Asset Managers Should Sharpen Focus on Independent RIAs That Insource Portfolio Construction

January 11, 2024 — Boston

The distinctions between advisor channels make it increasingly difficult for asset managers to break through and establish their products and services. Cerulli recommends asset managers focus their distribution efforts on the channels where home-grown portfolios remain prevalent, according to The Cerulli Edge—U.S. Asset and Wealth Management Edition.

According to the research, nearly two-thirds of financial advisors (60%) say their primary portfolio construction influence comes from within their own practice, while less than one-third (28%) report being influenced primarily by their broker/dealer (B/D) or custodian.

Asset managers should pay close attention to the profile of advisors who say they construct their own portfolios—advisors in the independent registered investment advisor (RIA) channel are the most likely to construct portfolios entirely in-house, followed closely by hybrid RIAs. Conversely, just one-third of advisors in the insurance B/D channel create portfolios within their own practices.

“While the RIA channel is made up of significantly more firms than the B/D channel, and with higher rates of practices that insource the investment management function, the channel has continued to consolidate, presenting an increased opportunity for asset managers to engage with the largest firms through key accounts efforts,” says Stephen Caruso, senior analyst.

Cerulli recommends asset managers aim distribution resources in favor of the channels such as independent and hybrid RIAs where advisors are more likely to select their own investments and can succeed by providing the resources needed to help advisors grow their asset bases and nurture client relationship. “RIA advisors tell Cerulli they are more likely to respond positively to asset managers that take the time to understand their unique characteristics and needs and those that provide transparent access to key investment decision makers for a given strategy,” says Caruso. “Asset managers have an important role to play in the product education and training needed to ensure advisor success,” he concludes.

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