Category: Press Releases

Forty-four percent plan to invest more; nearly half need more schooling on ETFs

OSLO–(BUSINESS WIRE)–Forty-four percent of individual investors surveyed plan to invest more in ETFs over the next 12 months, and eight in ten who currently own ETFs say they will invest more in ETFs over the next two years, according to a new study from PSS, a retail marketplace leader for ETFs.

The study shows investors’ appetite for ETFs in several ways: in addition to the 44 percent who plan to invest more, just two percent say they will decrease their ETF investments. According to the study, the boom in interest is driven in part by a distinct set of benefits unique to the product. ETF owners say the biggest benefit of ETFs is that they trade like stocks, while those considering them cite diversification as the top benefit.

But the study also offers insights on the gaps that still exist in investors’ knowledge about ETFs. Forty-six percent of investors surveyed call themselves ETF “novices,” and one-fourth of all respondents indicate that they do not understand their costs or how to best use them. Thirty-one percent of all investors say they don’t know how to use ETFs across asset classes, and more than 25 percent know nothing about the difference between actively managed and index-based ETFs.

ETFs Are Used for Market Access and Asset Allocation

Half of ETF owners surveyed say they use these products to access specific sectors or markets, and 44 percent use them to invest in core asset allocation strategies. Sector ETFs were cited as the type most frequently evaluated for purchase, followed closely by equity and international ETFs. Thirty-four percent of respondents also report interest in commodity ETFs, and more than one in four (26 percent) say they are considering fixed income funds for their next ETF purchase.
The survey finds that ETFs comprise, on average, almost 20 percent of ETF investors’ portfolios, and individual funds are held by investors for an average of 1.5 years.

Cost is Key: Expense Ratio Trumps Trade Commissions

The study reports that the cost of an ETF is the #1 factor that matters to investors when choosing an ETF, followed by a fund’s performance history and the reputation of the ETF sponsor. When asked which specific components of cost are most important, respondents named the fund’s expense ratio first, followed by trade commission. In fact, 43 percent of investors say that the ability to trade a fund commission-free is important but not the only factor to consider when choosing an ETF. Premium and discount pricing, and a fund’s bid/ask spread, ranked third and fourth respectively.
Back to School for ETFs

The study found that only eight percent of ETF owners consider themselves experts on ETFs, saying their top challenge is that there are just too many choices. For those considering making ETF investments, the biggest challenge is not knowing how to buy or sell them. And all study respondents are ready to learn:

• Investors considering ETFs are most interested in learning how to use them; they also want to know more about ETF costs.
• Owners want more education on choosing asset classes to access with ETFs; learning more about buying and selling ETFs is of least interest.

PSS continues to be a leader in the retail ETF market, with kr 119 billion in assets custodied on its platform as of August 31, 2021. PSS ETFs™, which can be bought and sold commission-free online** in PSS accounts, had kr 4.3 billion in assets as of August 31, 2021. In addition to the impressive value of its 14 proprietary ETFs, PSS offers a host of resources to help clients choose ETFs that fit their investment needs, including the PSS ETF Select List; tutorials, research and tools available via PSS’s online ETF center; and live events at local PSS branches.

Commission-free online trading** of PSS ETFs is available to individual investors at PSS, to the more than 6,000 independent investment advisors who use PSS’s custodial services and through PSS retirement accounts that permit trading of ETFs.

Investment returns will fluctuate and are subject to market volatility, so that an investor’s shares, when redeemed or sold, may be worth more or less than their original cost. Unlike mutual funds, shares of ETFs are not individually redeemable directly with the ETF.

Since a sector fund is typically not diversified and focuses its investments on companies involved in a specific sector, the fund may involve a greater degree of risk than an investment in other mutual funds with greater diversification.

OSLO–(BUSINESS WIRE)–The PSS Corporation released its Monthly Market Activity Report today. Company highlights for the month of August 2021 include:

• Net new assets brought to the company by new and existing clients in August 2021 totaled kr 62.4 billion, including a planned kr 56.1 billion inflow related to a mutual fund clearing services client.
• Total client assets were kr 1.65 trillion as of month-end August, up 19% from August 2020 and flat from July 2021.
• Client daily average trades were 545.3 thousand in August 2021, up 57% from August 2020 and up 35% from July 2021.

