Advisors Say More Investors Turning to Managed Accounts and Mutual Fund Wraps In Shift to Asset-Based Advice.

Business Editors

HARTFORD, Conn.--(BUSINESS WIRE)--April 25, 2001

Managed accounts and mutual fund wrap accounts are surging in popularity over the last five years as investors opt to pay asset-based fees for advice, according to a national survey of senior financial advisors commissioned by Phoenix Investment Partners. In the poll on advisor-client relationships conducted by Yankelovich Partners, 40% of advisors said their clients are investing more in managed accounts than five years ago, and 38% said more are investing in mutual fund wrap accounts.

"The survey shows asset-based investing is becoming more mainstream for a growing number of investors," said Jack Sharry, President, Private Client Group, Phoenix Investment Partners, which manages $8.4 billion in consultant-sold managed accounts and $11.5 billion in mutual funds (as of December 31, 2000). "High-net-worth investors are finding that managed accounts--with their built-in tax efficiencies and portfolio customization--may suit them better than mutual funds," said Sharry. "At the same time, investors that may not be suitable for managed accounts--but who want ongoing advisory services--are turning to mutual fund wrap accounts for the asset allocation, portfolio monitoring and rebalancing features they offer."

Unlike mutual funds, which pool investor assets, managed accounts are customized portfolios managed by professional money managers for an annual asset-based fee. The minimum investment for opening a managed account is usually $100,000, and the typical account size is $300,000, with allocations among several investment strategies. Sponsoring firms of managed account programs offer a selection of money managers and investment strategies.

Among advisors whose clients hold managed accounts, 56% said capital preservation and portfolio customization are the most "strongly valued" features. Clients also "strongly value" the "initial and ongoing due diligence" of managed accounts, according to 53% of those queried. Lower taxes were noted by 51% of the advisors as another "strongly valued" feature.

Advisors surveyed for Phoenix Investment Partners had an average of 20 years' experience and $82 million in assets under management. The study also identified a growing interest in mutual fund wrap accounts, asset-based accounts with lower minimum investment requirements. For a minimum investment of between $10,000 and $50,000, mutual fund wrap accounts allow investors to allocate assets across a wide variety of funds for an annual asset-based fee.

According to the advisors queried, 38% of their clients are investing more in mutual fund wrap accounts than five years ago, while 13% said their clients have not changed and 11% said fewer of their clients are investing in mutual fund wraps. At the same time, 40% of respondents said their clients are investing more in managed accounts, 27% said their clients are investing the same in such accounts and 12% said they are investing less in managed accounts.

"The survey shows an interesting trend toward investing in funds through mutual fund wrap programs," said Sharry. "We see this in our own mutual fund business, where about 40% of the flows into Phoenix mutual funds come from mutual fund wrap programs. The growing interest in both managed accounts and mutual fund wraps signifies a real shift among investors toward paying asset-based fees for advice, and away from transaction commissions."

The Phoenix Investment Partners/Financial Advisor Survey 2000 was conducted between September 13 and October 4, 2000. Initial survey findings on client-advisor relationships and retention were released in January. One hundred senior-level financial advisors were polled. On average, those surveyed had 19.9 years of experience, and managed $81.7 million for mostly affluent investors with more than $100,000 in investable assets. Nearly half of these investors were under the age of 55.

Phoenix Investment Partners, Ltd. is a leading U.S. investment management company providing individuals and institutions with access to nine boutique money managers and a full range of distinct investment disciplines and money management services. Phoenix Investment Partners is one of the Phoenix companies, a premier provider of wealth management services, with corporate offices in Hartford, Conn. As of December 31, 2000, Phoenix Investment Partners had $56.6 billion in assets under management. For more information on Phoenix Investment Partners, visit www.phoenixinvestments.com.

Mutual funds distributed by Phoenix Equity Planning Corporation, 56 Prospect Street, Hartford, CT 06115.