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Advisers want one thing above all else from their fund managers: Report

Advisers still place a lot of emphasis on historical performance and fees when they sum up the value of a fund manager, but it's the thinking behind their investment process that really matters.

While the process involved in selecting a fund manager inherently involves a number of factors, the primary concern for financial advisers isn’t necessarily past performance or fees according to a new report from research firm Investment Trends.

Instead, the 2023 Adviser product and marketing needs report explains, advisers want to know how a product provider thinks and the reasoning behind their investment logic.

“The primary factor for preferring a fund manager continues to be the manager’s investment philosophy, and it’s vitally important to communicate this clearly,” says Irene Guiamatsia, head of research at the group.

  • “Conversely, subpar performance and a lack of trust continue to be leading factors prompting advisers to have discontinued or contemplate discontinuing their association with a fund manager for new client inflows.”

    The communication piece is a key element of the product provision matrix, and speaks to the many millions that is spent each year by fund managers in building relationships with advisers and licensees directly through personal engagement, advertising and sponsorship.

    “As most of the workforce shifts back to face-to-face as the preferred engagement format, advisers are increasingly calling for a return to traditional engagement models, including BDM visits and in-person events like roadshows, conferences or breakfast/lunch briefings,” she explains.

    Yet advisers are used to receiving a lot of attention from fund managers. Instead of bombarding them with investment content, invitations and meeting requests, Guimatsia says, product managers would be better served paying more attention to using the exposure they already have more wisely. Marketing smarter, leveraging unique and meaningful sponsorship opportunities, and making sure that facetime with advisers covers ground that is useful to them, not the provider.

    “Advisers tell us they currently receive more contact from product issuers than they would like. While this is the expected outcome of a wide (and growing) product range, it certainly underscores the need to make each interaction with advisers count,” Guiamatsia says.

    The emphasis on investment philosophy and trust does not mean that traditional factors like performance and fees have been cast aside or their importance dimmed, however. On the contrary, Guiamatsia believes; they remain as important as ever.

    “Advisers are increasingly selective when deciding on a product provider to recommend to their clients. Three features in particular – performance, low cost, and active management expertise – have become vastly more important in the past two years.”

    In other news from the report, Investment Trends notes that advisers are embracing cash and fixed income in droves after 18 months of rate hikes. The fixed income sector will remain “A strong asset allocation story for some time”, it states, with advisers’ collective allocation to the sector surging to 15 per cent of new client inflows in 2023, up from 12 per cent in 2022.

    One in four advisers now acknowledge the impact of yield considerations and recessionary fears in their approach to portfolio construction, the report notes.

    “With the backdrop of the most accelerated rate hike cycle in recent history (domestically and in most OECD countries), the pendulum has certainly fully swung the other way, reigniting demand for cash and fixed income as asset classes of choice,” Guiamatsa commented.

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