Research Affiliates targets advisers

Research Affiliates, which produces investment research and asset allocation advice for institutional investors, is looking at a new market: advisers. The company's academic and quantitative work is used to manage $201 billion in assets worldwide, with major clients such as Pimco, PowerShares and Charles Schwab & Co. As financial advisers increasingly outsource portfolio management, however, Research Affiliates has started to gear its research — in somewhat less wonky form — toward advisers. It also has ventured further into behavioral finance. "We're trying to get transformative insight and products for investors and advisers," said John West, managing director and head of client strategies at the company. On its website's adviser section, for example, Research Affiliates has an essay on the most dangerous (and ubiquitous) shortcut in financial planning: using past returns to forecast the future. The paper also introduces the company's online asset allocation tool — which, at the moment, recommends very low levels of U.S. stocks. What are the messages the company wants to get to advisers and their clients? • Present a range of outcomes for clients to give perspective. For example, volatility has risen sharply this year — but it has simply risen to normal levels from extremely low levels, Mr. West said. • Use rebalancing to get clients to invest more in assets that have fallen. "It's a nice way of putting money into what has disappointed you the most," Mr. West said. "Rather than investing more in losers, investors often say, 'I want the losers out of the portfolio.'" • Learn to manage the thankless task of choosing fund managers. Research Affiliates offered a symposium for advisers this spring, with Rob Arnott, the company's chairman; Josh Brown, the CEO of Ritholtz Wealth Management; and Ben Johnson of Morningstar. The company will post videos of the symposium later this year, Mr. West said, and is considering making presentations before professional groups, such as the Financial Planning Association. "We're committed to making an impact in this market," he said. "There are trillions of dollars at the four largest custodians, and trillions more in the largest wirehouses. That will grow as people roll their 401(k) balances to advisers."