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Advisors Like Their Own SMAs Over Home-Office Picks

July 22, 2015

Financial advisors putting client assets into separately managed accounts would rather do research for themselves and have face time with investment managers and specialists than rely on their home office, according to a recent survey from FA-IQ’s sister publication FundFire. And when selecting among similar SMAs, what matters most to FAs — aside from performance, of course — is that access to personnel.

In a survey of 125 advisors who use SMAs, 76.2% said their own research was influential or very influential in selecting the product. Only 46.3% of advisors said the same of their home office’s research and recommendations — although Don Giovanello, an advisor and managing partner at Morristown Wealth Management, an independent firm affiliated with LPL Financial, tells the publication that he certainly considers LPL’s recommendation. But even fewer advisors, 29.7%, put that much stock in wholesalers’ recommendations, FundFire’s survey finds.

Past performance is clearly important for advisors choosing an SMA manager: Almost 84% said it was influential or very influential. But other factors play a role when choosing between similarly performing SMAs in the same category, including the manager’s reputation and tenure, turnover, fees and — in particular — the underlying holdings. The advisor’s decision between two managers may be greatly affected by how they complement or overlap existing holdings, reports FundFire.

Advisors also want to be able to talk to someone at the SMA: 66% of those surveyed said access to product specialists or portfolio managers was influential or very influential in their pick of the SMA. The ability to customize entry also plays a big role for some — Giovanello tells the publication that he prefers to work with smaller boutique firms in part because it allows him to move money over a long period of time rather than in one swift trade.

Finally, an SMA manager should be able to offer added value over low-cost exchange-traded funds, which is why Thomas Alvaré, founder and president of Comprehensive Investment Solutions, only goes to an SMA for complex markets such as municipal bonds and municipal-bond ladders, small-cap, international equities, real estate and commodities, he tells FundFire.

By Alex Padalka
  • To read the FundFire article cited in this story, click here if you have a paid subscription.