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ESG and SMA usage set to increase as financial advisers service next-gen investor demand


Broadridge Financial Solutions has released the results from an annual survey of 400 financial advisers, revealing that a majority across channels use ESG products, citing direct interest from investors. The study also shows how the advisor-wholesaler relationship is evolving post-pandemic.

Sixty-one percent of advisors use ESG products, and usage is even higher among female advisors (71 per cent) and advisors under 40 (67 per cent). Of advisors who use ESG products, 81 per cent plan to increase their usage over the next two years as investors actively seek out these products. Wirehouse advisors are the most likely of all channels to use ESG products and to cite both inclusion on their broker-dealer platform and promotion by their home offices as reasons for doing so.

Sixty-two percent of financial advisors use separately managed accounts (SMAs), and that number is even higher among advisors under 40 (70 per cent). Fifty-six percent of advisors who use SMAs plan to increase their usage over the next two years.

As advisors explore new investment vehicles such as ESG and SMAs, half of advisors (51 per cent) are now also using private funds. Eighty-one percent of advisors who use private funds also use SMAs.

“Now more than ever, investors are speaking up about the types of products they want to invest in, whether it be ESG, private markets or other emerging asset classes. As advisors become more focused on providing the best client-centric experience and are optimistic about the year to come, they are looking to be equipped with the right tools and products to service their clients and investments,” says Matthew Schiffman, Principal of Distribution Insight at Broadridge Financial Solutions. “Asset managers are primed to step up and address the demand for these products.”

On average, advisors maintain 48 per cent of their AUM with their top-five asset management firms. However, 28 per cent of advisors are very open to adding new asset managers, identifying an opportunity for asset managers to uncover new ways to showcase their value, win over prospects and retain AUM.

A quarter of advisors (25 per cent) plan to engage with external wholesalers more in 2021 and 70 per cent of advisors say that an external wholesaler is one of their top-three most preferred methods of engaging with an asset manager. 

“Forced into a fully remote environment just over a year ago, many advisers dramatically accelerated their digital journey to maintain and grow their business. Today’s advisors are actively focused on business development and client-facing activities, and are increasingly using model portfolios as part of their practice to allow for increased efficiency in a post-Covid world,” adds Schiffman. “Advisers were not able to engage with wholesalers in the same way they did before the pandemic and were initially hesitant to engage virtually. Now, as the Covid-19 vaccine rollouts progress and we may see a return to normal sooner than expected, advisors are eager to re-engage with wholesalers and are receptive to new relationships.”

Advisers continue to feel positive about conditions for success today and in the future, with the study showing that 77 per cent are favourable (somewhat or very) about growing and scaling their practice today, and 67 per cent expect conditions to be better three years from now. Further, 66 per cent of advisors are confident (somewhat or very) in acquiring new clients today and 56 per cent expect to see improvements three years from now.

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