2013 Global Survey of Financial Advisors...Spanish advisors spent 19.8 hours a month seeking new clients (vs. 17.9 for other countries). In total Spanish advisors were occupied for

2013 Global Survey of Financial AdvisorsSpain – Individual Country Report

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Methodology

CoreData Research was commissioned by Natixis Global Asset Management to conduct an international study of financial advisors, with the aim of better understanding the contemporary attitudes and needs of this key collective of individuals to the financial services industry.

Financial advisors are the bridge between product manufacturers and retail investors and many small, medium and in some cases, large corporations and it is therefore imperative to assess the opportunities and challenges facing this group of professionals.

Specifically this study assesses at advisor attitudes to a range of topics such as business growth, portfolio construction (including volatility, risk and income), client service, advice proposition, time management and investment challenges.

Data was gathered over a five week period spanning August and September 2013.

The survey was delivered through an online quantitative survey of approximately 40 questions and was hosted by CoreData Research.

Globally, the study involved 1,300 financial advisors in nine countries and across four continents.

Individual country details can be found in the appendices section of the report.

A Global View

The opportunities for financial advisory businesses worldwide are strong. Ageing populations, a perpetually uncertain investment environment and ever increasing complexity (compounded by relentless sources of information being thrust upon investors) are combining to cement the need for professional, quality, informed and impartial financial advice.

A by-product of robust equity markets is 60% of financial advice businesses globally are growing – in part driven by varying degrees of asset-based fee remuneration structures.

However, despite the recent market buoyancy and implicit demand around the world for professional advice, the post-crisis turnaround for businesses is not a guarantee of future success.

Financial advisors face a multitude of challenges and pressures, and it is imperative product manufacturers in the investment industry strive to reduce – and ultimately help remove – some of the hurdles hampering advisors.

One of the hardest tests for advisors is in seeking to achieve balance when making decisions against a backdrop of competing variables and sometimes contradictory variables.


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Advisors must sometimes feel analogous to a performing artist – trying to juggle their own time and resource limitations, client investment objectives, market realities, client understanding, client emotions/psychology, investment strategies and commercial business dynamics

Ultimately, to grow a business for the long term advisors require satisfied clients today and prospective clients tomorrow.

One of the big questions is whether advisors have the product set to satisfy existing clients and also to attract and meet the need of prospective clients?

A big risk for advisor businesses globally is the energy spent trying to meet existing client needs - a real risk as many advisors are finding this difficult to achieve.

In a double whammy, the subsequent neglect of seeking new clients to drive future business growth will really hurt businesses.

Future Alarm

Time spent seeking new clients (currently limited to only 11% or 15.9 hours per month).

Only 40% of advisors globally are actively seeking younger clients to replace older clients or those in decumulation phase.

Present Alarm

53% of advisors globally admitted difficulty in accommodating draw-downs for clients in retirement, but keeping portfolios growing to transfer wealth.

46% found it difficult to generate sufficient income for clients in retirement.

40% cited difficulty in effectively managing volatility risk for those in retirement.

In search of investment solutions to meet their needs, advisors and their clients are typically forced to make compromises and in some cases the end solutions either fail to deliver, client expectations/needs are too great for their investment portfolios to deliver a successful outcome, or the bridge that needs to be crossed is a bridge too far, e.g. clients don’t have a sufficient time horizon to reach their goals.

Some common investment paradoxes - a question of compromise or education?

Clients may want enduring stable income but they loath the volatility of being exposed to market capriciousness.

Clients may want portfolio growth but they invariably misunderstand and shirk risk.

Clients may accept a need for broader diversification but continue to hold heavy exposures to a handful of asset classes via traditional investment techniques.

In instances such as these, advisors are thrust into a scenario where they are forced to try and ‘tick all the boxes’.


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Almost four in five advisors globally say they seek investment strategies/products that help to manage risk (81%), manage volatility (79%) and produce income for clients (82%).

It seems there is a need for new thinking and approaches. Advisors mostly accept this. Diversification and a move away from traditional approaches could be part of the solution.

59% of advisors internationally agree there is a need to replace traditional diversification and portfolio construction techniques with new approaches to achieve results, with only 31% in disagreement and the remainder neither agreeing nor disagreeing.

Underneath all of this is also an acceptance by financial advisors that they, as their clients do, also have a strong need for better understanding.

