PLANADVISER - May/June 2018 - 17

A Role for Both Active and Passive
Advisers like the lower fees of passive, plus the upside of active, investing
ADVISERS believe that both active
and passive investing play a vital role
in building a retirement portfolio,
according to Cerulli. More than 80%
think passive investments can reduce
fees and that active managers are
ideal for certain asset classes.
" Approximately 75% of advisers
agree that active and passive investments
complement each other, " says
Brendan Powers, senior analyst at the
research firm. " Cerulli argues that the
debate of active or passive has shifted
to active and passive, with more focus
on how to best use both as tools to
build more efficient client portfolios.
" In general, active will retain a key
role in asset classes where it adds value
over passive, " Powers continues. " The
asset classes where more than half
of advisers prefer actively managed
mutual funds include international/
global fixed income (61%), multi-asset
class (60%), emerging markets fixed
income (58%), emerging markets
equity (53%) and international/global
equity (51%). "
Regarding which U.S. equity asset
categories advisers plan to boost allocations
to, the most common are technology
(33%) and small cap (30%).
Advisers' top portfolio objective-cited
by 98%-is downside risk protection.
Cerulli
also discovered
assets
that
advisers currently allocate 64% of
client
to actively managed
strategies, 25% to passively managed
exchange-traded funds (ETFs) and 11%
to passively managed index funds.
Fifty-five percent of advisers create a
customized investment portfolio for
each client; 42% start with an investment
model, which they then alter.
Among those advisers who use
models, 80% use one created by
their practice, 68% use a home-office
model, and 66% use an asset manager
model. -Lee Barney
Few Advisers Plan for Succession
A mere 27% have a formal plan, but within 5 years of retirement, it's 40%
FEWER than one in three financial
advisers have a formal succession
plan, according to a new report, " The
Succession Challenge 2018, " issued by
the Financial Planning Association
(FPA) and Janus Henderson Investors.
Forty-one percent have some sort of
succession plan.
For those within five years of retirement,
40% have a formal succession
plan, but for those within five to 10
years, the figure is just 34%.
Advisers in a larger practice are
more apt to have a formal plan, with
60% of those in firms with $500 million
or more in assets under administration
(AUA) having one. In firms with less
than $50 million, just 13% have one.
Succession planning also tends to
focus more on the value of the business
than the transition of the business:
72% said their plan includes a goal
for determining their practice's value.
Additionally, the report says, advisers'
succession plans include: information
on the client transition process (61%);
information on the workload transition
process (57%); information on the time
frame for the transfer process (56%);
and information on the team transition
process (41%).
That latter number varies with
team size. For advisers with 10 or more
team members, 67% have a formal plan
including information on team transition.
For those with fewer employees,
such planning is true for only 47% of
TALKING POINT
No Savings
Twenty percent of working Americans are
putting no money aside. Their No. 1 reason
is too many expenses, cited by 39% of
respondents to a recent survey.
Source: Bankrate Financial Security Index, February 28 - March 4, 2018
planadviser.com may-june 2018 | 17
advisers. Among those with a formal
plan, 39% worked with an outside
consultant to create it, and 18% worked
with someone in the broader organization,
e.g., their broker/dealer (B/D).
Among those advisers without a
succession plan, 85% said their practice
faces moderate to significant risk.
Only 28% of advisers said they feel
very prepared to transition the business.
-Lee Barney
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PLANADVISER - May/June 2018

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