60/40 allocation losing its luster, survey finds

Financial advisers no longer sing the praises of asset allocation models that use 60% stocks and 40% bonds to seek returns and balance investment risks. According to a new survey, advisers want new methods for portfolio construction. About half the 163 advisers who responded to the survey said that they are ambivalent about the benefits of the traditional 60/40 mix. In fact, 40% said flat-out that they think that the strategy is no longer the best way to achieve performance and manage risk. Barely one in five of the advisers surveyed said that they think that the 60/40 strategy is still the best method. “Our research confirms that financial advisers are questioning the merits of time-honored portfolio construction strategies and looking for new solutions,” said John T. Hailer, chief executive of Natixis Global Asset Management. Many respondents (63%) said that they either don't believe in or aren't sure of the value of long-term buy-and-hold strategies, according to the study, which was released by Natixis on Wednesday. About 40% of the advisers said that new asset allocation models and portfolio construction methods are needed, while only a little more than 20% said that they favor what they are using now. The 60/40 asset allocation method can't be used the same way it has been for the past 30 years, said financial adviser Neal Frankle of Wealth Resources Group. When he relies on it, he works with a dynamic portfolio of stocks, and on the fixed-income side, he has switched to all short- or medium-term bonds.

REAL ESTATE

The biggest allocation shift that Mr. Frankle has made with clients is to increasingly add physical real estate as an alternative asset for some clients, he said. “Real estate, for the right client, is the right place now because prices are low and it can produce an income stream,” he said. LPL Financial LLC financial adviser Thomas Dellinger said that he supports strategic versus tactical planning and isn't ready to abandon traditional asset allocation methods. “Old-school still works from my perspective,” he said.   [email protected]