Shifting Market Dynamics Drive Demand for Innovation from Financial
Advisors, Finds New Survey
BOSTON -- October 24, 2013
Shifting market dynamics are driving increased demand from U.S. financial
advisors for more innovative strategies to help investors balance risk and
return, according to a new survey released today by Natixis Global Asset
Financial advisors are seeking solutions to help manage volatility for an
increasingly broad spectrum of clients ranging from younger clients to
retirees – all with very different investment needs. Many advisors say it is
becoming more difficult to generate sufficient income for investors and the
demands on advisors are further amplified with a large number of clients
nearing or already in retirement. At the same time, advisors are finding it
challenging to balance clients’ asset growth objectives with the need to
“U.S. advisors face a juggling act every day as they work to serve the rapidly
changing needs of both their older and younger clients,” said John T. Hailer,
chief executive officer of Natixis Global Asset Management in the Americas and
Asia. “Not only do they need new, more innovative strategies for managing
retirement assets, they’re also looking for updated techniques to manage risk
and return for younger investors.”
Call for innovation
The study, released by Natixis’ Durable Portfolio Construction Research
Center, reveals the challenges advisors are facing. More than half (56%) say
it’s difficult to build portfolios that can simultaneously reduce risk and
enhance return, and a similar number (53%) say it’s challenging to balance
drawdowns for retirees with the need to keep their portfolios growing.
Underscoring the need for innovation, 69% say they need to replace traditional
diversification and portfolio construction techniques with new approaches in
order to achieve results. This is a significant increase from last year’s
advisor survey, in which only 46% said the same.
“Investors obviously need to take some risk to get returns, but the amount of
event risk we’ve seen in the past year certainly could be driving this
increased demand for new solutions,” Hailer said. “A focus on Durable
Portfolio Construction, which emphasizes risk first and also incorporates the
use of alternatives, could help advisors find that elusive balance.”
The alternative conundrum
Advisors recognize that alternative strategies, including hedge funds, private
equity and long-short investments, can play an important role in a client’s
portfolio. Eighty-four percent say they have discussed the use of alternatives
with their clients, and according to a separate investor survey released by
Natixis earlier this year, 72% of investors would consider alternatives if
their advisor recommended them.
But advisors often find it difficult to explain how these investments can
effectively complement more traditional assets such as stocks and bonds.
Nevertheless, the vast majority (89%) of advisors use alternatives with their
clients, but only 25% use them frequently, and mostly with their
When asked why they are not using alternatives more broadly, the top reasons
*They only recommend strategies they can easily explain to clients.
*A belief that clients think alternatives are too risky.
*Difficulty justifying the expense.
*Lack of knowledge about alternative strategies.
“These findings clearly show that it’s time to simplify the way we talk about
alternatives and portfolio construction,” Hailer said. “We have an opportunity
to do a better job of explaining the role alternative investments can play in
a portfolio – whether they are designed to smooth volatility or increase
returns by taking on more risk. It’s important to help investors understand
the characteristics of the strategy – potential risks, volatility, and what to
expect in various market environments.”
Retirement: Optimistic outlook for clients but challenges remain
Nearly half (47%) of advisors believe most of their clients understand how
much they need to save to meet their lifestyle expectations in retirement, up
considerably from 28% who felt this way last year. And advisors are generally
optimistic about their clients’ ability to provide for themselves in
retirement, with only 10% having a negative outlook.
Still, the challenges in helping those investors who are already retired are
growing more acute. Fifty-six percent say it’s difficult to deliver strong
investment performance for retirees when interest rates are low, as they are
today, and 52% say they’re challenged to generate enough income for retired
The financial advice business
Advisors are also challenged in terms of managing their time and resources.
The survey reveals that they spend almost twice as much time on administrative
tasks (11% on general administration and 6% on regulatory compliance) as they
do seeking new clients (9%). Due to these pressures, 43% are not actively
seeking new and younger clients despite the graying of their existing client
base. Clients over the age of 67 make up 36% of the average advisor’s
business; clients aged 46 to 67 represent 42%; and clients 45 and under make
Although time may be a challenge, advisors continue to make time to learn
about their industry. Advisors rate their ability to explain investments to
clients as their top strength and report that they spend 5% of their time
reading about the industry and 4% educating themselves on new portfolio
construction techniques. Still, nearly two-thirds (64%) point to a need for
“As demands from existing clients grow, advisors are finding it difficult to
balance that work with marketing efforts to attract new business,” Hailer
For more information from the Durable Portfolio Construction Research Center,
Natixis’ 2013 financial advisor research study is based on fieldwork conducted
in nine countries throughout the Americas, Europe, Asia, the Middle East and
the United Kingdom. Interviews were conducted online in August-September 2013
with 1,300 financial advisors, including 150 in the United States. See full
report for additional details.
About Natixis Global Asset Management, S.A.
Natixis Global Asset Management, S.A. is one of the 15 largest asset managers
in the world based on assets under management.^1 Its affiliated asset
management companies provide investment products that seek to enhance and
protect the wealth and retirement assets of both institutional and individual
investor clients. Its proprietary distribution network helps package and
deliver its affiliates’ products around the world. Natixis Global Asset
Management, S.A. brings together the expertise of multiple specialized
investment managers based in Europe, the United States and Asia to offer a
wide spectrum of equity, fixed-income and alternative investment strategies.
Headquartered in Paris and Boston, Natixis Global Asset Management, S.A.’s
assets under management totaled $783.3 billion (€602.5 billion) as of June 30,
2013.^2 Natixis Global Asset Management, S.A. is part of Natixis. Listed on
the Paris Stock Exchange, Natixis is a subsidiary of BPCE, the second-largest
banking group in France. Natixis Global Asset Management, S.A.’s affiliated
investment management firms and distribution and service groups include
Absolute Asia Asset Management; AEW Capital Management; AEW Europe;
AlphaSimplex Group; Aurora Investment Management; Capital Growth Management;
Caspian Private Equity; Darius Capital Partners; Gateway Investment Advisers;
H2O Asset Management; Hansberger Global Investors; Harris Associates; IDFC
Asset Management Company; Loomis, Sayles & Company; McDonnell Investment
Management; Natixis Asset Management; Ossiam; Reich & Tang Asset Management;
Snyder Capital Management; Vaughan Nelson Investment Management; and Vega
Investment Managers. Visit ngam.natixis.com for more information.
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NGAM Distribution L.P. is located at 399 Boylston Street, Boston, MA 02116.
Natixis Global Asset Management consists of Natixis Global Asset Management,
S.A., NGAM Distribution, L.P., NGAM Advisors, L.P., NGAM S.A., and NGAM S.A.’s
business development units across the globe, each of which is an affiliate of
Natixis Global Asset Management, S.A. The affiliated investment managers and
distribution companies are each an affiliate of Natixis Global Asset
^1 Natixis Global Asset Management (NGAM) is the world’s 15th-largest asset
manager based on global assets under management as of December 31, 2012,
according to Cerulli Associates.
^2 Assets under management (AUM) may include assets for which non-regulatory
AUM services are provided. Non-regulatory AUM includes assets which do not
fall within the SEC’s definition of ‘regulatory AUM’ in Form ADV, Part I
Alternative investments involve specific risks that may be greater than those
associated with traditional investments, and there is no assurance that any
investment will meet its performance objectives or that losses will be
Natixis Global Asset Management
David Snowden, 1-617-449-2507
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