Clients crave more education on this particular investment strategy

Financial Planners


Clients crave more education on this particular investment strategy

Clients crave more education on this particular investment strategy

A recent survey found that many retail investors are interested in index strategies, but don’t understand how they work. In fact, many retail investors say they want more information about index funds. However, I don’t remember hearing from his financial advisor about these investments.

These are among the findings of FTSE Russell’s first “Retail Investor Survey” of more than 1,000 Americans, with or without a financial advisor, in late 2022. Let’s take a look at the most interesting findings from our research related to indexing strategies and how they can help you. your business.

If you’re looking to grow your financial advisory business, check out SmartAsset’s SmartAdvisor platform.

Advisor Opportunities

Clients crave more education on this particular investment strategy

Clients crave more education on this particular investment strategy

FTSE Russell’s first ever ‘Retail Investor Survey’ found that more than a third of investors who don’t already own an index fund simply don’t know how to manage it. On the other hand, nearly half (45%) of investors who have a financial advisor and are aware of the index strategy do not remember their advisor talking about it.

Susan Quintin, head of business management, investments and wealth management at Russell’s parent company, the London Stock Exchange Group, said this is a low-cost strategy that financial advisers may be off their radar. Provide opportunities to educate customers.

“Today, investors are choosing index funds for performance and diversification over cost, while acknowledging a poor understanding of indexes and index-based strategies,” Quintin said in a statement. I have made it clear that I am,” he said. “This public invitation to advisors represents an important and often overlooked opportunity to engage with our clients.”

Not for the wealthy, is it?think again

This finding also contradicts the assumption that wealthy clients are less interested in index strategies. In fact, the study found that wealthier investors were more likely to own an index fund.

The proportion of high net worth investors (those with more than $1 million in investable assets) relies on index strategies more than any other segment.

  • 40% of investors with $1 million or more use an index strategy.

  • 31% of investors between $250,000 and $999,000 use index strategies.

  • 24% of investors between $100,000 and $249,000 use index strategies.

  • 18% of investors under $100,000 use an index strategy.

This suggests that HNW clients are not only interested in active management and that advisors should not hesitate to incorporate or recommend index strategies.

How index strategies add value to clients

Clients crave more education on this particular investment strategy

Clients crave more education on this particular investment strategy

The research identified one area in particular where index funds can add value. It’s a small cap.

In fact, 42% of all survey respondents said they are currently investing in small caps, and half of them are buying individual stocks. These assets are often more volatile than large cap stocks and can increase the level of risk within a client’s portfolio.

“It shows how advisors miss the trick, with nearly half (49%) of survey respondents who invest in small caps doing so by buying individual stocks. They are exposed to huge stock-specific risks,” the study said.

Investing in small-cap index funds is one way to gain exposure to small-cap stocks without the risks associated with owning individual stocks. However, less than 3 in 10 investors with exposure to small caps invested in them through index funds, the study found.

While this is a potential problem for retail investors, it is an opportunity for advisors to educate clients on the benefits of diversification and identify quality small-cap index funds for their portfolios.

Conclusion

Financial advisors may have blind spots in their index strategies. And they should talk more with their clients. A survey found that many investors would like to learn more about index strategies, but have never spoken to a financial advisor.

Tips for growing your financial advisory business

  • Let us be your organic growth partner. If you’re looking to grow your financial advisory business, check out SmartAsset’s SmartAdvisor platform.Matching qualified clients with certified financial advisors nationwide

  • Expand your footprint. According to a recent study by SmartAsset, many advisors expect to continue remote meetings with their clients after COVID-19. Consider broadening your search and working with investors who are accustomed to holding virtual meetings and spacing out in-person meetings.

Photo credit: ©iStock.com/skynesher, ©iStock.com/gorodenkoff, ©iStock.com/ChayTee,

Advisors, please take note: Clients are asking for more information on this particular investment strategy,” the post first appeared on the SmartAsset blog.

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