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Fidelity Warns Against “All-Star” Fund Picking

By Alex Padalka November 7, 2017

Fidelity suggests advisors concerned about their clients’ portfolios should look at both active and passive investments and consider a variety of investment styles and exposures. Rather than “picking the best players like an all-star game,” advisors should instead look at “players” that complement each other to form a “winning team,” according to Fidelity.

The warning comes as new research from the firm reveals that financial advisors are becoming more focused on the things they can control rather than, say, the government and the economy.

Portfolio management topped the list of priorities for advisors in the third quarter, with 24% citing it as their main area of focus, according to Fidelity’s latest Advisor Investment Pulse study, which has been analyzing advisors’ concerns since 2012.

Advisors interviewed for the survey say they’re concerned about de-risking portfolios, picking better funds, portfolio due diligence, appropriate allocations and keeping clients focused on overall goals instead of fixating on portfolio returns.

“As advisors continue their focus on protecting clients from a possible market correction and downside risk, they should consider long-term and diversified strategies for portfolio construction,” Bob Litle, head of intermediary sales at Fidelity Institutional Asset Management, says in a press release accompanying the study.

While portfolio management ranked second in the previous quarter, it’s the first time in five quarters that government and economy issues didn’t top the list, according to Fidelity. Only 12% of advisors cited government and economy as their top focus in the third quarter, compared to 29% in the second quarter, the study found.

Tied for second place among advisors’ concerns are market volatility and the level of equity markets, the study found. But only 15% cited volatility as their top concern in the third quarter, compared to 24% in the second quarter, Fidelity says.