Market volatility cited by 99% of RIAs among top three concerns facing clients, with 45% of RIAs saying risk management now the top priority in constructing portfolios

HOUSTON, Nov. 16, 2011 /PRNewswire/ -- Fifty-nine percent of independent registered investment advisors (RIAs) say market volatility has made clients more risk averse in the past 12 months and only 15 percent believe clients will be more risk tolerant a year from now, according to results of an Invesco market research study released today.

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Ongoing market volatility has prompted more RIAs to seek additional support and guidance on investment trends, risk management, practice management, and other benchmarks to more effectively grow and manage their business.

With these issues in mind, Invesco partnered with Cogent Research to conduct a blind study to learn what's top of mind for RIAs and their clients and what will be of most importance to them going forward.

Among other key findings in the Invesco study:

• Risk management is at the forefront of RIAs' minds.

Seventy percent of RIAs cited market volatility as the top concern of their clients, with 99 percent of RIAs citing it among their clients' top three concerns. By comparison, only 6 percent of RIAs said wealth accumulation was their clients' top concern.

Given their clients' current mindset,  45 percent of RIAs say managing risk is now their top priority in terms of portfolio construction, ahead of wealth preservation (24%), exceeding a performance benchmark (12%) and delivering absolute return (10%).

"This new investment environment and the resulting change in investors' risk tolerance is prompting advisors to re-evaluate how they manage client assets and which methods are most effective in mitigating risk," said Andrew J. Scherer, Managing Director of Invesco's RIA Division.

• RIAs are increasingly blending active and passive investments to minimize risk in client portfolios.

Many RIAs say they can add value by managing portfolios that use a combination of active mutual funds and ETFs. However, RIAs are seeking support and guidance on how to utilize these two complementary investment vehicles in their attempt to manage risk in client portfolios.

When it comes to portfolio construction, RIAs are increasingly blending actively managed products and ETFs not only to help clients meet their long-term financial needs, but also as a means of managing risk. In fact, RIAs indicate ETFs will represent 22 percent of client portfolios, on average, over the next year and 30 percent of client portfolios by 2014, a significant 36 percent increase.

"Our research shows that our industry has a long way to go to educate RIAs on the pros and cons of ETFs, in general, and on which specific ETFs are best at meeting client needs," Scherer said. "Thirty-nine percent of RIAs say they don't have an above average understanding of ETFs and 53 percent say don't have a high knowledge level of existing ETF products," reflecting the ongoing proliferation of new  ETF options.

• Generating a strategy to mitigate risk is only half the battle for RIAs. The other half is managing client expectations and understanding of risk.

"As new strategies to limit risk exposure come and go, RIAs are challenged with communicating these strategies in an easy-to-understand manner," Scherer said. "Our research found that only 55 percent of RIAs are very confident in their ability to explain complex investment principles to their clients, reflecting their desire to stay on top of new trends and investment strategies to meet client needs in a challenging market environment.

"While 83 percent of RIAs are using tools developed internally to help guide those discussions, 83 percent also have an interest in seeking guidance from trusted investment management firms on this topic," Scherer said.

In response to the key findings in the study that clearly define the most prominent needs of RIAs and their clients, Invesco is designing a Risk University offering that will have multiple components to better equip advisors in addressing risk. The Risk University will be organized to meet the top three needs of RIAs identified by the study – risk management, portfolio construction, and managing client expectations.

One aspect of the new comprehensive program is Invesco's Rethinking Risk Program, which provides a fresh look at portfolio construction concepts and discusses basic tenets about markets and investing that all investors need to know. Additional information on the program can be found at www.invesco.com/us.

"We will offer our Risk University to advisors in a variety of ways, including online access and in-person visits," Scherer said. "The goal of our Risk University is to help advisors serve their clients."

About the Invesco RIA Market Research Study

The RIA Market Research Study was conducted for Invesco by Cogent Research in September 2011. Cogent Research is not affiliated with nor employed by Invesco. The study is based on a survey of 206 RIAs with an average of $488 million in investable assets.

About Invesco

Invesco is a leading independent global investment manager, dedicated to helping investors worldwide achieve their financial objectives. By delivering the combined power of our distinctive investment management capabilities, Invesco provides a wide range of investment strategies and vehicles to our retail, institutional and high net worth clients around the world. Operating in more than 20 countries, the company is listed on the New York Stock Exchange under the symbol IVZ. Additional information is available at www.invesco.com.

Invesco Distributors, Inc. is the U.S. distributor for Invesco Ltd.'s retail mutual funds, exchange-traded funds and institutional money market funds and the subdistributor for its STIC Global Funds. It is a wholly owned, indirect subsidiary of Invesco Ltd.

About Cogent Research

Cogent Research helps clients gain clarity, obtain perspective, and formulate direction on critical business issues. Founded in 1996, Cogent Research provides custom research, syndicated research products, and evidence-based consulting to leading organizations in the financial services, life sciences, and consumer goods industries. Through quality research, advanced analytics, and deep industry knowledge, Cogent Research delivers data-driven solutions and strategies that enable clients to better understand customers, define products, and shape market opportunities in order to increase revenues and grow the value of their products and brands.

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SOURCE Invesco