Clients Hot for Tactical Allocation and Alts, But Not As Much As You

A new survey by Curian Capital found that the recent market volatility has increased clients’ appetite for tactical asset allocation and alternative investing strategies, but you advisors are even hotter for these strategies.

According to the 2012 Outlook for Advisor Priorities, a Curian survey of of more than 1,000 independent advisors, 55 percent of advisors said their clients’ are demanding the use of more tactical asset allocation, while 63 percent of respondents said the economic volatility has caused them to boost their use of tactical asset allocation. Further, 47 percent of advisors indicated that clients were hot on alternatives, versus 53 percent of FAs who said they’ve increased their use of those strategies.

VolatilityImpact_Curian

Of course, this is advisors’ perception of what their clients want, so there could be some bias there. They do seem to lean in the same direction, so it could be that advisors believe their clients want those strategies because they want them themselves.

Then there’s the question of whether advisors are responding out of demand from clients for tactical and alternative strategies, which in my book, is not the best strategy. Decisions should be made based on what’s best for the portfolio, not necessarily what the client demands. (See our December cover story on tactical asset allocation. Just because clients are itching for something different, doesn’t mean you should abandon the tenets of buy-and-hold. Tactical’s a loser’s game.)

ClientDemand_Curian

But even if we were to take client demands into consideration, the above is not the whole story of what clients demand. According to this survey, advisors say clients are more focused on increasing their exposure to conservative investments (79 percent) and guaranteed income (72 percent) in this volatility than tactical allocation and alternative investments. But advisors did not indicate plans to increase their exposure to these.

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