Three quarters of advisers (75%) admitted financial advisors require more education, with only 16% in disagreement, and the remainder neither agreeing nor disagreeing.


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Outlook for Spanish Financial Advisors

The Spanish economy has suffered heavily over the past five years having been hit hard by the global financial crisis and the Eurozone debt crisis. Recent figures reveal an unemployment rate of 26.3% in Spain - the second highest in Europe behind Greece.

It is widely believed the economy is on the verge of exiting recession after two painful years; however, the majority of its troubles are far from over with recent figures showing public debt of $1.3trn - equal to 92.2% of Spain’s entire economic output, according to its Central bank.

Prime Minister Mariano Rajoy's government is aiming to reduce public spending by 150bn euros between 2012 and 2014, but rising unemployment and the subsequent benefit payments, is making this target difficult to reach.

The pain in the Spanish economy is reflected in the financial advice market where over a third (36%) of advisers said their business had declined over the past few years (vs.14% for other countries). 9% of Spanish advisers said their business had declined ‘very strongly’ versus 4% for other countries.

Adviser Business Growth - Regionally

11%56%

26%

6%1%UK

8%

42%

31% 13%

6%Europe

9%67%

16%

7%1%US

27%

55%17%

1%Asia

40%

32%

15%8%5%Middle

East

Growing very strongly GrowingFlat/No changeDeclining Declining very strongly

GlobalGrowing = 60%Declining = 14%


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Adviser Business Growth – Spain vs. Global

9%

27%

20%

36%

8%

Spain

4%10%

26% 47%

13%

GlobalDeclining very strongly

Declining

Flat/No change

Growing

Growing very strongly

Financial advisors, like in any business or industry, face many challenges and below is a word cloud of topics referenced by Spanish advisors as challenges.

Challenges Facing Spanish Financial Advisors


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Advice Proposition

Advisors in Spain consider their primary strength to be one of four main factors in comparison to their international peers (76% vs. 67%).

Adviser Number One Strength

21%

22%

20%

7%

13%

5%

2%

4%

5%

Explaining investment concepts toclients

Portfolio construction to meet clientrisk-return profiles

Understanding client risk appetite

Retirement Planning

Observing and understanding generalinvestment market conditions

Analysing risk of investment conceptsand products

Tactical asset allocation

Strategic asset allocation

Fund manager selection andmonitoring

Spain

22%

20%

16%

15%

9%

6%

5%

4%

3%

Global

These areas are:

Understanding client risk appetite (20% vs. 16% other countries)

Explaining investment concepts to clients (21% vs. 22% other countries)

Portfolio construction to meet client risk-return profiles (22% vs. 20% for other countries)

Observing and understanding general investment market conditions (13% vs. 9% for other countries)

Only 7% of financial advisors in Spain view retirement planning as their primary strength (vs. 15% for other countries).

More than five out of six advisors (86%) in Spain seek specific strategies/investment products to manage income within a client’s portfolio (vs. 82% for other countries).

83% and 77% reveal they also seek investment products and strategies to help manage risk and volatility respectively.


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Advisers Seeking Specific Strategies/Investment Products to Manage:

Given the severe pressures across the Spanish economy, it is not surprising that nine out of 10 advisers (90%) said their clients missed the late 2012 rally in stocks because they had too much invested in cash.

This was more than any other country surveyed with an average response of 70% globally.

With many investors likely to be sitting on their cash holdings in Spain, most advisors (85%) were confident client portfolios could withstand a correction (vs. 78% for other countries).

However, there is less confidence in these portfolios (likely to be weighted heavily to cash) being able to withstand an increase in interest rates (73% vs. 80% for other countries).

90%70%

85% 78% 73% 80%63% 55%

10%30%

15% 22% 27% 20%37% 45%

0%

25%

50%

75%

100%

Spain Global Spain Global Spain Global Spain Global

Clients missed takingadvantage of the late2012 rally in stocks

because they had toomuch invested in cash.

I am confident clientportfolios can withstand

a market correction.

I am confident clientportfolios can withstandan increase in interest

rates.

Many clients believetheir own home is a

better investment thanstocks or stock funds.

Almost two-thirds (63%) of Spanish advisors believed their clients deem their own home as a better investment than stocks or stock funds (vs. 55% for other countries).

%


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Client Service & Working Hours

40% of Spanish advisors said they are actively seeking younger clients to replace older ones, slightly ahead of the average for other countries (37%).