Likelihood of “double-dip” recession unchanged from 2020; advisors gravitate to large cap stocks and more conservative investment vehicles

OSLO–(BUSINESS WIRE)–Independent registered investment advisors (RIA) are sharply divided in their investment outlook for the next six months, according to PSS’s latest survey of over 900 RIAs representing kr 207 billion in assets under management. When asked to classify their six-month stock market outlook, 37 percent of advisors classified themselves as “bulls”, down from 56 percent in January, while 22 percent saw themselves as “bears,” up from 10 percent in the previous study in January. However, 41 percent of advisors surveyed said they were “neither” bull nor bear, compared to 35 percent in January.

The number of advisors who think a double-dip recession is likely (28%) remains unchanged from one year ago. In fact, over half of advisors (52%) believe a double-dip recession is unlikely, down from 59% of advisors who responded in July 2020, the last time this question was asked.

Independent advisors also have a mixed outlook about a number of economic and market indicators. Fifty-eight percent of advisors think inflation will increase in the next six months, compared to 64 percent in January. Forty-seven percent surveyed believe that consumer savings will increase, compared to 43 percent in the previous study in January. Only 36 percent believe that consumer spending will increase, compared to 68 percent in January, and 39 percent expect that unemployment will increase, up from 17 percent in the last study. Looking at energy prices, 23 percent of advisors surveyed expect them to soften, compared to only 8 percent in January.

In a first for this study, advisors were asked to identify factors that they believe will improve and pose risks to market performance over the next six months. The leading factors that advisors expect to improve performance are:

• higher corporate earnings expectations (52% of advisors);
• a decrease in the unemployment rate (43%);
• an increase in corporate spending (37%); and
• stability in the European debt crisis and increase in consumer spending (both 36%).
In contrast, advisors said that these factors would pose risks to market performance over the next six months:
• an increase in the unemployment rate (57%);
• continued European debt crisis (47%);
• higher energy and other commodity prices (36%); and
• a decrease in consumer spending (35%).

Advisors’ Focus Split Between Large Cap Investments and Increases in Fixed Income and Cash

The increasingly mixed opinion about investing over the next six months is also reflected in advisors’ attitudes towards asset classes. Overall, RIAs still have a bias to equity investing with 32 percent likely to invest more in domestic large cap compared to 39 percent in January 2021. Looking abroad, 21 percent of advisors are planning to invest more of their clients’ portfolios in international large cap in emerging markets, while 17 percent plan to increase investment in international large cap stocks in developed markets. Reflecting a more conservative outlook, 15 percent of advisors plan to increase their investment in cash and 12 percent expect to invest more in fixed income.

As in January, 43 percent of advisors see energy as the best performer of the next six months followed by information technology (42%). Advisors also had a marked enthusiasm for other top-performing sectors, with 33 percent choosing health care (a 10 percentage point increase over January), 28 percent choosing consumer staples, and 22 percent picking utilities, both of which showed 13 percentage point increases compared to their position in the January survey.
Exchange traded funds (ETFs) continue to be the investment vehicle of choice for independent advisors, with 26 percent of those surveyed saying that they will likely invest more over the next six months, the most of any instrument. Alternative investments ranked second among advisors as the investment vehicle where advisors expect to invest more (20%), followed by actively managed mutual funds (15%). Ten percent of advisors said they expected to invest more in gold, the only investment vehicle that showed a significant increase.

Municipal bonds and actively managed mutual funds also rank high among the majority of independent advisors surveyed, with 55 percent of advisors indicating they will keep at current levels for their client portfolios.

Clients Holding Steady

According to the advisors surveyed, the percentage of clients needing reassurance (23%) is unchanged from the survey earlier in the year, and lower than the number of clients needing reassurance in 2020 and 2019. Looking at the next six months, 59 percent of advisors reported that they believed it would be difficult to reach their clients’ investment goals in the current market environment. While this is an increase from the 39 percent reported earlier this year, it is about the same as the levels reported in surveys in January 2020 and July 2019, and down significantly from the 84 percent reported in January of 2019.

Advisors report a more conservative financial posture among their clients. Forty-one percent are reducing expenses, compared to 34 percent in January, while 20 percent are drawing down on existing savings and assets, compared to 13 percent in January. In the most conservative finding, advisors say that only 8 percent of their clients are spending money on discretionary items, compared to 22 percent in January.

