Cerulli: Investor Preference for Fiduciary Accounts Up 16%; Interest in Less-Liquid Alts Also on Rise
Cerulli Associates, an international research and consulting firm, found that client assets in managed accounts continue to climb as investors and wealth managers increasingly prefer fiduciary relationships. This is according to the firm’s third quarter 2024 issue of The Cerulli Edge – U.S. Managed Accounts Edition.
Over the past decade, the percentage of traditionally advised client assets residing within fiduciary accounts – either a broker-dealer affiliated managed account or as a standalone registered investment adviser – increased from 40% to an all-time high of 56% in 2023. The core benefits of a fiduciary relationship have increasingly become more appealing to investors and are driving growth across channels, according to Cerulli
“Fiduciary relationships require provider firms and advisers to prioritize clients’ best interests before their own, while making their best efforts to ensure they minimize the potential impact of conflicts of interest that could incentivize them to act sub-optimally on behalf of clients,” said Scott Smith, director of Cerulli Associates.
Given investor preference for ongoing engagement and fiduciary alignment, Cerulli expects the proportion of new assets directed into managed accounts to continue to increase. The wirehouse channel recorded 12-point growth (from 33% to 45%) over the last 10 years while the independent broker-dealer channel recorded 26-point growth, climbing from just 24% to 50% by year-end 2023.
“Considering the benefit of fiduciary coverage that clients expect coupled with sponsor firms’ preference to align their future revenues with client asset growth rather than with the transaction generation of brokerage accounts, Cerulli projects increased reliance on managed accounts within the wealth management industry for the foreseeable future,” concluded Smith.
Cerulli data also revealed that the desire to add less-liquid alternatives to managed account platforms has increased continually over the past five years (43.5%) and outranks interest in liquid alternatives (8.7%). The firm inferred that with investors giving up liquidity in exchange for stronger returns, asset managers that can deliver less-liquid alternatives to sponsor platforms would offer a key point of differentiation.
Cerulli’s latest research follows our summer coverage where Cerulli determined that although alternatives providers estimate that just 13% of their assets under management is sourced from the retail channel, they expect it to climb to 23% in the next three years.
Headquartered in Boston, Cerulli Associates is an international research and consulting firm that provides financial institutions with guidance in strategic positioning and new business development.
Click here to visit The DI Wire directory page.
