Envestat is a series of monthly reports that deliver powerful insights, trends, and predictions about investor behavior and advisory practices brought to you by Envestnet. Each edition focuses on a specific area of interest shaping the industry.
We intend to offer industry leading insights through the intersection of our data and human capital. This is part of our deep commitment to empower advisors with better information to grow their business and better serve their clients.
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In our May Envestat, we set out to address some key questions:
- -How concentrated are total returns across APM, FSP, and UMA portfolios?
- -What accounts for the extreme outliers?
- -How can advisors avoid excessive volatility in their clients’ portfolios?
One consideration advisors must weigh when contemplating outsourcing is the impact it may have on fees. With this in mind, we thought it would be worthwhile to examine the economics of APM and FSP programs to help advisors determine which approach makes sense for their practice.
As noted last year, fund strategist portfolios (FSPs) are growing at a healthy pace. This prompted us to explore whether increased usage of FSP products by advisors on our platform was having a material impact on overall managed account sales, flows, and assets.
How are managed account assets projected to grow over the next 6 months? In this Envestat report, we analyzed past managed account data to come up with a forecast for gross sales, redemptions, and net flows for the first half of 2018.
One of the fastest growing product lines in the wealth management industry today is the Fund Strategist Portfolio.
A Fund Strategist Portfolio (FSP) is an asset allocated portfolio consisting primarily of mutual funds and ETFs. These can be used as a core portfolio or as a complement or satellite solution. FSPs typically are segmented according to risk, with asset allocation strategies that extend from capital preservation to aggressive growth.
Earlier this year, we charted the dispersion of returns in fund strategist portfolios (FSP) and advisor-managed portfolios (APM). Our scattergram captured how much more volatile APM portfolios were and showed their standard deviation was twice that of FSP portfolios. In this edition of Envestat, we expanded on our previous analysis to provide more granularity to that volatility with respect to advisors and accounts that had outperformed and underperformed in both products and sought to answer the following key questions: How are advisors and accounts distributed on a performance basis in both programs, and how does that compare to the average performance? Is there a meaningful difference in the distribution when comparing APM against FSP programs? What is the implication for the end-investor?
In our September Envestat, we explored which investment styles were attracting new advisors as well as those losing advisors. In our October edition, we extended the analysis to examine whether these advisors made good style choices.