Advisors Actively Seeking Younger Clients to Replace Older Clients or Those in Decumulation Phase

40%Spain

Global 37%

Meanwhile, trust is a huge issue for Spanish advisors, with four out of five (80%) citing an inability to build trust quickly as the main obstacle to establishing new client relationships (vs. 55% for other countries).

Top Three Methods Used For Attracting New Clients

The inability of Spanish advisors to create new business relationships is not through lack of effort. On average, Spanish advisors spent 19.8 hours a month seeking new clients (vs. 17.9 for other countries).

In total Spanish advisors were occupied for 53.2 hours a month meeting existing clients and seeking new ones (vs. 46.2 hours for other countries).


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Advisor Time Management Split by Task

Spain Global Spain Global

18% 18% Managing existing clients 29.9 30.7

20% 17% Meeting w ith existing clients 33.4 28.3

12% 14% Managing existing client investments 19.6 23.3

11% 11% Seeking new clients 19.8 17.9

12% 11% General administration 17.4 17.5

8% 8% Regulatory compliance 12.8 13.8

7% 7% Media/social media 10.8 11.2

8% 6% Educating myself about new portfolio construction techniques

13.8 9.5

2% 4% Marketing 3.4 6.4

2% 4% Other 4.0 6.4

Typical working day (%)

Working hours spent per month (7.5 hours per day * 22 working

days in a month)

How much of a typical working day do you spend on the following?

Other points:

Spanish advisors spent more time on educating themselves about portfolio construction ideas and techniques each month than advisors in other countries (13.8 hours per month vs. 9.5 hours).


12

Investment and Retirement

Spanish advisors were in a quandary as clients want to do more with their assets but are still staunchly against any possibility of putting any of their investment in danger.

This is reflected by 51% of Spanish advisors admitting that the level of investment risk the majority of their clients are willing to take (probably out of cash/other very defensive instruments) is increasing (vs. 32% for other countries).

Please state whether you agree or disagree with the following statement?

32

26

31

17

29

16

27

35

40

36

49

47

28

37

38

33

25

41

32

25

22

54

34

46

40

39

19

0 25 50 75 100%

Global

Agree for amajority of clients

Agree for aminority of clients

Disagree

51

20

45

14

43

20

38

43

53

20

45

35

31

35

45

27

17

31

29

35

20

55

22

35

35

39

16

0 25 50 75 100

The level of investment risk myclients are willing to take is

increasing.

Asset growth is increasingly apriority over simply protecting

principal.

Clients are only willing to takeminimal investment risk, even if it

means sacrificing returns.

Clients are questioning the merits ofa 'buy and hold' strategy.

Clients are asking to reduce theproportion of cash investments in

their portfolios.

Clients are eager to make up pastlosses even if it means taking on

more risk.

Clients are revealing theirexpectations of me more so than

before.

Clients are more interested indiscussing risk over the past year.

Clients are conflicted betweenobtaining return and preserving

capital.

%

Spain

This is quickly counteracted by 45% of advisors stating that the majority of their clients are only willing to take minimal investment risk, even if it means sacrificing returns (vs.31% for other countries).


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More than a third (34.7%) of Spanish advisors disagreed that asset growth is increasingly more of a priority over simply protecting capital (vs. 25% for other countries).

Other data:

43% of Spanish advisors said the majority of their clients are asking to reduce cash proportion of cash investments in their portfolios (vs.29% for other countries).

38% of Spanish advisors agreed that the majority of their clients are revealing their expectations more than they did previously (vs. 27% for other countries).

43% of Spanish advisors agreed that the majority of their clients are more interested in discussing risk in the past 12 months (vs. 35% for other countries).

How difficult is it to achieve the following for an average client?

20

13

15

19

20

20

17

16

15

17

21

20

15

25

22

20

18

9

16

14

16

15

15

10

27

26

26

27

26

23

26

33

19

34

21

21

23

17

20

20

0 25 50 75 100%

Global

Not difficultat all

Somewhatnot difficult

Neutral Difficult Extremelydifficult

13

11

11

14

13

17

14

13

14

9

23

16

20

23

13

30

11

12

15

13

11

5

21

11

32

29

36

40

35

37

34

36

30

38

15

17

21

19

17

10

0 25 50 75 100

Deliver strong risk adjustedperformance

Construct portfolios that reduce riskand enhance returns simultaneously

Balance client asset growthobjectives against protection of

principal

Protect client portfolios fromdramatic swings in value

Build more resilient portfolios

Effectively manage volatility risk forthose in retirement

Generate sufficient income forclients in retirement

Accommodate draw-downs forclients in retirement, but keep

portfolios growing to transfer wealth

%

Spain

Data points:

62% of Spanish advisors said it is difficult to deliver strong risk adjusted performance for the average client (vs.46% for other countries).