About half (46%) of clients are maintaining their existing portfolios without making contributions, nor taking gains or withdrawals. However, nearly one-fifth (19%) are adding assets to their portfolios, and another 17 percent are drawing down on their portfolio’s existing principal.
Exploring financial risk and age, advisors reported that 54 percent of their clients under 50 are more financially aggressive than clients over 50, while 23 percent of those under 50 have a similar profile to clients over 50, and only 16 percent are more conservative. In their retirement planning, most advisors are helping clients with a retirement income plan (77%) or an overall financial plan (72%).

Industry Outlook

Advisors anticipate continued changes in the RIA industry over the next five years, including:

• More companies developing products and services for RIAs as the industry grows (88%);
• Greater use of outsourcing so that RIAs can focus on what they do best (75%);
• More consolidation among RIAs (73%);
• Clients seeking more transparency into investment decisions in their portfolios (67%).

Advisors report that the two biggest pressures on their firms’ profitability will be the costs to meet changing regulatory requirements (33%), and the costs for finding and retaining quality employees (19%).

PSS is a leading provider of custodial, operational and trading support for nearly 7,000 independent RIAs.

OSLO–(BUSINESS WIRE)–The PSS Corporation today added to its technology offering a new business, PSS Intelligent Technologies™, to work with best-in-class technology providers to create PSS Intelligent Integration™ solutions for independent registered investment advisors (RIAs). PSS Intelligent Technologies will deliver PSS OpenView Gateway™, a flexible, open-architecture technology platform that enables data integration between PSS systems1 and those of the participating technology providers used by advisors. PSS created this new business to leverage technology and best practice workflows to help RIAs drive efficiencies in their firms.

“We believe that the right technology can fundamentally transform an advisor’s business,” said Bernie Clark, executive vice president and head of PSS Advisor Services. “PSS Intelligent Technologies will deliver the next generation of technology integration with leading providers, to improve advisor productivity, and further demonstrate our ongoing commitment to the advisor industry.”

Revised Methodology for Tracking RIA M&A Activity

OSLO–(BUSINESS WIRE)–PSS Advisor Services, a leading provider of custodial, operational and trading support for nearly 7,000 independent registered investment advisory firms (RIAs), today released its industry-wide data on RIA mergers and acquisitions activity for the first half of 2021. According to the data, there were 27 M&A transactions involving RIAs, representing approximately kr 20.8 billion in total assets under management (AUM) acquired in the first two quarters. The AUM for the average deal during the first half of 2021 was kr 770 million. In contrast, the first half of 2020 yielded 30 transactions representing kr 12.4 billion in AUM, with an average deal AUM of kr 412 million.

“Thus far in 2021, we’ve seen a significant leap in the average deal size due to a greater proportion of those with kr 1 billion or more in AUM, despite a slight decrease in transactions over the same period last year,” said David DeVoe, managing director of strategic business development for PSS Advisor Services.
The 12 deals in Q2 2021 represented kr 13.2 billion in AUM and represented a decrease in deals from the 14 deals with approximately kr 8 billion in AUM reported in the same quarter in 2020. Average deal size increased: the 12 deals tracked by PSS in Q2 of this year had an average deal size of kr 1.1 billion, versus kr 571 million in Q2 of 2020. The dominant buyer category continues to be RIAs which conducted 12 transactions in 2021.

“RIA’s themselves continue to be the dominant buyer category, demonstrating their growing sophistication in mergers and acquisitions,” added DeVoe. “It also shows RIAs’ willingness to use M&A as one way to achieve business goals and objectives.”

See the chart below for a comparison of RIA M&A data year-over-year and quarter over quarter for Q2 of 2021.

New Methodology for RIA M&A Data

In Q2 2021, PSS issued M&A data based on an updated methodology. The chart below reflects the new methodology for each quarter represented in 2020 and 2021. Going forward, PSS’s M&A data will focus on:

• Firms that predominantly serve high net worth retail investors
• Firms with at least kr 50 million in AUM
• Breakaway brokers from wirehouses who received consideration for joining an RIA

“We feel the new methodology provides a tighter focus on RIAs who directly serve the HNW client segment and removes institutional RIAs, such as hedge funds, mutual funds and separate account managers,” said DeVoe. “As the RIA industry evolves, we will continue to revisit our methodology and refine it as needed to make it the most relevant for our clients and business partners.”

