Bottom Line

This week looked a lot like the previous week. Trading activity and changes to client’s goals and objectives were both consistent relative to last week. Less risky asset styles had no net inflows or outflows and more risky assets flows saw modest outflows. Cash levels were flat but are still slightly high at 6.05% 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 rose slightly from 6.0% to 6.1% last week, still roughly two times the average, but roughly flat since early April. Advisors moved from slightly bullish to neutral on less risky assets. Advisors moved from neutral to modestly bearish on more risky assets as seen in slightly negative net flows. Client activity was flat 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 and foreign growth mutual fund and ETF styles last week. In equities, we continue to see a strong bias towards growth over value styles. We saw a slight uptick in clients leaving their advisor over the past 4 weeks.

Key Insights

  • Transaction volumes were flat last week and remain roughly 35% higher than the average in 2019.
  • Advisors slightly favored less risk assets last week, with neutral flows in less risky assets and slightly negative in risky assets. We define this as slightly “risk off” positioning and is consistent with all of 2019 trends.
  • Fixed income and foreign large cap growth fund and ETF styles saw modest net inflows last week, including Intermediate and Short Term. International equity value 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 clients’ 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 6.1% up from 6.0%.
  • Client contributions are trending slightly lower than normal while withdrawals remain flat, suggesting that clients have slowed their investing activities. This could also be due to the passing of bonus season, where seasonal contributions are to be expected.
  • Last week, we saw a slight rise in client defections from their advisor. The past 4 weeks have seen an increase in clients’ defections as compared to the average in 2019.

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
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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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