Despite the growing popularity of passively managed accounts, more advisors are increasing their use of actively managed accounts than those who are decreasing their use, a new study says.
Over the next one to two years, 30 percent of advisors who now actively manage some of their clients’ investments say they will increase the use of active management. Only 14 percent say they will decrease the use of active accounts, according to the report released Monday by Practical Perspectives, a research and consulting firm.
Most advisors use both strategies for their clients rather than using either exclusively, said Howard Schneider, president of Practical Perspectives and author of the report, "Financial Advisors and Use of Actively Managed Solutions -- 2017." The report is based on input from 575 financial advisors.
Only a small group (10 percent) use active management exclusively.
Almost all (89 percent) who use active management prefer to manage assets in-house, the survey says.
American Funds, BlackRock, PIMCO, Franklin Templeton, JP Morgan and MFS were named by the advisors as the providers of the best overall experience and most useful support of actively managed investments.
Among the things advisors would like to see added by active account providers are access to lower-cost investments, clarity on benefits of active management relative to passive, more timely and up-to-date insights on portfolios, and more responsive support.
“Passively managed solutions are clearly growing in prominence, and active management faces fundamental challenges related to cost, performance, and transparency,” Schneider said. “However, there does not appear to be widespread abandonment of active management among established advisors.”
“There are many steps active managers can take to help advisors position active management alongside passive management in building portfolios. Most advisors still prefer active management in more opportunistic equity and fixed income categories,” he added.