Performance not only reason for fund loyalty

Aside from investment performance, it is the softer traits that drive financial adviser loyalty to mutual fund providers, according to one research firm.

Cogent Research LLC surveyed 1,643 advisers in the spring to measure how loyal they are to their providers and how likely they are to make future investments there. They combined the two measures to develop a mutual fund provider commitment ranking.

The responses showed some shifts in adviser commitment from Cogent’s survey last year.

The two biggest gainers in overall adviser commitment were T. Rowe Price Group Inc. and Legg Mason Inc. By contrast, The Hartford Financial Services Group Inc., Dodge & Cox and Eaton Vance Investment Managers all lost ground.

The top scorer, Dimensional Fund Advisors LP, also scored highest in last year’s survey. 

A big component of adviser commitment is fund performance, said John Meunier, a principal at Cogent and a co-author of the report. Advisers said that they look at long-term investment performance and the consistency of performance, he said.

This year, more advisers than ever said that they also looked at performance over a shorter term of two to five years.

Beyond performance issues, the two biggest drivers of adviser commitment are the provider’s investment philosophy and the quality and depth of research that they provide.

Good investment performance is a given for adviser loyalty, Mr. Meunier said.

But company philosophy and good research “are more subjective attributes that affect adviser commitment,” he said.

“These can have a positive differentiator effect,” Mr. Meunier said.

lkuykendall @investmentnews.com

Related Topics: Dodge & Cox Inc., IN Research, Legg Mason Inc.