Bottom Line

Last week was closer to “normal”, if we define normal as 2019 and early 2018 trends. This week, trading activity and changes to client’s goals and objectives were both down significantly. Less risky asset styles saw modest inflows and more risky assets flows were flat. Cash levels are still slightly high at 6% of investment accounts. There were no significant changes to style flows last week as flows of mutual funds and ETFs continue positive into fixed income and US growth styles, and negative in international and value styles.

Summary

Cash dropped from 6.3% to 6.0% last week, still roughly two times the average, but roughly flat since early April. Advisors moved from slightly bearish to slightly bullish on less risky assets, with modest net purchases, while neutral on more risky assets as seen in zero net flows. Client activity was down slightly last week in terms of both contributions and withdrawals. Clients continue to take slightly more out of their accounts than they are putting in. We saw modest buying of fixed income mutual fund and ETF styles last week. In equities, we continue to see a strong bias towards growth over value styles. We saw no meaningful changes in client loyalty metrics last week, with very few clients leaving their advisor.

Key Insights

  • Transaction volumes dropped 25% last week and now are 35% higher than the average in 2019.
  • Advisors were slightly bullish on less risky assets last week, with net purchases in less risky assets and nearly net flat in more risky assets. We define this as slightly “risk off” positioning and is consistent with all of 2019 trends.
  • Fixed income fund and ETF styles saw modest net inflows last week, including Intermediate, Short Term, Long Term and High Yield Bond styles. International equity styles continue to lead net redemptions.
  • We look at the number of client risk tolerance changes as a proxy for how advisor and clients are engaging around risk conversations. The number of changes this week was down 13% compared to previous week but still 35% higher than the normal number of changes over the past 52 weeks. Advisors are actively modifying client’s expectations around risk and return, although the rate of changes is slowly returning to a normal rate.
  • Cash in advised portfolios is running at about 6.0% down from 6.3%. We believe this was due to a slight net inflow into fixed income funds and ETFs.
  • Client contributions and withdrawals in their investment accounts was slightly lower last week, suggesting that clients have also slowed their investing activities.
  • Last week, the number of new clients added and clients lost was in line with the past 18 months. We believe this data supports the theory that clients are finding comfort in advisors calm advice in this crisis.

Data Description

Our goal with this weekly compendium of industry metrics and indices is to inform the report’s consumer about the investment, risk and business activities executed by RIAs across the nation. We believe this information will provide advisors with near real time insights that may help them improve their business and client outcomes.

The data included in the RIA Pulse metrics comes from our wealth management solutions databases, which include Envestnet and Tamarac data. We filter the data those firms and advisors who we have segmented as Registered Investment Advisors (RIAs). The data is de-identified and aggregated to create a representative set of metrics and indices.

We curate the data to eliminate data which we deem to be incomplete, having insufficient history, or have minimal contribution to the metrics. We reevaluate the components and qualifiers of the metrics and indices on at least an annual basis in an effort to keep our RIA index representative of advisors’ inferred attitudes and actual behaviors. Risk On includes all individual equities (stocks).

We define risky assets as equity focused mutual fund and ETF styles. This includes, but is not limited to US Large Cap, Mid Cap, Small Cap, International, Emerging Markets Equities, Emerging Market Bonds, and High Yield Bonds.

We define non-risky assets as all individual fixed income instruments. Risk Off also includes fixed income focused mutual fund and ETF styles. This includes Taxable, Muni, Bank Loan, and International Fixed Income.

We define risk neutral assets as Cash/Money Markets, Balanced/Asset Allocated, and Alternative styles.

Disclosure

The information, analysis, and opinions expressed herein are for general information only. Nothing contained in this document is intended to constitute legal, tax, securities, or investment advice, nor an opinion regarding the appropriateness of any investment, nor a solicitation of any type. Investing carries certain risks and there is no assurance that investing in accordance with the portfolios mentioned will provide positive performance over any period of time. Investors could lose money if they invest in accordance with the portfolios discussed herein. Past performance is not indicative of future results.

Index performance is presented for illustrative purposes only and does not represent the performance of any specific investment product or portfolio. Fees and expenses are not included in the performance of an index. Fees and expenses will reduce performance. An investment cannot be made directly into an index. The information contained herein has been obtained from sources believed to be reliable, but its accuracy and completeness are not guaranteed. News feeds, data feeds, market quotes, and other links on this Envestnet Enterprise Portal are provided by independent third parties and are not guaranteed to be accurate, complete, or timely (including any information or data sources provided by Advisor or provided by third parties at the direction of Advisor). The news, market quotes, and links provided are shown for your convenience only. Linked web-sites are independent and are not owned or operated by Envestnet Financial Technologies. Envestnet Financial Technologies does not endorse any linked web-sites, nor does Envestnet Financial Technologies guarantee the timeliness, accuracy, completeness or adequacy of any information posted on the linked web-sites. Envestnet Financial Technologies does not necessarily agree with any opinion, outlook, or forecast stated on any linked web-site. Envestnet Financial Technologies reserves the right to terminate, modify, or change the links, news sources, and market quote sources at any time without notice.

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Written by Frank Coates

Frank is a co-founder of Wheelhouse Analytics, acquired by Envestnet in 2016. Frank Coates has long been recognized for providing innovative technology and data and analytical solutions to the investment management industry. Prior to co-founding Wheelhouse Analytics in 2007, Frank founded Coates Analytics, LP, where as CEO, he pioneered the development of asset flow analytics and dashboard technology in the retail financial product distribution industry. In 2007, Coates Analytics was acquired by PNC Global Investment Servicing (formerly PFPC). Frank is a former Director of Sales for Strong Mutual Funds and Director of Separate Accounts for Dreyfus. He is a highly regarded industry thought leader and is often quoted in industry journals. Frank has more than 20 years of experience in financial services focused primarily on business management, technology, and the distribution of financial products.

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