the portfolio manager's investment philosophy and strategy.
The Aberdeen Asset Management RIA Survey found that 59 percent of investment advisors agree that clarity regarding the fund manager's investment philosophy and strategy is the most important attribute considered when recommending a mutual fund to a client. Historical returns (19 percent), fund rankings (10 percent), fund manager tenure (8 percent) and brand name (3 percent) were other attributes considered by advisors, though of less importance.
"Simple, open and honest communication from the fund manager is of utmost importance to advisors when determining which funds to invest in on behalf of clients," said Mickey Janvier, Head of Wealth Management, Americas, for Aberdeen Asset Management. "Fund managers that can clearly and concisely articulate their investment philosophy and strategy are more likely to garner interest from advisors and attract assets. While this seems simple in theory, many fund managers continue to undervalue the importance of clear and concise communication with advisors about how portfolios are invested. These managers will have a difficult time remaining relevant in an environment where transparency is king."
Two-thirds (67 percent) of advisors surveyed agree that investment products have become increasingly difficult for clients to understand, compared to 33 percent that did not believe investment products have shown an increase in complexity. However, the majority of advisors (67 percent) also agree that these new, more complex and sophisticated products generally offer valuable benefits that can help clients achieve their investment objectives.
According to the survey, the number one way that advisors stay up to date on new products being introduced by the asset management industry is through their own online research (60 percent). Industry trade publications (20 percent), wholesalers (15 percent) and industry conferences (5 percent) are other ways in which advisors stay in the know on the latest investment products and solutions.
Mr. Janvier added, "In a world that increasingly favors simplicity and rejects excessive complexity, fund managers who can effectively leverage digital channels to help advisors understand how portfolios are invested will be the biggest winners."
For more insight into Aberdeen's simple way of life, please visit: http://www.simplyaberdeen.us/
The Aberdeen Asset Management RIA Survey was conducted on November 11 at the 2013 Schwab IMPACT Conference in Washington, D.C. Respondents were event attendees including RIAs and other investment industry experts. The data is based on responses from 201 respondents.
About Aberdeen Asset Management:
Aberdeen is an independent asset management group. Formed out of a management buy-out in Aberdeen, Scotland, in 1983, we are now a FTSE 100 company operating on-the-ground in over 23 countries across Europe, Asia and the Americas.
We are defined by our pure focus on asset management, including equities, fixed income, property and multi-asset portfolios. All our investment solutions are driven by our commitment to straightforward, transparent investment approaches that stress intensive, first-hand research and a long-term view.
As of September 30, 2013, we managed assets of $324.6 billion on behalf of institutional and private investors. www.aberdeen-asset.us
In the United Sates, Aberdeen Asset Management (AAM) is the marketing name for the following affiliated, registered investment advisers: Aberdeen Asset Management Inc., Aberdeen Asset Managers Ltd, Aberdeen Asset Management Ltd and Aberdeen Asset Management Asia Ltd, each of which is wholly owned by Aberdeen Asset Management PLC. "Aberdeen" is a U.S. registered service mark of Aberdeen Asset Management PLC.