Fixed Income Products and Portfolios (2)

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Fixed Income Products and Portfolios (2)

Financial advisors leverage multiple tools to assess the best fixed-income options for their clients, from analytics tools to reports from reputable publications.


  • Financial advisors can choose how to access the fixed income asset class through a portfolio of “individual bonds, fixed income mutual funds, ETFs, a separately managed portfolio of bonds, or some combination of these strategies/vehicles.”
  • Research suggests that credit risk is the primary factor advisors take into consideration when evaluating fixed-income products, followed by other types of risk, such as interest rate risk and reinvestment risk. When choosing an option, advisors also assess the amount of capital, interest rates, liquidity needs, diversification, tax considerations, predictability of income, and client’s preferences.
  • A study published by Erdos & Morgan examined what advisors consider essential when selecting fund providers. Performance and fees rank were the top-ranking factors, as well as the provider’s approach to managing volatility and perceived trustworthiness.
  • Thought leadership white papers, marketing materials, and wholesalers have little to no influence on their decisions, especially among registered investment advisors (RIA), which are more likely to adopt a “don’t call us, we’ll call you” approach.
  • Another study from Advisor Perspectives discovered that these professionals are becoming more sophisticated regarding how they evaluate a fund’s fee and performance. They are looking for more in-depth investment expertise from providers, rather than the typical rankings. They also demand wholesalers that are investment savvy, with real expertise.
  • As reported by Financial Planning, financial advisors are moving away from picking individual bonds and moving into managed products. Companies like BlackRock are offering solutions to make it easier to navigate the fixed-income landscape. “Separately managed accounts, ETFs and mutual funds have all grown, and individual bond picking has declined.”
  • Another tool recently developed is the Bond Navigator, which allows advisors to search a broad “universe of bonds, conduct a thorough evaluation of its structural characteristics, and make pre-trade pricing comparisons so that they understand its true market value.


  • There are multiple magazines and websites dedicated to financial advisors. Erdos & Morgan’s Financial Advisor Media and Usage and Outlook Study annually surveys over 39,000 financial advisors to uncover their favorite publications.
  • Although the studies are behind paywalls, publications and third-party sources usually provide some snippets of the results. As of 2017, Financial Advisor Magazine is the top publication for financial advisors, and it has been for years. The outlet publishes a wide variety of white papers, including best practices, small tips, market reports, and strategies.
  • Other popular publications include Financial Planning, Investment Advisor, Investment News, and Rep.
  • When it comes to online portals, the Financial Advisor’s website placed first, followed by Financial Planning, Investment News, Think Advisor, Advisor Perspectives, On WallStreet, One FPA, Wealth, and Advisor One.
  • Meanwhile. Advisor Perspectives ranked as the most-read electronic newsletter by financial advisors in 2019. It is visited by more than 200,000 advisors per month.

Bond Ratings

  • Bond ratings are an important tool to measure fixed-income investment, albeit it may not be as crucial as it used to be before the 2008 Recession. The ratings are given by independent rating agencies, namely Standard & Poor's, Moody's Investors Service, and Fitch Ratings. The ratings go from AAA to C/D.
  • The lack of trust sparkled by the 2008 Recession (credit agencies gave mortgages misleading ratings) is not the only reason why the ratings may not be as relevant today. In the 90s, several companies and the US government had a AAA rating and were viewed as a solid investment; however, the market changed in the past decade.
  • In August 2011, the US lost its AAA rating, downgraded to a AA+, due to the federal budget deficit following the Great Recession. In 2016, ExxonMobil also lost its AAA rating for the first time. In fact, only two companies maintain AAA ratings to this day: Microsoft and Johnson & Johnson.
  • Data from Morningstar Direct is often used as a rating system by publications, and possibly financial advisors.

