Market Watch

Financial Professionals Want the Best of Both Worlds: Active Management With Passive-Like Fees

Study: Looming market correction highlights need for downside protection

NEW YORK, Dec. 14, 2017 /PRNewswire/ — As equity markets continue to hit new highs, we believe advisors are growing increasingly concerned about a potential market correction and have little confidence that passive investment strategies provide adequate downside protection for client portfolios, finds a new survey of more than 200 financial professionals conducted by AllianceBernstein (“AB”).

The survey, fielded at the 2017 Annual Schwab IMPACT Conference, held in Chicago from November 14-17, 2017, also found that many advisors are interested in flexible fee structures. Most financial professionals (77%) would consider an actively managed mutual fund that charges passive-like fees, with higher fees only when the fund outperforms its benchmark index.

Locking in lower fees, but giving up opportunities?

“In recent years, the shift from traditional active strategies to low-cost passive funds means that investors have locked in lower fees, but they’ve also given up the opportunity to outperform,” said Chris Thompson, head of Americas sales at AB. “A flexible management fee that starts low and goes up only when the fund outperforms provides a very attractive alternative to passive, and aligns the interests of asset managers and investors.”

The survey also found that the majority of advisors (78%) believe the market is due for a correction, and in a down market, 62% would expect passive strategies to perform worse than their active counterparts.

“Advisors enjoy the low fees offered by passive strategies, but do not feel confident putting their client assets on auto-pilot at a time when markets continue to reach new highs. This is creating an opening for an entirely new category of products that combines the fee benefits of passive with the attractive potential of active,” added Thompson.

Advisors enjoy the low fees offered by passive strategies, but do not feel confident putting their client assets on auto-pilot

*This year, AB launched three performance-based fee funds–the first of their kind. They charge index-fund-like advisory fees if performance is at or below the index and a scaled performance fee as they outperform the index.

About the Survey
The survey was conducted onsite at the 2017 Schwab IMPACT conference with a total of 210 respondents comprised of registered investment advisors, financial advisors and financial professionals.

About AB
AB is a leading global investment management firm that offers high-quality research and diversified investment services to institutional investors, individuals and private wealth clients in major world markets. At September 30, 2017, AB Holding owned approximately 35.2% of the issued and outstanding AB Units and AXA, a worldwide leader in financial protection, owned an approximate 64.9% economic interest in AB.

Additional information about AB may be found on our website,



Investors should consider the investment objectives, risks, charges and expenses of the Fund/Portfolio carefully before investing. For copies of our prospectus or summary prospectus, which contain this and other information, visit us online at or contact your AB representative. Please read the prospectus and/or summary prospectus carefully before investing.
AllianceBernstein Investments, Inc. (ABI) is the distributor of the AllianceBernstein family of mutual funds. ABI is a member of FINRA and is an affiliate of AllianceBernstein L.P., the manager of the funds.