67% of Spanish advisors said it is difficult to construct portfolios that reduce risk and enhance returns simultaneously for the average client (vs. 60% for other countries).


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51% of Spanish advisors said it is difficult to balance client asset growth objectives against protection of principal (vs. 47% for other countries).

57% of Spanish advisors said it is difficult to protect portfolios from dramatic swings in value for the average client (vs. 48% for other countries).

Spanish advisors saw managing volatility for the average client who is already in retirement as a main concern with over half (56%) citing this as a difficult task in this environment (vs. 40% for other countries).

In terms of income, over half (51%) said it is difficult to generate sufficient income for the average client in retirement (vs.46% for other countries). However, almost a third (33%) were ‘very confident’ about their ability to grow client’s current investment portfolios to meet retirement income needs (vs. 23% for other countries).

How confident are you that your client's current investments are able to?

18

13

3

11

6

9

8

61

61

39

53

63

68

65

21

27

58

36

31

23

28

0 25 50 75 100%

Global

Notconfident

Moderatelyconfident

Veryconfident

17

11

5

12

5

6

8

46

48

30

50

60

61

61

37

41

65

38

35

33

31

0 25 50 75 100

Protect my portfolio fromdramatic swings in value

Preserve capital

Ensure appropriate portfoliodiversification

Take advantage of bull marketperiods

Protect client long-terminvestments from inflation

Grow portfolios to meetretirement income needs

Provide steady income forclients in retirement

%

Spain

16% of financial advisors in Spain thought the majority of their clients know how much they need to save to meet their retirement lifestyle expectations (vs. 31% for other countries).


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Portfolio Construction

Two-thirds of Spanish advisors (68%) said financial advisors need to replace traditional diversification and portfolio construction techniques with new approaches to achieve results (vs. 59% for other countries).

57% of Spanish advisors also agreed that the traditional 60/40 portfolio allocation is no longer the best way to pursue return and manage investment risk for most investors (vs. 49% for other countries).

In terms of portfolio construction and management, to what extent do you agree with the following?

16

21

18

30

15

7

17

18

18

16

16

9

18

12

16

11

11

10

22

26

22

23

30

23

27

22

27

19

29

52

0 25 50 75 100%

Global

Stronglydisagree

Disagree Neither agreenor disagree

Agree Stronglyagree

13

9

14

23

11

3

17

19

16

19

13

5

13

19

13

11

7

7

32

30

22

22

39

29

25

23

35

25

29

55

0 25 50 75 100

There are very few tools available toadequately remove the 'guesswork'

associated with managinginvestments in today's markets.

A traditional equities and fixedincome split is appropriate forinvestors with moderate risk

tolerance.

A traditional portfolio allocation is nolonger the best way to pursue returnand manage investment risk for most

investors.

Historical market data demonstratingthat longer holding periods decrease

the likelihood of a negativeannualized return is no longer valid.

Financial advisors need to replacetraditional diversification and

portfolio construction techniqueswith new approaches to achieve

results.

Financial advisors need moreeducation.

%

Spain

Other data points:

There are very few tools available to adequately remove the 'guesswork' associated with managing investments in today's markets (57% of Spanish advisors agreed vs. 49% other countries)

84% say advisors need more education (vs. 75% for other countries).


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Alternative Investments

Alternative investments1 were a popular choice in Spain with 86% of advisors having discussed them with their clients (vs. 73% for other countries).

86

Spain Global

73

41

45

36

24

31

9

28

53

34

28

36

10

Communicating how products/strategies support client

investment objectives

Products are often too complex toexplain

It's hard to make many alternativeproducts appealing against often

cheaper options

Too broad an asset class

A lack of supporting information/track records

Other

%Spain Global

Discuss Alternatives

Challenges in either communicating or understanding alternative investments better

However, while seven out of eight Spanish advisors (88%) had a good understanding of alternative investments, this falls to just 27% for their clients (vs. 34% for other countries).

Despite this lack of understanding on the client side only 8% of Spanish advisors said they never use alternatives across their client base (vs. 15% for other countries).

