Cerulli: Advisers should think twice about running money

Advisers who manage mutual-fund and ETF portfolios may be doing their clients a disservice. Adviser-as-portfolio manager programs that use packaged products are the single biggest segment in the managed account space, with about $660 billion in assets, according to Cerulli Associates Inc. But the performance of these programs from 2010 through 2011 has been questionable, the research firm says. Cerulli estimates that adviser-run programs generated just 4.3% in returns over those two years, versus 9.9% for packaged fund allocation programs run by broker-dealers, and 15.9% for a blended benchmark of 60% in U.S. stocks, 10% international stocks and 30% in bonds. "Advisers generally lag because they're out of investments in bad markets, then forget to get back in," said Scott Smith, associate director at Cerulli. "In a time of ongoing agitation, advisers want to be seen as doing something," he added. Advisers did do better in down periods, such as the second quarter of 2010 and the third quarter of 2011, according to Cerulli's research, released late last week. But this loss aversion hurts returns when markets rebound, as in the third quarter of 2010 and the last quarter of 2011 when packaged programs run by B-Ds outperformed.