Citing poor results turned in by equity mutual fund managers and separately managed stock accounts alike, investors have, for a few years, been slowly turning their back on active asset management in favor of a more passive approach. The numbers now coming out on asset flow in 2011 indicate a continuation, if not increase, in this activity. The mood seems to be, “if you can’t beat it (the S&P or DJIA), join it.” And the trend includes a penchant for ETFs over traditional mutual funds. Both Bloomberg and Mutual Fund Wire reported this phenomenon in recent articles.

What does this mean to wealth managers and financial sales professionals? First, it means that both of these groups need to understand the statistics precipitating these trends. Second, it means that both should recognize the emotions that investors have from the under performance. And third, they must realize that, with proper asset allocation, passive index ETFs can be an effective addition to an overall actively-managed portfolio.

This is no different than the strategy and tactics we have continually stressed in these blogs and in the training, both in-class and online, that we do for the wealth and institutional markets. This strategy includes knowing the:

  1. CONTEXT of the market in which you compete.
  2. EMOTIONAL ISSUES your clients and prospects face.
  3. STRENGTHS and WEAKNESSES of your competitors.
  4. COMPETITIVE TACTICS to make you successful.

Take a look at the articles linked above and determine how you can use the information contained in them to better prepare yourself on the four issues stated above.

If you would like to better prepare yourself for situations like this visit our course catalog and check out the course, Principles of Financial Planning: Asset Allocation.

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