Current financial market uncertainty, low interest rates and a worldwide economic crisis are prompting financial advisors to re-examine traditional client portfolio investments and look for alternative investments, according to the 2012 Natixis Global Asset Management U.S. Advisor survey released today.
Some financial advisors are questioning the relevance of time-honored asset allocation strategies that rely on a 60/40 mix of stocks and bonds and long-term, buy-and-hold approaches, according to the study. An estimated 49% of advisors queried say they're uncertain that the traditional 60-40 allocation between stocks and bonds is still the strategy to take. Meanwhile, 23% of advisors said that the current traditional investment approach also falls short in satisfying investors' needs in contemporary markets, according to the survey.
An estimated 40 percent of advisors with 15-plus years of experience say a 60/40 stock and bond mix is not the best strategy to seek returns and manage risk. Advisors were twice as likely to say that new approaches are needed compared to those who favor the status quo (46% vs. 22%). An estimated 63% advisors are also unsure of the value of a long-term buy and hold strategy. Meanwhile, an estimated 77% of advisors queried say their clients questioned the strategy.
The survey indicated that advisors increasingly are interested in adding a mix of alternative investment strategies to client portfolios to manage the impact of market volatility and achieve greater diversification. They are doing so for clients at various income and asset levels, the survey says.
"Our research confirms that financial advisors are questioning the merits of time-honored portfolio construction strategies and looking for new solutions," said John T. Hailer, president and chief executive officer, Natixis Global Asset Management -- The Americas & Asia. "Advisors understand the importance of building more durable portfolios that do well in both up and down markets, and they are tackling the correlation across asset classes by incorporating alternative investments."
According to the survey, advisors who have adapted to difficult market conditions say they're growing their businesses. An estimated 60% of advisors said they believed that their businesses are sufficiently diversified to succeed in uncertain market conditions. Fifty-four percent said that market volatility has enabled them to capture assets from competitors and 46% of advisors say that market conditions had helped them expand their businesses over the past three years.
As markets continue to slowly improve, investors are struggling to find a balance between increasing returns and asset conservation. An estimated 80% of advisors say their clients are "torn" between seeking increased returns and the need to keep their investments safe. According to the survey, 58% of advisors say a majority of their clients place an increasing priority on asset growth over protecting principal and 33% say most of their clients are eager to make up for past losses, even if it means taking on more risk.
Released by NGAM through its Durable Portfolio Construction Research Center, the study is based on a nationwide survey of 163 advisors at 150 advisory firms that collectively manage approximately $670 billion in assets. Headquartered in Paris and Boston, Natixis Global Asset Management S.A.'s assets under management totaled $748 billion as of March 31. Natixis Global Asset Management S.A. is part of Natixis.