New research from global analytics firm Cerulli Associates explores the increasing popularity of rep-as-portfolio-manager (RPM) programs.
“Since the 2008 market collapse, advisors who may have previously outsourced portfolio management to home-office consulting groups are reasserting control of client accounts, which permits them to more nimbly respond to their customers’ changing risk profiles in a volatile market,” states Tom O’Shea, associate director at Cerulli.
Advisors point to flexibility as the No. 1 reason for using RPM platforms, with more than 67% citing “flexibility and control” as the major factors. More than half of advisors plan to increase their use of managed account platforms that give them discretion of their clients’ allocation to mutual funds, exchange-traded funds (ETFs), and stocks.
“The changing landscape of investment discretion caused by the growth of RPM programs is forcing asset managers to rethink their distribution strategies,” O’Shea explains. “Most broker/dealer firms offer their advisors two levels of discretion on an RPM platform: full and partial. Discerning the type of RPM discretion an advisor exercises is critical to the wholesaler’s effectiveness in the field because it will point the salesperson toward the gatekeeper they need to influence.”
“Asset management firms should focus their attention on helping advisors understand how their products complement an advisor’s portfolio construction methodology,” O’Shea continues. “Advisors have graduated from selling products to building client solutions, and asset managers need to demonstrate what kind of building block their product is.”