Financial advisors say they plan to increase their use of alternative investments and tactical asset allocations, according to a new survey.
At the same time, four out of five advisors say their clients want more conservative investments and nearly three-quarters say their clients are demanding more guaranteed income features.
The survey released Monday by Curian Capital was based on responses from 1,009 independent advisors authorized to represent Curian Capital, as well as other product providers. They represent more than 150 broker-dealers and have an average of $36 million in assets under management.
As a result of market volatility, 55% of advisors say their clients want more tactical asset allocation and 47% say they want more alternative investments.
Sixty-three percent of advisors say their existing use of alternatives makes up 10% or less of their clients' portfolios, while only 3% have a quarter or more of their clients' investments allocated to alternatives. However, 61% say they plan to increase their use of alternative asset classes this year.
Most advisors say their primary goal for including alternatives is to diversify portfolios and further stabilize them, while their main concern is the illiquid nature of certain alternatives.
Almost the same amount, 67%, say they will boost their use of variable annuities this year and 63% will increase their use of separately managed accounts. Conversely, advisors who say they expect to increase their usage of mutual fund wraps (27%) and commissionable mutual funds each decreased by 10% from 2010.
"Amid continuing economic volatility, advisors are turning to new and varied investment strategies to ensure their clients will have enough money to last through their retirement years," the study says. "Given the move toward diversification through low-correlated asset classes and alternative investment options, it will become increasingly critical for wealth management systems to keep pace."
Among survey respondents, 82% report they have adequate income-generating investment products to meet their clients' retirement needs.
On other subjects, topping the list of concerns for advisors as a threat to their clients' retirement accounts was government spending (35%) and market volatility (31%).
More than three-quarters say the quality of product providers' online capabilities affects their use of the product and that they are more likely to use products if the online resources are of a high quality.
As in previous years, the desire to attract more affluent clients is the major goal of most advisors (77%). Other top goals include making their business more efficiency and improving their marketing efforts.