Last week was a marked change for advisors with investment activity shifting back to fixed income categories.
- Cash continued its gradual downward trend from the preceding weeks dropping from 5.3% to 5.11%, which is a 3% decrease.
- Advisors shifted their focus to bonds this week with strong activity across all the major bond categories.
- Overall trading activity diverged with net inflows into non-risky asset classes and net outflows from risky assets classes.
- Both short-term bond and emerging markets bond funds gained significant traction from the prior week.
Cash declined slightly from 5.3% to just below 5.11% last week. The drop was a reflection of cash being put to work into fixed income as yields rebounded amid better-than-expected data on the U.S. labor market. Cash is still roughly two times the average, but roughly flat since early April. From the prior week, net flows diverged from net neutral territory with less risky assets gaining favor over more risky assets. Client contribution activity was noticeably higher from the prior four weeks. However, clients continue to take slightly more out of their accounts than they are putting in. We saw strong buying of Intermediate Bond, Short Term Bond, and High Yield Bond mutual fund and ETF styles. In equities, Large Cap Core and Foreign Large Value dropped out of favor with Mid-Cap Value stock funds trailing closely behind.
- Transaction volumes popped up slightly last week, while still trending closely to the average in 2019.
- Cash in advised portfolios is running at about 5.11% down from 5.3%.
- Advisors had net positive flows into less risky assets. We define this as slightly risk averse, which over time conforms with our findings that advisors’ take a slightly risk off position. (Less risky assets are slightly favored over risky assets.)
- Intermediate, Short-Term, and High Yield Bond fund and ETF styles saw strong net inflows last week.
- We look at the number of client risk tolerance changes as a proxy for how advisors and clients are engaging around risk conversations. The number of changes this week was nearly identical to the pre-crisis levels.
- Client contributions are trending slightly higher than normal, suggesting that clients have taken more interest in their investment activities this past week.
- Last week, we saw a continued decline in client defections from their advisor and a modest increase in new clients. Clients continue to show strong loyalty to their current advisor.
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.
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