Most Mutual Funds Still Held Through Advisers

More than 51 million U.S. households, or 44%, own mutual funds. More than three-quarters of mutual fund-owning households owned funds outside their defined contribution (DC) retirement plan. But of the those households who owned funds outside of their DC plan, about half also held funds inside their DC plan. Of the households with funds outside of their DC plan, 80% used a financial adviser to purchase the mutual funds outside their plan, which was consistent across all demographics, according to research from the Investment Company Institute (ICI).

The percentage of mutual funds purchased through an adviser last year was up slightly at 56% (verse 54% in 2006), according to data from ICI and Cerulli Associates. The percentage has been steady in recent years, but has gone down dramatically in the last couple decades (in 1990, 72% of mutual funds were sold through advisers) with the rise of DC plans. The data show that the percentage of mutual funds purchased from a DC plan in 2007 (24%) was down slightly from 26% in 2006. The number of purchases directly from the fund companies remained steady at 14%. (The remaining 6% of mutual funds in 2007 were held through discount brokers and mutual fund supermarkets.)

About half of the households owning funds outside DC plans used two or more types of advisers, according to the research. Full-service brokers and independent financial planners were the most commonly used professional financial advisers. Fifty-five percent of households that owned mutual funds outside DC plans purchasing through a full-service broker, and nearly half owned funds purchased through an independent financial planner.

Most people found their adviser through a referral through a friend, family member, or business associate. Only 9% already knew their adviser.

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