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Advisor commitment to mutual fund companies is shifting

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 A new report recently released by Cogent Research reveals shifts among advisors in their level of commitment to the fund companies they currently use.

 

Compared to last year, across two dozen leading firms, T Rowe Price and Legg Mason experienced the biggest gains in overall advisor commitment. Meanwhile, The Hartford, Dodge & Cox, and Eaton Vance all lost significant ground relative to their respective 2010 rankings.

JP Morgan Funds ranked second overall this year behind Dimensional Fund Advisors (DFA), which once again placed first. These and other findings are contained in the 2011 Advisor Brandscape, an annual report on advisor trends and product usage by Cogent Research which is based on a nationally representative sample of 1,643 retail investment advisors across all major distribution channels.

The mutual fund provider commitment scores and rankings compiled by Cogent Research are based on a combination of two separate measures; advisor Loyalty to current providers and their anticipated future investment with those providers. Individual results across all 24 providers included in the ranking are indexed, and then separated into four groups; “Stars,” “Leaders,” “Players,” and “Drifters.”

According to John Meunier, Cogent Research Principal and co-author of the report, these results not only reflect where providers stand today among the advisors they serve, but point to how momentum is shifting across the provider landscape. “Last year, DFA and BlackRock were the only Stars in our mutual fund company commitment ranking,” says Meunier. “This year, a total of four firms made it into the top tier, and the gap between DFA and the rest of the pack has narrowed substantially.”

The study also shows that, after several years of declining interest, use and dependence on mutual funds has grown over the past year. The percentage of users is up from 95% to 97%, and the overall average advisor allocation to mutual funds (as a percentage of total book) rose from 35% to 39%. However, while these results may appear encouraging, half (50%) of all the advisors currently using mutual funds report that they expect their dependence on these products to decline over the next two years.

“It’s obvious, the competition for market share and advisors’ attention will only intensify over time,” says Meunier. “So, building loyalty and momentum today is a simple matter of survival.”

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