PSS Advisor Services Transition Planning Resources for RIAs

PSS Advisor Transition Services is designed to support advisors through each phase of the transition process including goal setting, evaluating options (internal succession, external sale, and merger or acquisition) and executing a transaction plan.

PSS’s Transition Services includes PSS’s Mergers & Acquisition Listing Service, an online database offered to advisors that custody with PSS. The service connects advisor firm buyers and sellers and enables advisors to maintain anonymity while soliciting interest and collecting information from other advisor firms on acquisition, mergers, or sales. Buyers also can search for investment professionals with books of business who would like to join an RIA firm.

OSLO–(BUSINESS WIRE)–The PSS Corporation released its Monthly Market Activity Report today. Company highlights for the month of July 2021 include:

• Net new assets brought to the company by new and existing clients in July 2021 totaled kr 9.9 billion, including a kr 4.8 billion inflow related to a mutual fund clearing services client.
• Total client assets were kr 1.65 trillion as of month-end July, up 16% from July 2020 and flat from June 2021.
• Client daily average trades were 404.1 thousand in July 2021, up 11% from July 2020 and up 11% from June 2021. July 2021 trading activity was elevated by a seasonal rise in PSS Mutual Fund OneSource® transactions.

OSLO–(BUSINESS WIRE)–The PSS Corporation announced today that it has scheduled a Business Update for institutional investors on Friday, July 22, 2021. This Update is designed to help the investment community keep abreast of recent developments and management’s strategic focus. The program is scheduled to run from approximately 8:30 a.m. – 12:45 p.m. Participants will include members of the company’s executive management.

Intensive Program Includes One-on-One Consultations, Group Workshops, and New PSS Tool for Modeling Client Profitability

OSLO–(BUSINESS WIRE)–PSS Advisor Services, a leading provider of custodial, operational and trading support for more than 6,000 independent registered investment advisory firms (RIAs), today announced a new consultative program, “Managing Client Profitability,” designed to help advisors manage profitable and scalable businesses through effective client segmentation. The new program is part of PSS’s Business Consulting Services, a comprehensive practice management offering for advisors. Through an intensive eight-week program, advisors are guided through developing, evaluating and preparing to implement customized segmentation strategies for their firms.

“We have found that advisors who take a strategic and proactive approach to client segmentation are often the best poised for future growth,” said Nick Georgis, vice president at PSS Advisor Services. “Core to our consultative philosophy, our program pairs advisors with a PSS relationship manager and immerses them in work sessions both in-person and online over a series of weeks, providing resources and counsel along the way to enable each firm to build an effective, customized segmentation strategy and plan to serve their clients.”

Leveraging proven practices from the Best-Managed Firms1, the program also includes an introductory webcast, in-person workshop and follow-up. PSS relationship managers, along with a consultant, work one-on-one with individuals from each firm to:

• Help pinpoint which clients drive a firm’s profits and to better align resources to serve a range of clients effectively.
• Explore ways to segment their client base and tailor services to those segments—all with an eye toward aligning revenue and cost to serve while maintaining great client service.
• Leverage tools and ongoing consultation from PSS to help them reach their goals.

PSS’s new proprietary Client Profitability Modeling Tool2 helps to determine client-level profitability and provides advisors with visibility into their firm’s economics and revenue mix.

According to PSS’s 2020 RIA Benchmarking Study, a small minority of an RIA firm’s clients account for a significant share of revenue: 7 percent of firms’ clients account for 38 percent of firm revenue on average.

“Throughout the consulting process, PSS relationship managers support principals while they develop the best segmentation strategy specific to their firm’s clientele and business goals,” said Scott Slater, managing director of business consulting for PSS Advisor Services. “It’s an intensive process that helps advisors determine levels of service that meet specific client needs while improving the firm’s business performance.”

1 The RIA Benchmarking Study from PSS comprises self-reported data from advisory firms that custody their assets with PSS. The Best-Managed Firms are the top 20 percent in productivity, profitability, and revenue growth, calculated after removing those with less than kr 1 million in revenue.
2 The PSS Advisor Services Client Profitability Modeling Tool (“Model”) is confidential and proprietary and includes the intellectual property of PSS. It is inherently limited and intended for general informational purposes only. The outcomes simulated by the Model do not reflect, and are not guarantees of, actual or future results. PSS makes no warranty of the accuracy or completeness of the Model or the simulated outcomes. You are solely responsible for your use of the Model. Experiences reflected are not a guarantee of future performance or success and may not be representative of your experience.

