Advisors Favor ‘Smart Beta’ Strategies


FTSE Russell reported in a new survey that that smart beta strategies are becoming a growing part of the asset allocation schemes of US-, UK- and Canada-based financial advisors. However, implementation of these strategies is still evolving and advisors are keen to better understand how they can use smart beta to its full potential.

Rolf Agather, Managing Director of North America Research, FTSE Russell spoke to Traders Magazine and said the results of the second smart beta advisor survey show that there is continued and growing popularity of smart beta strategies among retail advisors. There is also a significant opportunity for growth in the wealth market but more education is needed, he added.

“Importantly, the use of smart beta strategies is evolving and not all markets view these strategies in the same way, highlighting the need for more consistent global education and insight on smart beta index-based strategies for investment and portfolio allocation,” Agather said.

The 2018 FTSE Russell smart beta advisor survey expanded on the 2015 US advisor smart beta survey with input from 256 financial advisors divided almost equally between the US, UK and Canada. These established, full-time, fee-based financial advisors and wealth managers all have more than three years experience and $25 million in assets under management.

Key survey findings:

  • Aware but not familiar. Across all three markets, there is a high awareness of smart beta strategies yet a low level of familiarity. Among financial advisors surveyed, 68% in Canada, 72% in the UK and 79% in the US say they are “aware” of smart beta strategies, yet on average only 35% of those surveyed are “very familiar.”
  • On their way… Outlook for adoption of smart beta strategies is strong in all three countries, with more than half of financial advisors surveyed in the UK and Canada and 40% of those surveyed in the US expecting to increase their usage.
  • But not there yet. Financial advisors in the US and Canada are looking for more information about smart beta strategies before increasing their usage. UK advisors are skeptical as to the benefit, expressing concerns over predictability of performance (35% of non-users) and insufficient track records (32% of non-users). And in the US, 47% of advisors say they “don’t know enough about” smart beta strategies, suggesting an opportunity for continued education.
  • Actively passive or passively active? The survey uncovered differences in the use of smart beta across the three countries but all respondents believe these strategies help meet both strategic and tactical needs and complement active and passive investment strategies. Interestingly, findings indicate a continued evolution of how smart beta is being used. In the UK and Canada, eight of 10 view smart beta as best sitting alongside active strategies while, in the US, six of 10 advisors view smart beta as best sitting along passive strategies

FTSE Russell partnered with Greenwald & Associates to execute this research on smart beta perception and usage among financial advisors. The research was conducted in September-October 2017 among 256 financial advisors (92 in the US, 81 in Canada and 83 in the UK). In the US, respondents were drawn primarily from RIAs (41%), wirehouses (29%) and independent broker-dealers (14%). In Canada, respondents were divided between full-service brokerages (43%), independent financial advisors (33%) and career exclusive financial advisors (14%). In the UK, the top three affiliations were with independent financial advisors (39%), wealth managers (33%) and private banks (17%).

US advisors were the most experienced, with 60% having more than 10 years working as an advisor. The comparable percentages in the UK and Canada were 43% and 30%, respectively. In terms of assets under management, US and UK advisors were more likely to have $100 million or more in AUM (61% and 56%, respectively) as compared to Canadian advisors (37%). More specific details on survey methodology and findings can be found in the survey report.

  • 68-79% of US-, UK- and Canada-based financial advisors “aware,” yet only 35% on average are “very familiar” with smart beta investment strategies
  • Outlook for future use of smart beta is strong in all three countries, yet advisors still skeptical and looking for more information
  • Smart beta implementation still evolving; financial advisors divided as to whether it complements active or passive investment strategies



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