Financial Planning Tools

  • Financial planning tools are fundamental tools for most advisors. MoneyGuidePro and eMoney are the market’s frontrunners, with a 25.69% and 22.93% market share, respectively, according to T3/Inside Information Software Survey, conducted with over 5,500 members of the financial advisory community, and sponsored by Orion Advisor Services and Morningstar.
  • Interestingly, their numbers significantly differ from a survey conducted by Financial Planning, which shows a 94% market penetration, and a much larger market share for MoneyGuidePro (65%).
  • The reason for the discrepancy is connected to the advisors surveyed. The T3 survey suggests that more experienced advisors are more likely to use financial planning tools and risk assessment tools. The market penetration of all types of software was higher on Financial Planning’s survey (composed mostly of RIAs) than on the Technology Tools survey, which uses a more diverse and larger sample size.
  • MoneyGuidePro offers risk assessment and scenarios, plan summary, detail plan analytics, net worth, social security optimization, online fact finder, risk tolerance, test variables, holistic stress testing, allocation comparison, among other features.

Portfolio Management Tools

  • Portfolio Management tools have a market penetration of 84.19%. The market share is more distributed than financial planning tools, with Albridge taking the first place (20.41%), followed by Morningstar Office (16.92%), Envestnet/Tamarac (13.85%), Orion Advisor Services (9.4%), Schwab Portfolio Center (9.39%), and Advent/Black Diamond (5.36%).
  • The T3 survey points out that experience and size of the firm plays a role in adoption, with fewer than 60% of advisors with 1-5 years of experience, and less than 50% of firms at the smallest size range employing these type of solutions, which could explain why Financial Planning survey shows different numbers, albeit the market penetration is practically the same.
  • According to Financial Planning, Envestnet is the market leader, with 14%, followed by Orion (14%), Morningstar Office (11%), Albridge (9%), and Tamarac Advisor (9%).

Investment Data/Analytics Tools

  • Investment Data and Analytics Tools are programs that help advisors to evaluate track records, performances, histories, and other metrics of mutual funds, ETFs, and bonds. T3's annual survey showed that Morningstar is by far the market leader, with a 38.82% market share, and an average rating of 7.73.
  • It is accompanied by FI360 (8.24% — 7.69), YCharts (5.54% — 7.61), Kwanti/Portfolio Lab (3.14% — 8.55), Bloomberg Terminal (3.03% — 8.59). All the other competitors have less than 2% market share and ratings below 8.
  • The survey also asked advisors what programs they are thinking about adding to their tools. YCharts and Morningstar were pretty much tied (116 vs. 115), followed by FI360 (83), AdvisoryWorld (74), Kwanti/Portfolio Lab (65), Bloomberg Terminal (57), FactSet (43), and Zacks Advisor Tools (41). All other programs were mentioned by less than 20 advisors.
  • Furthermore, the survey found these tools have a 66% market penetration; however, only two-thirds of the advisors within this group are using the tools to evaluate the fund/ETF/individual security track records before they construct the client's portfolio.
  • Economic Analysis and Stress Testing Tools, on the other hand, have a smaller market penetration (49.36%). This category is somewhat of a novelty, and it is used to forecast or evaluate different future possibilities of portfolio combinations.
  • Riskalyze has the largest market share (11.26%), followed by DFA Returns (6.69%), FI 360 (6.12%), Morningstar Direct (5.99%), YCharts (4.03%), Kwanti/Portfolio Lab (2.89%), BlackRock Scenario Tester (2.69%), Bloomberg Terminal (2.31%), and Hidden Lever (2%). Other software market shares are below the 2% mark.
  • To assess Risk Tolerance, Riskalyze is the market leader (29.88% market share), followed by FinaMetrica (5.48%), other tools have less than 1% of the market share. Risk Tolerance tools have a 37.71% market penetration; however, advisors expressed the desire to acquire these tools.
  • Meanwhile, a survey conducted by Financial Planning showed different numbers. Riskalyze was the number one tool for risk assessment (27%), followed by Morningstar (20%). The survey also indicated a more significant market penetration (around 70%). Both surveys were conducted in 2019.
  • The Water Awards of 2019 named Numerix as the best Credit Risk Provider. In 2017, Moody's was the winner.

Social Media

  • A survey with over 1,000 American advisors unveiled that they are active on social media for business purposes. LinkedIn is the most popular platform, followed by Facebook, Twitter, YouTube, and Instagram. Although the survey was focused on their marketing efforts, it is worth noting how active and engaged they are on the platforms.