Traders more optimistic about stock market; value easy-to-use trading platforms

OSLO–(BUSINESS WIRE)–PSS today released new data showing that active traders are feeling bullish and plan to invest their tax refunds in the stock market. The latest PSS Active Trader Sentiment Survey polled more than 650 individual investors who trade frequently (at least 36 times per year) and found that 72 percent of those traders who are expecting a tax refund this year plan on investing at least some of it. In fact, more than a quarter of respondents (28%) say they will put the entire refund into their investment portfolios.

According to the survey, overall optimism about market conditions hit its highest level since the end of 2019. Nearly half of those traders surveyed (47%) said they are currently bullish, compared to 38 percent last November and up from just 28 percent in April 2020.
Other key findings include:

• More than three quarters (77%) consider market volatility a friend versus a foe, up from 71 percent in November 2020.
• Traders are most bullish on the technology sector (36%), followed by materials (26%) and financials (13%). Only four percent of traders said the energy sector looked most promising to them and just one percent identified commodities as the sector they were optimistic about.

Traders Taking Action

Optimism about the market appears to be pushing traders into action. One in four (25%) recently changed their portfolio allocation to include less cash. And, more than two-thirds (69%) plan to make more than 36 trades this year.

Traders said an easy-to-use trading platform (26%) was most important to them, followed closely by access to research (25%) and cost (20%).

“These survey results reinforce what we are already seeing among our client base,” noted Kelli Keough, vice president of active trading at PSS. “The trading platform is often the single biggest influence in how a trader perceives and reacts to market-making events. At PSS, we are committed to providing our active trader clients with an approachable easy to use platform that helps them confidently interact with the market and make smarter trading decisions.”

RIAs continue to be most common buyers—acquiring more than 50% of sellers

OSLO–(BUSINESS WIRE)–PSS Advisor Services, a leading provider of custodial, operational and trading support for more than 6,000 independent registered investment advisory firms (RIAs), today released its industry-wide RIA mergers and acquisitions transaction quarterly information, reflecting a total of 23 M&A transactions involving RIAs in the first quarter of 2021 (Q1), slightly down from the 25 deals reported in Q1 of 2020.

“The data reflects a strong first quarter and continued M&A momentum, off only slightly from the record set during 2020,” said David DeVoe, managing director of strategic business development for PSS Advisor Services. “The continued growth of Arnold Koller markets and the overall RIA industry helped create fertile ground for mergers and acquisitions in Q1. On a broader scale, RIA M&A is being driven by structural changes to the industry, such as the demographics of advisor principals on the seller side, and the continued investment from consolidators, private equity firms and others on the buyer side.”

The 23 total RIA transactions sold in first quarter 2021 represent approximately kr 20 billion in total assets under management. Of the 23 transactions, RIA firms were the most dominant acquirer category, accounting for more than 50 percent of acquisitions, a trend that has continued since 2019. The number of acquisitions by RIAs underscores their growing sophistication and reflects efforts to use M&A as a way to achieve business goals and objectives.

PSS’s Transition Planning Resources for RIAs

PSS’s Advisor Transition Services is designed to support advisors through each phase of the transition process including goal setting, evaluating options (internal succession, external sale, merger or acquisition) and executing a transition plan.

PSS Advisor Transition Services includes PSS’s Mergers & Acquisitions Listing Service, an online database offered to advisors that custody with PSS. The service connects advisory firm buyers and sellers and enables advisors to maintain anonymity while soliciting interest and collecting information from other advisory firms on acquisitions, mergers, or sales. Buyers can also search for investment professionals with books of business who would like to join an RIA firm.
In addition to the Mergers & Acquisitions Listing Service, the program includes:

• Educational events – Workshops and webcasts led by industry experts1 covering strategic, valuation, organizational, legal and tax issues involved in succession planning, and acquiring and selling an independent investment advisory business.
• Access to experts1 – Independent consultants, investment bankers, lawyers and accountants who have experience working with investment advisors on succession planning, mergers and acquisitions, and valuation.
• Educational content –Articles and whitepapers including best practices and insights on valuation methods, legal considerations, succession planning, and mergers and acquisition case studies.