Usage of alternative investment strategies across client base

8

15

72

57

20

27

0 25 50 75 100

Spain

Global

%Never Infrequent Regular

1 An alternative is an investment that is not one of the three traditional asset types (stocks, bonds and cash). Most alternative investment assets are held by institutional investors or accredited, high-net-worth individuals because of their complex nature, limited regulations and relative lack of liquidity. Alternative investments include hedge funds, managed futures, real estate, commodities and derivatives contracts.


17

When asked why they do not use alternatives investments, two thirds of Spanish advisors (68%) said it is because the client deems them risky.

Which statements apply as to why you don't use alternative investment strategies in your client portfolios?

Spain

50

33

32

17

9

20

26

34

15

14

%

68

38

30

28

24

24

24

23

15

15

My clients believe alternativeinvestments are risky

My clients are afraid of them

My business model doesn'tsupport alternative investments

My clients don't believealternatives should replace more

traditional investmentsI can't justify charging clients in

addition to the cost of theseproducts

My clients believe the fees aretoo high

I stick to what I can explain to myclients

I need to learn more aboutalternative investments beforeinvesting client money in them

I don't think they work

My clients will never understandhow they work

%

Global

58% of Spanish advisors viewed alternatives as returns enhancers (vs. 38% for other countries), while 85% of them viewed alternatives investments as diversifiers (vs. 63% for other countries).

69% of Spanish advisors viewed hedge funds as an alternative investment, followed by private equity funds (55%).

In general, Spanish advisors were more inclined to employ alternatives for those with more investible assets.

How inclined are you to use alternative investments for clients with the following asset types:

0-$300,000 of investible assets - 34.7% of Spanish advisors inclined (vs. 33.9% for other countries)

$300,000 to $500,000 of investible assets – 38.7% of Spanish advisors inclined (vs. 41.6% for other countries)

$500,000 to $1m of investible assets -58.7% of Spanish advisors inclined (vs. 52.7% for other countries)

More than $1m of investible assets – 76% of Spanish advisors inclined (vs. 62.5% for other countries)


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Environment, Social and Governance Factors

18% of Spanish advisors said their clients were interested in having environmental, social and governance filters on their investments (vs. 27.6% for other countries).

1882 Spain

Yes No

19

13

52

10

5

Client demand

Diversification

Environmentalor

social benefits

Higher returns

Other

Are your clients interested in having Environmental, Social and Governance

filters on their investments?

What, in your opinion, are the most important reasons for considering ESG factors?

%

%


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NOTES:

The study involved 1,300 financial advisers in nine countries and across four continents.

For Spain there were 150 participants.

Of these 106 were independent financial advisors, 21 were tied financial advisers, 18 were heads of an advice firm (practicing advisors) and 5 were in other advisory roles.

The average client portfolio size was €677,333. With regard to the firm’s asset level, the average firm represented by each adviser manages approximately €753.7 million.

The total level of assets of firms in Spain involved in the study amounted to €113.1 billion.

This communication is for information only. Analyses of the survey referenced herein are as of October 24, 2013. There can be no assurance that developments will transpire as may be forecasted in this material. This material may not be distributed, published or reproduced, in whole or in part. Although Natixis Global Asset Management believes the information provided in this material to be reliable, it does not guarantee the accuracy, adequacy or completeness of such information.

In the EU (ex UK): Distributed by NGAM S.A., a Luxembourg management company authorized by the CSSF, or one of its branch offices. NGAM S.A., 51, avenue J.F. Kennedy, L-1855 Luxembourg, Grand Duchy of Luxembourg.

Natixis Global Asset Management consists of Natixis Global Asset Management, S.A., NGAM Distribution, L.P., NGAM Advisors, L.P., NGAM S.A., and NGAM S.A.’s business development units across the globe, each of which is an affiliate of Natixis Global Asset Management, S.A. The affiliated investment managers and distribution companies are each an affiliate of Natixis Global Asset Management, S.A. • ngam.natixis.com

This material should not be considered investment advice nor a solicitation to buy or an offer to sell any product or service to any person in any jurisdiction where such activity would be unlawful.

Copyright © 2013 NGAM Advisors, L.P. – All rights reserved.

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2013 Global Survey of Financial Advisors...Spanish advisors spent 19.8 hours a month seeking new clients (vs. 17.9 for other countries). In total Spanish advisors were occupied for