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Cerulli Study Says Financial Advisors Who Currently Use Options Expect to Increase Use of Options by 30 Percent in Three Years

CHICAGO (May 11, 2017) - The Options Industry Council (OIC), an industry resource funded by OCC and the U.S. options exchanges, today announced the results of a study, How Financial Advisors Use and Think About Exchange-Listed Options, which found that approximately one-third of financial advisors currently use options in 20 percent of client portfolios, and that usage is expected to increase by 30 percent in the next three years. The goal of the study, conducted by Cerulli Associates, a global research and consulting firm specializing in asset management and distribution trends worldwide, is to identify target audiences and educational strategies for the OIC that may lead to increased adoption of exchange-listed options strategies among financial advisors.

The study said that on average, independent registered investment advisors (RIAs) who currently use options use them across 28 percent of client accounts, the broadest use across channels. In addition, independent RIAs and hybrid RIAs expect the greatest increases in options usage rates across client accounts in the next three years, from 28 percent and 22 percent to 39 percent and 33 percent, respectively.

The study also noted that employee channel advisors (wire house and national and regional broker-dealers) who currently use options report the highest volume of trades, with 35 percent of these advisors executing more than 20 trades annually in a typical client account. By contrast, only 21 percent of independent advisors who currently use options report doing more than 20 trades annually for clients. Higher frequency of trading is likely supported by greater centralized support services, especially at wire house firms, where advisors report a higher overall level of centralized firm resources than other channels. When assessing the opportunity set for increasing adoption of use, it is important to consider not only the frequency of use, but also the depth of use, as these behaviors may not occur simultaneously.

According to Cerulli Associates, advisors who currently use options appear willing to expand their use of options strategies beyond the traditional use of covered calls, long calls and long puts. Though use is less prevalent than that of the strategies listed above, many advisors also use protective puts, option spreads, short calls and puts, cash-secured puts, and collars. Almost 80 percent of independent RIAs report using protective puts, the highest usage rate among all channels.

The study pointed out that mega team advisors (practices with more than $500 million in assets under management) who currently use options use them for more diverse purposes than smaller teams. Income generation is a primary objective for these advisors. However, they place a greater emphasis on downside risk and portfolio diversification than advisors from small teams. Nearly 60 percent of advisors from the largest practices frequently cite downside risk protection as a goal of using options, while only 37 percent of advisors from smaller teams do.

"As OIC's goal is to provide unbiased educational content to investors and market participants in order to help the exchange-listed options industry grow, the insights obtained from the Cerulli study will be invaluable in that effort," said Eric Cott, Director of Financial Advisor Education for OIC. "We now have a great opportunity to shape future educational efforts on behalf of the industry to target advisors who are most open to using exchange-listed options, and potentially increase market share of these valuable financial risk management tools with current option users."

OIC and Cerulli Associates teamed up for the first time to get a better understanding of the behavior of advisors who use options strategies with clients and those who do not. More than 600 advisors across various distribution channels were surveyed on how, when and why they used options.

Read the full study and view more findings.

About OIC

Celebrating its 25th anniversary, OIC is an industry resource funded by OCC, the world's largest equity derivatives clearing organization, and the U.S. options exchanges. Its mission is to provide free and unbiased education to investors and financial advisors about the benefits and risks of exchange-listed equity options. Managed by OCC, OIC offers education which includes webinars, podcasts, videos, seminars, self-directed online courses, mobile tools, and live help. OIC's Roundtable is the independent governing body of the Council and is comprised of representatives from the exchanges, member brokerage firms and OCC. For more information on the educational services OIC provides for investors, visit www.OptionsEducation.org.

About Cerulli Associates

Headquartered in Boston with offices in London and Singapore, Cerulli Associates is a global research and consulting firm that provides financial institutions with guidance in strategic positioning and new business developments. Our analysts blend industry knowledge, original research, and data analysis to bring perspectives to current market conditions and forecasts for future developments. Cerulli's research product line includes the Cerulli Report series, the Cerulli Edge series, and Cerulli Lodestar.