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Financial Advisors Cite Yield, Market Complexity as Top Concerns with Muni Bond Allocation, According to Columbia Threadneedle Survey


Columbia Threadneedle Investments today announced the results of a
survey of financial advisors that reveals yield and market complexity
are top concerns when establishing municipal bond exposure for clients.

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A little less than half (43 percent) of financial advisors report that their biggest concern with th ...

A little less than half (43 percent) of financial advisors report that their biggest concern with the asset class is finding the right amount of yield to align with their clients' goals and preferences. (Graphic: Columbia Threadneedle Investments)

A little less than half (43 percent) of financial advisors report that
their biggest concern with the asset class is finding the right amount
of yield to align with their clients' goals and preferences. The next
most highly-cited concern (14 percent) was complexity in the muni market
post-2008, followed by unintended consequences of benchmark investing
(12 percent), and an inability to conveniently access all sectors of the
muni market (12 percent). 111 financial advisors participated in the
industry survey.

Credit and interest rate environments also have a noteworthy impact on
financial advisors' municipal investment recommendations. In fact, the
overwhelming majority of respondents (85 percent) said their muni
investment decisions are at least moderately affected by credit and
interest rate environments. While most advisors report their decisions
being moderately impacted by these factors (60 percent), credit and
interest rate environments are more likely to have a large impact than a
limited impact on decisions (25 percent and 15 percent, respectively).

"Financial advisors are concerned about yield and market complexity when
it comes to allocating client dollars to the muni space. This market has
changed significantly in the last ten years, but there are still smart
ways to invest in it if you know what to look for," said Catherine
Stienstra, Head of Municipal Investments at Columbia Threadneedle.
"Traditional benchmark indices exclude viable investment options, are
debt-weighted and can be over-concentrated in less attractive sectors.
This puts advisors in a tough position when they try to balance
cost-efficiency with investment opportunity. As passive investing
continues to grow, rather than simply accept an imperfect benchmark
portfolio, municipal bond investors with a preference for passive
solutions should think about adopting a smart beta approach."

Financial Advisors Juggle Preference for Active and Focus on Cost

Although the majority of respondents favor actively managed investments
(54 percent), interest in a muni bond strategic beta ETF is strong,
according to the survey. More than half (55 percent) said they would
consider investing in a muni bond strategic beta ETF or are already
invested in these products and would consider others. Cost continues to
be an important issue when allocating to a strategic beta fixed income
solution. In the last year, price increased as a top consideration,
rising from 34 percent in June 2017 to 39 percent in June 2018.

"Financial advisors are being pulled in multiple directions as they
remain committed to doing what's best for their clients," said Marc
Zeitoun, Head of Strategic Beta at Columbia Threadneedle. "The competing
priorities of price and preference for active management are a good
example of the balancing act they face. Strategic beta ETFs present a
great middle ground between ‘best thinking active investment insight'
and passive implementation. It's no wonder that track record and a
firm's expertise as an active fixed-income manager remain the most
important factors when considering strategic beta ETFs."

About Columbia Threadneedle Investments

Columbia Threadneedle Investments is a leading global asset manager that
provides a broad range of investment strategies and solutions for
individual, institutional and corporate clients around the world. With
more than 2,000 people, including over 450 investment professionals
based in North America, Europe and Asia, we manage $482 billion1
of assets across developed and emerging market equities, fixed income,
asset allocation solutions and alternatives.

Columbia Threadneedle Investments is the global asset management group
of Ameriprise Financial, Inc. (NYSE:AMP).

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1As of June 30, 2018.

Investment products offered through Columbia Management Investment
Distributors, Inc., member FINRA. Advisory services provided by Columbia
Management Investment Advisers, LLC.

Columbia Threadneedle Investments is the global brand name of the
Columbia and Threadneedle group of companies.

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