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Rating:Mutual Funds Are Losing Advisors Says Research Not Rated 1.0 Email Routing List Email & Route  Print Print
Friday, May 28, 2010

Mutual Funds Are Losing Advisors Says Research

Reported by Daniel Tovrov

Advisors are not selling mutual funds as often as they have in the past. The latest Advisor Action Report from Financial Research Company reveals that investment managers saw fewer advisor-placed mutual fund assets in 2009 as a result of the credit crash. That crash shook advisors' and investors' confidence in traditional products, a conclusion that is unlikely to surprise fund firms. Yet, the takeaway is that mutual fund marketers have failed to develop a story of why advisors should stick with funds through troubled times.

Those advisors who are abandoning mutual funds are turning to alternative investments and exchange-traded funds. For advisors, the crisis caused a reevaluation of the buy-and-hold model, says Amy Stong, the study's author.

"Advisors are stressing restrictions. When advisors have a conversation with clients, they're thinking alternatives," Stong told The MFWire, noting that advisor look more closely at fund investment restrictions and policy.

FRC surveyed 758 advisors, representing the wirehouse, broker-dealer, bank, RIA and insurance channels, to see how the crisis affected their business and investment perspective, and what that means for asset managers and fund families.

The report found that 17 percent of advisors rely less on asset managers during economic downturns, especially in the wirehouse, B-D and regional sales channels.

Additionally, only 35 percent of advisors said they had increased their exposure to fixed income.

Meanwhile, 60 percent of advisors said they were uncomfortable with commodities and 60 percent said that their clients were hold too much cash in their portfolios.

"The events of the credit crisis are leaving a lasting impression. They were significant and recent, so they stay in investors' minds," Strong said. 

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