Magazine article American Banker

Popular Product May Fade

Magazine article American Banker

Popular Product May Fade

Article excerpt

Byline: Ruthie Ackerman

Rep-as-adviser managed accounts have been steadily growing in popularity and will continue to do so in the short-term, but Cerulli Associates sees growth dampening further out because of the account's nondiscretionary nature.

Rep-as-adviser accounts are nondiscretionary advisory accounts where the adviser acts as a fiduciary and provides advice, but must get approval from the client for any investment changes.

On Monday Cerulli released new managed accounts research revealing that the number of client accounts in rep-as-adviser programs rose 29% from 2007, through yearend 2009, even during the market downturn. But because advisers are required to contact clients every time a change is made to their portfolio, the account management environment is thought to be highly inefficient. Because of issues of capacity and scalability, Cerulli believes that the long-term growth will not keep pace with 2010 projections of double-digit growth for the managed account industry as a whole.

While Cerulli analysts forecast that not all managed account programs stand to benefit equally from the market turnaround, "during the market downturn, home-office-driven programs took the hardest hit, and rep-driven programs thrived," the firm said in a press release.

"However, Cerulli expects that with continued market improvement the systematically diversified home-office-driven programs will come back in favor and the growth of rep-driven programs will slow. …

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